U.S. Trade Sanctions & Business Competitiveness - US-Global

Weyinmi Uranje
ITRN 701
George Mason University- School of Public Policy
Monday April 16th 2012
US Trade Sanctions
US Trade Sanctions
 Other countries under the OFAC Sanctions Program are:
- Somalia- (2010)-Properties and property interest of specific
individuals and entities were seized by the U.S. government.
Reason: Due to the increase in piracy, armed robbery at sea, and
the violation of the arms embargo imposed by the UN.
- Libya- (2011)- Properties, and property interests of
individuals and entities were seized by the U.S. government.
Reason: Due to the human right abuse against the people of Libya.
US Trade Sanctions
(Reasons for Economic/Trade Sanctions)
 Economic and Trade sanctions are imposed on the target countries in
order to persuade or force the target country’s government to change
its policies.
 Reason behind these sanctions
- National Security Issues- Military sensitive issues
- Nuclear, Chemical, and Biological Weapons
- Missile Technology
- Procurement of Specialized Arms
- Foreign Policy Issues
- Human Right Abuse
- Democratization
US Trade Sanctions
(Different forms of Economic/ Trade
 Economic/ Trade sanctions can be levied in different ways; by
- Limiting exports to the target country
- Limiting imports of good and services from the target country.
- They can prohibit private financial transactions between the
U.S (business & citizens), and the target country’s
businesses, and government.
- They can also restrict U.S government programs like (EXIM Bank) and (OPIC) from assisting in trade and
investment with the target country.
Source: The Heritage Foundation “ A Users Guide to Economic Sanctions”.
US Trade Sanctions and It’s effect
on US Businesses
Focus: Cuba and Iran
US Trade Sanctions on CUBA
US Trade Sanctions on CUBA
(Cuba’s Economic and Trade Background)
 Cuba- located between the Caribbean Island and the Bahamas.
Approximately 150km from Florida.
 GDP(PPP) (2010)- $114,100 billion. Ranked 68th in the world.
 Exports: Sugar, Nickel, Tobacco, Fish, Medical products,
coffee and Citrus
 Export Partners: China 25.5%, Canada 23.3%, Venezuela
10%, Spain 5.6%
 Imports: Petroleum, Food, Machinery, Equipment, and
 Import Partners: Venezuela 35.2%, China 11.7%, Spain 8.5%
Brazil 4.6% Canada 4.2%, U.S. 4.1% (Agriculture).
 US – Cuba Relationship - Poor to Non-existent.
U.S Trade Sanctions on CUBA
 The U.S. placed a trade embargo on Cuba in 1961, which
eventually turned into a comprehensive unilateral economic,
trade, and financial sanction.
 Reasons behind this sanction:
- Castro seized all American properties and industries in Cuba.
- A move from communism towards the democratization of
 Freedom of speech and press
 Freedom of religion
 Freedom of political affiliation
U.S Trade Sanctions on CUBA
Over the past 50 years, the U.S. as extended, adjusted and added to the regulations of the Cuban sanction.
Trading With the Enemy Act of 1917, section 5(b);
Foreign Assistance Act of 1961, section 620(a);
Cuba Assets Control Regulations of 1963;
Cuban Democracy Act of 1992, also known as the Torricelli Act;
Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996, (Helms-Burton Act);
The Trade Sanctions Reform and Export Enhancement Act of 2000.
U.S. Trade Sanction on Cuba
(Effect on US Businesses)
 Tourism: Cuba’s biggest source of income.
 Tourism brings in 2.7 billion into Cuba primarily from Canada and the European Union.
 20,000 Cuban-American now travel every month since the removal of the ban in April 2009.
(Note: Only Cuban- Americans can travel to Cuba).
American businesses in the travel and tourism market could gain tremendously, if the embargo was completely
lifted. The companies below could benefit from entering the Cuban tourism and travel market.
 Royal Caribbean
 Carnival Cruise Line
 Oil- Undiscovered oil in Cuba has led countries like China, Spain, Russia, India, Norway, Malaysia,
Vietnam, Angola, BUT not the U.S to partner up with Cuba to drill oil. The U.S geological survey
estimates that Cuba has 4.6 billion barrels of undiscovered oil. A Spanish company Repsol will be the first
to drill. (HINT: They will drill 80km off the coast of Florida)
Senator Lisa Murkowski (R- Alaska ) and Mary Landrieu (D -Louisiana ) worked on a legislature that would
lift the trade embargo on US oil companies, by allowing them to do to business with Cuba. However, this
legislation never passed. The companies below could benefit from doing business with Cuba.
 Chevron Corporation
 Exon Mobil Corporation
 Conoco Philips
U.S. Trade Sanction on Cuba
(Effect on US Businesses)
Nickel- Cuba has the third largest reserves of nickels in the world. In 2007, Cuba exported 2.7 billion
worth of nickel, although in recent years, the price has dropped. Cuba mines copper, cobalt, and
The U.S does not have nickels, so they import all their nickels from Canada and Australia. By removing the
trade embargo on Cuba, U.S businesses will have the ability to import nickels from Cuba.
 Agriculture
The 2000 Trade Sanctions Reform and Export Enhancement Reform.
- Aimed at relaxing the enforcement of the economic and trade sanction;
by allowing the export and sale of agricultural produce and medicine to Cuba.
Produce exported to Cuba
Fish, Forest Product, Fresh fruits and Vegetable, Milk Powder, Processed Foods, Wheat
and Dry Beans.
