What is the effect U.S. trade restrictions on IT exports to Cuba?

The Senate Finance Committee is researching the economic impact of U.S. embargo on trade with Cuba and I was asked to testify before the US International Trade Commission on the effects of the U.S. restrictions on our exports of telecommunication equipment and services to Cuba. I have a chance to revise the testimony, and would appreciate feedback.

Click to download Word or PDF versions of the draft.

Here is the testimony introduction:

The Commission has asked for testimony on the effects of the U.S. trade restrictions on our telecommunication exports to Cuba. Since there is a great deal of uncertainty about the Cuban plans and policies and U.S. policy is also in a state of flux, I will lay out a framework for discussing the issue rather than attempting specific predictions. This framework can be modified and fleshed out by future research. I will focus on Internet-based telecommunications, which are subsuming traditional telephony.

Potential U.S. exports to Cuba include:

• Personal Internet access devices
• Internet services for fees or advertising
• Internet infrastructure
• Internet service provision
• Digital entertainment and other content
• Sensor-based Internet access devices – “the Internet of things.”

Some of these markets, for example, providing Internet infrastructure and service, are more severely impacted by U.S. restrictions than others.

U.S. restrictions are only one impediment to the sale of these goods and services – there are others that are out of our control:

• Cuban government fear of free information exchange
• The Cuban economy
• The absence of domestic Internet infrastructure
• Socialist values and practices
• Foreign competition
• Domestic competition from state monopolies

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Update 6/26/2015

An anonymous reader has the opinion that my testimony document underestimates the potential of the Cuban market. They listed the following examples:

Web hosting service -- the reader is "middle man" for ten Web sites hosted in Canada and knows of many others.

Specialized professional audio/video equipment that is only made in US, or were US products traditionally have much better quality. Examples include products from Avid, M-Audio and Alesis. Their products are sometimes bought by Cuban companies in third countries using a foreign nationals or foreign companies as middle man. Other times they have to settle for lower quality products from China or Europe.

Computer assisted Medical equipment -- this is a big opportunity because the Cuban government spends a lot on health care every year

Specialized Software -- for example Oracle databases, which are pervasive in Cuba.

The reader went on to say that some US companies refuse to sell their products to Cuban even in foreign countries. For example Dell dealers refuse to sell laptops to people with Cuban passports in Madrid and Barcelona.

Note that the specialized software is pirated, as is much of the software and content distributed in the weekly "paquete." Copyright infringement will be an issue in any discussion of liberalization of US trade policy. Also note that the medical and audio/video equipment is sold primarily to government enterprises, not private individuals or cooperatives.

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Update 1/16/2016

The FCC has removed Cuba from its exclusion list, opening the door for U.S. telecom carriers to provide facilities-based telephone and Internet service to Cuba without separate approval from the Commission. (Cuba was the last remaining country on the Commission’s
Exclusion List).

The ball is in Cuba's court, but I do not expect them to pick it up any time soon.

Dreaming -- this would be a good time for ETECSA to experiment with satellite Internet as an interim measure.