The Case for Cuban Engagement

After six decades of communist rule in Cuba, the island is now governed by someone outside of the Castro family for the first time since the 1959 revolution. The new leader, Miguel Diaz-Canel, was vice president and a provincial party chief.

Many believe that the political and economic status quo of the Caribbean nation is unlikely to change. However, lessons from the business world indicate that any change in an organization’s key leaders ushers in a new era for a company.

Whether it’s an acquisition, merger or the appointment of a new CEO, these transformations usually carry enormous repercussions for key functions.

New priorities are typically manifested by new promotions, new players, new rules and new aims. In turn, this results in shifting financial conditions, new private developments and new service assortments.

When applying such transition effects onto countries, one could argue that there is an opportunity for President Trump to act decisively in formalizing and normalizing trade relations with Cuba if conciliatory and meaningful changes are made.

For example, changes could be made so that there are no longer higher hotel rates for Americans than for Europeans, as well as no more ongoing accusations or regurgitation of historic events that have long passed.

Curative International Marketing, a theory developed at Georgetown University’s McDonough School of Business, directly addresses past errors and focuses on long-term restitution and improvements.

Such a move would advance U.S. businesses and their strategic interests while allowing Cuban citizens to operate in the private sector independent of the communist regime.

So far in the Trump administration, the opposite tactic has been taken by restricting American travel and trade with Cuba, which is a reversal of President Barack Obama’s policies.

A pro-business posture allows for increased commercial relations (beyond cigars) that would be more effective in countering the interests of the Cuban military’s monopoly in business.

This policy would empower private Cuban entrepreneurs by eliminating their dependence on the Cuban state apparatus and open them up to U.S. leadership and influence in the region. Private success over public ventures would speak volumes in favor of new economic and social thinking.

As a first measure, restoring the capacity for U.S. citizens to schedule individual visits to Cuba, which was eliminated in 2017, should be considered.

The potential economic boon for Cuba’s tourist industry could eventually stimulate growth in both the U.S. and Cuban economies. Also, this measure would promote democratization and bolster innovation and an entrepreneurial spirit in Cuba.

The recent promising developments in the Korean Peninsula indicate that diplomacy rather than deterrence can advance American interests in places where ideological and strategic divisions run deep. As the White House approaches a deal in East Asia, it could apply the lessons learned from the North Korean negotiations closer to home in Cuba.

President Trump’s acumen for dealmaking can face an ultimate test in Cuba. Opening conversations — and trade — with the island could mark a vast improvement in the bilateral relationship. Hopefully, the American people can look forward to the use of politics that shapes a future good for all of us.

Michael Czinkota teaches international business and trade at Georgetown University’s McDonough School of Business and the University of Kent.

Lisa Burgoa of the School of Foreign Service contributed to this commentary.

New World, New Policy: Entrepreneurial Money Produces Residency Permits

A successful Chinese entrepreneur, showed me a news article. It reported that wealthy Chinese could buy an American passport and become US citizens. Is this really true? What are the implications of this visa program?

The US Employment Based Fifth Preference (EB-5) program was established by the U.S. Congress in 1990, to link investment, employment and residency. Three years later, the program language was relaxed from “to create ten direct employment opportunities”, to “directly or indirectly create 10 job opportunities.” This is broad and flexible wording. It is designed for entrepreneurial and wealthy investors outside the US, who fund a new commercial enterprise of  at least $500,000 for investments. Under the program, those entrepreneurs, their spouses and their unmarried children under 21 years old can apply for green cards permitting residency.The objective is to attract foreign investments to the U.S., and to stimulate economic development and job creation.

EB-5 demand has increased rapidly. In 2012, President Obama extended the program. In May of 2017, Congress extended the EB-5 Program until September 2017. There are many supporters.

In 2014, 10 thousand EB-5 petitions were filed with the United States Citizenship and Immigration Services (“USCIS”). Overall, 5,115 have been approved. Over $2.5 billion investments were attracted. An additional $6.2 billion are awaiting federal adjudication. EB-5 capital is also an attractive low cost funding tool for project developers in the U.S. It offers foreign investors a way to permanent residency that is not backlogged by other applications and does not require sponsorship by a US employer.

