Big changes are afoot in the world of trade. Not only is there an ongoing global shipping crisis, there are also windows in the world of international borders that are closing and opening. This summer, Britain shocked the world by voting to leave the European Union. If a hard Brexit does occur, as seems likely, then the UK will depart from one of the world’s largest common markets.
On the other hand, a gradual rapprochement between the United States and Cuba appears to indicate that trade between the two nations might once again commence. Already, Cuban rum and cigars have had import restrictions lifted. Now, visitors may bring home unlimited quantities of these items—as long as they are to be given as gifts, and not sold. Surely this small beginning may lead to a flowering of exchange between the two countries—if so, what would this look like?
Brexit Looks the Flatten UK Economic Growth—But Not in the Short Term
When the bottom fell out of EU-UK relations, a lot of things fell with it. The value of the pound, for example, is now through the floor at $1.22, down from a recent high of $1.70 towards the end of 2014. Ironically, this devaluing may have actually had a temporary cushioning effect on trade. Because its goods are now cheaper, Britain might actually have more export success over the short term.
This temporarily rosy outlook somewhat underestimates the magnitude of the UK’s problem, however. For example, experts predict that if the UK leaves the EU’s customs market, the effect could be a dramatic reduction in trading volume as ports and roadways will become jammed with vehicles waiting to be inspected. The cumulative effect of this and other trade obstructions would lower the UK GDP by a whopping 4.5%—and in order to stem the bleeding, it would need to increase trade with nations outside the EU by a staggering 37% in turn.
Onlookers in the European Union shouldn’t allow themselves to feel smug, however. A loophole in their governing process has allowed the tiny region of Wallonia, home to only 3,500 people, to hold up a free trade deal with Canada that would eliminate over 9,000 tariffs.
Benefits of Increased Trade With Cuba Are Potentially More than Merely Economic
Since President Obama was elected in 2008, signs have pointed towards an eventual thawing of relations between the United States and its island neighbor. First, in 2009, the travel ban was lifted for Cuban-Americans. In 2012, a legally sanctioned ship sailed from Miami to Cuba for the first time, carrying gifts and aid. Foreign investment, ferry travel, and the aforementioned cigar glasnost are all well under way.
You’d think that, being a much smaller nation, most benefits of renewed relationships with Cuba would accrue to the island. This isn’t wrong: Cuba currently receives $1.4 billion from the US annually via remittances alone. The benefit isn’t all one-sided, however: both the agriculture and communications sectors stand to gain heavily from increased trade with Cuba.
Some benefits might not be measured only in terms of money. One positive externality for the US comes in the form of medicine. Relative to its small size and poverty, the nation of Cuba has invested in an amazing healthcare system. Among its innovations is medicine that functions both as a treatment and a vaccine for lung cancer, which is now undergoing medical trials in the US for the first time ever.
In Order to Realize Opportunities, Companies Must Navigate Complex Waters
Narrow waters separate two island nations from their respective continents. One nation is slowing closing itself off from the world, and one is finally beginning to open up after decades of isolation. For each country, there remain opportunities for enterprises to make money via the exchange of goods. For those enterprises, navigating a complex and changing web of regulation will be their primary challenge.
How do you currently get a permit to export goods to Cuba? Will the falling pound affect shipping prices to the UK? When will new regulation go into effect? To learn how organizations have answered these questions and shaved down transportation costs in the process, take a look at our report, “Reducing Global Logistics Cost With Benchmarking And Shipping Container Pricing Strategy.”