Worldwide: U.S., EU, And UN Sanctions: Navigating The Divide For International Business

CHAPTER 1.

INTRODUCTION— THE GOLDEN AGE OF SANCTIONS

A. ''AN UNABASHED FAILURE'' TO WAR BY ANOTHER MEANS

Sanctions have become a ubiquitous policy tool, suggested as a ''solution'' to international and domestic crisis as varied as terrorism, corruption, and illegal immigration, and implemented by a range of jurisdictions; the United States remains the most enthusiastic purveyor of the tool, but Washington is being followed closely by policy makers in Brussels, London, Riyadh, Moscow, and Beijing.¹ Despite this, it is worthwhile remembering that it was not that long ago—and well into the early 2000s—that scholars and policy makers viewed sanctions as a broad-based failed tool of statecraft, often more likely to hurt policy objectives than to achieve them and increasingly apt to harm innocents rather than to exert pressure on their intended targets. How did we get here?

It is hard to overstate how little the academic and policy making communities believed in the power of sanctions. The titles of the books and articles— let alone their contents—are very clear in their dismissal of the instrument.

There was ''Sanctioning Madness,''² ''Economic Sanctions: Too Much of a Bad Thing,''³ and ''U.S. Economic Sanctions: Good Intentions, Bad Execution.''⁴ The conventional wisdom, backed up by complex econometric studies and borrowing from the work of political scientists, game theorists, and philosophers, was that sanctions ''worked'' (defined differently in different studies) no more than one-third of the time. Indeed, the conventional wisdom held that sanctions could not work any more often because of the nuances of how states were organized and the fundamental bias in states towards survivability. That is, no matter the economic harm incurred, a state backed into a corner could not possibly be compelled towards a policy outcome that could lead to (or that necessitated) its demise or that even called into question a bulwark of its self-definition. To get that outcome, sanctions were fundamentally ineffective and the only tool available was the most ancient—occupation and subjugation by armed force.

Indeed, the effectiveness of sanctions is far from a settled issue. Many scholars have argued that the cessation of commercial activity has rarely been a decisive, or even important, factor in bringing hostilities to an end.5 Scholars on this side of the argument point to examples of where sanctions policies have failed, such as the fact that Germany continued building planes, tanks, and submarines despite a complete embargo during World War II and the Castros' decades-long control of Cuba despite U.S. sanctions.6 With the increasing interconnectedness of the global economy, it has become increasingly easy for targeted countries to find alternate suppliers, financial markets, and financial backers to replace embargoed goods or withheld funds.

Another common critique of sanctions is that they are often inconsistent with the ideals of the World Trade Organization (WTO) and free trade obligations. However, despite their incompatibility at first blush, sanctions and fair trade cannot only be compatible, but sanctions can help facilitate free trade. Although sanctions may appear to inhibit trade in the short term, they can help in the long run when effective as trade liberalizers. Economic sanctions were used to combat Nazism, Communism, terrorism, and other threats, and to the extent they thwarted such threats, they contributed to the creation of conditions favorable to the spread of globalization and free trade.⁷

Defenders of the use of economic sanctions point to the fact that the founders of the General Agreement on Tariffs and Trade (GATT), and its successor, the WTO, deliberately left room for members to have recourse to enact sanctions where a nation's security was at stake.⁸ This is evidenced by Article XXI of GATT, which states, ''[n]othing in this Agreement shall be construed . . . to prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests.''⁹ ''Essential security interests'' are not defined by GATT and are left to the judgment of WTO members.¹⁰

Footnotes

1. This treatise is of informatory nature only and it is not intended to provide legal advice, and no legal or business decision should be based on its content. Sanctions are in constant flux. We thus appreciate any comments, questions, and suggestions you might have. Please do not hesitate to reach out to the authors in case you have any questions, queries, or suggestions. Gibson Dunn also regularly provides updates on recent developments. If you are interested to receive those, please let us know and we shall add you to the respective mailing list.

2. Sanctioning Madness, available at: https://www.foreignaffairs.com/articles/1997- 11-01/sanctioning-madness.

3. Economic Sanctions: Too Much of a Bad Thing, available at https://www.brookings.edu/research/economic-sanctions-too-much-of-a-bad-thing/.

4. U.S. Economic Sanctions: Good Intentions, Bad Execution, available at https://piie- .com/commentary/speeches-papers/us-economic-sanctions-good-intentions-bad-execution.

5. Donald E. deKieffer, The Purpose of Sanctions, 15 CASE W. RES. J. INT'L L. 205, 205 (1983).

6. Id. at 205–06.

7. David A. Baldwin, Prologomena to Thinking about Economic Sanctions and Free Trade, 4 CHI. J. INT'L L. 271, 280 (2003).

8. Maarten Smeets, Conflicting Goals: Economic Sanctions and the WTO,2GLOBAL DIALOGUE 10 (Summer 2000).

9. General Agreement on Tariffs and Trade, Article XXI(b).

10. Smeets, Conflicting Goals at 11.

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Originally Published by Bloomberg Law in 2019

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.