CHAPTER 5
THEORIES ON THE OUTCOME OF ECONOMIC SANCTIONS
Some people think of economic leverage as the punitive use of economic
sanctions, with highly publicized conditions set for their removal. This is highly
ineffective, and sometimes counterproductive.
- Richard Nixon, U.S. President, 19821
Since the estimated cost of economic sanctions to Iraq – 48 percent of the gross
national product – is so far beyond that observed in other cases, the initial results [of
our model of economic sanctions] placed the probability of success [of economic
sanctions against Iraq] at nearly 100 percent.
- Economists Gary Hufbauer and Kimberly Elliott
January 14, 1991, two days before the Gulf war started2
The conventional theory of how sanctions are supposed to work assumes that
political change is directly proportional to economic hardship. The greater the
economic pain caused by sanctions, the higher the probability of political compliance.
The theory assumes that the population in the target state will redirect the pain of
sanctions onto political leaders and force a change in policy. This theory has been
criticized by many theorists, who argue that economic factors do not explain the
success or failure of economic sanctions but that domestic and international political
1
2
M. S. Daoudi and M. S. Dajani, Economic Sanctions: Ideals and Experience (London: Routledge &
Kegan Paul, 1983), p. 187.
Gary C. Hufbauer and Kimberly A. Elliott, “Sanctions Will Bite – and Soon,” New York Times,
January 14, 1991, A 17.
160
factors are key to deciding outcomes. Johan Galtung has termed this the “naïve
theory” of sanctions. The economic effects of sanctions do not necessarily translate
into political impact because there is no direct transmission mechanism.3
Baghdad’s continued resistance in face of the U.S.-led economic sanctions
provides an especially dramatic contradiction to the conventional expectation. Iraq has
suffered tremendously under the West’s sanctions during the 1990s, but Saddam
Hussein remains in charge and has not shelved plans to develop weapons of mass
destruction. Iraq has been imposed sanctions by the United Nations (UN) since August
6, 1990. As of late 1999, infant mortality rates had increased sevenfold, annual
inflation had risen to over 4000 percent, and per capita income had fallen to less than
half of the 1990 level. In the face of continued economic losses and bellicose U.S.
rhetoric, the Iraqi regime has only acquiesced to UN demands when additional
military threats have been made. In every issue area, when the only pressure is
economic sanctions, Iraq has not conceded. Domestically, Hussein’s regime shows no
signs of falling; if anything, the sanctions have strengthened it. Despite the most
potent sanctions ever in human history, economic sanctions have failed to produce any
significant Iraqi concessions.4
To test whether increased punishment against the target makes the target more
likely to concede, Robert Pape stratifies the HSE database, excluding trade disputes,
economic warfare, and double-counting, into high and low economic impact
categories, setting the dividing line at a 4.6 percent reduction in the target’s GNP. If
each overdetermined and indeterminate case challenged by Pape in the original HSE
database is counted as a full success, then the success ratio in the high category is 2 to
3
4
David Cortright and George A. Lopez, “Sanctions and Incentives as Tools of Economic Statecraft,” in
Raimo Vayrynen (ed.), Globalization and Global Governance (Lanham, Maryland: Rowman &
Littlefield Publishers, Inc., 1999), pp. 111-116.
Chantal de Jonge Oudraat, “Making Economic Sanctions Work,” Survival, vol. 42, no. 3 (Autumn
2000), pp. 106-111. Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and
161
8 cases, or 25 percent; in the low category, it is 5 to 77 cases, or 6 percent. This
appears to provide at least some support for the proposition that sanctions success is
correlated with economic loss.
However, the only two arguable successes in the high category are the two lowest
in economic punishment. If the boundary line between the low and high categories
were moved only from 4.6 to 5.2 percent, the high category would contain no
successes at all. Furthermore, ordinary least squares regression confirms that there is
no statistically significant relationship between the target’s GNP loss and sanctions
success.5
Therefore, economic sanctions do not necessarily succeed by imposing more
economic pain upon the target. Economic asymmetries do not tell us anything about
the target’s relative valuation of the political concessions being sought or the net
worth of the sender-target economic relationship. A dominant or inferior position of
the target in the bilateral economic relationship can be subject to the countervailing
influences of differential discount rates of economic benefits and the costs of political
concessions. To understand the target’s calculation, economics alone is not enough.
The following are four comprehensive approaches to account for the outcome of
economic sanctions.
5
International Relations (New York: Cambridge University Press, 1999), pp. 1-2.
Of HSE’s entire database of 115 cases, 30 inappropriately included 10 cases of economic disruption
in war; 15 cases of trade disputes or strategic embargoes; and 5 cases counted twice. This leaves a
total of 85 valid cases, including 5 successes, or an overall success rate of 6 percent (9 percent if we
include the overdetermined and indeterminate cases) versus the 34 percent HSE report. Robert A.
Pape, “Why Economic Sanctions Do Not Work,” International Security, vol. 22, no. 2 (Fall 1997),
pp. 107-109.
162
I. The Hufbauer-Schott-Elliot Approach
The first approach is called the Gary Hufbauer, Jeffery Schott, and Kimberly
Elliot (HSE) approach. HSE has been collecting the most comprehensive database of
economic sanctions cases and the database is used broadly by many theorists. The
HSE approach is induced from economic sanctions cases studies. According to Gary
Hufbauer, Jeffery Schott, Kimberly Elliot, George Lopez, David Cortright, Joseph
Collins, and Gabrielle Bowdoin, a survey of the analytical and historical literature on
sanctions suggests that sanctions – and the threat of sanctions – are most effective
under the following conditions:
I.
The goal of economic sanctions is relatively modest. Sanctions are seldom
effective in bringing about major changes in the policies of the target country;
II.
The target is economically weak and political unstable. Although the average
sender’s economy was 187 times larger than that of the average target in the HSE
database, the relative size between the sender’s and target’s economy is not very
helpful in predicting success in the majority of cases;
III. The target suffers high costs from sanctions while the sender endures low,
sustainable costs. The costs of sanctions to the target exceeds 2 percent of its
GNP while the sender suffers minimal costs;
IV. The sender and target are friendly toward one another. Economic sanctions seem
most effective when aimed against erstwhile friends. By contrast, sanctions
directed against target countries that have long been adversaries of the sender
country are generally less successful;
V.
There exists a high total trade concentration for the target with the sender. It is
generally greater than 25 percent of target’s total trade;
VI. Economic sanctions are imposed quickly, with maximum harshness and without
163
significant international assistance of the target’s trading partners who otherwise
might circumvent such restrictions. Time affords the target the opportunity to
adjust -- to find alternative suppliers, to build new alliances, and to mobilize
domestic opinion in support of its policies.
VII. In most instances, multilateral sanctions are not associated with success. On
average, the degree of international cooperation is actually somewhat less in
successful cases than in failed cases. That is, unilateral sanctions will be more
effective than multilateral sanctions, which will entail significant coordination
costs for the sender; and
VIII. The sanctions, when possible, are financial sanctions, not trade sanctions. The
financial sanctions are less costly (even beneficial) to the sender and more
effective than trade control.6
II. The Domestic Politics/Symbolic Approach
The domestic politics/symbolic approach focuses on the politics within the
sender and target countries. Outcomes are largely determined by the domestic political
economy of the target country. Domestic politics/symbolic explanations provide three
factors working against the effectiveness of economic sanctions: (1) few cases with
damaging sanctions; (2) the rally-around-the-flag effect reinforced by nationalism;
and (3) manipulated redistribution effects of sanctions. By contrast, this approach
provides two factors contributing to the effectiveness of sanctions: (1) the
6
Reference includes Gary Clyde Hufbauer, Jeffery J. Schott, and Kimberly Ann Elliot, Economic
Sanctions Reconsidered: History and Current Policy, 2nd ed. (Washington, D.C.: Institute of
International Economics, 1990), pp. 49-115; George A. Lopez and David Cortright, “Economic
Sanctions in Contemporary Global Relations,” and Kimberly Ann Elliot, “Factors Affecting the
Success of Sanctions,” in David Cortright and George A. Lopez (eds.), Economic Sanctions:
Panacea or Peacebuilding in a Post-Cold War World? (Boulder, Colorado: Westview Press, 1995),
pp. 9, 53; Joseph J. Collins and Gabrielle D. Bowdoin, Beyond Unilateral Economic Sanctions
(Washington, DC: Center for Strategic and International Studies, 1999), pp. 15-6.
