Economic sanctions and global logic

Citation

Ali, A.J. (2010), "Economic sanctions and global logic", Competitiveness Review, Vol. 20 No. 5. https://doi.org/10.1108/cr.2010.34720eaa.001

Economic sanctions and global logic

Article Type: Economic sanctions and global logic From: Competitiveness Review: An International Business Journal, Volume 20, Issue 5

In his defense of global economic integration, Ohmae (1995) made two predictions. The first is that as we move toward a genuinely borderless economy the proposition of the effectiveness of nation states in managing economic activities becomes an old concept and no longer valid. Second, people from more points on the globe have aggressively come forward to participate in history and they have economic demands to make. Implied in Ohmae’s predictions was that governments and political conflicts would have less impact on the progression of the global economy and the quest for an integrated world economy. Ohmae was motivated by what he called global logic; economic activity is what defines the landscape on which all other institutions, including political institutions, must operate.

Ohmae’s predications have not materialized yet and global logic is often ignored by powerful politicians and governments. A casual survey of the global political and economic landscape reveals that governments have resorted to various means in order to obstruct free economic movements of goods and services, and labor movement has been severely restrained in recent years. Indeed, the WTO has recorded several instances where economically advanced countries have imposed tariffs on other countries and intervened in the market, thereby impairing free trade and global economic liberalization.

One of the most serious threats to global logic is the frequent application of the economic sanctions regime in international markets. The recent US-led UN economic sanctions against Iran were followed by other sanctions imposed by the European Union and the USA. These sanctions attempt to punish the regime in Tehran for not heeding to major superpowers’ demands that Iran must curtail its nuclear program. Over the years, superpowers acting alone or through the UN Security Council have enacted hundreds of sanction regimes against countries in developing nations.

In fact, economic sanctions have been applied in the international scene more often than might be expected. It should be noted that these sanctions are imposed normally by powerful countries which advocate free trade and economic freedom and trade liberalization. Foer (1996) observed that, since the Cold War, economic sanctions have been the US Government’s bludgeon of choice in responding to nations which do not agree with its directions or dictates. Likewise, the American Heritage Foundation, a conservative think tank, reported (O’Quinn, 1997):

Since 1990 […] the United States has been far more willing to employ unilateral economic sanctions to achieve other foreign policy objectives. During President Clinton’s first term, U.S. laws and executive actions imposed new unilateral economic sanctions 61 times on a total of 35 countries. These countries are home to 2.3 billion people, or 42 percent of the world’s population, and purchase exports of $790 billion, or 19 percent of the global export market.

The report also noted that economic sanctions have a poor track record. The report documented that recorded economic sanctions failed to achieve their stated objectives in 66 percent of those cases and since 1973 the success ratio for economic sanctions has fallen precipitously to 24 percent for all cases. While we do not intend to discuss whether economic sanctions are successful or not, the implementation of economic sanctions remains controversial, highly contested, and are often the results of intense lobbying pressures in Western countries.

Economic sanctions must be judged, however, on whether they are consistent with the principles of economic freedom and trade liberalization. That is, in enacting economic sanctions against other nations, should governments observe global logic? Do economic sanctions serve and facilitate understanding and cooperation? In answering these questions, we should take note of the fact that in Western countries free trade is considered a means of not only improving the economic welfare of nations but also contributing to cultural and political understanding and ultimately to enhancing peaceful engagement and fruitful cooperation among nations.

If the projected justifications for free trade are genuinely observed, then politics should be an instrument for furthering trade and breaching barriers among nations. That is, politics is in the service of trade not vice versa. This may lead to two interrelated conclusions: countries which impose economic sanctions on others and simultaneously advocate free trade are hypocrites, or these countries are driven by nationalistic sentiments and the urge to dominate. The first manifests an opportunistic attitude. The second conclusion indicates that trade is an instrument for politics.

In global politics, countries do not shy away from publically revealing the first conclusion, but in today’s global environment they seldom acknowledge the second one. In fact, they use whatever communication and diplomatic skills to distance themselves from the label of domination. As unfortunate as this reality is, powerful nations behave as if it does not occur. A case in point is the effort mounted by both the USA and Britain to convince Arab regimes to ease or ignore Arab League directives to boycott Israel for its occupation of Palestine. Both countries have been successful in changing the attitudes of many Arab Governments that politics should not be a tool in international trade.

Hypocrisy, however, is not easily missed by business people and young intellectuals. In early June, a delegation from the US Congress had a meeting in the Jeddah Chamber of Commerce. During the meeting, members of the Chamber insisted on “no commerce talks before real peace dawns” in the region. The American delegation team countered it by insisting that politics should not be a subject in economic and commercial relationships (Alghamdi, F., 2010; Alghamdi, J., 2010). This argument was refuted by local businessmen who indicated that it is the USA which has been using trade to serve its world political design. One of the participants stated, “The United States has cut its economic relations with Iran and Cuba because of political issues.”

The arguments and counter arguments brought up in the Jeddah Chamber of Commerce are not only insightful but also indicative of the fact that business people are increasingly sensitive to political interferences in their own world and that such intervention is counterproductive and an obstruction to global logic. This development necessitates transparent conduct on the global stage and a clear commitment by governments in the industrial world to not hold international trade captive to political games. These governments should set an example for the developing world and prove to them that free trade is beneficial to all participants.

Economic sanctions have a devastating impact on the receiving society. They demoralize entrepreneurs and severely limit their ability to start new ventures, grow, and have faith in a globalized world. Likewise, economic sanctions are a menace to institutional building in developing countries and create obstacles for them to fruitfully engage in the world community.

It is likely that in enacting economic sanctions, politicians fail to understand the significance of global logic and the importance of trade in narrowing misunderstanding among nations and in enhancing the welfare of citizens across the globe. Resorting to economic sanctions, too, manifests an abandonment of persuasive skills. Indeed, economic sanctions are a setback for civilization and the aspirations of people across the globe to live in a world free of inhibition and coercion.

Abbas J. Ali