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What is a Trade Embargo?


What is a trade embargo? A trade embargo is a governmental restriction on trade for political purposes.  The restriction can be referred to as a trade barrier, which is any regulation or policy that restricts international trade. Sanctions, or economic sanctions, refer to provisions of a law that can enact penalties for disobedience towards the restrictions, or rewards for obedience.

What is a Trade Embargo to the governments of nations?

The objective of a trade embargo is to put pressure on other governments by prohibiting exports to, and imports from, those countries. Embargoes rarely involve a categorical ban on all trade, as even the most restrictive tend to allow for medicine and portions of food.

Trade embargoes are often invoked against countries which demonstrate a threat towards other nations or to their own people. Embargoes are often portrayed as a means to avoid war. For instance, the United Nations, at the behest of the U.S., U.K. and others, imposed economic trade sanctions on Iraq under the regime of dictator Saddam Hussein from 1990 to 2003. Hussein, who was Iraq’s leader from 1979 until early 2003, was responsible for the genocides of his own people and was convicted of crimes against humanity in a trial following his capture.

Said Richard Holbrooke, U.S. ambassador to the U.N. during the Clinton administration, “The concept of sanctions…[is] necessary. What else fills the gap between pounding your breast and indulging in empty rhetoric about going to war besides economic sanctions?”

What is a Trade Embargo to the people of nations?

A practical facet of embargoes and sanctions is the demonstration by a government to its people that their leaders will take action against a threat.  However, the victims of the sanctions are often not those in power, but the citizens of the affected nation.

This was the case in Iraq. Led by a dictator who had proven his indifference to citizens’ welfare, powerful Iraqi leaders made deals with other nations for goods and services during the economic sanctions. As a result, they benefitted individually while Iraq’s health, strength and infrastructure crumbled.

The once developing and prospering nation became a land where eradicated diseases returned and children were dying. As a result of legal trade being blocked, citizens were poverty-stricken and dependent on food aid from the U.N. and education had all but dissipated.

At least 500,000 children did suffer and die during the U.N.-imposed economic sanctions and the country has yet to rebuild completely, even in 2017.

As history acknowledges, trade embargoes have the power to prevent war but are potentially fraught with unintended consequences.

– Jaymie Greenway

Photo: Flickr

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How North Korean Relations With the West Affect the Poor

North Korean RelationsOn July 21 in Aspen, Colorado, Mike Pompeo, Director of the CIA, told a press conference audience that the United States will be blocking all American travel to North Korea to prevent Americans from supporting the North Korean economy or being detained.

Over the past two decades, North Korean relations with western and other Asian nations have progressively worsened and have produced negative effects on the North Korean people. Already known as a nation ravaged by food shortages, where children and other vulnerable groups of people have been malnourished for many years, increased North Korean aggression has begun to produce worsening effects on the quality of life available to North Korean citizens.

This comes in the form of economic and trade sanctions preventing the North Koreans from receiving foreign aid and furthering the economic development needed to sustain the country’s 25 million citizens.

North Korea has long been known to have serious issues providing nutrition for all its citizens. The condition of North Korean farming in 2017, however, hit a particularly difficult point with severe droughts and record-low crop production.

According to The New York Times, North Korea’s stable crop production, which includes crops such as rice, corn, soybeans and potatoes, has been drastically damaged as the country is going through the worst drought it has seen in the past sixteen years. This is making it significantly more difficult for the country to feed its population and “threaten[s] food security for a large [portion of the] population,” according to the Food and Agriculture Organization of the United Nations.

Under these dire circumstances, increased trade and foreign aid are critical to remedy the problems with producing crops. North Korea, however, is unable to receive foreign aid or increase trade with the U.S. or its allies due to numerous sanctions in place to dissuade nuclear threats and military aggression.

In part because of economic sanctions, North Korea holds one of the highest poverty rates in the world. Going hand-in-hand with the high poverty rate is the level of undernourishment seen among the population.

Since 1990, the rate of malnutrition in North Korea has risen from 21 percent to a staggering 32 percent. From a humanitarian perspective, this rate is astronomically high and must be reduced.

This places the U.S. in an uncomfortable position from a poverty-reduction standpoint. If the U.S. provides aid to North Korea, all funds will likely be diverted from reaching the people. However, if inaction is chosen, millions of people will lack the resources necessary to survive. While it may be a long and difficult process, the first step in solving North Korea’s issues with poverty may be in reopening negotiations.

In exchange for lessened hostility and improved North Korean relations with the west, the United States and its allies could agree to help provide foreign aid to a country in desperate need of it.

Poverty reduction in North Korea is tremendously difficult to gauge due to the government’s desire for secrecy. If a distinct effort is made to try and coordinate with the North Korean government to decrease hostility and improve North Korean relations with the west, poverty reduction measures can certainly be implemented for a country whose people desperately need help.

– Garrett Keyes

Photo: Flickr

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Why Economic Sanctions Lead to Poverty

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According to the U.S. State Department, the U.S. currently has trade barriers and financial restrictions, or economic sanctions, of various types against eleven countries, including Iran, Cuba, North Korea and Russia.

Some of the sanctions target only individuals as in Zimbabwe’s case. Russian sanctions, on the other hand, target a range of industries, most notably defense, oil and energy.

