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Home | Blog | With Cuba Policy, Trump Strikes Another Blow Against Economic Freedom

With Cuba Policy, Trump Strikes Another Blow Against Economic Freedom

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Tags Protectionism and Free TradeU.S. History

06/16/2017

One of the few good things President Obama did was partially liberalize the US government's policy toward Cuba. While it should have gone much further than it did, the Obama administration expanded the types of travel and trade allowed with Cubans in Cuba. 

In the wake of these moves, American entrepreneurs responded immediately with new air service, cargo service, and a myriad of other services designed to provide support to American travelers and business people. 

The reason these services did not exist before, of course, was because the US government's Cuba policy has been based on severe punishments inflicted on Americans who attempted to engage in trade with Cubans. 

As with any set of government regulations, American restrictions against Cuban trade relied on a federal bureaucracy to spy on Americans, track their trade habits, and punish those who engage in the "wrong" type of trade. The penalties are not minor. According to the Treasury Department before the liberalization, this was standard policy for those who engaged in trade with Cubans: 

Criminal penalties for violating the Regulations range up to 10 years in prison, $1,000,000 in corporate fines, and $250,000 in individual fines. Civil penalties up to $65,000 per violation may also be imposed. The Regulations require those dealing with Cuba (including traveling to Cuba) to maintain records for five years and, upon request from OFAC, to furnish information regarding such dealings.

Given that Obama's changes were very small, similar policies continue today.

The overall message is this: if you sell the wrong kind of widget to a Cuban, be prepared for many years in federal prison. The bureaucrats, prosecutors, and other government agents who enforce these rules will all be well paid, of course, courtesy of the American taxpayer. 

Even today, it is technically still illegal to travel to Cuba as a tourist. The Obama administration elected to not investigate travelers who claimed to be traveling to Cuba for legal purposes — namely, research and education. 

This will soon change. Reuters reports: 

Laying out his new Cuba policy in a speech in Miami, Trump will issue a presidential directive to reverse some of the loosened regulations that Obama introduced after a 2014 breakthrough between the two Cold War foes, senior White House officials said.

Trump, taking a tougher approach against Havana after promising to do so during the presidential campaign, will outline stricter enforcement of a longtime ban on Americans going to Cuba as tourists and seek to prevent U.S. dollars from being used to fund what the new U.S. administration sees as a repressive military-dominated government.

But facing pressure from U.S. business and some fellow Republicans to avoid turning back the clock completely in relations with communist-ruled Cuba, the president will leave intact many of Obama’s steps toward normalization.

The new policy will ban most U.S. business transactions with the Armed Forces Business Enterprises Group (GAESA), a sprawling conglomerate involved in all sectors of the economy, but make some exceptions, including for air and sea travel, the officials said. This will essentially shield U.S. airlines and cruise lines serving the island.

However, Trump will stop short of closing embassies or breaking diplomatic relations restored in 2015 after more than five decades of hostilities. He will not cut off recently resumed direct U.S.-Cuba commercial flights, though his more restrictive policy seems certain to dampen new economic ties.

Note the key words here: "stricter enforcement" means more government agents, more government spending, more rules, more regulation, more court orders, and more prison time and fines for violators.  It means conducting investigations of Americans to make sure they're traveling to Cuba only for the "correct" reasons. 

Moreover, the moral argument here, coming from the US government, is questionable at best. So long as the US maintains ties with Saudi Arabia, sells arms to the Saudi regime, and generally falls over itself praising the regime — as Trump recently did — the US has zero credibility in arguing for the necessity of embargoes against "repressive military-dominated" regimes. 

Under the Saudi regime — a military dictatorship — Christianity is illegal, criticizing the regime is illegal, property rights for women (i.e., half the population) are non-existent, and people are routinely beheaded for "witchcraft" and "sorcery." The regime is currently waging a brutal war against women and children in Yemen. A variety of Saudi institutions and citizens are among the world's leading financial supporters of global terrorism and jihadism. 

"But never mind that!" is the message of the Trump administration. "What we really need is a crackdown on Cuba." 

So, as it is abundantly obvious that the US regime has no actual moral problem with the Cuban regime, why do elements of the US  Cuban embargo persist even to this day? 

Much of it is simply interest-group politics. Sentiment against the Cuban regime remains a powerful political factor in Florida politics, and Florida remains an important prize in the electoral college. During the campaign, Trump attempted to placate Florida voters by promising a crackdown on American freedoms in relation to Cuba. Now, he's attempting to follow through on that promise. 

Fortunately, more reasonable heads — those from the business community, for instance — have prevailed to a certain extent, and it appears there is little change of a total breaking of diplomatic relations with the regime, or of a full-blown crackdown in trade. 

This is just par for the course with the Trump administration. For Trump, trade policy has always been a political instrument and has never had anything to do with the freedom — or lack thereof — of Americans in exercising their property rights. If Trump wants to teach those nasty Germans a lesson for selling "too many" cars in the United States, then he thinks it's his prerogative to do so. And what if Americans actually want to buy German cars? "Tough luck," is Trump's position. When we're talking about "America first," actual individual Americans apparently come last. 

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
Image source: A. Tag https://www.flickr.com/photos/tagann/
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