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Potential Transportation Impacts of Expanded U.S.-Cuba Trade Final Report

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Potential Transportation Impacts of Expanded U.S.-Cuba Trade Final Report Potential Transportation Impacts of Expanded U.S.-Cuba Trade Final Report PRC 17-81 F Potential Transportation Impacts of Expanded U.S.-Cuba Trade Texas A&M Transportation Institute PRC 17-81 F February 2018 Authors Jolanda Prozzi Victoria Wilson Copies of this publication have been deposited with the Texas State Library in compliance with the State Depository Law, Texas Government Code §441.101-106. 2 Potential transportation impacts of expanded U.S.-Cuba trade U.S. trade with Cuba has been strictly regulated since 1960. This study aimed to identify the potential trade and transportation impacts of a more open U.S.-Cuba trade relationship. Specifically, the study aimed to examine and better understand the impact of an open U.S.-Cuba relationship on Texas’ sea ports and the infrastructure linking those ports to various regions of the state. This study was, however, prepared prior to the current Presidential administration’s establishment of policy related to trade with Cuba. Although strictly limited, U.S. exports to Cuba totaled about $299 million in 2014, 95 percent of which consisted of agricultural products. For the most part, U.S. imports from Cuba are prohibited. In 2014, the United States supplied only 3 percent of Cuba’s total imports. Cuba’s close proximity to the U.S. would translate to low transportation costs and quick delivery times for goods; U.S. production efficiencies make this especially true for agricultural exports, the value of which could reach $18.6 million annually for Texas, creating a total economic impact of $42.9 million for the state. Texas’s agricultural commodities most likely to benefit from an easing of trade restrictions with Cuba are: poultry meats ($10 million), grain ($6.1 million), beef and meat products ($0.5 million), dairy ($0.3 million), and other products such as animal feed, cotton, and potatoes ($1.7 million). The trade possibilities for non-agricultural products are less certain, but experts believe the potential is greatest for: oil and gas well supplies, resins, software, telecommunications, and pharmaceuticals. Traditionally, Texas seaports play an important role in trade with Cuba, having handled 18 percent of U.S. exports to Cuba from 2003 to 2009. Currently, the lack of a direct container vessel service between Texas and Cuba represents a significant limitation. Texas seaports appear to be well equipped to handle expanded exports to Cuba, but Cuban infrastructure concerns create capacity limitations for the island nation. Addressing those limitations – which include highway and rail improvements – would require an investment of up to $25 billion in Cuba’s transportation infrastructure. If Texas-Cuba trade rose to $2.68 billion per year (two times the value of Dominican Republic trade), Cuba would become Texas’ 25th largest trading partner, but would still represent only 0.6 percent of Texas’ total international trade. Even over the long-term, Cuba is likely to represent a relatively small market for Texas exports. 3 Table of Contents Potential transportation impacts of expanded U.S.-Cuba trade .............................................. 3 List of Figures ................................................................................................................................ 6 List of Tables ................................................................................................................................. 6 Executive Summary ...................................................................................................................... 7 Chapter 1. Introduction ............................................................................................................... 9 Chapter 2. U.S. Laws and Regulations Impacting U.S. Trade with Cuba ............................ 10 Restrictions on Trade with Cuba ............................................................................................... 11 Restrictions on Investment in Cuba .......................................................................................... 12 Trump Administration Memorandum ....................................................................................... 12 Chapter 3. Cuba’s Economic Profile ......................................................................................... 14 Major Trading Partners ............................................................................................................. 14 Major Trade Commodities ........................................................................................................ 15 Agricultural Products .......................................................................................................................................... 16 Nonagricultural Products .................................................................................................................................... 17 Commodities to Benefit from Open U.S.-Cuba Relationship ................................................... 17 Chapter 4. U.S. Restrictions on Trade with Cuba ................................................................... 24 Chapter 5. Cuban Measures and Factors Impacting U.S. Trade with Cuba ........................ 25 Chapter 6. Cuba’s Transportation Infrastructure .................................................................. 27 Major Airports ........................................................................................................................... 27 Major Seaports .......................................................................................................................... 28 Case Study: The Port of Mariel ................................................................................................. 28 Road Infrastructure .................................................................................................................... 33 Rail Infrastructure ..................................................................................................................... 33 Chapter 7. The Potential for Texas Agricultural Exports to Cuba ........................................ 35 The Cuban Market for Agricultural and Food Products............................................................ 36 Wheat .................................................................................................................................................................. 37 Corn 38 Dairy Products .................................................................................................................................................... 38 Poultry Meat ....................................................................................................................................................... 38 Rice 38 Animal Feeds ...................................................................................................................................................... 38 Dry Beans ........................................................................................................................................................... 39 Other Products .................................................................................................................................................... 39 Economic Impacts on Texas ..................................................................................................... 39 Potential Roles of Texas Ports .................................................................................................. 40 Concluding Remarks ................................................................................................................. 42 Chapter 8. The Potential for Texas Manufactured Exports to Cuba .................................... 44 Current Exports to Cuba ............................................................................................................ 44 Expected Exports Given Open U.S.-Cuba Trade Environment ................................................ 45 Comparison between Cuban and Caribbean Markets ............................................................... 46 Comparison of Cuba to Dominican Republic and Japan .......................................................... 46 4 Japan ................................................................................................................................................................... 47 Dominican Republic ........................................................................................................................................... 47 Challenges Facing Exports to Cuba .......................................................................................... 48 Texas Infrastructure Needs Given Increased Trade with Cuba ................................................. 49 Potential of Port Mariel as Transshipment Hub ........................................................................ 49 Chapter 9. Conclusions ............................................................................................................... 52 Appendix. Timeline of U.S.-Cuba Relations ............................................................................. 54 References .................................................................................................................................... 55 5 List of Figures Figure 1. Timeline of U.S.-Cuba Trade Regulations. ................................................................... 10 Figure 2. Cuban Imports (2005 to 2014). ....................................................................................
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