Innocent or Not-so-innocent Bystanders: Evidence from the Gravity Model of International Trade About the Effects of UN Sanctions on Neighbour Countries

Authors


  • The author gratefully acknowledges support by a Summer Research Fellowship from the John M. Olin Programme in Law and Economics through the Stanford Law School.For helpful comments, discussions and encouragement, the author is indebted to Chonira Aturupane, Sajjid Chinoy, Pierre Englebert, Rishi Goyal, Nick Hope, Mike Kuehlwein, Anne Krueger, Anton Lowenberg, Steve Marks, Jack Mutti, Mary Schuelke, Mark Wright and Asaf Zussman, as well as two anonymous referees. He also thanks seminar participants at Stanford, Pomona College, Claremont McKenna College, the Midwest Economic Theory and Trade Conference at Washington University, and the 2005 meeting of the Midwest Economics Association.

Abstract

This paper examines two hypotheses about the effects of UN sanctions on trade flows between land neighbours of the target country and the rest of the world. First, there have been claims that sanctions hurt neighbour countries by cutting off trading routes, increasing transportation costs and disrupting established trading ties. We would expect that a neighbour's trade with the rest of the world would fall, as a result. Second, there is extensive evidence that neighbours have been involved in smuggling. Consequently, neighbours should trade more with the rest of the world during UN trade embargoes, because now they also trade on behalf of the target. I employ the gravity model of international trade to show that, overall, a neighbour's trade with the rest of the world tends to fall during UN sanctions episodes. This confirms the first hypothesis above: on a net basis, land neighbours have been ‘innocent bystanders’ hit by UN sanctions.

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