Economic Diplomacy and the Geography of International Trade

Economic Diplomacy and the Geography of International Trade

Peter A.G. van Bergeijk

The book presents an overview of the general aspects of trade uncertainty, a central element in the analysis of economic diplomacy, illustrating that some instruments, such as sanctions (both positive and negative), increase trade uncertainty, whilst others – multilateral trade policy, for instance – aim to reduce this uncertainty. Commercial policy and bilateral economic diplomacy are explored, and economic sanctions analysed. An extensive review of the literature and empirical investigations of 161 sanctions and the commercial relationships of 37 countries provide topical and empirical perspectives on how international diplomacy may both be a cost and a benefit of the key drivers of productivity growth. Finally, policy conclusions are drawn, and a future research agenda presented.

Chapter 6: Failures and … Successes of Economic Sanctions

Peter A.G. van Bergeijk

Subjects: economics and finance, international economics, political economy, politics and public policy, political economy

Extract

The study of economic sanctions essentially requires an introduction to what has been called the ‘donkey psychology’ of economic diplomacy. Just like a donkey, it is assumed that countries can be induced to move in the right direction by means of both a stick and a carrot, that is to say, by negative and positive economic sanctions. The donkey psychology, however, also points out that sanctions can be counterproductive: if the donkey beater pulls a donkey by the tail, it will run away in an opposite direction. Continuing the donkey metaphor would be boring and cumbersome. So in this discussion the country or group of countries that imposes or threatens to impose the economic sanction is called the sender. The country (or group of countries) on which the sanction is imposed is called the target. Negative sanctions are the most visible economic instruments of foreign policy. A negative sanction is a punishment or a disincentive. Three kinds of negative economic sanctions can be distinguished: boycotts, embargoes and capital sanctions.1 • A boycott restricts the demand for certain products from the target country. A boycott can be administered by governments and international organizations, but some notable consumer boycotts have been effective as well. The 1991 oil boycott against lraq and the consumer boycott of South African agricultural products in the 1980s are examples of both types. • An embargo restricts the exports of certain products to the target economy. Embargoes are enforced by a system of export licenses and controls of destination, transit...

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