In addition to using economic sanctions as a measure to coerce specific action, whether it be social, political or economic, economic sanctions are also used in retaliation for trade restrictions placed on a country. The country facing restrictions will then in turn place trade restrictions on the first country. Trade restrictions are also sometimes used to protect domestic goods from foreign competition.

Types of Economic Sanctions

Economic sanctions come in a variety of forms. These include tariffs, duties, quotas, other barriers, and complete embargos. Tariffs are taxes placed on imported goods, with the intent of raising the price of imported goods in comparison to domestic goods. Thus, a consumer in the marketplace will pay an inflated price for imported goods. Customs duties are the taxes paid by a person at the point of entry into a country with foreign goods. Many people associate the term “duty” with the “duty free” shops at some airports. Countries may also set quotas on the amount of goods they will export to a foreign country or that they will import from that foreign country. Economic sanctions may also include any other trade barriers put in place, including administrative and paperwork hurdles. The most extreme economic sanction is a trade embargo, which is a complete prohibition of trade with a particular country. When used, embargos have mostly been put into place as a sanction for political issues.

Past Sanctions – Resolving Trade Disputes

When countries are unable to resolve their trade differences through negotiations or through coercive economic sanctions, the World Trade Organization (WTO) handles the dispute. In addition, the WTO handles complaints about the legality of various economic sanctions.

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