Trade Sanctions Essay ⋆ Business Essay Examples ⋆ EssayEmpire

The term trade sanctions refers to actions by which governments try to fulfill political or economic goals by using international trade as a policy instrument. Some other terms such as trade embargoes, boycotts, and economic sanctions are often used interchangeably and loosely to describe similar actions.

Sanctions are restrictions or policies directed very specifically at one country, or a group of countries, that attempt to restrict or even completely prevent trade or other economic interactions with that country. Restrictions may take the form of duties on imports from the sanctioned country that raise the cost of imports and may render that country uncompetitive, or they may take the form of complete ban on imports. Besides restrictions on imports, sanctions can be imposed on exports to the country and or on capital flows and investments between the two countries. In more extreme cases other forms of restrictions, for example, preventing a country from having economic interactions with third countries, can be used to achieve political goals. Sanctions may sometimes be imposed against a specific product such as arms or oil.

The purpose of imposing trade sanctions is to force the leaders of the sanctioned country to conform to the will of the sanction-imposing countries. Sanctions are seen as instruments that will impose economic costs on the targeted country and compel its ruling elite to bring about the desired changes. The most important sought-after change has been to bring about democratization of the regimes in the target countries. Trade sanctions are also imposed in response to a country’s aggression against its neighbor(s). Other reasons for imposition of sanctions include nuclear proliferation, civil wars, violations of human rights, military coups, inability to control narcotics trade and distribution within the country, and support for international terrorism. It has also been argued that trade sanctions are sometimes imposed to serve the interests of particular interest groups within the sanctions-imposing countries that may wish to restrict imports into the country. International law permits use of sanctions to achieve certain goals because they do not involve the use of armed forces. Sanctions may be imposed by one country, or a number of countries may take the action together. Sanctions may be imposed under the aegis of an international body, such as the United Nations (UN), by an agreement between countries, or unilaterally by one country.

While economic warfare through sanctions is not a new idea, use of sanctions has increased during the past 50 years. According to one estimate, there were 62 acts of sanctions by the United States or the UN during the 1990s. Three examples of trade or economic sanctions during the past few decades help illustrate how trade sanctions work. The United States imposed trade and economic sanctions against Cuba starting in 1960 with the aim of bringing down the avidly anti-American regime led by Fidel Castro. Many countries joined together under the aegis of the UN to impose sanctions against the apartheid regime in South Africa in 1986. The UN was also used by some countries to impose trade sanctions against Iraq in 1990 in response to that country’s invasion of Kuwait. These three examples highlight many aspects of trade sanctions as to their reasons, extent of the restrictions imposed, their effectiveness, and their consequences.

U.S. Sanctions Against Cuba

Treatment of Cuba by the U.S. government is a good example of the range of activities that encompass trade and economic sanctions. The U.S. government first imposed embargo on arms shipments to Cuba in 1958, due to political unrest in the country. These export restrictions were supplemented with restrictions on imports of Cuban sugar in 1960, after the 1959 revolution in which a U.S.-supported Cuban regime was overthrown by Marxist guerrillas. When Cuba aligned itself with the Soviet Union and confiscated U.S.-owned properties in Cuba, the scope of these sanctions was widened. Full economic sanctions were imposed after the Cuban Missile Crisis of October 1962. Under these sanctions, all goods made from or containing Cuban material (even if assembled in other countries) were embargoed, transportation of U.S. goods on ships owned by companies that did business with Cuba was banned, restrictions were imposed on U.S. citizens traveling to Cuba, and Cuban assets in the United States were frozen. At one point, the United States even suspended aid to countries that continued to trade with Cuba.

In 1996, the scope of the sanctions was expanded considerably when the Helms-Burton Act was passed. This Act placed restrictions on the U.S. operations of non-U.S. companies that were doing business with Cuba. Although the European Union (EU) initially challenged this law on the grounds of extraterritorial application of U.S. laws, it dropped its challenge as a result of a negotiated agreement with the U.S. government. Many of these sanctions have remained in place since their imposition, with some exceptions in years when the restrictions were not renewed by Congress. These sanctions have been imposed by the United States unilaterally, except for about a decade from 1964 when the Organization of American States (OAS) joined the United States in imposing sanctions on Cuba.

The declared objective of the trade and economic sanctions against Cuba had been to “bring democracy to Cuba” through the destabilization of the Castro regime. During the period just after the Missile Crisis, these sanctions were also justified on the grounds of national security. Any visitor to Cuba when Fidel Castro was still in power would have observed the effects of these sanctions. Cubans used American cars from the 1960s not out of their love for vintage cars, but because they were unable to acquire newer models.

While Cuba boasted the highest ratio of trained doctor to population of any developing country— even exporting its medical staff to other developing countries—the shortage of supplies was so severe that ordinary Cubans begged tourists to leave behind any medication they may have brought with them. The sanctions thus fulfilled their role as instruments for imposing economic costs on the target country. In its stated goal of replacing Castro, however, the sanctions were a complete failure. Castro remained in power until a ripe old age. Once the Soviets had withdrawn their missiles from Cuba, the national security argument for continuation of sanctions could not have been a serious one.

Sanctions Against South Africa

By 1980, most countries had begun to seriously oppose the minority-led South African government’s policy of apartheid. In 1986, Canada on the behalf of Commonwealth countries, the European Economic Community, Japan, the United Kingdom, and the United States imposed trade sanctions against the South African regime. Each of these countries had its own list of sanctioned goods that could not be imported from or exported to South Africa. These lists included commodities, raw materials, textiles, weapons, oil, and computers. These trade sanctions were supplemented by restrictions on investments in and out of the country, as well as cultural, sports, and academic boycotts of the country.