Throughout the world today,  numerous programs like the EB-5 have been established. In Australia for example, foreign investors are granted the opportunity to immigrate, but only receive temporary residency for four years. An investment of AUD $1.5 million in an Australian company ( U.S $1.2 million) is required. France allows foreign investors to obtain residency for 10 years by making a “long term  and non-speculative investment of at least € 10 million (U.S $11.8 million) in industrial or commercial assets.”

There is a standard moral objection to the EB-5 program: The United States should not be in the business of selling the right to live there. This claim suffers from a slight misunderstanding. In effect, the government gives the visas away — to profit-making businesses that have jumped through the program’s requisite bureaucratic hoops. Then the companies can solicit investment based on the promise of permanent residency. In spite of ten thousand slots a year, 40,000 investors still wait for a green card. Obviously investor needs have not been met.

Investment immigrants are in high supply. The U.S government should use the opportunity and open the gates to them. The U.S. has an immigration culture, with a spirit willing to absorb both elites and  refugees of the world.

However, change must come; the program needs to be refined in terms of size of investment, number of jobs generated, industry direction, geographic location, and job recipients. I believe that the investment minimum should be $2.5 million, and the American job creation shall be at least 25. Then we can continue this program helping both investors and employees; a noble outcome!

It’s not Double or Nothing for Trade

By Michael R. Czinkota and Charles J. Skuba

In January of 2010 State of the Union address, President Obama set the goal of doubling U.S. exports over the next five years, supporting two million new American jobs through trade with international partners. At the terminus of that timeline, our analysis indicates the completion of less than half the goal with exports of goods and services at approximately $2,350 billion in 2014, compared to $1,571 billion in 2009.

Although he did not hit the numbers, we credit President Obama for an ambitious trade agenda, including completion of previously negotiated free trade agreements with South Korea, Colombia and Panama, and the pursuit of new trade agreements like the Trans Pacific Partnership (TPP), Transatlantic Trade and Investment Partnership (TTIP), and Trade in Services Agreement (TISA).

But why the failure in export growth? In 2009, total global trade decreased by 12%, while U.S. exports decreased by 14%. At the time it seemed reasonable to project stronger growth from 2010 forward. U.S. exports did grow at a robust annual rate of nearly 17% that year and 14% in 2011. Growth of only 4% in 2012 and 2.9% in both 2013 and 2014, however, did not help, since doubling exports requires annual growth of more than 15%.

President Obama’s export goal hinged on the strength of U.S. production, but even the best products require customer spending to generate sales. Europe has experienced disappointing economic growth while major emerging markets like China, India, and Brazil, all sharply declined. A strong U.S. dollar makes American products more expensive, further affecting demand.

One encouraging note is the transition of President Obama from a relatively protectionist U.S. Senator, in favor of trade barriers and subsidies for domestic industries, to a strong advocate of trade agreements.

Where are we now and where do we go from here? Jobs supported by exports now represent 13% of the U.S. economy, up from only 5% in 1990. Yet, the U.S. is still behind on a global scale. Exports represent half of Germany’s economy, 30% of Canada’s, and one quarter of China’s. These key trading partners export more than twice the value per capita than the United States.

U.S. free trade agreements play an important role in lowering trade barriers, boosting exports, and creating jobs. In 2014 the 20 countries with which the United States has a free trade agreement received almost half of U.S. exports and exports to those countries grew by almost twice the overall rate. Free trade agreements level the playing field for global competition. The TPP does that and includes labor and environmental provisions crafted to the highest standards in the world in the strategically important Pacific Basin.

Opponents of free trade agreements often claim that previous accords like NAFTA sent American manufacturing jobs abroad. We disagree. A global economy imposes competitive pressures and requirements on all industries. American manufacturing and services companies cannot escape from the competitive realities of globalization but they can benefit from free trade agreements.

Our outlook for 2015 trade policy and politics: the Administration and Republican majorities on Capitol Hill must and will collaborate on international trade. President Obama has asked for bipartisan support for Trade Promotion Authority (TPA), allowing Congress to vote yeah or nay on trade bills, but not on individual provisions. This will allow U.S. trade negotiators to deliver meaningful industry and regional commitments. TPA is a crucial negotiating tool which the Republican Leadership supports.

There should also be strong domestic support for free trade agreements like TPP and TTIP, which can restore and perhaps even kick start further global progress in the World Trade Organization.

For both Republicans and Democrats, the key trade policy objective of increasing jobs requires policy assessments of the jobs affected by new laws, regulations, and executive orders. It also means linkages between investment and job outcomes, and specific rewards for employment success and help for those hurt by trade. A successful economy requires new measures in technology oriented education availability, and greater global partnerships in science, technology, research and development.

