The Embargo Test

DO WE REALLY NEED TO PLACE SANCTIONS AGAINST ERRING STATES? YES, ACCORDING TO THE PUBLIC OPINION OF COUNTRIES PASSING TRADING SANCTIONS. BUT IF THE GENERAL POPULATION IS HIT HARD, EMBARGOES CAN BACKFIRE

by Elisa Borghi, Dept. of Economics, Bocconi
Translated by Alex Foti

 
Recent international crises have put the use of economic sanctions and their effectiveness under the spotlight. Various researchers are critical, claiming that the ability of sanctions to deliver stated political goals is very limited. Hufbauer and his co-authors, in the most reputed scholarly text surveying and analyzing nearly 200 episodes of boycotts and embargoes in the Twentieth century, say that only in one out of three cases did sanctions manage to produce an actual change in the behavior of the actors being sanctioned. The probability of success depends on the cost that sanctions impose on the targeted country. This cost is greater if the country introducing sanctions has significant influence on the economy of the punished country. Sanctions imposed by more than one state are more effective because they limit the chances for the affected country to resort to economic relations with third parties in order to circumvent the effects of the economic embargo.
 
Another aspect that affects the likelihood of effectiveness is the economic, financial and social situation of the sanctioned country. Sanctions may have a significant effect if they are able to generate strong political pressures to force the ruling class to alter their behavior in the desired direction. This is more likely if the country is already in unstable conditions. In certain cases, however, inflicting economic restrictions may engender perverse effects, by stoking nationalist and patriotic sentiment, and pushing the population and opposition groups in target states to coalesce with the regime in defense of national sovereignty against imposition from abroad. The likelihood of perverse effects is greater if the cost of sanctions falls on the general population: increasingly, states resort to sanctions aimed at individual industries or particular individuals linked to the ruling power group, to limit adverse consequences for the population.

The probability that trade sanctions succeed is considered low by many; however, studies may underestimate their effect due to selection bias. In fact, the imposition of sanctions is preceded by threat of their introduction; if the threat appears credible and the estimated cost of possible sanctions is sufficiently high, the dispute can be resolved before an actual embargo is put in place. If this is true, the cases where the introduction of restrictive measures is actually observed are at high risk of failing, because they are the consequence of ineffective threats.
 
But in the face of limited results, why do countries often resort to sanctions? In many cases, they remain the dissuasion tool of last resort barring armed intervention, which often considered prohibitively expensive and politically unacceptable. They can also play an important role in signaling the weightiness of an international issue to domestic public opinion and the international community alike. By placing sanctions, a country states its position clearly to the world and shows it means business.