164
fifth-column effect; and (2) political instability of the target.
First, public choice analysis suggests that damaging sanctions will be
infrequently used. Sanctions are often imposed half-heartedly by the sender
government, out of a need to satiate domestic political pressure of the public and
interest groups to do something in response to the target’s disputed behavior. Hence,
sanctions are symbols; their effectiveness is of secondary concern. In addition, the
sanctions costs will hurt some interest groups and even the public at large, who will
oppose severe sanctions measures. Thus, it is not surprising that the sanctions actually
adopted often appear ineffectual and the target country may face insufficient coercive
pressure to consider acquiescing.7
Second, even if the sanctions are potent, target governments can use the specter
of economic sanctions to create a rally-around-the-flag effect. Johan Galtung used the
term “rally-around-the-flag” effect to argue that leaders in target nations could use the
economic pain caused by foreign nations to rally their population in opposition to
“foreign meddling.” Sanctions may give the target leaders a pretext to demonstrate
their ability to share the plight of the people. In such cases, rather than creating
disintegration in the target state, sanctions would invoke political integration within
the target state and solidify the leader’s resistance to economic pressure.8
7
8
William H. Kaempfer and Anton D. Lowenberg, “A Public Choice Analysis of the Political Economy
of International Sanctions,” in Steve Chan and A. Cooper Drury (eds.), Sanctions as Economic
Statecraft: Theory and Practice (New York: St. Martin’s, 2000), pp. 159-161.
Johan Galtung, “On the Effects of International Economic Sanctions,” World Politics, vol. 19
(October 1966- July 1967), pp. 388-399. See also Miroslav Nincic and Peter Wallensteen,
“Economic Coercion and Foreign Policy,” in Miroslav Nincic and Peter Wallensteen (eds.),
Dilemmas of Economic Coercion: Sanctions in World Politics (New York: Praeger, 1983), p. 6;
Makio Miyagawa, Do Economic Sanctions Work? (New York: St. Martin’s Press, 1992), pp. 84-6;
David M. Rowe, The Domestic Political Economy of International Economic Sanctions, working
paper no. 93-1, (Cambridge, MA: The Center for International Affairs, Harvard University, 1993), p.
30; David Cortright and George A. Lopez, “Sanctions and Incentives as Tools of Economic
Statecraft,” in Raimo Vayrynen (ed.), Globalization and Global Governance (Lanham, Maryland:
Rowman & Littlefield Publishers, Inc., 1999), pp. 114-5; Kaplowitz, Anatomy of a Failed Embargo,
pp. 52-54; Zachary Selden, Economic Sanctions as Instruments of American Foreign Policy
(Westport, Connecticut: Praeger, 1999), p. 22. George E. Shambaugh, States, Firms, and Power:
Successful Sanctions in United States Foreign Policy (Albany, New York: State University of New
York Press, 1999), p. 12.
165
Zachary Selden further explains that the “rally-around-the-flag” effect is based
on the idea that sanctions provide a common external enemy to unite the population of
the target country and increase the popularity of the current leadership. Nothing brings
together diverse social elements as quickly as the perception that they have been set
upon by a common enemy, and sanctions can provide this common object of
opprobrium. The experience of states at war is analogous. No matter what
disagreement exists in the society as a whole, war against a common enemy provides
a focal point to rally the population and direct their attention away from domestic
issues.9
In addition, Klaus Knorr, Joseph Nye, Ernest Preeg, Robert Pape, David
Cortright, George Lopez, and Makio Miyagawa all point out that modern states are
not fragile because of rising nationalism. The political leader of the target state can
excite the nationalistic sentiment of the entire population by stigmatizing the sanctions
as a humiliating affront to the nation, and thereby promote national unity in the face of
outside pressure. Nationalism provoked by economic sanctions tends to foster political
integration.10
Particularly, economic sanctions that do not discriminate between the “guilty”
and “innocent” in the target may actually encourage the formation of a unified front in
the target. In other words, sanctions, in practice, are an application of the principle of
collective guilt, or at least collective punishment. Sanctions may be invoked to punish
9
Zachary Selden, Economic Sanctions as Instruments of American Foreign Policy (Westport,
Connecticut: Praeger, 1999), pp. 4-5, 20-23.
10
Klaus Knorr, The Power of Nations: The Political Economy of International Relations (New York:
Basic Books, 1975), pp. 111-2. Ernest H. Preeg, Feeling Good or Doing Good with Sanctions:
Unilateral Economic Sanctions and the U.S. National Interest (Washington, D.C.: Center for
Strategic and International Studies, 1999), p. 9. Robert A. Pape, Bombing to Win: Air Power and
Coercion in War (Ithaca, NY: Cornell University Press, 1996), pp. 21-27. David Cortright and
George A. Lopez, The Sanctions Decade: Assessing UN Strategies in the 1990s (Boulder, Colorado:
Lynne Rienner, 2000), p. 20. Makio Miyagawa, Do Economic Sanctions Work? (New York: St.
Martin’s Press, 1992), pp. 84-86. See also Lewis A. Coser, The Functions of Social Conflict (New
York: The Free Press of Glencoe, 1964), pp. 87-95.
166
a government for a particular policy choice, but sanctions will have more of a negative
impact on the innocent. Economic sanctions tend to seriously affect those who are not
responsible for making the policy – the public and business groups – while those elites
that are responsible – decisionmakers and their associates – remain largely unaffected
given their ability to skirt the sanctions, particularly in authoritarian countries. This
indiscriminant impact will significantly reduce the effectiveness of economic
sanctions.11
Robert Pape argues, “Pervasive nationalism often makes states and societies
willing to endure considerable punishment rather than abandon what are seen as the
interests of the nation, make even weak or disorganized states unwilling to bend to the
demands of foreigners….Even in the weakest and most fractured states, external
pressure is more likely to enhance the nationalist legitimacy of rulers than to
undermine it.”12
For example, in the past, strategic bombing by Western countries badly damaged
the economies of North Korea, North Vietnam, and Iraq without causing their
populations to rise up against their own regimes. In addition, Joseph Nye asserts that
Western countries did not go in and colonize the countries of the Organization of
Petroleum Exporting Countries during the 1973 oil crisis only because they realized
the costliness of using force against nationalistically awakened people in the oil
producing states.13 This in part happened with respect to Iraq in 1991.
Furthermore, both Daniel Drezner and Margaret Doxey contend that the target
11
12
13
Robin Renwick, Economic Sanctions (Cambridge, Massachusetts: Center for International Affairs,
Harvard University, 1981), pp. 88-89. Richard N. Haass, “Conclusion: Lessons and
Recommendations,” in Richard N. Haass (ed.), Economic Sanctions and American Diplomacy (New
York: Council on Foreign Relations, 1998), pp. 201-203. Ernest H. Preeg, Feeling Good or Doing
Good with Sanctions: Unilateral Economic Sanctions and the U.S. National Interest (Washington,
D.C.: Center for Strategic and International Studies, 1999), pp. 194-195.
Robert A. Pape, “Why Economic Sanctions Do Not Work,” International Security, vol. 22, no. 2
(Fall 1997), pp. 93, 107.
Joseph S. Nye, Jr., Understanding International Conflicts: An Introduction to Theory and History
(New York: Longman, 2000), p. 190.
167
governments will present themselves as defenders of the countries and their interests
from enemies. Leaders in the target governments will always use external threats as a
means of building up domestic support for the governing regime. By contrast,
opposition groups will risk being dubbed unpatriotic or disloyal if they do not rally
around the flag.14
For example, in Cuba, western economic sanctions were depicted as an attack by
a rich imperialist regime, not against Fidel Castro, but against the entire nation and its
aspirations. This gave Castro a scapegoat to divert attention from internal problems
and the errors of his regime. In Rhodesia, the enforcement of sanctions created
internal cohesion, particularly among the European minority. Resistance became
synonymous with patriotism, while dissent became treason. The sanctions reduced the
influence of racial moderates and those most loyal to the Crown in the white
population and encouraged consolidation of opinion against the externally imposed
economic sanctions. Pakistan has been facing different forms of U.S. sanctions for the
last 25 years. However, the result is that the people of Pakistan are gradually turning
the United States into their enemy.15
Third, target governments may prefer to be sanctioned because they can
distribute economic rent of the trade restriction to their supporters and weaken their
domestic opponents – it often is the “liberals” and “reformers” in authoritarian
societies who are most vulnerable to external sanctions. While in the long run
sanctions hurt the trade-oriented sectors of the target economy by depriving them of
14
15
Margaret P. Doxey, International Sanctions in Contemporary Perspective, 2nd ed. (New York: St.
