Why Are We Nuts About Sanctions?

In the past fifty years, the United States has enacted more sanctions than any country. In fact, no one comes remotely close. We have sanctioned more than 80 countries over 175 times. If we include “soft” sanctions such as denying export financing through EXIM Bank, the number would be much higher. Our sanctions threaten two-thirds of the world’s population. Over half our sanctions have occurred in the last decade. We have gone sanction nuts.
And now the House passed legislation to put pressure on China to stop its deliberate policy of undervaluing the yuan to give its exports an unfair advantage in global markets. Despite the yuan’s modest gains against the dollar since Beijing allowed more flexibility in mid-June, International Monetary Fund economists estimate the yuan is 5-27 percent undervalued.

As an exporter, I am as concerned as anyone about the undervalued yuan, but trade sanctions just don’t work, and they certainly won’t work on China.

What helped drive this measure? Trade unions of course, once again linking trade with American job loss. Which is nonsense. A robust US trade program creates US jobs.

But some people have it right. A Reuters story quoted Republican Representative David Dreier who complained that Democrats had ignored pending free trade pacts with South Korea, Panama and Colombia that would do more to help the U.S. economy.

We do not want to get into a currency war with China or anyone else.

It doesn’t look like the Obama administration is happy until they are engaged in at least two wars. Just as we start a trade war with China, we are warring with the Mexican government over the ability of US trade unions to shut down Mexican truckers bringing goods into the US. In retaliation, Mexico has imposed punishing tariffs on a number of US goods being exported to Mexico. The first round of tariffs was imposed in 2009. Just recently Mexico announced new tariffs on 26 previously tariff-free goods. This includes produce items such as oranges, grapefruits, apples and pistachios, as well as ketchup, chewing gum, and chocolate. Already prices for this produce and other goods cost 20 percent more in Mexico than it did previously. You can guess the outcome. Mexican consumers will no longer buy US goods, but will look for cheaper imports from countries that have a better relationship with Mexico. Mexican Economy Minister Bruno Ferrari came out recently with the sobering data that after the first round of higher tariffs were sanctioned by Mexico in 2009, imports of these US items dropped by 81 percent during the first year.

We simply can’t afford a trade war at a time when the US needs to invigorate its global trade program. As Reuters reminds us: “China and the United States have a complex and difficult — but vital — diplomatic relationship, not least in dealing with nuclear threats from Iran and North Korea.”

One Response to “Why Are We Nuts About Sanctions?”
  1. jerry parks says:

    It is also a perception problem for americans that dont realize what our representatives in Government are doing in our name. It is not wise to be arrogant about our economic relations with other peoples when we need cooperation globally to even come close to sustaining our growing population. I cant bully my personal relationships and expect sucess, and our countrys posture in the World needs to be less arrogant and more cooperative as well. We need to produce to stay healthy as people and as a nation and building healthy relationships with likeminded people seems obvious to me. Perhaps being in government dims your vision to what is obvious to individuals.

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