Economic Sanctions– It’s a Paradox: Cost Business Billions of Dollars, People Suffer, Rarely Successful; Misguided, Defies Reality…

What are economic sanctions? Whom are they deployed against? Do they work? For more than two millennia, countries are attempting to influence one another’s behavior by imposing economic sanctions, and in most cases they have failed…

U.S. and other countries uses sanctions in an effort to dissuade nations from taking undesirable actions, e.g.; supporting terrorism, proliferating weapons of mass destruction, violating human rights, trafficking in drugs, despoiling the environment, failure to adequately protect sea turtles…

Economic sanctions are a form of punishment that one or more countries impose on another country (or other entities) with the purpose of changing behavior… According to Kim Elliott, Jeffrey Schott, and Gary Hufbauer; when examining 35 U.S. sanctions programs since 1973, the study estimates they have succeeded 23% of the time…

Hence most often, the reality of economic sanctions is that the only change that occurs is– the sanctioning country’s loss of business, and much suffering in the population of the sanctioned country, e.g.; in the case of Cuba the U.S. unilateral sanctions have failed: Castros remain in power and the Cuban government continues to pursue its particularly-thuggish form of authoritarian communism… and according to ‘U.S.-Cuba Trade and Economic Council’; approximately 4,500 companies from over 100 countries import to, export from, provide services to, or have investments within Cuba…

The Cuban regime trades with almost everyone (e.g.; China, Canada, Europe, Brazil, Russia… for about $20 billion per year), and the suffering endured by the Cuban people. (Consider over 40 years of U.S. sanctions on Cuba, and the billions of dollars lost by U.S. business and the untold human suffering)… Then to argue that the economic sanctions somehow isolates these rogue regimes and change behavior, simply defies reality…

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Although there is little consensus among scholars and policy-makers on the use of the economic sanctions; It’s clear that economic sanctions do have a serious impact on business, i.e.; lost business revenues, and business compliance with sanctions… hence, as companies expand across global borders they must tread carefully in the area of economic sanctions…

Failure to comply with sanctions programs can have serious legal, financial implications… In the U.S. alone penalties for individuals may include; criminal fines up to US$5 million and imprisonment up to 30 years and/or civil fines of US$1.1 million for each violation. A company may also be penalized for its employee’s actions with fines up to US$10 million… Sanctions have become defining feature in response to geopolitical rogue issues that are implemented primarily by developed countries, e.g.; U.S., Europe…

The assumption is by demonizing, penalizing countries or persons– they change behavior, and become good world citizens… Critics say– sanctions are often poorly conceived and rarely successful in changing behavior… Supporters say– sanctions are an effective and essential foreign policy tool…

In the article Effectiveness and Ethics of Economic Sanctions by Marcus Boomen writes: Economic sanctions are an important feature of the modern economic, political, social landscape, lauded as the humanitarian alternative to war… They are implemented with stated intention of altering a target entity’s behavior so as to conform with international ethical norms. But analysis of the effectiveness and ethics of economic sanctions reveals they are a resounding failure…

Hence, a Question: Why are sanctions used so frequently? Answer: Sanctions serve as a symbolic function; they signal to the target and world; what is, and is not, acceptable ethical behavior… but as perceived by the sanctioning nation(s)…

Economic sanctions are a country’s foreign policy tool, which have been used frequently for the last 20 years as a humane alternative to war. But, despite their prevalent use they have conclusively failed in stated purpose. Sanctions almost never succeed in stopping the unethical behavior of a target, particularly when enacted over long periods of time or through unilateral actions. Sanctions are not cost-free from an ethical perspective; comprehensive sanctions can cause great pain and suffering to innocent and weak in sanctioned country’s population…

Although, in some cases, sanctions have mitigated the worst impacts on civilians; they still carry costs that are difficult to justify when weighed against their comparatively miserable efficacy. The only way economic sanctions make sense is when they are viewed as symbolic against unacceptable behavior; then arguably there is place for sanctions as means to shape public opinions and international norms…