It is time for Congress and the Administration to develop and share credit for progress in international trade. Past failures and shortcomings demonstrate the need for collaboration in achieving trade agreements that deliver significant economic results. 2015 offers an excellent opportunity for the President and Congress to achieve a new beginning. The United States and the world will benefit from such joint leadership.


Michael Czinkota ( researches international marketing issues at Georgetown University He served in trade policy positions in the Administrations of Presidents Reagan and G.H.W. Bush. Charles Skuba ( teaches international business and marketing at Georgetown University. He served in the George W. Bush Administration in trade policy positions in the U.S. Department of Commerce.

NEWS ANALYSIS: Obama, Lagarde head to G-20 facing shaky global economy


The (politically bruised) leader of the world’s largest economy and the head of the global financial counsellor honed their message of co-ordination at a White House meeting last week ahead of the Asia-Pacific Economic Co-operation forum in Beijing and a meeting of the Group of 20 largest economies in Brisbane.

The Obama administration and the IMF are worried Europe, Japan, China and other major emerging markets aren’t doing enough to spur growth.

Just as the US economy shows signs of gathering steam, they’re concerned that dimming overseas demand and a strong dollar will put the brakes on American growth.

The eurozone faces rising risks of a third recession in five years. China is trying to balance a slowdown with the need to overhaul its economy.

Japan’s central bank is being forced to goose growth with more easy-money policies because other government efforts aren’t enough to juice inflation and revive prospects.

Emerging markets are facing dwindling growth outlooks, failing to live up to vows to restructure their economies. And the economic and political crises in Ukraine and the Middle East, which threaten to turn into much more dangerous regional conflagrations, are fuelling investor anxieties.

That leaves the US doing the heavy lifting for the global economy.

Mr Obama and Ms Lagarde are on the same page on many of the policy problems and solutions.

“They discussed the global economic recovery and the IMF’s role with regard to US national security priorities, including financial support for Ukraine and countries in the Middle East and North Africa,” a White House official said.

The official said the two also conferred on emergency financing for Liberia, Sierra Leone and Guinea, the three countries worst-hit by the deadly Ebola outbreak. The IMF has said the beleaguered and impoverished nations will need more international aid to fight the epidemic.

The US and the IMF back more stimulus by the European Central Bank to spur eurozone growth.

Both are advocating governments around the world spend more on infrastructure as a way to inject more cash into their economies.

They’ve both criticised regional powerhouse Germany for not doing enough to spark eurozone growth. They’re fretful Tokyo isn’t going to deliver on a promised economic restructuring, setting the stage for a potential eruption of Japan’s Mt Fuji of debt.

The Obama administration and the IMF are concerned that major economic overhauls in countries such as Brazil, India and China aren’t moving ahead fast enough to ensure global consumption can fuel the world’s economy.

And they are also likely to back a push for greater financial oversight, shifting focus from the traditional banking sector to the largely unregulated financial sectors where economists worry new crises could be developing.

The IMF’s top financial official, José Viñals, warned last week that shocks, such as from another European recession, the Ukrainian crisis or unexpected US rate hikes, could trigger major market sell-offs.

“The need for action is now,” Mr Viñals said.

Monetary policy can’t be the only game in town, he said.

“It needs to be better supported by … fiscal policies, structural policies and financial policies.”

In trying to win over his peers on a decisive growth strategy, Mr Obama will face a political headwind: he has lost some clout in the realm of economic diplomacy in his administration’s failure to secure congressional approval for governance changes at the IMF.

The five-year-old deal would restructure the emergency lender by giving emerging markets greater power at the fund, more in line with their burgeoning economic heft in the world.

Feeling disenfranchised, key emerging markets are crafting strategies to bypass Washington and its leverage at the fund, including replicating the IMF’s emergency-lender role with new cash reserve pools.

“The US failure to get supporting legislation for IMF quota reform is a huge black eye,” said Fred Bergsten, senior fellow and founding director of the Peterson Institute for International Economics.

By highlighting “the IMF’s role with regard to US national security priorities,” the White House is likely signalling that Mr Obama will redouble efforts at home to get the governance changes through Congress.

It’s still an open question, however, whether the new Republican majority will help or hinder the president’s plans.