Martin’s Press, 1996), p. 104. Daniel W. Drezner, “The Complex Causation of Sanction Outcomes,”
in Steve Chan and A. Cooper Drury (eds.), Sanctions as Economic Statecraft: Theory and Practice
(New York: St. Martin’s, 2000), p. 214.
Makio Miyagawa, Do Economic Sanctions Work? (New York: St. Martin’s Press, 1992), pp. 84-86.
Donald L. Losman, International Economic Sanctions: The Cases of Cuba, Israel, and Rhodesia
(Albuquerque: University of New Mexico Press, 1979), pp. 127-131. “New American Sanctions
Against Pakistan,” Rawalpindi Nawa-I-Waqt (in Urdu), November 23, 2000, trans.
FBIS-CHI-2000-1124.
168
income,
in
the
short
run
a
sender’s
embargo
strengthens
the
target’s
import-substitution sectors by giving them rent-seeking opportunities in the target. In
addition, the target government may redirect external pressure onto isolated or
repressed social groups while insulating and protecting itself. As a result, sanctions
may end up strengthening the target government, and hence its ability to resist the
coercive attempts of the sender government.16
For example, when the coalition led by the United Kingdom imposed sanctions
against white Rhodesia, household incomes for black families fell and white income
rose. Despite extremely desperate circumstances, the military government of Haiti did
not feel compelled to accede to the demands of the international community and
return control of the country to its democratically elected leadership because some of
the Haitian elites benefited from the black market trading that was created by
sanctions. Despite being sanctioned by one of the world’s toughest embargoes led by
the United States since 1990, Saddam Hussein actually rewarded those associated with
the Iraqi government, the military, or the ruling Baath party, with luxury cars and
other goods. In the case of the UN sanctions against Yugoslavia, Serbian leader
Slobodan Milosevic similarly used the UN embargo to reward crony enterprises with
scarce goods and used the UN aid to reward his inner elite, while punishing his
political rivals. Therefore, leaders in these countries have an incentive to see these
sanctions remain in place.17
16
17
Robert A. Pape, “Why Economic Sanctions Do Not Work,” International Security, vol. 22, no. 2
(Fall 1997), p. 107. Paul D. Taylor, “Clausewitz on Economic Sanctions: The Case of Iraq,”
Strategic Review, vol. 23, no. 3 (Summer 1995), pp. 50-56. David M. Rowe, The Domestic Political
Economy of International Economic Sanctions, working paper no. 93-1, (Cambridge, MA: The
Center for International Affairs, Harvard University, 1993), p. 31.
Zachary Selden, Economic Sanctions as Instruments of American Foreign Policy (Westport,
Connecticut: Praeger, 1999), pp. 4-5, 102-103. Gideon Rose, “Haiti,” in Richard N. Haass (ed.),
Economic Sanctions and American Diplomacy (New York: Council on Foreign Relations, 1998), pp.
67-68. Daniel W. Drezner, “The Complex Causation of Sanction Outcomes,” in Steve Chan and A.
Cooper Drury (eds.), Sanctions as Economic Statecraft: Theory and Practice (New York: St.
Martin’s, 2000), p. 215. Howard Schneider, “10 Years On, Iraqis Shrug Off Embargo,” Washington
Post, February 24, 2001, p. A1.
169
However, under certain circumstance, economic sanctions can be effective.
According to the public choice perspective, sanctions will be effective if they are
designed to hurt specific groups (the ruling coalition or the “guilty”) selectively within
the target polity. David Cortright and George Lopez argue that economic sanctions
may empower internal political forces and render their opposition more effective to a
regime’s objectionable policies, thus generating an ‘internal opposition effect’. In
other words, targeted sanctions work, over time, by reducing the influence of the
proponents of a given policy. Zachary Selden calls this effect the “fifth-column”
effect.18
Jonathan Kirshner argues further that by disaggregating the target, the emphasis
needs to shift from “how much does a state suffer” to “who suffers.” The more the
sanction hurts the target central government directly, the greater the chance is that it
will influence its policy. Beyond this, the success of sanctions depends on whether or
not core support groups are affected and therefore put pressure on the target
government. Further, and most subtly, Kirshner argues that sanctions can have
differential effects within the central government and across core groups themselves,
shifting the balance of political power within the government and altering its
preferences.19
Therefore, Jonathan Kirshner suggests the central questions governing the
outcome of economic sanctions are: (1) under what circumstances will the sanction
18
19
Kaempfer and Lowenberg, “The Problems and Promise of Sanctions,” pp. 65-9. Kaempfer and
Lowenberg, International Economic Sanctions, p. 8. William H. Kaempfer and Anton D. Lowenberg,
“A Public Choice Analysis of the Political Economy of International Sanctions,” in Steve Chan and
A. Cooper Drury (eds.), Sanctions as Economic Statecraft: Theory and Practice (New York: St.
Martin’s, 2000), pp. 164, 186. See also Jonathan Kirshner, “The Microfoundations of Economic
Sanctions,” Security Studies, vol. 6, no. 3 (Spring 1997), pp. 32-64. A. Cooper Drury, “Revisiting
Economic Sanctions Reconsidered,” Journal of Peace Research, vol. 35, no. 4 (1998), p. 499. David
Cortright and George A. Lopez, The Sanctions Decade: Assessing UN Strategies in the 1990s
(Boulder, Colorado: Lynne Rienner, 2000), pp. 20-22. Zachary Selden, Economic Sanctions as
Instruments of American Foreign Policy (Westport, Connecticut: Praeger, 1999), pp. 20-23.
Jonathan Kirshner, “The Microfoundations of Economic Sanctions,” Security Studies, vol. 6, no. 3
(Spring 1997), pp. 41-50.
170
affect the target government (or elements within the ruling coalition) directly?; and (2)
which private groups are likely to be affected by a given sanction? The effectiveness
of sanctions will depend on how sanctions assist or hinder the work of opposition
groups in the targeted country.20
For instance, in the case of the U.S. extending China’s MFN status in the 1990s,
both James Lilley and David Lampton argue that a denial of MFN status would
actually work against the U.S. goals by reducing the bargaining power of the more
liberal leaders and reinforcing that of the more conservative elements in China.
Should MFN status have been denied China, those groups and sectors in coastal
provinces and urban areas that are more dependent on foreign trade would have been
the most direct and immediate casualties. But these areas represent the most
cosmopolitan segments of the Chinese elite, who have been the strongest advocates of
economic and political reforms. Further, a denial of MFN status would have entailed a
return to more central control and bureaucratic discretion, which would have worked
to the advantage of the interior regions of China, the large state-owned enterprises,
and political and economic cadres in charge of ideological indoctrination and
industrial planning. Therefore, Lilley and Lampton argue, the U.S. sanctions would
actually have weaken the position of the Chinese reformers, who advocate
compromise with the United States, and have provided a political windfall for the
Chinese hardliners, who would not support any concession to the United States.21
In order to reinforce the fifth-column effect while minimizing the prospect of the
rally-around-the-flag effect, David Cortright and George Lopez suggest a greater use
of targeted financial sanctions. By avoiding harmful impacts on vulnerable population,
20
21
Jonathan Kirshner, “The Microfoundations of Economic Sanctions,” Security Studies, vol. 6, no. 3
(Spring 1997), pp. 46-50.
James R. Lilley, “Trade and the Waking Giant – China, Asia, and American Engagement,” in James
R. Lilley and Wendell L. Willkie II (eds.), Beyond MFN: Trade with China and American Interests
(Washington, D.C.: AEI Press, 1994), pp. 48-53. David M. Lampton, “A Better Approach in Waging
171
targeted financial measures deny political elites the opportunity to rally broad political
support. Instead of punishing the general population, asset freezes and similar
measures apply pressure primarily on the political and military elites responsible for
wrongdoing. By contrast, income and term-of-trade effects of trade are often
widespread within the target economy, and are difficult to aim accurately at some
groups and not others. Although limiting imports and exports can devastate the local
economy (and thus inflict severe punishment on the target), such costs often affect
ordinary citizens far more than the elites who actually make policy decisions.22
In their analysis of international economic sanctions against South Africa, Xavier
Carim, Audie Klotz, and Olivier Lebleu conclude that bans on immediate financing
the short-term debt of South Africa offered the United States direct bargaining
leverage. According to their study, financial sanctions sharpened divisions within the
white
oligarchy
and
strained
the
alliance
between
business
and
the
Afrikaner-dominated National Party, which governed South Africa until 1994.
