The Costs and Benefits of Economic Sanctions

by Michael C. Dorf

It is better to be shocked with a taser than shot with a gun, but a shock from a taser is nonetheless extremely unpleasant. So too with economic sanctions, which unleash less destructive force than armed conflict but nonetheless can be nasty. I'll explore the point today with reference to Trump policies and the current controversy embroiling the National Basketball Association.

Citizens and government officials might resort to economic sanctions rather than military force for one or both of two main reasons: (1) the sanctioned party has engaged in bad acts but not bad acts of the sort that justify military force; (2) the sanctioned party has engaged in bad acts that justify military force but the use of military force would have terrible consequences either for the civilian population or, where the sanctioned party has a powerful military or is backed by a militarily powerful ally, would lead to a potentially catastrophic military confrontation.

President Trump's decision to apply economic sanctions to Turkey for its incursion into Syria to attack Kurds could be said to have elements of both considerations. Syria might have cause to respond to Turkey's armed attack with military force, but the US, which is not even loosely aligned with Syria, does not. The US was, until Trump's disastrous decision to abandon them, allied with the Kurds, but not necessarily in a way that would justify the use of military force by the US under international law.

In any event, it is highly doubtful that considerations of international law were the main driver in Trump's decision to apply economic rather than military pressure to Turkey. A direct military confrontation with a NATO member would be unprecedented. Fighting ISIS in coordination with Kurdish forces in close proximity to Syrian and Russian forces was complicated enough. Fighting Turkey would be nightmarish. Accordingly, once Trump made his despicable decision to precipitously withdraw US troops from Syria, economic pressure was the only realistic option on the table.

To be sure, the decision to use economic leverage against Turkey was somewhat over-determined. It is Trump's favored means of dealing with foreign powers. He uses it as leverage with respect to trade (by levying tariffs against China and Europe, for example) as well as for unrelated purposes (such as coercing Mexico to block Central American refugees at its southern border). And of course, Trump withdrew from the Iran nuclear deal to reimpose stiff sanctions against Iran--although here the sanctions never made sense as a tool of achieving Trump's ostensible policy goal of a better deal, leading one to conclude that the withdrawal was mostly about repudiating an Obama policy simply because it was an Obama policy.

Of course, Trump is hardly the first president to impose sanctions on a foreign country. Before there was the Iran deal there were sanctions on Iran. Despite his bromance with Kim Jong-un, Trump has not lifted the pre-existing sanctions on North Korea. Etc.

Democrats have generally been eager to use economic sanctions. Indeed, to the extent that the Democratic Party has been somewhat less hawkish than the Republican Party over the last couple of generations, Democrats have often preferred economic sanctions to military force when GOP hawks favored military action. That was the position of some of the Democrats who opposed the invasion of Iraq, for example.

Despite bipartisan support for economic sanctions under various circumstances, they have a number of clear downsides.

First, as applied to bad actors who head authoritarian regimes, economic sanctions are a blunt instrument. The head of such a regime and his inner circle typically live in luxury while their people suffer. Economic sanctions harm ordinary people but often leave the rulers unaffected.

Second, sanctions are hardly costless to the country that imposes them. Sanctions typically take the form of full or limited embargoes. They deprive the country sanctioned of the advantages of trade but they also deprive the sanctioning country of the reciprocal advantages. That's just simple economics. If sanctions are effective they will block the ability of firms in the sanctioned country to engage in what would otherwise be mutually desired exchanges. Even if other countries can provide substitutes, the removal of the output of the sanctioned country will lead to higher prices for those substitutes.

Third, at least in theory, economic sanctions can be counterproductive with respect to a reformable regime. During the 1980s, many conservatives opposed sanctions against the South African apartheid state on the ground that the US government and US companies operating in South Africa could promote reform from within under a policy that President Reagan called "constructive engagement." The policy failed, eventually yielding to sanctions. More broadly, constructive engagement itself has its limits. A regime that is bad enough to warrant discussion of sanctions is probably only going to reform under pressure.

Here China seems like another example. It has been 47 years since Nixon's opening to China. The engagement may have played some role in encouraging China's transformation from brutal communism to state capitalism in all but name. That's a major accomplishment, having lifted hundreds of millions of people out of poverty. However, engagement with China has not altered the fundamental authoritarianism of the regime.

That brings me to the fourth and final downside of economic sanctions. The "good guys" are not the only ones who can impose them, as China's extreme reaction to a tweet by Houston Rockets General Manager Daryl Morey indicates. Morey tweeted support for Hong Kong protesters, which led China to cut ties with the Rockets and potentially the NBA as a whole. The league has been remarkably weak in its defense of Morey's free speech, with some stars who have shown courage in their own political convictions about racial injustice in the US coming dangerously close to the official Chinese line. Why? Because China is a hugely important market for the NBA.

Bottom Line: Economic sanctions are often a less bad option than the use of military force, but they are not a free lunch.


Postscript: I have a new column on Verdict today about the House impeachment inquiry. Although I typically write a blog post that complements my Verdict column, as should be obvious, today's post and column are unrelated.