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In the article Costs and Benefits of Economic Sanctions by Kimberly Ann Elliott writes: Since 1970, unilateral U.S. sanctions have achieved foreign policy goals in only 13% of the cases where they were imposed, and the negative effects that these repeated failures have on U.S. credibility… Research suggests that U.S. economic sanctions are costing U.S. $15 billion to $19 billion annually in potential exports. This translates to 200,000 or more jobs lost in the highly profitable export sector… While ‘benefits’ of sanctions are elusive, ‘costs’ often are not: Sanctions penalize many businesses in exporting trade, which are among the most sophisticated and productive in the economy…

As sanctions have expanded and proliferated, they have also led to increasing tensions between Western allies, as well as, trading partners around the world… Indeed, many business people claim that the effects of even limited unilateral sanctions go well beyond target sectors, and the effects linger long after they are lifted… firms from sanctioning countries come to be regarded as ‘unreliable suppliers’. Hence sanctioned countries may avoid buying from some exporters even when sanctions are not in place, thus giving firms in other countries a competitive advantage in those markets… Also, foreign firms may also design goods and technology out of their final products for fear of one day being caught-up in a sanction episode…

In the article Doing Business With Enemy by William V. Hearnburg, Jr. writes: Most people are unaware that U. S. aggressively enforces a broad range of economic sanctions against over 10 countries, and more than 3,500 organizations and individuals. These sanctions prohibit individuals and companies from conducting any type of business with the targeted entities and subject violators to heavy civil and criminal penalties. Because of the sheer number of targeted entities, and the fact that connections among individuals, organizations and foreign governments may be shadowy and ill-defined, it’s very easy to do business with the enemy unknowingly and violate the law unwittingly…

Punishment for violations of sanctions can be severe: Civil fines range from $11,000 to $1 million for each violation. Civil fines may be imposed even if violation was committed unknowingly and with innocent intent. The majority of the fines imposed are most likely the result of corporations simply failing to recognize trade transactions involving a target country…

Additionally, criminal penalties may be levied for willful violations and include fines from $50,000 to $10 million and imprisonment from 10 to 30 years. While sanctions may be effective tool for implementation of U.S. foreign policy, and a weapon in the war on terror, they can also be a trap for uninformed: it’s vitally important that business people, corporations take steps to ensure they are not unknowingly doing business with the enemy…

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It’s a paradox of policymaking that economic sanctions are so often imposed in the pursuit of foreign policy objectives with so little apparent success… According to Joseph G. Gavin III; to better understand this paradox it’s useful to reexamine common perceptions of economic sanctions… the chief purpose of economic sanctions is to send signals and not, as is commonly perceived to exert economic leverage… A corollary is that pressures to impose economic sanctions are likely to endure despite the paucity of tangible results… Hence it’s important that policymakers recalculate balance of likely short-term gains against the harmful long-term effects of such policies on the competitiveness of U.S. business…

However sanctions will continue to be popular, and business interests are a secondary consideration, because economic issues cannot compete with government policy issues, at least in the short-term… Hence, for the business community to make progress in defended its position; it must refine its arguments beyond the simplistic ‘sanctions will not work’ arguments, and argue for a more convincing ‘cost-benefit’ approach…

Business must document, as much as possible, the economic costs that fall on specific– industry sectors, markets, companies… the damage done to U.S. competitiveness, reputation, profitability… It’s time to move debate beyond whether sanctions work in traditional sense, to more realistically balance between; long-and short-term costs of sanctions. in order to achieve better awareness, balance of collective interests of the nation in avoiding– frivolous, misguided, counter-productive applications of economic sanctions.

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  • According to Suzanne Nossel; isolating bad actors is mainstay of U.S. foreign policy; but it hasn’t worked… and in an increasingly connected global world, it’s less and less likely to make a difference…
  • According to Henry A. Kissinger; mandated sanctions are threatening to place U.S. policy in a straitjacket. Some 73 nations and over half the world’s population are subject to U.S. sanctions; fewer allies are following the U.S. lead…
  • According to Madeleine K. Albright; something must be done about proliferation of sanctions… Sanctions that have– no flexibility, no waiver authority are just blunt instruments; diplomacy requires some finesse…
  • According to Senator Richard Lugar; unilateral economic sanctions rarely succeed in altering the behavior of a country or countries against whom they are aimed; they do not always serve U.S. interests and may, in fact, inflict more harm on U.S. than on the target country…