I recently read an article from Time Magazine talking about House Majority Leader Tom DeLay's arguments against lifting the sanctions (14) against Cuba. The article showed a photo of DeLay smoking a Cuban cigar while on a visit to Jerusalem in 2003. While DeLay's actions at the time were perfectly legal, under today's laws he would be comitting a crime to consume a Cuban product while abroad. After reading this article, the somewhat hypocritical stance of Mr. DeLay made wonder "Just how effective are our sanctions against Cuba, and how much impact are we really having on the Cuban economy?" So I did some research.

The Cuban climate is ideally suited to producing two main products, both agricultural: tobacco and sugar (1). Therefore, I'm going to focus on the effect that a U.S. ban on sugar and tobacco imports from Cuba has on the Cuban economy. If these bans are having a significant negative impact on the Cuban economy, then they're accomplishing their goals and we should leave them in place. If the bans aren't causing Cuba any hardship, or if the net result is a hardship on American citizens, then we should consider lifting them.

Let's start with sugar. When Castro took over, the majority of the sugar operations in Cuba were American plants. Castro's government took those plants over and nationalized them as part of the Communist takeover (2). Russia, itself Communist at the time, was willing to trade oil, wheat, fertilizer, and other needed commodities for Cuban sugar. Russia was estimated to account for as much as 60-80 percent of Cuba's sugar exports. (6) Around 1989, when the Soviet Union dissolved, so did most of the Russian trade for Cuban sugar. With the Russian demand for sugar significantly reduced, the Cuban sugar industry virtually collapsed. In 2002, the Cuban government permanently shut down all but 71 of its 156 sugar mills (2). This is no great surprise, as it is estimated that it cost Cuba approximately 17 cents to produce a bag of sugar that would sell for only 5 cents on the world market (3). Russia might have been willing to trade for Cuba's "expensive" sugar, but the rest of the world was not.

Currently, the United States government has restrictions on the amount of sugar that can be imported, regardless of its country of origin. The effect of these restrictions is to artificially inflate the American price of sugar to levels well above the world average, which the sugar producers in our country claim is essential to keeping them financially solvent. If the sanctions against importing Cuban sugar were lifted, but the existing import restrictions remained in place, the United States would likely not gain or lose. And given the cost figures stated earlier, we would actually be doing the Cubans more financial harm to import their sugar (at a net 12-cent loss per bag) than to retain sanctions against it. So in the case of sugar, our sanctions are actually benefiting Cuba rather than harming it. One could also argue that American consumers are already being harmed because we are paying an above-market price for sugar in order to subsidize our domestic sugar industry.

But how about cigars? Cuban cigars have a reputation for being the finest (or among the finest) in the world. What effect would opening up the U.S. cigar market to cuban cigars have? This, too, is fairly simple to sort out. The United States is the world's top cigar producing country. We are also the world's top cigar consuming country. For example, in 1996 the United States consumed 255 million cigars more than it produced. It also exported and imported large quantities of cigars. (8) At its high point in the last 40 years, the Cuban cigar industry produced about 153,000,000 cigars for export. (9)(10) Even if the U.S. were able to import all of those cigars, shutting out every other country in the world, that 153 million would be a drop in the overall bucket of American cigar demand. Today, the only Cuban cigars available in the United States are illegal imports or cigars made from tobacco that pre-dates the embargo. As a result, market prices for Cuban cigars in the United States are much higher than they are elsewhere in the world. Once again, the American consumers are being harmed by this policy. How about the Cubans? Are we causing them economic hardship? Hardly. Cuban cigar industry experts claim that the world market for their cigars is already much larger than their capacity to produce them. Thus, the lack of a United States marketplace for Cuban cigars doesn't really matter to the Cubans. They have no problem selling their cigars elsewhere.

So who's buying these Cuban cigars? All our allies are. France and Spain are Cuba's two largest markets for cigars. According to a Miami Herald article, "At least 70 percent of the Cuban cigar exports go to Europe. The other 30 percent is divided among other world markets, including the Middle East, Asia, and Canada." (5) If the United States opened its markets to Cuban cigars, we'd be competing with virtually every other country on the planet for them. But since that would make it legal to purchase them, odds are that the prices (relative to today's black market or pre-embargo pricing) would drop considerably, benefiting the American cigar consumer. And again, since Cuba is already capable of selling its entire crop of cigars today to countries other than ours, they would benefit little (if at all) from the increased marketplace. The best they might hope for is that the added demand might raise the global market price of their product, but even that is questionable given that demand already exceeds supply. Even if Cuba shipped us all the cigars we wanted, there is always the question of whether the mystique of smoking an "illicit" Cuban cigar will hold up in a reality where the cigars are legal (as well as questions of whether Cuban cigars are really any better than their counterparts from other countries). (16)

As we've now seen, the trade embargo with Cuba isn't doing Cuba any significant harm. In the case of the cigar industry, all it's done is create a black market for Cuban cigars (and counterfeit Cuban cigars) in the United States (13)(15), turning some American cigar smokers into criminals and driving up the price of the few available Cuban cigars. In the case of the sugar industry, our ban on Cuban sugar imports is actually preventing Cuba from selling its sugar at a loss to American customers, which in effect is benefiting Cuba. So it is, in effect, hurting the U.S. more than helping it, and helping Cuba more than hurting it. Prior to the embargo in 1959, the United States supplied 70% of Cuba's imports. (4) Today, that business goes to other countries. Again, America is losing more than Cuba loses.

That means we must not be keeping the embargo in place for economic reasons, right? It's got to be the moral, ethical, and human rights reasoning. Let's think about that for a moment. If we were on the moral and ethical high ground here, wouldn't our allies abroad join us in banning the importation of Cuban goods? One would think so. Yet the records show that Cuban cigars are perfectly legal to buy and sell in Canada, Mexico, France, Spain, Germany, England, the Middle East, and Asia. (11) In fact, Spain and France have been so concerned about getting "enough" Cuban cigars that they've actually gone out of their way to invest in the Cuban manufacturers and distributors, just to ensure that it gets its share of the Cuban cigar production (which is the world's largest share, by the way). (12)

If our neighbors on all sides, our closest allies in the United Nations, and just about every other country on Earth doesn't see a moral or ethical problem importing and consuming Cuban cigars and sugar, why should we? Are we really a "better" or "more moral" nation by enacting and enforcing sanctions that our allies don't have, and which probably benefit Cuba more than they hurt it? I don't think so. I think it makes us look pompous and self-righteous at best, and embarrassingly silly at worst. This would be no worse than the millions of dollars worth of goods we import from Communist China or other areas of the world whose political, religious, or ethical views differ from our own.

Perhaps it's time we dropped the embargo.