Embargo
It is a trade sanction or restriction adopted by a country or an international organization to bar some or all of the trade.
What is an Embargo?
An Embargo is a trade sanction or restriction adopted by a country or an international organization to bar some or all of the trade. Thus, it is a restriction placed on the trade of certain goods, services, currencies, or imports and exports.
They often punish a targeted country for questionable policies or actions or pressure and force countries to change their internal and foreign policies. It may also be to boycott a nation such that it can no longer carry out its actions in times of war.
Thus while they are financial or commercial penalties, they may not arise due to economic policies but due to questionable foreign policies, acts of war, etc.
While economic sanctions typically include restrictions like tariffs, trade barriers, taxes, etc., this sort of sanction is a much more severe step. It usually involves a complete or strict boycott of the trade from the targeted country.
These are not military blockades, counted as acts of war; these are legal barriers. They are done by banning imports or exports, freezing and seizing assets, creating quotas on imports, or any other steps which boycott the trade from a country through legal means.
Key takeaways
- A national or an international organization may impose an embargo as a trade sanction or restriction to halt some or all commerce. Consequently, it restricts the import and export of specific commodities, services, or currencies.
- They frequently pressure countries to change their internal and external policies or penalize a targeted country for problematic policies or conduct. Another option is to boycott a nation so it cannot carry out its actions during times of war.
- These are used for various reasons, be it questionable foreign policies, trade policies, or environmental policies, to try and force countries to change such policies.
- Historically haven’t been very effective as the targeted government rarely changes its policies.
- It can also cause a lot of hardships to the common masses of that country due to shortages. This, combined with the low effectiveness of such sanctions, has led to criticism.
- Sanctions used by the USA to respond to disagreements over policies of countries like Syria, North Korea, China, Cuba, and others are all examples of such sanctions.
How an Embargo Works
Globalization has made international trade a necessity in the current world. However, due to differences in the availability of raw materials and efficiencies in producing certain goods and services, each country has a set of goods and services it can not produce.
Therefore, international trade becomes necessary to allow a country to consume goods it cannot produce naturally. These sanctions remove the ability of governments to trade with other countries.
This can negatively impact a nation as they may no longer be able to acquire certain goods and services, which may create shortages.
This is often done to punish other countries without using military force. For example, suppose a government has declared war on another or has declared a policy against fundamental human rights. In that case, other countries may impose an embargo on all trade relating to that country.
The targeted country may, as a result, suffer at the hands of shortages due to trade restrictions.
Even the United Nations allows for using such sanctions as a collective measure to suppress a country that is becoming a threat to international security. Moreover, using such sanctions and discrediting such governments may force them to change their foreign policies.
Thus countries which rely a lot on other nations or on international trade to acquire goods and services are very vulnerable to embargos, as such sanctions may lead to prolonged economic downturns in the country.
They are often forced to abide by other countries foreign policies to maintain trading relations.
Types of Embargoes
These sanctions can be for a variety of purposes. For example, they may be imposed to force a country to change its political, economic, or trade policies. They may also be used as a response to border disputes or strained international relations.
Additionally, such sanctions may be due to environmental reasons where a country's environmental policies may not align with their trading partners.
These sanctions can be of various types. For example, trade embargos bar or boycott trade with a particular country. This means restricting imports and exports of goods, services, or even currency from a specific country.
There may be a ban on certain goods, like military goods, which is a strategic embargo. It is done to promote the national defense, protect the country from militant threats or discourage the target country's activities.
Sanitary embargoes are used to protect plants, animals, and people. For example, according to the World Trade Organization (WTO) restrictions, the trade of endangered animal species is prohibited to safeguard their lives.
These sanctions also may vary according to the degree of restrictions placed. In some cases, there is a complete prohibition of the trade, and in others, conditions may be for certain goods only.
Some may allow for the trade of only essentials or goods and services required to protect humanitarian needs, like the trade of food products or medicines.
Effect of Embargoes
Historically, the majority of these haven’t been very effective. Most such sanctions end up failing. While they are used as a tool to force governments to change their foreign policies, they rarely succeed in doing so.
In many countries, the government may not be worried about how such sanctions affect the commoner. Thus the sanctions may fail to change policies or the government.
For example, the Embargo used by the US against Cuba in 1962 failed as neither the government changed nor did they attempt to change their policies.
While these sanctions may not make governments change their policies, they can effectively punish them. As a result, they can often cause shortages in the target countries' economies and increase prices.
This could be seen in the Arab’s restriction on oil supply to the US in the 1970s, which ended up creating a massive oil shortage in the US.
Consequences of an Embargo
While such sanctions are not militant, they can still cause a lot of harm to the people in the target economies. By cutting off international trade, there may be a huge shortage in the country's supply of essentials like food, energy, and medicines.
In addition to this, such sanctions often lead to trade wars. Boycotting one country may result in that country placing similar barriers. This may have a negative impact on international trade and globalization in general.
With countries restricting trade, they may become more dependent on their products and may be afraid to invest in foreign exchange. This may impact global trade patterns and negatively impact unrelated countries, which may suffer due to limited work.
There may also be a negative impact on the country placing the trade sanctions as the businesses who impose the transaction may lose out on opportunities to invest in the target countries or to trade with the target countries.
For example, due to sanctions, US-based companies can not invest in China and can trade only in minimal quantities, which may hamper the general flow of business.
Embargo Criticism
In recent times, many experts have criticized such trade sanctions. This may be due to low success. Such sanctions have rarely successfully changed the country's policies against whom it is used.
It may worsen international relations between the countries due to a likely retaliation by the target countries.
It has also been criticized due to the hardships the commoners of the target company face resulting from the shortage of essentials.
Ultimately, these transactions lead to hardships and disruption in business activities without positive changes in the government's outlook. While the country may be punished for its acts, a much higher price is usually paid by the commoner in those countries.
Embargo Examples
The USA has often used these sanctions against countries like Cuba, Syria, North Korea, Iran, etc., or any other country with extremely objectionable foreign policies.
For example, in 1958, the US used a strategic embargo to ban the sale of arms to Cuba. In the aftermath of the Cuban Missile Crisis in 1962, the boycott was extended to other goods and services.
Even though the sanctions are still in place today, it was not of great help as a large part of the humanitarian problems persisted, and the government refused to change its foreign policies.
Similarly, in 1973-74, the USA was on the other side of the spectrum and faced a boycott by the Oil and Petroleum Exporting Countries OPEC.
Due to the support of the USA towards Israel, OPEC restricted the oil supply to the US, which led to a massive oil shortage and increased oil prices massively in the country.
The USA also placed an embargo against South Africa in response to racial injustice in the form of Apartheid.
This was one of the cases where the sanctions helped put massive pressure on the government and helped in the election of Nelson Mandela with a racially inclusive government.
In 2017, in response to the worsening international response between the USA and China, there was a trade war between the countries. As a result, the USA imposed massive taxes and tariffs, after which China too retaliated with similar sanctions.
In a similar vein, Russia has been subject to many similar sanctions. Since the cold war, many sanctions have been placed by western countries to try and force a policy change without much success.
Similarly, even though sanctions were placed on Russia in the aftermath of Russia's invasion of Ukraine, they could not stop the invasion. However, the sanctions created a shortage of electronic equipment, which is essential in producing tanks, thus slowing them down.
or Want to Sign up with your social account?