Financial sanctions have improved the effectiveness of sanctions.23
Finally, the domestic politics/symbolic approach argues that domestic political
and economic instability reinforces the effectiveness of economic sanctions,
particularly when the target government faces heavy costs. If the target government
has suffered from recent instability, it will be more vulnerable to sanctions. Thus,
under this circumstance, the target will be more likely to make concessions to avoid
sanctions. By contrast, it is very plausible to argue that if the sender suffers from
domestic economic and political instability, it will be less likely for the sender to
22
23
the Next MFN Battle,” Topics, vol. 27, no. 6 (August 1997), p. 45.
David Cortright and George A. Lopez, “Sanctions and Incentives as Tools of Economic Statecraft,”
in Raimo Vayrynen (ed.), Globalization and Global Governance (Lanham, Maryland: Rowman &
Littlefield Publishers, Inc., 1999), pp. 114-116.
Xavier Carim, Audie Klotz, and Olivier Lebleu, “The Political Economy of Financial Sanctions,” in
Neta C. Crawford and Audie Klotz (eds.), How Sanctions Work: Lessons from South Africa (New
York: St. Martin’s Press, 1999), pp. 159-177.
172
maintain sanctions and the target to concede because economic sanctions are
double-edged.24
Statistical Evidence
There is virtually no statistical exercise on the rally-around-the-flag effect,
nationalism, or the fifth-column effect stemming from economic sanctions. It is very
difficult to quantify these effects. Nevertheless, there are a few statistical tests on the
effectiveness of financial sanctions and the issue of economic health and political
stability in addition to the HSE study.
Regarding the effectiveness of financial sanctions, according to his 126 cases
studies involving 59 countries from 1948 to 1972, James Blessing argues that the
suspension of aid does not appear to have been a very effective means of inducing
change in target behavior. However, he argues that this finding is not statistically
significant and should only be viewed as a hypothesis.25
HSE reach a more affirmative conclusion that financial sanctions among 115 cases
between 1914 to 1989 have been more effective than trade sanctions alone. Financial
sanctions used alone contributed partially to the achievement of foreign policy goals
in 41 percent of the cases, compared to only 24 percent for trade sanctions alone. In
addition, the declining use of financial sanctions matches the declining success rate of
economic sanctions in the HSE database. Financial sanctions were part of sanctions
packages in more than 90 percent of episodes prior to 1973, while they were present in
only two-thirds of the cases between 1974 to 1989. Coincidentally, almost half the
24
25
Gary Clyde Hufbauer, Jeffery J. Schott, and Kimberly Ann Elliot, Economic Sanctions Reconsidered:
History and Current Policy, 2nd ed. (Washington, D.C.: Institute of International Economics, 1990),
pp. 97-98. Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International
Relations (New York: Cambridge University Press, 1999), pp. 114, 122.
James A. Blessing, “The Suspension of Foreign Aid: A Macro-Analysis,” Polity, vol. 13, no. 3
173
sanctions episodes in the pre-1973 period succeeded, whereas the success rate among
the cases between 1974 to 1989 was just under 25 percent.26
Regarding the issue of economic health and political instability, using a probit
model to analyze 98 cases based on the 1985 HSE database, 27 excluding
double-countings and the episodes where sanctions were threatened but not imposed,
San Ling Lam finds that the target country’s overall economic health and political
stability is significant at the 10 percent level. In addition, Kimberly Elliot and Peter
Uimonen use the same method to test the HSE cases, excluding sanctions threat cases
and cases in which military action was pursued concurrently with economic sanctions.
Elliot and Uimonen find that the target country’s overall economic health and political
stability is significant at the 1 percent level.28
Using ordered logit estimation based on the HSE database, A. Cooper Drury finds
that distressed targets tended to succumb to sanctions more often than strong, healthy
targets, but their relationship was marginally significant at best. 29 Using probit
regression based on the HSE-Drezner database, Daniel Drezner finds that health of the
target regime is significant at the 5 percent level. The variable, health of the target
regime, is negatively correlated with concession size.30 Further, Drezner uses Boolean
analysis of 39 cases of economic sanctions imposed by Russia between 1992 and 1997.
26
27
28
29
30
(Spring 1981), pp. 524-535.
Gary Clyde Hufbauer, Jeffery J. Schott, and Kimberly Ann Elliot, Economic Sanctions Reconsidered:
History and Current Policy, 2nd ed. (Washington, D.C.: Institute of International Economics, 1990),
pp. 102-111. Hufbauer, Gary Clyde, and Barbara Oegg, “Targeted Sanctions: A Policy Alternative?,”
presented at Georgetown Journal of Law and Policy in International Business and Georgetown Asia
Forum Symposium on Sanctions Reforms? Evaluating the Economic Weapon in Asia & the World,
February 23, 2000, http://www.iie.com/TESTMONY/targsanc.htm, accessed November 27, 2000, p.
3 of 6.
Gary Clyde Hufbauer and Jeffery J. Schott, Economic Sanctions Reconsidered: History and Current
Policy, (Washington, D.C.: Institute of International Economics, 1985).
San Ling Lam, “Economic Sanctions and the Success of Foreign Policy Goals,” Japan and the
World Economy, vol. 2 (1990), pp. 239-247. Kimberly Ann Elliott and Peter P. Uimonen, “The
Effectiveness of Economic Sanctions with Application to the Case of Iraq,” Japan and the World
Economy, vol. 5 (1993), pp. 403-409.
A. Cooper Drury, “Revisiting Economic Sanctions Reconsidered,” Journal of Peace Research, vol.
35, no. 4 (1998), pp. 507-508.
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
174
He finds that if the sanctions impose significant costs on the target regime, then that
regime’s domestic stability is a crucial factor in determining the outcome.31
Democracy vs. Authoritarism
According to the above analysis, the domestic politics/symbolic approach
emphasizes that the effectiveness of economic sanctions will depend upon the
dynamic balance between the rally-around-the-flag effect and the fifth-column effect
in the target. Since the public and interest groups play a critical role in these two
effects by pressuring the target government to sustain or abandon its objectionable
policy, it is plausible to hypothesize that sanctions are more likely to be effective in
societies where there is some degree of democratic freedom than in rigidly totalitarian
states. The rally-around-the-flag effect might dominate in authoritarian countries
while the fifth-column effect might prevail in the democratic countries. It is expected
that authoritarian countries usually have stronger domestic political systems than
democratic ones and thus authoritarian rulers are more able to manipulate their own
societies in comparison with leaders of democratic states.32
Ivan Eland contends, “In cases where the target government has absolute
totalitarian control over society, especially over the media and the formation of
political opposition, the rally-around-the-flag effect will dominate and no
31
32
York: Cambridge University Press, 1999), pp. 121-125.
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 131-247. Daniel W. Drezner, “The Complex
Causation of Sanction Outcomes,” in Steve Chan and A. Cooper Drury (eds.), Sanctions as
Economic Statecraft: Theory and Practice (New York: St. Martin’s, 2000), pp. 212-233.
David Cortright and George A. Lopez, The Sanctions Decade: Assessing UN Strategies in the 1990s
(Boulder, Colorado: Lynne Rienner, 2000), p. 22. Brian Walsh, Economic Sanctions and
International Power: The Emergence of Defensive and Co-optive Power, Ph.D. dissertation, the
University of Maryland, College Park, 1998, p. 288. Stephen D. Krasner, “Domestic Constraints on
International Leverage,” in Klaus Knorr and Frank N. Trager (eds.), Economic Issues and National
Security (Lawrence, Kansas: University Press of Kansas, 1977), p. 178.