Sanctions Against Iraq

The UN imposed trade embargo against Iraq in 1990 after Iraq invaded the sovereign nation of Kuwait. This embargo was extended in 1991 to become what are now thought to be the most comprehensive sanctions in history. Trade in anything other than medicines and some food was prohibited by these sanctions. While some attempts were made to negotiate minor changes to the extent of sanctions, neither the Iraqi nor the U.S. (the driving force behind the sanctions, with some opposition from Russia and France) governments were willing to compromise. Saddam Hussein believed that the sanctions could not last, and the U.S. government was convinced that he would use any opportunity to rebuild his stock of weapons of mass destruction.

An “oil-for-food” (OFF) program was operationalized at the end of 1996, which allowed imports of food under stringent conditions. Before the implementation of this OFF program, Iraq’s external trade had come almost to a complete halt. About $4.5 billion of Iraq’s assets were frozen and the country had defaulted on all its foreign obligations. The country could not repair its damaged oil facilities and was unable to produce sufficient oil to reach its quotas permitted under the OFF program in some years.

The stated aim of the sanctions was to make life so uncomfortable for the Iraqi people that they would force the removal of Saddam Hussein from power, which would prevent him from developing weapons of mass destruction. Clearly, the sanctions failed in achieving the goal of change of leadership. They did succeed in achieving the second goal. The cost, however, has been the suffering of a civilian population that became pawns in the battle between Saddam Hussein and the Western powers.

Iraq had boasted one of highest human development index rankings in the Middle East before 1990. After the Gulf War of 1991, it ranked below most of the countries of the region. Sanctions were also blamed for higher death rates of infants in Iraq after the war. Although the number of deaths attributable to sanctions is widely disputed, both in terms of the number of deaths, and the attribution of those deaths to various reasons, high infant mortality rates became the cause célèbre for the battle between those in favor and those against the sanctions.

Do Sanctions Succeed?

The debate on whether trade sanctions are successful is unsettled. In most cases, sanctions manage to impose at least some economic costs on the sanctioned country. One study has found that the gross domestic product (GDP) in the sanctioned countries decreased by an average of about 3.3 percent in cases where the sanctions were successful. Sanctions, however, also impose costs on the sanctioning country. Cuban sanctions, by one estimate, have cost the United States lost exports of about $7 billion. These costs may alienate business interests within the sanctioning country or in the third country, and may weaken the force with which the sanctions are implemented. U.S. sanctions against the Soviet Union’s construction of a gas pipeline were resisted by European governments who saw their own firms suffering from the embargoes.

Sanctions may lead other countries to come to the aid of a sanctioned country, when other parts of the world do not agree fully with the reasons for the sanctions. This has been especially true when sanctions are tied up in ideological battles. U.S. imposition of sanctions against Cuban sugar contributed to the strengthening of ties between Cuba and the Soviet Union.

Sometimes, sanctions do not work because they create their own antidote. Regimes in sanctioned countries often manipulate the impact of sanctions to their own interests. It has been argued that Fidel Castro remained in power for as long as he did precisely because he was able to unite the population behind his policies with a call to fight against the “oppressive measures of imperialists.” When Britain and the UN had imposed sanctions against the white minority regime of Ian Smith in Rhodesia, the mostly white business community was manipulated by Smith to rally behind his government, even though that community had previously believed that a (black) majority rule was inevitable. Similarly, Saddam Hussein used the sanctions to his own ends by creating an external enemy. Through his control of the supply of whatever goods and food remained in the country, he managed to consolidate his power by limiting access to these supplies to faithful allies.

Autocratic regimes seem to be more resistant to compromises under sanctions than democratically elected government. In general, sanctions seem to work when forceful and quick actions are taken rather than when “screws are tightened slowly.”

Bibliography:

Steve Chan and A. Cooper Drury, Sanctions as Economic Statecraft: Theory and Practice (St. Martin’s, 2000);
Harald Grossmann and Jochen Michaelis, “Trade Sanctions and the Incidence of Child Labor,” Review of Development Economics (v.11/1, 2007);
Gary C. Hufbauer et al., Economic Sanctions RECONSIDERED (Pearson Institute for International Economics, 2007);
International Business Publications, U.S. Foreign Trade Sanctions Handbook (International Business Publications USA, 2007);
Casey B. Mulligan and Kevin K. Tsui, Political Entry, Public Policies, and the Economy (National Bureau of Economic Research, 2008);
Meghan L. O’Sullivan, Shrewd Sanctions: Statecraft and State Sponsors of Terrorism (Brookings Institution Press, 2003);
James A. Paul and Senwan Akhtar, “Sanctions: An Analysis,” Global Policy Forum, www.globalpolicy.org (cited March 2009);
Slavi T. Slavov, “Innocent or Not-so innocent Bystanders: Evidence From the Gravity Model of International Trade About the Effects of UN Sanctions on Neighbour Countries,” World Economy (v.30/11, 2007);
Michael C. Soussan, Backstabbing for Beginners: A Crash Course in International Diplomacy (Nation, 2008);
United States Government Accountability Office, Iran Sanctions: Impact Good or Bad? (Nova Science Publishers, 2008).

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