Understanding Embargoes in Economics

Understanding Embargoes in Economics

Let me explain what an embargo really is in economic terms. It's a trade restriction that a government, a group of countries, or an international organization puts in place as an economic sanction. These can block all trade or just specific parts, like arms imports. The goal is straightforward: punish the targeted country for its actions and cut off the resources it needs to continue those policies.

Key Points on Embargoes

You should know that embargoes are international trade barriers set up in response to policies we find unacceptable. They've proven more effective at punishing the targeted countries than at forcing them to change their ways. For instance, the U.S. has embargoes that completely bar trade with Cuba, North Korea, Iran, and Syria, and similar restrictions on Russia and Russian-occupied parts of Ukraine have created comparable effects. Remember, the U.S. also faced the Arab oil embargo from 1973 to 1974 because of its support for Israel.

How Embargoes Function

Countries turn to embargoes to punish and discourage bad behavior without jumping straight to military options, often reacting to things like human rights abuses or armed conflicts. When widely enforced, an embargo becomes a strong weapon by isolating the country and stripping away the advantages of global trade.

Nations that rely heavily on international trade or imported technology feel the pinch the most from these measures. On the flip side, stubborn authoritarian governments have withstood embargoes for years, even if it means their people's living standards take a massive hit.

U.S. Trade Embargoes Explained

The U.S. has enforced long-term, all-encompassing trade embargoes on Cuba, North Korea, Iran, and Syria because it views their policies as especially problematic. These are supported by various laws from Congress and orders from the president.

Under the Trading with the Enemy Act, the U.S. president can impose embargoes and sanctions during wartime. There's also the International Emergency Economic Powers Act, which lets the president restrict commerce in clearly defined national emergencies.

In the U.S., the Office of Foreign Assets Control, part of the Treasury Department, handles these embargoes. This office is key in hunting down and freezing funds linked to terrorist groups and drug traffickers.

The Impact of Embargoes

Embargoes seldom lead to policy shifts or government changes in the targeted country. Take the U.S. embargo on Cuba since 1962—it's done nothing to remove the communist regime or encourage tolerance for opposition.

The Arab OPEC oil embargo on the U.S. during the 1973 Arab-Israeli War didn't sway American support for Israel either. But embargoes can hit their mark in terms of punishment; that same oil embargo caused fuel shortages, rationing, and skyrocketing gas prices, raising the price tag on U.S. foreign policy.

In the 1980s, targeted trade restrictions on South Africa, combined with investment sanctions from the U.S. and others, helped speed up the end of apartheid. As for Russia, the limited sanctions after its 2014 actions in Ukraine didn't stop further aggression in 2022, but the wider sanctions since then have cut off semiconductors for military use and tank parts.

The boycott, divestment, and sanctions movement against Israel for occupying Palestinian territory draws from the South Africa example, and the strong pushback from Israel and its allies shows just how damaging such measures could be.

Criticisms of Embargoes

Beyond their slim chances of sparking policy changes, embargoes face backlash for harming everyday people who have no say in the problematic policies. The global embargo on Iraq after its 1990 invasion of Kuwait was slammed for hitting the poorest and most vulnerable Iraqis hardest. You'll hear similar complaints about the U.S. embargo on Iran related to nuclear treaty violations.

Countries Under U.S. Embargoes

Trade with Cuba, North Korea, Iran, and Syria is outright banned under broad U.S. embargoes. The U.S. also has restrictions on trade with Russia and Ukrainian areas occupied by Russia, which function much like an embargo.

Can Embargoes Actually Work?

Embargoes tend to punish the targeted country more effectively than alter its policies, though they played a role in the sanctions that pushed South Africa to dismantle apartheid. The recent trade sanctions on Russia after its 2022 Ukraine invasion have notably hampered Russian military supplies.

Legal Foundations of U.S. Embargoes

U.S. trade embargoes rest on congressional laws and presidential executive orders. The Treasury's Office of Foreign Assets Control oversees them and processes exemption requests.