U.S. Economic Sanctions and Globalization: Economic Impact and Policy Implications

Research and Event Summaries

Project Abstract

The Free flow of goods, capital, and people across countries is certainly the essence of globalization. Yet economic sanctions seem to buck the trend for freer trade and greater financial integration. The United States is the single largest source of unilateral economic sanctions imposed upon numerous other countries. Sanctions are viewed as an instrument of U.S. foreign policy that may be positioned somewhere between diplomacy and military engagement. An evaluation of the economics of sanctions in the globalization process should provide a fresh perspective and insight to the issues at hand. This project is to take on that task.

First, the extant work on economic sanctions has tended to focus on the impact of sanctions on trade flows in goods between and among sender countries (those nations imposing sanctions), targeted countries (those nations against which the sanctions are imposed), and third countries. This focus on imports and exports of goods, largely to the exclusion of the impact of sanctions on service trade, limits greatly our understanding of the total impact of sanctions from the perspective of the U.S. This oversight is particularly problematic given the U.S.' global competitiveness in services trade and its corresponding preponderance in its global economic portfolio.

Second, a critical aspect of economic globalization is the increased importance of international capital flows relative to trade flows. Assessing the impact of sanctions on trade flow (goods and services) is still insufficient; since economic sanctions can change the overall economic environment for the countries being sanctioned, they affect capital flows as well as trade flows. This project will investigate the impact of U.S. economic sanctions on both trade and capital flows.

Third, economic globalization has expanded the international trade matrix. That is, international trade has increasingly become multilateral instead of bilateral. As a result, unilateral sanctions imposed by the U.S. may render opportunities for third countries to increase trade with the sanctioned (target) country. This project will study the third country effects of U.S. Economic sanctions.

Fourth, the benefits of globalization have many dimensions. But mutual benefits are the basis for free trade and investment flows as stated in standard international trade and investment theories. Economic sanctions, by their very nature, are distortionary and inflict harm to both the target and the sender countries. The current cost-effectiveness analyses are mostly from the sender's perspective. This project will provide an evaluation for the sender and the target countries.

Finally, economic sanctions may affect the global business strategies of firms in the country that imposes sanctions (the sender country) and in the sanctioned country. Firms in the sender country are viewed as unreliable business partners by firms in the target country. Thus the impact of sanctions may still be felt even after the sanctions are lifted. This project will provide an evaluation of the lingering effects of U.S. economic sanctions.

Faculty

Jiawen Yang (PI), Associate Professor, Department of International Business
Hildy Teegen, Associate Professor, Department of International Business

Publications

U.S. Economic Sanctions: An Empirical Study
Occasional Paper, CSGOP-03-10

Using Unilateral Economic Sanctions Effectively: A Grounded Theory
Occasional Paper, CSGOP-03-11

U.S. Economic Sanctions Against China: Who Gets Hurt?
Occasional Paper, CSGOP-03-12

Economic and Strategic Impacts of U.S. Economic Sanctions on Cuba
Occasional Paper, CSGOP-03-13

The GW Center for the Study of Globalization
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