175
[fifth-column] effect will arise to pressure the government to comply with the [sender]
nation’s wishes.”33
Coincidentally, authoritarian countries are often able to back down and withstand
the effects of economic sanctions. Richard Haass points out three possible reasons: (1)
sanctions sometimes trigger a rally-around-the-flag, nationalist reaction; (2) by
creating scarcity, they enable governments to better control the distribution of goods;
and, (3) they create a general sense of siege that governments can exploit to maintain
political control.34
However, Robert Pape disagrees, arguing, “Democratization further imbues
individual citizens with a personal attachment to national goals. Even in the weakest
and most fractured states, external pressure is more likely to enhance the nationalist
legitimacy of rulers than to undermine it. In some situations, advances in
communication further improve the ability of governments to enhance the legitimacy
of the state and its policies.”35 There are times when a target with a functioning
electoral system will resist international efforts to sanction it quite successfully.
Indeed, HSE report at least eleven cases where sanctions against liberal democracies
failed.36
Michael Mastanduno also agrees with Robert Pape. He contends that democratic
states can also respond to sanctions, as they typically do to war, with political
integration rather than disintegration. Formal political structures are less important
than the interests and influence of domestic political actors, and the relationships
33
34
35
36
Ivan Eland, “Economic Sanctions as Tools of Foreign Policy,” in David Cortright and George A.
Lopez (eds.), Economic Sanctions: Panacea or Peacebuilding in a Post-Cold War World? (Boulder,
Colorado: Westview Press, 1995), p. 35.
Richard N. Haass, “Sanctioning Madness,” Foreign Affairs, vol. 76, no. 6 (November/December
1997), p. 80.
Robert A. Pape, “Why Economic Sanctions Do Not Work,” International Security, vol. 22, no. 2
(Fall 1997), pp. 106-107.
Eleven cases refer to cases 48-3, 54-1, 54-3, 56-1, 57-1, 63-5, 71-1, 74-1, 74-2, 78-4, and 83-1 in the
HSE database.
176
between those actors and the state. He concludes that the key is the ability of domestic
actors to act as “transmission belts”, carrying the economic effects of sanctions into
the political process of the target state. Therefore, he suggests that the research
strategy be to get “underneath” the formal political structure to assess the impact of
sanctions on particular domestic actors and on the relationships among the state, its
supporters, and its opponents.37
Statistical Evidence
Kim Nossal observes that the overwhelming majority (twelve of fourteen) of
sanctions successes since 1945 occurred in cases where the target political system was
a liberal democracy. He also notes that authoritarian regimes generally find it easy to
resist the punitive impact by simply passing the costs of the sanctions to the governed.
By contrast, Robert Pape, examining HSE cases, excluding economic warfare and
trade disputes, finds that there are four sanctions successes for democratic targets as
well as four for authoritarian targets if sanctions successes include indeterminate cases.
(Regarding the debate on sanctions success, see Chapter 3.) This is in sharp contrast to
Nossal’s finding.38
Although sometimes a correlation between sanctions success and political form
seems to exist, it is by no means clear or self-evident how or why sanctions seem to
37
38
Michael Mastanduno, “Economic Statecraft, Interdependence, and National Security: Agenda for
Research,” Jean-Marc F. Blanchard, Edward D. Mansfield, and Norrin M. Ripsman, Power and the
Purse: Economic Statecraft, Interdependence, and National Security (Portland, OR: Frank Cass,
2000), pp. 297-298.
For Robert Pape, four sanctions successes for democratic targets refer to cases 48-1, 77-4, 79-3, and
87-3 in the HSE database; four sanctions successes for authoritarian targets refer to cases 33-1, 75-1,
82-3, and 89-1 in the HSE database. Kim Nossal argues that among the many sanctions episodes
since 1945, only fourteen stand out as unequivocally successful, in the sense that the target state was
prompted to alter its behavior by the use of sanctions. Kim Richard Nossal, “Liberal Democratic
Regimes, International Sanctions, and Global Governance,” in Raimo Vayrynen (ed.), Globalization
and Global Governance (Lanham, Maryland: Rowman & Littlefield Publishers, Inc., 1999), pp.
134-135. Robert A. Pape, “Why Economic Sanctions Do Not Work,” International Security, vol. 22,
177
work so well in countries that are either liberal democracies or have some of the
structures, forms, and practices associated with liberal democratic politics. For
example, despite finding a strong link between sanctions success and the target’s
political system, Kim Nossal concludes that economic sanctions will be effective only
when the target has a democratic form and is weak, vulnerable, and dependent.39
However, the conclusions reached by Nossal and Pape are biased because they do
not take the cases of failed sanctions against the democratic targets into account. It
would be useful to know whether sanctions against democratic targets are more likely
to succeed among all sanctions cases against democratic targets rather than simply
whether the democratic targets will dominate among all sanctions successes of both
democratic and authoritarian targets. In addition, we need to compare this success
rate for the democratic targets with that for the authoritarian targets.
Based on the HSE database, 8 cases of economic sanctions against liberal
democracies succeeded while 11 cases failed. The success ratio is 42 percent for the
democratic targets. By comparison, 32 cases of economic sanctions against
authoritarian regimes succeeded while 64 cases failed, a success ratio of 33 percent.
Although the success rate for the democratic targets is higher than that for the
authoritarian targets, chi square tests show that there is no statistically significant
correlation between regime types and the outcome of economic sanctions. (See Table
5.1.)
Table 5.1. Sanctions Result against Democratic and Authoritarian Countries
Success (case)
39
Democratic targets
Authoritarian targets
8
32
no. 2 (Fall 1997), pp. 98-106.
Kim Richard Nossal, “Liberal Democratic Regimes, International Sanctions, and Global
Governance,” in Raimo Vayrynen (ed.), Globalization and Global Governance (Lanham, Maryland:
Rowman & Littlefield Publishers, Inc., 1999), pp. 147-148.
178
Failure (case)
11
64
Success rate
42%
33%
Note:
a: Sanctions successes on democratic targets include cases 48-1, 56-3, 58-1, 65-2, 73-1, 77-4, 79-3, and
87-3 in the HSE database.
b: Sanctions failure on democratic targets include cases 48-3, 54-1, 54-3, 56-1, 57-1, 63-5, 71-1, 74-1,
74-2, 78-4, and 83-1 in the HSE database.
c: Whether a target is a democratic regime or an authoritarian society mostly depends upon the
comparative measures of freedom annually published by the Freedom House. If the measure of
political rights indicates below or equivalent to 3 with 1 representing the most free and 7 the least
free category, the target is treated as a democratic country. If the measure indicates above 3, the
target is considered as an authoritarian country.
Source:
Gary Clyde Hufbauer, Jeffery J. Schott, and Kimberly Ann Elliot, Economic Sanctions Reconsidered:
History and Current Policy, 2nd ed. (Washington, D.C.: Institute of International Economics, 1990).
Freedom House Survey Team, Freedom in the World (New York: Freedom House, 1980-1999).
III. The Signaling Approach
The signaling approach argues that in a world of imperfect information,
substantial costs incurred by the sender can signal the intent that threats will be carried
out. As long as the sender bears the significant cost of economic sanctions and these
sanctions are coupled with substantial military threats, the target will tend to make
concessions. In this regard, sanctions are only useful in acting as a signal of resolve,
and economic sanctions cannot work alone. The casual argument in this school of
thought is that what appears to be a sanctions success is actually the product of an
implicit military threat. Economic sanctions are not the genuine cause of concessions,
but merely an observable signal of military power or threat. For example, almost half
of the cases deemed successes by HSE are really examples of the successful
application of force. This would appear to be evidence that economic sanctions are
179
really a signal for more coercive measures.40
James Lindsay elaborates that sanctions will succeed as signals only if four
conditions are met. First, it must be clear the sender objects to the target’s behavior
and will try to change it. Second, the potential target must perceive that the sender can
inflict economic pain. Third, the sender must not perceive that the potential target can
resort to adequate counterpressures. And, fourth, the potential target must not place a
higher value on the disputed behavior than on the costs expected to be incurred.
