How do sanctions affect trade?
Russia’s invasion of Ukraine has brought worldwide condemnation, with many considering the Eurasian country a pariah state. The response from the international community has been to impose cultural and economic sanctions on the country, isolating them from social and sporting events as well as impacting international trade.
But as more members of the international community inflict sanctions on Russia, the question we are being asked is “How do sanctions affect trade?”.
What is a sanction in international trade?
Trade sanctions are laws passed which prevent, or severely restrict, trading with a particular country. These are put in place as responses or punishment of a country when their practices are not ethical, or when they are breaking international law Common trade sanctions consist of quotas, higher tariffs, non-tariff barriers (such as licenses), and embargoes on certain commodities or the country as a whole.
Sanctions on trade can be leveraged by individual countries or by multiple allies at once, as is happening with Russia right now.
What other types of sanctions are there?
Trade sanctions are a sub-type of economic sanction, but there are other economic blocks that can be enforced on a country:
– Individuals of a certain profile or status can have their assets in a country frozen or seized.
– Businesses of a certain profile can have their assets in a country frozen or seized.
– Transfer of funds from/to a certain country can be blocked, either wholly or for individuals and businesses of a certain profile.
In addition to economic restrictions, there are other blockages that can be levied against a country:
– Social and cultural sanctions, such as preventing visas or banning attendance at international gathering and events. EG The Olympics.
– Military sanctions, where military are deployed to intervene in a county’s affairs.