Why Do The U.S. and The EU Begin to Normalize Relations with Cuba?

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President Barack Obama stands with Cuba’s President Raul Castro before a bilateral meeting at the United Nations headquarters.

Stockade Cuba, once isolated for generations from U.S. and Europe, suddenly becomes the center of Americas. As president Barack Obama scheduled his historic trip to Cuba in late March, the European Union didn’t want to fall behind America’s step in thawing relations with Cuba, signing an agreement on political dialogue on March 11 to normalize bilateral relations after two years of negotiations.

In fact, this is not the first time for the European Union to try to restore its ties with Cuba. Cuba and the EU had maintained tense relations for years because of the situation of human rights on the socialist island. The turning point came in 2014, when Cuba and the EU Launched talks on a bilateral agreement on Political Dialogue and Cooperation. Nowadays, “human rights” seems no longer a contradiction compared to their desire for benefits from Cuba. “The issue of human rights was addressed in a way acceptable to both sides”, said Cuban Deputy Foreign Minister Abelardo. For years, several EU countries reached specific bilateral agreements with the Cuban government. France has signed several deals with Cuba to ease its debts or convert the debts to development projects. As the second largest exporters in Cuba, Italy also sent a group of officials and entrepreneurs to discuss opportunities in trade to Cuba last year. Even Germany, who had few investments and trades with Cuba, decided to set a Trade Representatives’ office in Cuba. Why do they all want to strengthen ties with Cuba?

Every single movement in international relation is driven by profits. First, foreign direct investment in Cuba is very appealing. French Construction and Telecom company Bouygues, brewer magnate Pernod Ricard Group, and energy magnate Total, all had investments in Cuba, bringing a large sum of profits to France. Among all the projects, the most attractive sector for foreign investors in Cuba should be tourism. Owing to its beautiful landscape, exotic culture and more open market, tourism has become the most important and profitable sector in Cuba’s economic development. In 2015, tourists to Cuba amounted to 3500 thousand which broke the record. However, with an increasing number of tourists it received, the inadequate capacity of hotels in Cuba became a big problem, which even caused Cuba’s growth rate of income from tourism to decrease from 17% to 6%. EU and the United States were aware of this problem, and have sought for benefits from it. According to the EU, roughly one-third of the tourists visiting the island each year come from the bloc. Accor has already established some branches in Cuba; Kempinski cooperated with Cuban company Gviota and will finish their new project in 2017; Sofitel also began to run its plant in Cuba recently. For the United States, a strained relationship is a barrier for American companies to gain profits in Cuba. For example, Starwood has to get formal approval from U.S. to operate in Cuba, and Cuba’s resistance to letting foreign companies build or own property made it less likely to build new hotels. In this circumstances, negotiation and cooperation seem a win-win choice.

Trade should be another significant drive for normalizing relationships. Cuba is rich in many natural resources, including nickel, cobalt, manganese, chromium, iron, copper and so on. Its main exports are tobacco, refined oil, sugar and drugs, and its main imports are food, machines and fuels. Due to America’s trade sanctions, Cuba is short of materials, but as a matter of fact the market has huge potential. There are some barter agreements between Cuba and Venezuela, Brazil, and China. For instance, Venezuela provides oil for Cuba, and Cuba provides human resources for Venezuela in return. As a labor-abundant country, if Cuba can export labor-intensive goods and import capital intensive goods from EU or the United states, both parties will benefit. Nowadays, the average wage for Cuban is only 20 dollars per month. As international trade expands, Cuban’s income will get higher and higher. On the other hand, foreign companies will be happy to see open the market of Cuba. For example, an inspiring phenomenon in Cuba is that more and more people have an access to the Internet, which delighted Netflix a lot who planned to provide video service to Cuba. The EU is currently Cuba’s second-biggest trading partner, accounting for about 20% of the island’s total trade, so it comes naturally that they prefer a better relationship.

EU’s attitudes towards Cuba was influence by the United States to a large extent. According to the Helms-Burton law, citizens and corporations of the United States have the right to prosecute anyone, even any countries that do business with enemy of the United States. This law deterred EU and many countries in EU to trade with Cuba. When Obama intended to break the ice, EU certainly chose to implement its plan that has been considered for a long time to normalize its relationship with Cuba. Meanwhile, there is always advantages for the first mover. In my view, if the United States reach out some cooperation agreements with Cuba, such as tariff reduction or even free trade agreement, EU’s profits from trading with Cuba will definitely get hurt. That’s another reason I think why EU is so eager to strengthen its relationship with Cuba.

Some people also emphasized on Cuba’s political position in South America, which can help relax any potential conflicts in that area. Whatever reasons for the United States and the EU to choose to normalize relationships with Cuba, peace and development is always the theme in the present world, and we will see freer and broader trade between different countries.

Reference:

http://www.huffingtonpost.com/2014/12/17/us-cuba-talks_n_6340468.html

http://www.cnn.com/2016/03/11/americas/cuba-eu-relations/index.html

http://www.business-standard.com/article/news-ians/cuba-eu-willing-to-strengthen-ties-116031200236_1.html

http://www.business-standard.com/article/news-ians/cuba-eu-willing-to-strengthen-ties-116031200236_1.html

http://eeas.europa.eu/cuba/index_en.htm

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