Joe Cobb

Cutting off trade to punish another nation seldom achieves its goal and may stir a variety of unintended consequences.

It seems to make sense: You don’t shake hands with someone you want to punish, and you don’t do business with him, either.

Even closely linked nations have political conflicts, and imposing economic sanctions – cutting off trade – is always one of the first policies proposed.

The main use of trade embargoes is symbolic. In 1935, for example, when Italy waged a dirty war in Ethiopia, the League of Nations imposed economic sanctions. European governments dithered, just as they have done more recently over Bosnia. Public opinion was outraged. David Lloyd George, a leader of the British government’s opposition, observed that the sanctions “came too late to save Abyssinia [the ancient name of Ethiopia], but they are just in the nick of time to save the [British] government.”

Politicians who need to show “leadership” but don’t want to get too rough use economic weapons. These are much cheaper than military adventures, yet more forceful than diplomatic protests. Every U.S. president since Woodrow Wilson has invoked trade sanctions.

But economic policies that express hostility can also provoke it. For example, after Japan invaded China in the 1930s, the United States and Europe imposed an oil embargo. The Japanese fleet was down to about 30 days of remaining fuel when it struck Pearl Harbor and launched a wider war for Asia’s resources.

Trading with the enemy in time of war is viewed as treason – not only because valuable technology, essential supplies, and even secret information are involved, but also because trade is essentially a peaceful, profitable activity. The enemy will profit from it, and the whole idea of a war is to impose heavy costs on the other guy. There must be sacrifice to win a victory. To maintain a nation’s will, governments have to assure everyone that sacrifices are shared. If some businessmen are allowed to make profits while others sacrifice, no government can maintain a serious front.

But the “sharing” of sacrifice is hard to guarantee. When President Carter announced that the United States would boycott the 1980 Moscow Olympics because the Soviets had invaded Afghanistan, most Americans thought it was a good moral posture, but the athletes who had trained for years paid the price. The grain embargo Carter imposed on the Soviet Union hurt wheat farmers, but consumers of grain were actually better off.

Trade embargoes and economic sanctions are imperfect foreign policy tools for a government to seize in a moment of anger, not only because they unequally hurt their own people, but more importantly because they seldom hurt the enemy as desired.

The unequal effect of economic sanctions is all the more obvious in totalitarian societies, where governments control the economy. Shortages of gasoline, toilet paper, and household conveniences are justified by pointing to “the enemy.” The political elite in Iraq, Cuba, and Libya – all the target of U.S.-supported embargoes – are probably not deprived of luxuries and medicine, but the masses are.

The U.S. embargo on Cuba probably strengthened Fidel Castro’s grip on the island by stimulating nationalistic feelings against the “imperialists.” Moreover, the availability of Soviet aid for 30 years and foreign investment today have blunted the effect.

In the U.S. Civil War, although economic sanctions against the South may have contributed to the Union victory, they were hardly decisive. The shortages of cloth and manufactured goods served to strengthen the prowar spirit of Confederate women.

Interrupting trade, even for short periods of time, can have long-term consequences. Before the War of 1812, Thomas Jefferson imposed a trade embargo against the British that almost caused New England to secede from the Union. The South watched and acted on the idea in time. But America adjusted to the embargo. Even Jefferson built a mill at Monticello to produce nails, which he could no longer buy from England. That proved to be uneconomical when transatlantic trade resumed, and he changed his opinion to favor “temporary” protectionism when free trade would wipe out the value of such investments. More than 150 years of U.S. tariff politics and political corruption followed.

Necessity is the mother of invention, and nations that cut off trade find themselves in sudden need of things that used to be available. Finding new sources of supply and developing substitutes become urgent – and often profitable.

Smuggling and blockade running require sharp business skills and combine adventure with entrepreneurship. Inventors can become national heroes. During World War II, with the breakdown of world trade, Germany came up with substitutes for petroleum products, and the United States developed artificial rubber.

In a comprehensive 1990 study of economic sanctions since World War I, including 116 case histories, the Institute for International Economics found that the success or failure of such policies depends critically on the circumstances of each case. About one-third of the time, economic sanctions failed; about one-third of the cases showed ambivalent results; and about one-third could be ranked as successful.

In more recent years, however, with the expansion of world trade, economic sanctions have more often failed. Among the lessons of the case studies is that strong countries should pick weak opponents, not those their own size. Economic sanctions are more likely to succeed if two countries already have important trade relations. And careful choice of the sanctions to impose is essential: They shouldn’t cost the imposing nation’s people very much. Economic sanctions of a financial nature seem to be more effective than trade embargoes in general.

Political leaders who turn to economic sanctions as a tool of foreign policy are often simply at a loss for something else to do. It is tough being a “leader.”

Copyright © 2007 The World & I Online. All rights reserved.
Published in The World & I magazine, October 1995.