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  • Mathieu Provencher

Iran and Cuba joining a party?

(picture from Wix's library)

Hello Everyone!

When discussing trade, Economists tend to use examples such as Hong Kong and Singapore to represent those that succeeded and North Korea to represent those that failed.

Funnily enough, “trade” is often understood as economic exchanges with the west. We tend to have somewhat of an American or a European definition of what it means to be part of the international trade community.

That made quite a lot of sense in the past since the most important consumers were indeed western countries. Also, the USA and Europe designed the rules of trade at a time when they were the clear economic powers of the world.

Although today’s world is very different, “western” countries are still key players in the world of international trade. Being able to trade with the USA and Europe can open doors to profitable and relatively reliable markets, which helps greatly in developing industries and innovations.

This year may open such doors to both Iran and Cuba, at least officially so. Firms from the USA can now start planning trade and investment opportunities in these countries while firms from Iran and Cuba can be cautiously optimistic towards their new trading partners.

These are cases in which Economic benefits were lost because of Ideological concerns… for both parties. Although we may be removing Economic barriers between these countries, ideological barriers are still very present. These two cases, particularly Iran (Canada, for example, never agreed with the embargo on Cuba and continued trading with them despite the USA’s position), may end up being very different from Singapore and Hong Kong.

It is a safe bet that Iranian and Cuban people are more than willing to put some of their differences with American people aside to be able to prosper… however, it is less obvious if the Iranian and Cuban ruling elite can do the same.

These governments have resisted Economic sanctions for many years. They have been targeted by international institutions, forced to accept limited trade, financial services, and help from the rich world. These years of hardship will probably not be forgotten very easily and may lead to a loose acceptance of international rules.

This first step towards reconciliation (reducing trade barriers) is a demonstration that both the west and reluctant countries can share some interests towards economic prosperity. However, there may be more and more “reluctant” or “rogue” countries to trade with (lately, Venezuela, Argentina, Russia, and perhaps China) and they are more and more willing to set aside some of the rules set up by the USA and Europe in order to exchange between them.

Economic sanctions already have questionable impacts on policies of the targeted countries. If more options are available, these sanctions will most probably loose even more efficiency in trying to get everyone to agree to arbitrary rules set up by old economic powers.

Maybe Iran and Cuba will be remembered as success stories where more trade and integration with western counties helped foster economic prosperity… or maybe they will be remembered as countries showing how western interests can bring devastating dependence to those that exchange too closely with them.

Whatever happens, it’s going to be exciting!!!!

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