Economic sanctions
Encyclopedia
Economic sanctions are domestic
Domestic policy
Domestic policy, also known as public policy, presents decisions, laws, and programs made by the government which are directly related to all issues and activity within the country....

 penalties applied by one country (or group of countries) on another for a variety of reasons. Economic sanctions include, but are not limited to, tariffs, trade barriers, import duties, and import or export quotas. The most famous example of an economic sanction is the fifty-year-old United States embargo against Cuba
United States embargo against Cuba
The United States embargo against Cuba is a commercial, economic, and financial embargo partially imposed on Cuba in October 1960...

.

Economic sanctions are not always imposed because of economic circumstances. For example, the United States has imposed economic sanctions against Iran
Sanctions against Iran
This article outlines economic, trade, scientific and military sanctions against Iran, which have been imposed by the U.S. government, or under U.S. pressure by the international community through the United Nations Security Council...

 for years, on the basis that the Iranian government sponsors groups who work against US interests.

The United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...

 imposed stringent economic sanctions upon Iraq
Iraq
Iraq ; officially the Republic of Iraq is a country in Western Asia spanning most of the northwestern end of the Zagros mountain range, the eastern part of the Syrian Desert and the northern part of the Arabian Desert....

 after the first Gulf War
Gulf War
The Persian Gulf War , commonly referred to as simply the Gulf War, was a war waged by a U.N.-authorized coalition force from 34 nations led by the United States, against Iraq in response to Iraq's invasion and annexation of Kuwait.The war is also known under other names, such as the First Gulf...

, and these were maintained partly as an attempt to make the Iraqi government co-operate with the UN weapons inspectors' monitoring of Iraq's weapons and weapons programs. These sanctions were unusually stringent in that very little in the way of trade goods were allowed into or out of Iraq during the sanction period (further information about these sanctions and their effects can be found at www.casi.org.uk and at http://i-p-o.org/Iraq-UN-sanctions.htm). The sanctions were not lifted until May 2003, after the government of Iraqi president Saddam Hussein
Saddam Hussein
Saddam Hussein Abd al-Majid al-Tikriti was the fifth President of Iraq, serving in this capacity from 16 July 1979 until 9 April 2003...

 was overthrown.

There is a United Nations sanctions regime imposed by UN Security Council Resolution 1267 in 1999 against all Al-Qaida- and Taliban-associated individuals which has undergone years of modification by a dozen UN Security Council Resolutions. The cornerstone of the regime is a consolidated list of persons maintained by the Security Council. All nations are obliged to freeze bank accounts and other financial instruments controlled by, or used for the benefit of, anyone on the list.

Trade sanctions

Trade sanctions are trade
Trade
Trade is the transfer of ownership of goods and services from one person or entity to another. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and...

 penalties imposed by a country or group of countries on another country or group of countries. Typically the sanctions take the form of import tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....

s (duties), licensing schemes or other administrative hurdles
Non-tariff barriers to trade
Non-tariff barriers to trade are trade barriers that restrict imports but are not in the usual form of a tariff. Some common examples of NTB's are anti-dumping measures and countervailing duties, which, although they are called "non-tariff" barriers, have the effect of tariffs once they are...

. They tend to arise in the context of an unresolved trade or policy dispute, such as a disagreement about the fairness of some policy affecting international trade (imports or exports).

For instance, one country may conclude that another is unfairly subsidizing exports of one or more products, or unfairly protecting
Protectionism
Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...

 some sector from competition (from imported goods or services). The first country may retaliate by imposing import duties, or some other sanction, on goods or services from the second.

Politics of trade sanctions

Trade sanctions are frequently retaliatory in nature. For example, in 2002 the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 placed import tariffs on steel
United States steel tariff 2002
The Section 201 steel tariff is a political issue in the United States regarding a tariff that President George W. Bush placed on imported steel on March 5, 2002 . The tariffs were lifted by Bush on December 4, 2003....

 in an effort to protect its industry from more efficient foreign producers such as China
China
Chinese civilization may refer to:* China for more general discussion of the country.* Chinese culture* Greater China, the transnational community of ethnic Chinese.* History of China* Sinosphere, the area historically affected by Chinese culture...

 and Russia
Russia
Russia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...

. The World Trade Organisation (WTO) ruled that these tariffs were illegal. The European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...

 threatened retaliatory tariffs on a range of US goods, forcing the US government to remove the steel tariffs in early 2004. Economic sanctions frequently result in trade war
Trade war
A trade war refers to two or more states raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers...

s. They can be a coercive measure for achieving particular policy goals related to trade or for humanitarian violations; for example the United States sanctions against Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...

 over patent
Patent
A patent is a form of intellectual property. It consists of a set of exclusive rights granted by a sovereign state to an inventor or their assignee for a limited period of time in exchange for the public disclosure of an invention....

 law in the late 1980s, or the European Union's sanctions against Burma (Myanmar) based on lack of democracy and human rights infringements.

