Food shortages, economic volatility, and human rights violations are only three of the many ailments that have plagued the floundering Cuba in the past decade. These problems originate in Cuba’s strangling government, which has been challenged by international sanctions since its origin in 1959. For the past half-century, the US has remained entrenched in its unsuccessful embargo of Cuban goods with the intent to undermine the Castro regime. Yet both the U.S. and Cuba stand to benefit from trade between the two nations.

The embargo was first imposed in 1962 following Cuba’s alignment with the Soviet Union. Since then, the Helms-Burton Act of 1996 codified the embargo into law and strengthened its reach by restricting trade of Cuban-made goods with foreign companies. The US has remained steadfast in its demand for Cuban democracy and dismantling of the current government, but few European and Latin American allies support its economic embargo. The source of current support for the embargo lies in the Cuban-American lobby, which sways the vote of Cuban- Americans in Florida. Currently, U.S. law has ceased trade apart from basic necessities—agricultural imports from the U.S. totaling $1 billion—with its southern neighbor, and has reduced trade between Cuba and other nations.

The large economic impact the lifting of the Cuban embargo would have on Cuba is closely tied to its dependence on trade. Historically, the socialist system of trade has left Cuba’s prosperity in the hands of the Soviet Union and, recently, Venezuela. In the period following the dissolution of the Soviet Union, Cuba’s GDP dropped 35% as Soviet subsidies were lost and 85% of Cuba’s trading partners ceased trade with the island. Shortages of basic goods and medicine, a plummeting standard of living, and rising debts all revealed Cuba’s dependence on international trade and subsidies from socialist allies. And while Cuba has recovered from this period, much of it was due to relaxed state control of the economy and increased humanitarian trade from the US.

Since 2004, Cuba has replaced its Soviet sponsorship with Venezuelan subsidies and trade. Amidst Cuban economic growth, open trade with the United States could relieve Cuban dependence on foreign support. As Cuba’s main trading partners are currently Venezuela, Canada, and the EU, Cuba could competitively export agricultural and fuel products to its close neighbor, the U.S. With the surplus earned from exports, the government could make balance debts and offer a greater variety of goods to its citizens.

The United States would also benefit greatly from lifting the embargo. In terms of U.S. exports, the U.S. International Trade Commission estimated that the annual U.S. export losses from the embargo are approximately $1 billion dollars. Additionally, the United States could also normalize relations with nations frustrated by their stubbornness over excluding Cuba. When choosing whether to continue or close the embargo, the U.S. must weigh its effectiveness against these forgone benefits.

The embargo has now been in place for 50 years and has been utterly unsuccessful. Broadly, the embargo was intended to push Cuba toward democracy and oust Fidel Castro as its leader, but instead Cuba has adapted to the loss of U.S. support and has distanced itself from its powerful neighbor. Independent of the embargo, Raul Castro—Fidel’s 80-year- old younger brother—has loosened government economic control. Cubans are now able to sell some private property and apply for 181 approved self-employment occupations. Although the work is predominantly menial labor, the 371,000 licenses granted for self-employment is nonetheless a step toward capitalism. As Cuba takes these small steps on its own, U.S. trade will expose the benefits of capitalism to the Cuban government.

The losses from trade that the United States incurs by imposing the Cuban embargo further exposes its absurdity. The U.S. government promises to lift the ineffective embargo on the condition that Cuba transitions to democracy, yet communist China remains America’s second largest trading partner. After 50 years, the embargo resembles more an outdated manifestation of the Cold War than an effort to improve the lives of Cuban citizens.nearly impossible for entrepreneurs to create successful businesses.

With the world’s second largest economy after the United States, China has definite potential to exert strong influence on the global economy. However, largely due to the government’s reluctance to laissez faire, it hasn’t yet fully capitalized on its clout, especially in the global financial sector. But all that may soon change, as China’s central bank chief said in early April that China may loosen overseas investment regulations for private investors.

Historically, China first voluntarily opened up to foreign trade and investment under Deng Xiaoping in 1978 with his new capitalist-inclined system that promoted market forces. Since then, China’s financial sector has undergone significant reforms but it still exhibits the legacy of a centrally- planned economy in which the government, to this day, plays an instrumental role in credit allocations and pricing of capital. In addition, the government instituted a myriad of regulations that control both foreign investment into China and Chinese investment in foreign investments. Hindered by a maze of administrative procedures, foreign investors in China have complained that the Chinese government does not allow them to compete fairly with native businesses. Chinese investors that want to invest overseas, too, are heavily limited by esoteric guidelines.

However, beginning in October of 2011, the Chinese government took a significant step toward freeing up its hold of the financial sector. The deregulations include allowing foreign companies with RBM deposits outside of China to use their offshore account to directly invest in China, and allowing direct investment overseas for private Chinese investors in Wenzhou, also known as a “general financial reform zone” experiment. The government, afraid of the volatile international financial sector, decided to allow Wenzhou–a city in China recognized as the “birthplace of China’s private economy” due to its role as leader in developing a commodity economy, household industries, and specialized markets in the early days of economic reforms–to experiment with direct investment overseas. Concerns over inflation and property risks have held back the Chinese government from allowing a larger-scale deregulation, but nonetheless the Wenzhou experiment is widely acknowledged by the international community as a significant step forward.

Besides de jure governmental regulations, there are many de facto barriers to Chinese involvement in foreign trade. The most prohibiting factor to foreign trade is not what the laws say, but rather the existence of confusing, and often conflicting, laws at all levels of government. A unitary state with 23 provinces, 5 special autonomous regions, 4 self-governing municipalities, 2 special administrative regions, and a hierarchy of departments at all levels, China has innumerable bodies with legislative and enforcement powers that can influence foreign firms’ operations. Many foreign, and even native, companies have vocalized the impossibility of navigating the Chinese bureaucracy. A common phrase in Chinese business circles is, “It’s okay since no firm is 100% in compliance with regulations.” This trend poses significant legal risk for potential foreign investors.

Another substantial barrier to investment in Chinese markets is the inability of foreign private equity firms to freely convert RBM into other currencies. In terms of entry into Chinese market, foreign entrants must obtain special permission from the Ministry of Commerce to make investment in China using foreign currency-denominated funding pools. The Ministry of Commerce, then, picks certain transactions that it considers beneficial for the country and its policies. Later, the lack of RMB convertibility means that it’s difficult for a company to get its profits out of China. Again, companies require Ministry of Commerce permission, and are subject to different regulations depending on which individual in the Ministry handled the case, and his or her interpretation of the laws. Currently, successful foreign companies in China exploit the murky financial environment by taking advantage of unpredictable legal enforcement and shady accounting through local knowledge and networks.

However gloomy and risky foreign investors view the opportunities in China, one thing is for certain: they all want a slice of the large economic pie. “The more open China is to the world, the more benefits China will get and the more competitive local industry will be,” said Li Xiaogang, director of the Foreign Investment Research Center at the Shanghai Academy of Social Sciences. Following a similar philosophy, the Chinese government has begun responding to international pressure and removing itself as the referee in the financial markets. Ironically, Chinese deregulation may eventually level out the playing field in China’s financial sector, and with foreign companies as players, all the participants may reap benefits.