Security related trade controls are governmental measures which aim to achieve political goals.
Governments, individually or collectively, impose these types of controls in the pursuit of national security and foreign policy interests, e.g.
- human rights violations,
- isolating particular nasty characters such as dictators, war lords or transnational criminals,
- disrupting military adventures or other military oriented threats (increasingly the threat of cyber warfare),
- proliferation of weapons of mass destruction,
- combating global terrorism, and
- implementing United Nations Security Council economic sanctions as a response to threats or breaches of international peace and security (effectively since the end of the Cold War).
This blog covers two types of security related trade controls, namely export controls and economic sanctions. The reason for this is that both these types of trade controls are not only subject of my PhD research, but also because they are frequently lumped together into the same basket.
They are both non-military instruments which governments apply to achieve similar national security and foreign policy goals.
However, it is important to note that export controls and economic sanctions are different.
1) The presumptions and focus are different.
Although the conditions and prohibitions of both export controls and economic sanctions can be overcome, the presumption of export controls is to regulate or even promote trade under certain conditions. In contrast, the presumption of economic sanctions is to prohibit or disrupt trade. Although export controls can and are used to implement economic sanctions regimes, their focus is more limited than economic sanctions.
- Export controls focus on goods, items subject to a regulation, e.g. strategic goods – military or dual-use goods, technologies or software.
- Economic sanctions focus is broader, whereby they also focus on the parties and countries subject to a sanction regime.
- Economic sanctions can also cover transfers of anything of value that can benefit the Targets of sanction regimes – e.g. financial assets, transfers of property (interests hereof), and non-trade related issues (e.g. travel bans and the denial of foreign assistance).
2) The duration of the restrictive measures are different.
- Export controls are a permanent feature, i.e. condition, to export strategic goods regardless of the political relations between countries. Strategic goods are always subject to some form of governmental oversight or a licensing system.
- Economic sanctions are imposed as a political reaction, i.e. disapproval of conduct of individuals or policies of governments/regimes. They are case-specific – imposed to address a specific issue(s) or a situation.
- Economic sanctions are also designed to be uplifted once the reasons for imposing the restrictive measures no longer apply. For instance, the current United Nations, U.S. and EU nuclear related sanctions against Iran sanctions, international sanctions against Apartheid South Africa (1985–1991) or the UN sanctions against Iraq (1990–2003).
Through the ages, world leaders have applied security related trade controls. They were first employed in Ancient Greece, during the two World Wars and most extensively during the Cold War.
Therefore, they are not new and have evolved, most notably, with the rise of the modern state system and the rise of capitalism.
However, since the beginning of the twenty-first century governments have increasingly imposed security related trade controls. A reason for this is the new found activism of the United Nations at the end of the Cold War. Freed from the shackles of the super-power competition, the United Nations has increasingly applied economic sanctions.
Security related trade controls impact the activities of exporters and companies in a number of different situations.
The obvious impact is for those organizations which trade in strategic goods, but also when companies invest in such organizations. In regard to economic sanctions, the impact concerns whether organizations are active in high-risk countries (sanctioned end-destinations) or if they are involved with high-risk parties in specific transactions (sanctioned parties).
For both types of trade controls, compliance efforts are focused to ensure immunity from example, unnecessary operational delays, contractual problems or criminal penalties. In this context, compliance risks can also originate outside of an organization – e.g. non-compliance of suppliers that can infect supply chains. Note that in many countries, strict liability applies for new mergers and acquisitions – whereby new owners can be held liable for non-compliance.
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