U.N. economic sanctions against Iraq from 1991 to 2003 illustrate the impact of sanctions on the populace. Not only were financial transactions, overseas flights and exports banned, but imports were limited strictly to food and medicine. Gross domestic product (GDP) plunged from $38 billion in 1989 to $10.6 billion in 1996 in Iraq. Per capita GDP plunged to around $500 per person from 1991 to 1996, a decline of over 75 percent from the prior period.

Gross domestic product (GDP) plunged from $38 billion in 1989 to $10.6 billion in 1996 in Iraq. Per capita GDP plunged to around $500 per person from 1991 to 1996, a decline of over 75 percent from the prior period.

For Iraqi people, these statistics had consequences on their health and livelihood. The United Nations Children’s Fund (UNICEF) found that mortality doubled in children aged 5 and below. People consumed 32 percent fewer calories a day. Half of Iraq’s water treatment facilities ceased functioning, and 59 percent of people lacked access to clean water as a result. Over a quarter of Iraqi health centers closed and three-quarters of hospital equipment broke down.Econimic_Sanctions

People consumed 32 percent fewer calories a day. Half of Iraq’s water treatment facilities ceased functioning, and 59 percent of people lacked access to clean water as a result. Over a quarter of Iraqi health centers closed and three-quarters of hospital equipment broke down.

As salaries declined, many social problems arose. Iraqi citizens had to sell their belongings for food and many had to sell their homes. Crime and divorce rates skyrocketed. Many single mothers were forced into prostitution.

While exact figures are hard to find, a United Nations field office said, “The country has experienced a shift from relative affluence to massive poverty.” Likewise, debate surrounds the exact number of deaths caused by sanctions but estimates somewhere in the hundreds of thousands.

Less severe sanctions also hurt. The World Bank reports that Iranian per capita GDP fell from over $7,800 in 2011 before sanctions, to under $5,450 in 2014. The Moscow Times said an additional 2.3 million Russians became impoverished through the first nine months of 2015. Sanctions hurt, and yet, the people do not rebel. Leaders stay in power and policies rarely change.

University of Oregon professor James C. Davies “J-Curve” theory of revolutions explains why sanctions often fail to induce revolution. According to this theory, people revolt when reality fails to meet expectations for the future following a period of rising prosperity. An example of this theory in practice can be found in South Korea. Following decades of prosperity, people demanded more political power and freedom in the 1980s and successfully rebelled.

Economic sanctions are powerful in their effect on society, often causing significant problems for citizens within the countries being sanctioned.

– Dennis Sawyers

Sources: Central Intelligence Agency, Global Policy Forum, The Moscow Times, The Nation, U.S. Department of State, World Bank
Picture: Google Images, Wikipedia

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Russia Looks to Weather Economic Sanctions

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The Russian economy is suffering due to sanctions enacted by the United States and the European Union. Inflation has risen dramatically and with the ruble teetering back and forth, the safety of their currency is uncertain.

During the annexation of Crimea and Russian military movement in the Ukraine, the U.S. and E.U. increased trade restrictions on Russia and wealthy businessmen regarded as being close to Vladimir Putin. As the Russian economy shifts focus toward a stronger economic development and trade with the Asian countries, Russia’s reliance on the dollar decreases.

One of the ways in which Russia is attempting to achieve this is by trading in domestic currency rather than relying on the U.S. dollar. Russia’s dependence on Asia in general and China in particular hints at Putin’s larger goal for the Russian economy to be less involved in U.S. and Europe. Among of the most important deals Russia has made is  the Agreement on Cooperation which was signed by Vladimir Putin and Chinese president Xi Jinping. The $25 billion deal will allow Russia and China to trade in domestic currencies rather than the dollar.

Another significant deal is the $400 billion trade deal that will increase oil exports from Russia to China. It includes a proposal for a new pipeline that will send oil directly from Western Siberia to China. Underlying Putin’s unease with the U.S. is the desire to begin limiting U.S. economic hegemony. However, the dollar is so prevalent in the foreign economy it seems unlikely that a dramatic shift will occur in the near future. Russia’s largest market is currently the E.U. and sanctions have reduced the amount Russia is able to export.

Economic sanctions enforced by President Barack Obama seek to undercut Russian oil exports which make up half of Russia’s economic revenue. Putin announced recently at a G-20 Summit that the West needs to lift sanctions. He states, “This is harmful, and of course is doing us some damage, but it’s harmful for them as well because, in essence, it’s undermining the entire system of international economic relations.”

If Russia is less dependent on the U.S. market, sanctions will mean little to Putin and the Russian economy. Eventually there will be little to deter him from further military involvement in the Ukraine or elsewhere. It will be more difficult for the U.S. to influence Putin’s perceived aggression.

Russia is not the only country who wants to decrease dependence on the U.S. market. Other BRICS (Brazil, Russia, India, China and South Africa) countries are looking to do the same. For the meantime, Russia may be forced to cope with the low price of oil. American economists predict that the prices should level out at about $83 a barrel and stay there for a while to come.

– Maxine Gordon

Sources: International Business Times, Reuters, New York Times, The Guardian
Photo: Newsweek