Effectiveness of Economic Sanctions

Economic sanctions are used as a tool of foreign policy by many governments. Economic sanctions are usually imposed by a larger country upon a smaller country for one of the two reasons- either the latter is a threat to the security of the former nation or that country treats its citizens unfairly. By far regime change is the most frequent foreign policy objective of economic sanctions.However, there is a controversy over the effectiveness of economic sanctions in their ability to achieve the stated purpose. Haufbauer et al claimed that in their studies 34 percent of the cases were successful but Robert A. Pape disagreed with them by saying that when he reexamined the claimed 40 cases of success, only 5 of them stood out.

Cost Benefit Analysis of Economic Sanctions

Under many circumstances, economic sanctions are used as an alternative weapon instead of going to war to achieve the desired outcome. War is expensive but economic sanction is not cheap either. It also affects the economy of the imposing country to some degree. If import restrictions were made, the consumers in the imposing country would have fewer choices of goods. If export restrictions were made or sanction prohibited businesses in the imposing country from doing business with the target country, the imposing country could lose markets and investment opportunities to competing countries. Accurate cost benefit analysis is difficult to make in most of the cases in terms of how the sanctions also affect the economy of the imposing country.

Recent historical examples of trade sanctions

There have been many examples of such disputes and associated sanctions. For example, US steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...

 companies requested, and were at times granted, protection from steel imports that they claimed enjoyed an unfair advantage due to the economic policy of the steel exporting country. At times it was asserted that the exporting company was dumping steel overseas (in the USA) at below cost. See United States steel tariff 2002
United States steel tariff 2002
The Section 201 steel tariff is a political issue in the United States regarding a tariff that President George W. Bush placed on imported steel on March 5, 2002 . The tariffs were lifted by Bush on December 4, 2003....



Again, as the Asian economies became more and more effective competitors on the international stage, achieved largely via export-led growth, many countries imposed import tariffs and other measures aimed at protecting domestic industries. The intention was not always permanent protection (of the threatened industry) but sometimes an attempt to give the domestic firms time to adjust to a changed competitive context.

The disagreements that occur are not only bi-lateral and can be fundamental to the working of the global economy and e.g. to the alleviation of global poverty. As of September, 2003, World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...

 talks in Cancún
Cancún
Cancún is a city of international tourism development certified by the UNWTO . Located on the northeast coast of Quintana Roo in southern Mexico, more than 1,700 km from Mexico City, the Project began operations in 1974 as Integrally Planned Center, a pioneer of FONATUR Cancún is a city of...

 broke down between the advanced nations and the developing world. Unresolved issues include the advanced nations subsidizing their agricultural sectors to the detriment of the developing world, which might otherwise sell more agricultural produce into e.g. the USA and Europe.

In mid-March 2010, Brazil introduced new sanctions against the US. These sanctions were on the basis that the US government was paying cotton farmers for their products; an action not allowed by the WTO. The sanctions cover cotton, as well as other products such as cars, chewing gum, fruit, and vegetable products. The WTO is currently supervising talks between the states to remove the sanctions.

North Korea
North Korea
The Democratic People’s Republic of Korea , , is a country in East Asia, occupying the northern half of the Korean Peninsula. Its capital and largest city is Pyongyang. The Korean Demilitarized Zone serves as the buffer zone between North Korea and South Korea...

 has been the subject of international sanctions since the Korean War
Korean War
The Korean War was a conventional war between South Korea, supported by the United Nations, and North Korea, supported by the People's Republic of China , with military material aid from the Soviet Union...

, which were eased under the Sunshine Policy
Sunshine policy
The Sunshine Policy was the foreign policy of South Korea towards North Korea until Lee Myung-bak's election to presidency in 2008. Since its articulation in 1998 by South Korean President Kim Dae Jung, the policy resulted in greater political contact between the two nations and some historical...

 and by U.S. President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...

, but they were tightened again in 2010.

See also

  • Countervailing duties
    Countervailing duties
    Countervailing duties , also known as anti-subsidy duties, are trade import duties imposed under WTO Rules to neutralize the negative effects of subsidies. They are imposed after an investigation finds that a foreign country subsidizes its exports, injuring domestic producers in the importing country...

  • International sanctions
    International sanctions
    International sanctions are actions taken by countries against others for political reasons, either unilaterally or multilaterally.There are several types of sanctions....

    • Trade war
      Trade war
      A trade war refers to two or more states raising or creating tariffs or other trade barriers on each other in retaliation for other trade barriers...

  • Protectionism
    Protectionism
    Protectionism is the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas, and a variety of other government regulations designed to allow "fair competition" between imports and goods and services produced domestically.This...

  • Sanctions against Iran
    Sanctions against Iran
    This article outlines economic, trade, scientific and military sanctions against Iran, which have been imposed by the U.S. government, or under U.S. pressure by the international community through the United Nations Security Council...

  • Trade embargo
  • United States embargoes

External links

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