More trade with Cuba could aid Minnesota but it needs to go both ways

Rep. Collin Peterson and Sen. Amy Klobuchar recently introduced the Travel Restriction Reform and Export Enhancement Act in the House and Senate. The bill would remove travel restrictions between the U.S. and Cuba and make it easier for Americans to sell goods there.

Louis Johnston From economist Louis Johnston, St. John’s University | College of St. Benedict

Removing those barriers would roughly double American agricultural exports to Cuba and greatly benefit Minnesota farmers. But it does nothing to help Cuba export goods in which it holds an advantage.

That’s a problem.

The only way Cubans can ultimately pay for American imports is to export goods and services to the U.S and earn U.S. dollars. Cuban importers could borrow the money from U.S. banks to buy American products.

The legislation makes this easier to do. But Cuba will have to earn U.S. dollars to pay back the loans because U.S. banks won’t accept loan payments in Cuban currency

The bill does nothing to alleviate this problem. In fact, it sets up the banks to make loans that have a high chance of not being paid back if we continue to ban imports from Cuba.

There are Cuban exports that Americans would want. Cuba’s largest export is sugar, and there is clearly a large American appetite for sweeteners.

But sugar beets are one of Minnesota’s major agricultural products and that would pit the export interests of some Minnesota farmers against the business interests of others.

Free and open trade is a policy about which almost all economists agree. The logic of trade is simple: A country should export the goods in which it has a comparative advantage and import goods in which they do not have a comparative advantage.

Political considerations, concerns about environmental and labor standards, and other factors are important determinants of trade flows, and clearly play a role in U.S.-Cuba trade.

In the long run, however, the economic reasoning is inescapable: we need to let Cuba sell stuff to us so that we can sell stuff to them.

Johnston teaches economics at St. John’s University and the College of St. Benedict and is a regular voice on MPR News.

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