Since the implementation of the Trade Sanctions Reform and Export Enhancement Reform,
US export of agricultural food to Cuba in 2008- 710 million
US export of Agricultural food to Cuba by 2009- 2.8 billion
U.S. Trade Sanction on Cuba
(Effect on US Businesses)
 Problem: Financial transactions between the U.S. exporter and Cuban buyer is
problematic and inefficient .
 Cash-against documentation transaction is the current form of payment .
 Transactions have to be processed through a third- countries financial institution.
This procedure increases the cost of agricultural product sales to Cuba.
 Cuban buyers are also not allowed to take goods on credit.
 Solution: Removing the embargo on business travels and financial regulations will
increase the sale of agricultural goods, and provide an environment for strong business
relationship for both parties.
Source: United States International Trade Commission, " U.S. Agricultural Sales to Cuba: Certain
Economic Effects of U.S Restrictions". http://www.usitc.gov/publications/332/pub3932.pdf
U.S. Trade Sanctions (IRAN)
U.S Trade Sanctions (IRAN)
(Economic and Trade Background)
 GDP – (PPP)(2011)- 928.9Billion. Ranked 18th compared to other
countries in the world.
 Exports: Petroleum (80%), Chemical and Petrochemical Products,
Fruits and Nuts, and Carpets.
 Export Partners: China 19%, India 14.8%, Japan 11.6%, Turkey 8%,
South Korea 6.7%, Italy 6.2%, Spain 4.7%
 Imports: Industrial Supplies, Capital goods, Foodstuffs and other
Consumer goods, Technical Services.
 Import Partners: China 17.4% UAE 16.7%, Germany 7.6% South
Korea 6.3%, Russia 5.7% Turkey 4.8%, Italy 4.2%.
 U.S.-Iran relationship: Terrible-Hostile
U.S. Trade Sanctions on IRAN
 On October 29, 1987, President Regan issued an executive
order imposing an import embargo on Iranian goods and
 On March 16, 1995, President Clinton issued an executive
order prohibiting U.S involvement with petroleum development
in Iran.
 On August 19th 1997, President Clinton signed an executive
order that clarified previous executive orders, and it prohibited
all trade and investment activities with Iran by U.S persons.
U.S. Trade Sanctions on IRAN
 On November 10th 2008, U.S. depository institution were prohibited from
authorizing transfers that involved Iran and non-Iranian foreign banks.
 On September 29th 2010, the authorization that allowed Iranians to
import into the U.S commodities like food stuff and carpets was revoked.
 Recently, the US and it allies (EU, Japan, and South Korea) placed an
embargo on the Iran oil. The US has also frozen the assets of the Iranian
Central Bank, and other Iranian firms shipping arms to Syria.
For this reason, US persons and businesses can not trade or invest in Iran’s
oil or with their banks.
U.S. Trade Sanctions on IRAN
(Effect on U.S. businesses)
 The recent sanction on Iran has placed a lot of pressure and restraints
on US firms that are currently trading with Iran.
U.S. firms are forced to suffer the consequences from the embargo
due to the abrupt stop in financial transactions between both parties.
 Most U.S. firms can not get their goods, or receive payments for
the production of requested goods.
U.S. Companies affected by the current embargo are listed below,
 Merck & Co - Drug makers
 Mr. Harrington’s American Pulp and paper- Outlet Store
 Pfizer – Pharmaceutical Maker
Policy Recommendation
 US needs to realize that Unilateral Sanctions is a double edge sword. Most times,
comprehensive sanctions never get the intended reaction from the target country.
With the economy in due need of job creation and business simulation, lifting the sanctions
on Cuba is more of an advantage than a loss. The trade embargo on Cuba makes US
businesses less competitive compared to their foreign allies.
 The U.S. needs to take into consideration US businesses before imposing sanction on a target
country. The loss and gains of US businesses should be weighed heavily.
 A grace period of 30-60 days should be given to businesses in the middle of a transaction with
the target country, thereby reducing the loss of revenue. OFAC can always monitor these
transactions to make sure businesses abide by U.S laws.
 A re-evaluation of the comprehensive sanctions is necessary. Throwing a bucket of sanctions
on a country is never the appropriate way of getting them to take into consideration your
policy suggestions.
Work Cited
United States International Trade Commission, " U.S. Agricultural Sales to Cuba: Certain Economic
Effects of U.S Restrictions". http://www.usitc.gov/publications/332/pub3932.pdf
CNBC, "American Businesses Hoping to Cash in on Cuba". http://www.cnbc.com/id/37339627
US Chamber of Commerce, " Oppose Unilateral Economic Sanctions"
U.S Department of Treasury, OFAC, " What You Need To Know About The U.S Sanction Against Cuba".
Council on Foreign Relations, “U.S.- Cuba Relations”. http://www.cfr.org/cuba/us-cuba-relations/p11113
Map of Sanctions: http://online.wsj.com/article/SB126256626983914249.html
U.S. Department of Treasury, OFAC, “Sanctions Program and Country Information”.
The Heritage Foundation, “ The User’s Guide to Economic Sanctions”.
Work Cited
Central Intelligence Agency, “IRAN”. https://www.cia.gov/library/publications/the-world-factbook/geos/cu.html
Amnesty International, “ The U.S. Embargo Against Cuba: Its impact on social and economic rights.”
CNBC, “Who is Doing Business with Cuba, Despite Embargo”.
BBC News,- Latin America and Caribbean “ Cuban Oil Project Fuels U.S. Anxieties”.
Congressional Research Service, "Iran Sanctions"
The National, " US Companies at Home Feel the Squeeze of Iran Sanctions"
U.S Department of Treasury, OFAC, " An Overview of O.F.A.C Regulations Involving Sanctions Against Iran".
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