Lindsay concludes that given the stringency of these conditions, it is likely that
sanctions have a limited signaling value.41
Furthermore, David Baldwin, David Leyton-Brown, and Lisa Martin argue that
substantial sender costs are crucial in order for sanctions to send the desired signal. A
sender is less likely to bluff if it incurs a high price in imposing sanctions. Their
values as a signal comes not from the damage inflicted on the target, but the cost to
the sender. By contrast, if the sender imposes economic sanctions because of the
domestic need of “doing something” and reluctance to use the force, low-cost
sanctions may indeed signal a lack of resolve.42
However, Valerie Schwebach argues that irresolute actors would sometimes have
an incentive to bluff by imposing sanctions. The very potential of sanctions to be good
signals of resolve could undermine their effectiveness as signals since irresolute actors
are tempted to use them. Thus this bluffing behavior would blur the connection
40
41
42
Daniel W. Drezner, “The Complex Causation of Sanction Outcomes,” in Steve Chan and A. Cooper
Drury (eds.), Sanctions as Economic Statecraft: Theory and Practice (New York: St. Martin’s, 2000),
pp. 215-216. Robert A. Pape, “Why Economic Sanctions Do Not Work,” International Security, vol.
22, no. 2 (Fall 1997), pp. 98-106.
James M. Lindsay, “Trade Sanctions as Policy Instruments: A Re-examination,” International
Studies Quarterly, no. 30 (1986), pp. 164-170.
David Baldwin, Economic Statecraft (Princeton, N.J.: Princeton University Press, 1985), p. 372.
David Leyton-Brown, “Lessons and Policy Considerations about Economic Sanctions,” David
Leyton-Brown (ed.), The Utility of International Economic Sanctions (New York: St. Martin’s Press,
1987), pp. 305-6. Lisa L. Martin, Coercive Cooperation: Explaining Multilateral Economic
Sanctions (Princeton, New Jersey: Princeton University Press, 1992), pp. 5, 36-38.
180
between sanctions and resolve, and decrease the usefulness of sanctions as signals. For
example, HSE report only six cases in which the threat of sanctions alone was
sufficient to induce target compliance.43
To sum up, the signaling approach makes two predictions about the pattern of
economic sanctions outcomes. First, the sender should incur greater costs and should
couple sanctions with a threat to use force; by doing this, the sender communicates a
more credible signal to the target. Therefore, the sender’s costs should be positively
correlated with concession size. Second, the threat to use force, or the differences in
aggregate power, should be positively correlated with concession size. Accordingly,
the causal mechanism that determines sanctions success is the prospect of military
conflict, not the use of economic sanctions.44
Statistical Evidence
Regarding sender costs, using probit techniques based on the 1985 HSE database,
San Ling Lam finds that the sender’s costs are negatively correlated with sanctions
success, and results are significant at the 5 percent level. Using logistic regression
based on the HSE database, excluding the cases of economic warfare, T. Clifton
Morgan and Valerie Schwebach find the sender’s costs to be negatively correlated
with sanctions success and significant at the 1 percent level of significance.45
43
44
45
Valerie L. Schwebach, “Sanctions as Signals: A Line in the Sand or a Lack of Resolve?,” in Steve
Chan and A. Cooper Drury (eds.), Sanctions as Economic Statecraft: Theory and Practice (New
York: St. Martin’s, 2000), pp. 188-203.
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 113, 122.
San Ling Lam, “Economic Sanctions and the Success of Foreign Policy Goals,” Japan and the
World Economy, vol. 2 (1990), pp. 244-246. T. Clifton Morgan, and Valerie L. Schwebach, “Fools
Suffer Gladly: The Use of Economic Sanctions in International Crises,” International Studies
Quarterly, no. 41 (1997), pp. 38-47.
181
Regarding the correlation between the use of military action and concession size,
San Ling Lam finds that both covert and overt military action has no statistically
significant effect on the outcome of sanctions. Using probit regression based on the
HSE database, excluding sanctions threats cases and cases with military action,
Kimberly Elliot and Peter Uimonen find that the use of quasi-military force has a
negative effect on the chances of success and is significant at the 5 percent level.
Looking at ratios of sender to target gross national product, both studies by Lam, as
well as the one by Elliot and Uimonen, show that economic sanctions are less likely to
succeed if the sender is significantly more powerful than the target. This result is
significant at the 5 percent level in Lam’s study and at the 1 percent level in Elliot and
Uimonen’s. In addition, T. Clifton Morgan and Valerie Schwebach find that the
relative military capabilities between the sender and the target has a negative effect on
the outcome of the economic sanctions and is significant at the 1 percent level. That is,
as the sender’s relative capabilities increase, the target is less likely to make
concessions.46
Using ordered-probit measures to test the HSE-Drezner database, Daniel Drezner
finds that the signaling approach is not supported by evidence. The military statecraft
variable is statistically insignificant. The aggregate power measure is significant at the
5 percent level, according to Drezner, but it takes a negative coefficient. As the sender
acquires more power, it is less likely to generate significant concessions. In another
estimation of Drezner, neither the military statecraft nor the aggregate power
hypotheses has statistical significance.47
46
47
San Ling Lam, “Economic Sanctions and the Success of Foreign Policy Goals,” Japan and the
World Economy, vol. 2 (1990), pp. 244-246. Elliott, Kimberly Ann and Peter P. Uimonen, “The
Effectiveness of Economic Sanctions with Application to the Case of Iraq,” Japan and the World
Economy, vol. 5 (1993), pp. 403-409. T. Clifton Morgan and Valerie L. Schwebach, “Fools Suffer
Gladly: The Use of Economic Sanctions in International Crises,” International Studies Quarterly, no.
41 (1997), pp. 38-47.
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 122-125.
182
Moreover, Daniel Drezner uses Boolean analysis of 39 cases of economic
sanctions imposed by Russia between 1992 and 1997. He concludes that the threat of
military force is neither a necessary nor sufficient condition for economic sanctions to
produce significant or moderate concessions. Indeed, the absence of military statecraft
is a sufficient condition for producing concessions. In an overwhelming majority of
the cases, military force either played no role or only a negative one.48
IV. The Conflict Expectations Model
Daniel Drezner uses his conflict expectations model to argue that if the sender
and the target are adversaries, the target will be more reluctant to acquiesce under the
pressure of economic sanctions because its concessions represent a transfer of political
leverage to the sender, magnifying the long-term impact of the concession in the
target’s eyes. An adversarial relationship with the sender would cause the target to
consider two political concerns: relative gains and reputation. When relative gains
concerns are prominent, a concession represents a gain for the sender and a loss for
the target. When reputation is important, acquiescence bolsters the sender’s credibility
as a tough negotiator while weakening the target’s reputation.49 For example, given
the escalating demands from the U.S. Congress after the Tiananmen incident, Beijing
could not be assured that concessions to the United States would not simply produce
further demands and thus did not make concessions.50
According to Peter Liberman and other neo-realists, a state’s sensitivity to
48
49
50
Daniel W. Drezner, “The Complex Causation of Sanction Outcomes,” in Steve Chan and A. Cooper
Drury (eds.), Sanctions as Economic Statecraft: Theory and Practice (New York: St. Martin’s, 2000),
pp. 221-229.
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 27-35.
David M. Lampton, Same Bed, Different Dreams: Managing U.S.-China Relations, 1989-2000
(Berkeley: University of California Press, 2001), p. 305.
183
relative gains depends on the degree and duration of the security threat posed by
specific adversaries. States will fear the relative gains of near-by, powerful,
offensively armed, and hostile nations more than those of distant, weak, defensively
armed, and friendly ones. For example, East-West trade during the Cold War provides
a clear demonstration of security-motivated relative-gains policy. Believing that trade
would provide a great benefit to the smaller and more backward Soviet economy, U.S.
officials halted trade with the Soviet bloc during the 1950s and 1960s, and continued
to embargo high-tech exports thereafter.51
If the target is an ally, relative gains and reputation concerns are less prominent
because the target anticipates fewer zero-sum conflicts in the future. Between allies,
the target will care more about the immediate costs and benefits of a stalemate than
about the long-run implications of any transfer of leverage. Therefore, the target will
concede more to avoid the costs of deadlock. Ceteris paribus, the target’s concessions
will increase when the target and the sender are more closely aligned. In addition,
Daniel Drezner argues that the absence of conflict expectations is a necessary
condition for economic sanctions to produce significant concessions. If the
target-sender relationship is adversarial, there must be a large gap in costs for
sanctions to generate even moderate concessions.52 (See Figure 5.1.)
Figure 5.1. The Effect of Conflict Expectations on Concession Size
Peter Liberman, “Trading with the Enemy: Security and Relative Economic Gains,” International
Security, High
vol. 21, no. 1 (Summer
1996), pp. 150-155. Duncan Snidal, “Relative Gains and the Pattern
Concession
of International Cooperation,” in David A. Baldwin (ed.), Neorealism and Neoliberalism: The
condition
Contemporary Debate (New York:
Columbia University Press, 1993), pp. 170-233. John C.
