ECON3315

1
ECON3315 International Economic Issues

• Instructor Patrick M. Crowley

Issue 3 Trade sanctions and human rights
2
Overview

• Sanctions - background
• US sanctions
• Success of sanctions
• Sanctions as a counter to terrorism
• Trade and human rights
• China and the WTO a case study

3
Sanctions - background

• Trade sanctions on countries have a long history
• First trade sanctions imposed in 432BC by Athens
  against Megara
• US first imposed trade sanctions against Europe
  in 1807
• Japan in 1938 (led to attack on Pearl Harbor)
• South Africa during the apartheid era, many
  developed countries imposed trade sanctions (UK,
  US, Europe)
• Soviet Union (US, Europe) during cold war
• Nicaragua (US) during sandinasta rule
• Uganda during Idi Amins rule (UK)
• Libya under Colonel Gaddafi (UK/US)
• Cuba under Fidel Castro (US)
• Rhodesia under Ian Smith (UK)
• Zimbabwe under Robert Mugabe (UK)
• Afghanistan under Taliban (US, UK)
• Post-9/11 US sanctions against axis of evil
  states
• Most recently against Syrian regime

4
US sanctions

• US sanctions can comprise the following
• Ban on sensitive technology exports
• Ban on export of weapons
• Ban on foreign assistance (granting credit,
  loans, aid)
• Ban on financial transactions with sanctioned
  governments
• Ban on firms doing any business with country
• Since 9/11 add to this
• Freezing of assets held in the US and abroad
• 3rd party measures if assets not frozen then
  sanctions on these countries too
• Foreign Terrorist Asset Tracking Center in US
  Treasury
• Under Bush administration axis of evil Cuba,
  Iran, Libya, North Korea, Sudan, Syria. What
  changes have taken place?
• Current US sanctions Belarus, Burma, CAR, Cote
  DIvoire, Cuba, DRC, Iran, Iraq, Lebanon, Libya,
  N Korea, Somalia, Sudan, Syria, Russia,
  Venezuela, Yemen, Zimbabwe.

5
Success of sanctions
Pre-1973 Pre-1973 1973-84 1973-84
Policy goal Successes Failures Successes Failures
Modest policy changes 9 3 9 23
Destabilization 9 6 1 3
Disruption of military adventures 5 8 1 4
Military impairment 2 6 0 2
Other policy changes 2 11 1 3
TOTAL 27 34 12 35
Record shows that even under fairly modest goals,
more failures than successes Also record shows
that the failure rate of trade sanctions has been
increasing
Source Bruce Bartlett, Cato Institute, 1985
6
Success of sanctions
Source Hufbauer and Oegg, 2003 International
Economics Policy Brief, IIE.
7
What is the effect of sanctions on trade?
From previous slide, total US trade lost is
estimated in 1999 to have been 11.5bn Evidence
is that trade sanctions are effective in reducing
trade to sanctioned countries. But often effect
is to make country more self-sufficient, with
negative impacts on sanctioned country citizens
and on US firms
Scope of sanctions imposed All countries, exports plus imports OECD countries, exports only United States, exports only
Limited -15-20 -21.5 -15-20
Moderate -31.2 -31.1 -68.0
Extensive -91.9 -78.0 -96.8
Source Kimberly Elliott, evidence given to House
Subcommittee on Trade, 1997.
8
What is the effect of sanctions on trade?

• Hufbauer and Oegg (2003) find that
• Limited or moderate sanctions increase trade
• Effectiveness of sanctions has decreased slightly
  from 1995-1999
• No after-effect once sanctions have been lifted
• They account for problems with gravity model and
  estimate 25bn reduction in trade
• Note that this does not include services

9
International agreements on trade sanctions

• Export controls have been put in place by 40
  countries for conventional arms and dual use
  goods and technologies
• Called the Wassenaar Arrangement and signed in
  1995 in the Netherlands
• Missile Systems Control Regime established 1985
• Also Australia group limits exports of goods
  that could be used to make chemical and
  biological weapons
• Apart from this, little coordination of trade
  sanctions except through the UN Security Council
• UN sanctions are currently in place against (Sept
  2013)
• Belarus, Burma, Cuba, Iran, Libya, North Korea,
  Somalia, Sudan, Syria, Zimbabwe.
• For example, Canada currently has trade sanctions
  against
• Burma, Belarus, Cote dIvoire, DR of the Congo,
  Eritrea, Guinea-Bissau, Iran, Iraq, Lebanon,
  Libya, Liberia, North Korea, Sierra Leone,
  Somalia, Sudan, Syria, Tunisia and Egypt, Zimbabwe

10
Sanctions as a counter to terrorism

• Post 9-11 measures are appropriate in broad US
  policy context, but some skepticism of success is
  in order as
• History of sanctions against state sponsors of
  terrorism shows little success
• Pre-existing sanctions were not successful
  against terrorist-supporting states (e.g.
  Afghanistan)
• War against South American drug lords in 80s not
  a success either (lt1 of total assets estimated
  as captured)
• Many of the terrorist assets are not in
  conventional assets

11
Trade and human rights

• Multilateral agreement on investment was
  negotiated by OECD countries in 1995 this made
  many activists scared about reach of
  multinational enterprises (MNEs)
• View was that by protecting MNE investments, this
  could harm governments right to act to protect
  labor
• Large anti-free trade lobby against the WTO at
  its meetings ( - with riots in Seattle)
• WTO Human Rights Caucus established in 2003 to
  monitor human rights in WTO members (Canada
  heavily involved)
• Q If membership of WTO granted, will greater
  human rights follow? Or should HR be a condition
  of membership?

12
Recent research
13
China and the WTO a case study

• Particular concern over Russia and Chinas
  entrance into the WTO
• China first applied to join GATT in 1986
  eventually joined WTO in 2001
• WTO agreement specifies respect for property
  rights, legal rights and patent protection and
  also specifies that legal systems must be in
  place
• But barely any mention of human rights in any WTO
  agreements
• Result general disagreement between US and China
  over state of human rights.
• Continuing problems which have now spilled over
  to the private sector with (for example) Google.