Matthews III, “Current Gains and Future Outcomes: When Cumulative Relative Gains Matter,”
International Security, vol. 21, no. 1 (Summer 1996), pp. 112-146. Beverly Crawford, Economic
Concession
Vulnerability in International Relations: The Case of East-West Trade, Investment, and Finance
(New York: Columbia University Press, 1993).
size
52
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 27-35, 43-47, 244-245. Daniel W. Drezner, “Allies,
Adversaries, and Economic Coercion: Russian Foreign Economic Policy Since 1991,” Security
Studies, vol. 6, no. 3 (Spring 1997), pp. 66-71.
51
Low
184
Low
High
Conflict expectations
The conflict expectations model also argues that the target’s concession will
increase as the difference between the target’s and the sender’s costs of deadlock
increases. According to Daniel Drezner’s model, the expected costs of sanctions have
a monotonic effect on the outcome. As the target’s costs of deadlock increase, ceteris
paribus, the sender’s gains from the equilibrium outcome increase. As the sender’s
costs of deadlock decrease, ceteris paribus, the sender’s gains increase as well. That is,
only sufficient asymmetrical interdependence between the sender and the target would
result in enough pressure on the target to produce concessions to the sender through
imposing economic sanctions.53
Table 5.2 shows how the cost and alignment variables interact. As can be seen in
this table, the gap in costs has a consistent effect on the outcome, while alignment has
53
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 45-46. Miroslav Nincic and Peter Wallensteen,
“Economic Coercion and Foreign Policy,” in Miroslav Nincic and Peter Wallensteen (eds.),
Dilemmas of Economic Coercion: Sanctions in World Politics (New York: Praeger, 1983), pp. 2-3,
12.
185
a contradictory effect.54
Table 5.2. The Predicted Pattern of Economic Sanctions
Costs gap
Ally
Adversary
Large gap in costs
Significant concessions
Moderate concessions
Small gap in costs
No sanctions attempt
Minor concessions
Source: Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations
(New York: Cambridge University Press, 1999), p. 54. Reprinted with the permission of
Cambridge University Press.
To sum up, the conflict expectations model makes two major predictions about
the pattern of sanctions success. First, the sender will win more substantial
concessions by imposing economic sanctions against the target when the gap in the
costs of deadlock between the sender and the target is greater. Ceteris paribus, as the
sender’s costs of deadlock increase, the sender is less likely to impose sanctions
against the target. If it does choose to employ sanctions, it will obtain less significant
concessions. An increase in the sender’s costs makes economic sanctions less viable
and less profitable. By contrast, an increase in the target’s costs makes economic
sanctions more viable and more profitable.
Second, the target will concede more if conflict expectations between the target
and sender are low. By contrast, as conflict expectations increase, the target will be
more resistant to concessions. Even with a large gap of costs between the sender and
the target, the target would make at most moderate concessions. However, if the
sender’s demand is greater than the optimum possible concession and cannot be
compromised, the equilibrium outcome is deadlock and the sender could not extract
any concession from the target.
54
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 47, 53-54.
186
Statistical Evidence
Regarding the gap in costs, HSE’s results provide moderate support for the
notion that when the costs gap between the sender and the target is greater, sanctions
are more likely to be successful in attaining the desired response from the target.
Specifically, their analysis indicates that for successful cases the average ratio of the
costs of sanctions to GNP is 2.4 percent for the target country and the average
cost-to-sender index (scored from 1 to 4, with 1 representing a net gain and 4 a major
loss to the sender) is 1.8 point for the sender. In failed cases the ratio was 1.0 for the
target and the index 2.0 for the sender.55
Using a probit model based on the 1985 HSE database, San Ling Lam finds the
target’s costs to be significant at the 5 percent level. Using probit regression based on
the HSE database, excluding sanctions threats cases and cases with military action,
Kimberly Elliot and Peter Uimonen find the target’s costs to be significant at the 1
percent level. A. Cooper Drury uses logistic regression to analyze the HSE database.
He finds a positive correlation between the target’s costs and a successful outcome at
the 5 percent level. Using logistic regression based on the HSE database, T. Clifford
Morgan and Valerie Schwebach also find the target’s costs to be significant at 1
percent. On the whole, these results suggest a clear link between the target’s costs and
the outcome of a sanctions event.56
55
56
Gary Clyde Hufbauer, Jeffery J. Schott, and Kimberly Ann Elliot, Economic Sanctions Reconsidered:
History and Current Policy, 2nd ed. (Washington, D.C.: Institute of International Economics, 1990),
pp. 102-103.
San Ling Lam, “Economic Sanctions and the Success of Foreign Policy Goals,” Japan and the
World Economy, vol. 2 (1990), pp. 244-246. Kimberly Ann Elliott and Peter P. Uimonen, “The
Effectiveness of Economic Sanctions with Application to the Case of Iraq,” Japan and the World
Economy, vol. 5 (1993), pp. 403-409. T. Clifton Morgan and Valerie L. Schwebach, “Fools Suffer
Gladly: The Use of Economic Sanctions in International Crises,” International Studies Quarterly, no.
41 (1997), pp. 43-45.
187
San Ling Lam, and T. Clifford Morgan and Valerie Schwebach include a measure
of the sender’s cost in their studies. Using a probit model based on the 1985 HSE
database, Lam finds the sender’s costs to be negatively correlated with sanctions
success and significant at the 5 percent level. In addition, Lam also finds that the
logarithm of the ratio of sender’s GNP to target’s GNP is significant at the 5 percent
level. Using logistic regression based on the HSE database, Morgan and Schwebach
find the same correlation at the 1 percent level of significance. High sender costs are
found to be negatively correlated with sanctions success. However, Morgan and
Schwebach point out that sanctions do not seem to result in great changes in expected
outcomes, regardless of the costs. Extreme costs are required to produce relatively
small changes in outcomes.57
Makio Miyagawa analyzes in detail 31 cases of economic sanctions between
1933 and 1990. Miyagawa finds that the cost to the sender will reduce the
effectiveness of a sanction.58 Using ordered-probit measures to test the HSE-Drezner
database, Daniel Drezner finds the gap in costs takes a positive sign; the greater the
gap in costs, the more the target will concede. The cost term is significant at the 1
percent level in both of his regressions.59
Regarding the conflict expectations effect, the U.S. General Accounting Office
studies 27 sanctions episodes beginning after the World War I and concludes in a 1992
report to the Senate Foreign Relations Committee, “Economic sanctions are most
effective when they are applied multilaterally or against otherwise friendly nations
with economic and political ties to the [sender] country.”60
57
58
59
60
San Ling Lam, “Economic Sanctions and the Success of Foreign Policy Goals,” Japan and the
World Economy, vol. 2 (1990), pp. 239-247. T. Clifton Morgan and Valerie L. Schwebach, “Fools
Suffer Gladly: The Use of Economic Sanctions in International Crises,” International Studies
Quarterly, no. 41 (1997), pp. 43-45.
Makio Miyagawa, Do Economic Sanctions Work? (New York: St. Martin’s Press, 1992), pp. 61-88.
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 122-124.
United States General Accounting Office, Economic Sanctions: Effectiveness as Tools of Foreign
188
Using a probit model based on the 1985 HSE database, San Ling Lam finds that
the prior relationship (alignment) is statistically significant at the 10 percent level.61
Using ordered-probit measures to analyze the HSE-Drezner database, Daniel Drezner
finds the alignment term takes a positive sign. Drezner’s results are significant at the 1
percent level in his first regression and at the 5 percent level in his second regression.
This means that as the expectations of future conflict between the two countries
declines, the target will make a larger concession. In addition, if an ally and an
adversary face the same costs of deadlock, the ally target will still concede more. 62
Further, Daniel Drezner applies the Boolean method to analyze 39 episodes of
economic sanctions imposed by Russia between 1992 and 1997 and concludes that
economic sanctions will produce significant concessions if the target is a close ally
and the sender does not threaten military force. The absence of conflict expectations is
a necessary condition for the sender to extract significant concessions. The presence
of a military threat or domestic instability in the target country is neither necessary nor
sufficient conditions. In the presence of conflict expectations, there must be a
significant gap in costs of sanctions to lead to a successful outcome.63
V. Conclusion
First of all, it should be emphasized that economic sanctions are generally
ineffective and the rate of success in terms of target compliance has been declining
over time, particular from 1975 to 1990. The success rate of economic sanctions,
61
62
63
Policy, Report to the Chairman, Committee on Foreign Relations, U.S. Senate, GAO/NSIAD-92-106,
February 1992, p. 3.
San Ling Lam, “Economic Sanctions and the Success of Foreign Policy Goals,” Japan and the
World Economy, vol. 2 (1990), pp. 239-247.
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 122-124.
Daniel W. Drezner, The Sanctions Paradox: Economic Statecraft and International Relations (New
York: Cambridge University Press, 1999), pp. 131-247.
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excluding economic warfare and trade disputes, is as low as 4.6 to 10.4 percent.
The HSE approach suggests that sanctions are most effective under the following
conditions: modest sender goals, a weak and unstable target, high costs to the target,
low costs to the sender, friendly relationship between the sender and the target, a high
trade concentration for the target with the sender, quick and harsh unilateral sanctions,
no assistance to the target by third countries, and, finally, sanctions that are primarily
financial rather than trade-oriented. Although the HSE database is blamed for sample
bias by including trade disputes and economic warfare, most of the above variables
have been further confirmed by the other three approaches mentioned in this chapter.
The domestic politics/symbolic approach focuses on the political economy within
the sender and target countries. This approach provides three factors working against
the effectiveness of economic sanctions: (1) few cases with damaging sanctions; (2)
the rally-around-the-flag effect reinforced by nationalism; and (3) manipulated
redistribution effects of sanctions in the target. Furthermore, it is very plausible that if
the sender suffers from domestic economic and political instability, it will be less
likely for the target to concede because the sender will have more concerns about the
costs of sanctions.
Economic sanctions might be treated as a humiliating affront to the target and
thus trigger a rally-around-the-flag effect. Pervasive nationalism and a lack of
discrimination between the “guilty” and the “innocent” will significantly reinforce the
rally-around-the-flag effect. The sender might become the common enemy for the
target. The resistance of domestic groups and the public to economic sanctions
becomes synonymous with patriotism, while dissent would trigger accusations of
disloyalty or treason. These effects will facilitate political integration in the target and
cause the sanctions to fail.
By contrast, this approach cites two factors as contributing to the effectiveness of
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sanctions: (1) the fifth-column effect; and, (2) political and economic instability in the
target. The fifth-column effect is seen when some particular groups in the target
country hurt by the sanctions petition their government to comply with the sender’s
demands. The more the sanction hurts the target central government directly, the
greater the chance to influence its policy. In addition, core support groups of the target
regime negatively affected by sanctions will put pressure on their government. As a
matter of fact, China’s political strategies toward Taiwan, yi min bi guan (utilizing the
public to urge the official) and yi shang wei zheng (exploiting business to press
politics), are based on the expectations of a fifth-column effect. Furthermore, the
target government with domestic political and economic instability will tend to
concede to the sender’s demand.
Nevertheless, economic sanctions can generate both the rally-around-the-flag
effect and the fifth-column effect at the same time. In order to bring about alteration of
an
objectionable
policy,
the
fifth-column
effect
must
overwhelm
the
rally-around-the-flag effect. In other words, sanctions must reduce the political
effectiveness of pro-regime groups more than they reduce the effectiveness of
opposition groups. In particular, financial sanctions tend to reinforce the fifth-column
effect while minimizing the rally-around-the-flag effect. By contrast, trade sanctions
cannot be aimed accurately at any particular group, thus they are more likely to trigger
a rally-around-the-flag effect.
There are several statistical tests of financial sanctions and political instability in
the target country, although there is no exercise on the rally-around-the-flag effect,
nationalism, and the fifth-column effect. Overall, the argument that financial sanctions
are more effective is based on moderate statistical evidence and the argument that the
target with unstable political and economic conditions tends to make concessions to
the sender has strong statistical support.
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There is no sufficient statistical evidence, however, to confirm that the
democracy of a target country is a necessary or sufficient condition for sanctions
successes. In general, a democratic regime may provide more space for the public and
interest groups to influence the target government. But an authoritarian regime also
needs to respond to pressure from interest groups or the members of the regime itself,
such as factions or competing leaders, bureaucratic sectors, local leaders, core
business groups, or sometimes even the public.
The signaling approach argues that sanctions could be useful as a signal for more
coercive measures. This approach makes two predictions about the pattern of
sanctions outcome. First, the sender’s costs should be positively correlated with
concession size. Second, a threat to use force, or difference in aggregate power, should
be positively correlated with concession size.
However, statistical results provide no support for the signaling approach. The
statistical evidence available categorically rejects the argument that high sender costs
can effectively signal resolve and thus lead to a successful outcome. High sender costs
are found to be negatively correlated with sanctions success. In addition, neither
military power nor military threats affect the outcome of a sanctions attempt.
Therefore, economic sanctions are not a stalking horse for military threats or relative
capabilities.
The conflict expectations model makes two major predictions. First, the greater
the gap between the sender’s and target’s costs, the greater the target’s concessions.
An increase in the sender’s costs makes economic sanctions less viable and less
profitable. By contrast, an increase in the target’s costs makes economic sanctions
more viable and more profitable. Second, if the sender and the target are adversaries,
the target will be more reluctant to acquiesce under the pressure of economic
sanctions because of relative gains and reputation concerns. As the target and sender
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anticipate few political conflicts in the future, the magnitude of the target’s
concessions will increase. For economic sanctions to produce significant concessions,
the absence of conflict expectations is a necessary condition. If the target-sender
relationship is adversarial, there must be a large gap in costs for sanctions to generate
even moderate concessions. The statistical results provide solid empirical support for
this model.
Regarding the implication for cross-Strait economic relations, in theory, China’s
sanctions against Taiwan generally tend to be ineffective. The probability of success
of Chinese economic sanctions is only 4.6 to 10.4 percent. In addition, the necessary
condition for China’s successful sanctions with Taiwan’s moderate concessions is:
China enjoys a large gap of costs.
The following conditions will contribute to the effectiveness of economic
sanctions: (1) China enjoys a significant costs gap of economic sanctions between
Taiwan and China; (2) China’s sanctions trigger a fifth-column effect; (3) China
imposes financial sanctions against Taiwan instead of trade sanctions, but financial
flows now favor Taiwan’s leverage; (4) Taiwan is unstable; and (5) China imposes
sanctions against Taiwan quickly, with maximum harshness, and without significant
international assistance to Taiwan.
By contrast, the following conditions will contribute to the ineffectiveness of
China’s
sanctions:
(1)
China’s
sanctions
trigger
nationalism
and
a
rally-around-the-flag effect in Taiwan; (2) China suffers from domestic instability; (3)
Taiwan’s government can manipulate redistribution effects of sanctions to favor the
ruling coalition; and (4) Taiwan’s decision-makers have strong concerns of relative
gains and reputation in the cross-Strait conflict.
It is impossible to predict the domestic situation for both Taiwan and China,
whether Beijing could impose sanctions against Taiwan quickly, with maximum
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harshness, and whether the Taiwanese government could manipulate redistribution
effects of sanctions to favor the ruling coalition when Beijing were to impose
economic sanctions against Taiwan. However, these are not the most important
variables to influence the effectiveness of economic sanctions. They are secondary to
the following variables: costs gap of sanctions between Beijing and Taipei (including
the
reaction
of
the
international
community
toward
China’s
sanctions),
rally-around-the-flag effects, fifth-column effects, and perception of decision-makers
in Taiwan. As a result, this research focuses on the last four variables to assess
Taiwan’s vulnerability with respect to cross-Strait economic relations.
Chapter 8 will assess the possible costs of China’s possible economic sanctions
against Taiwan. By examining two cases of the 1995-96 Taiwan Strait missile tensions
and the 1999-2000 Taiwan Strait incident, Chapter 11 will further test the following
hypotheses on the outcome of China’s possible sanctions against Taiwan:
1. As China’s military threats increased, Taiwan experienced rising nationalism
and a strong “rally-around-the-flag” effect, with a moderate fifth-column
effect, in terms of the reaction of Taiwan’s public, elites, and interest groups.
2. Taiwan’s
decision-makers
emphasized
(credibility) in the cross-Strait conflict.
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relative
gains
and
reputation