ANALYZING THE LEGAL ASPECTS OF INTERNATIONAL TRADE SANCTIONS AND THEIR IMPACT ON GLOBAL TRADE

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This article is written by Anjali of 6^th Semester of Chaudhary Charan Singh university, Ghaziabad.

Abstract

Sanction means neither war nor peace. The first country who was responsible to imposed sanction was U.S. United Nations are the group of countries who imposed trade sanction whereas individual imposed trade sanctions as an autonomous sanctions regime. International trade sanction has a negative impact on economic growth. This article provides the details of how trade sanction will influence on global trade and explore the legal aspects of international trade sanction.

Keywords

Economic sanction, trade sanction, embargoes, Indian trade, export and import restriction, India opinion on sanction and tariffs and quotes

Introduction

Tarde sanction is one of the types of economic sanction. sanction can be imposed broadly on entire country under international trade sanction. Business with person of restricted country will be considered as criminal activity. These sanctions are favorable for country who want to suppress another country for desire results. If the sanctioned country restricts trade, then without import goods will be higher in price and that will influence the economy of trade restricted country.

Tarde sanction issued by country can be according to international law and compliance foreign policy. Tarde sanctioned country would discuss with banks, financial institution and other investors for risk and compliance challenges that could be associated with them.

The united state has imposed sanctions regimes more frequently or more harshly for longer periods than any other nation in the world.

International trade sanction

International sanction [1]is a way to protect the relation between two countries. If any individual, entity, state or organization become threat against international peace or security then international sanction can be imposed. It must be always according to international law and human rights. International trade sanction imposes according to jurisdiction which restrict country form trading.

There are several types of sanctions which can be imposed but some of important are,

Diplomatic sanctions in which country restrict or remove the embassies
Military sanctions it involves intervention of armed forces.
Economic sanction can be commercial or financial which basically prohibits the trade and financial relationship. Economic sanction also include assets freeze, arms embargoes and travel bans from and to another country.

Where economic sanction imposed by one country on another related to trade then it will be an international trade sanction.

Few are the sanctions could be issued related to trade internationally,

Export restriction

Export restriction can be imposed when there is any security threat to the county. Mainly weapon items, new technology and technical data could become a threat to the nation.

According to latest news [2]in June 2023 U.S. may thing to export restriction on AI chips to China [3][4]to slow down the flow by clamping down the computing amount chip can have.

Import restriction

Import restriction prohibits the goods and products from the targeted country.

In June 2023 Indian government restrict the import of gold jewelry and articles. Government amends trade policy related to unstudded jewelry which is free for import now restricted.

Embargoes

Embargoes means a general trade restriction by the government against the targeted country for their actions and objectionable policies. Through embargoes country can punish without military force for the response of human rights violations

For example: In 1973-1974 Arab oil embargoes was created on U.S. for the support of Israel.

Tariffs and quotas

Tariffs is one kind of tax imposed on export and import of products by the government. Quotes are limiting the quantity of goods and products for import to protect the interest of domestic producers because import products are usually cheaper in price.

For example: government limit the quantity of grain up to 10 ton only.

Implementation through sanctions

In international trade, creditors suppressed foreign government to compel financial obligation by threating to impose the sanctions. Trade sanction can be imposed through boycotts and embargoes of goods and it is made in the form of restriction of export and import or by providing protective measures related to trade.

The power of creditors arises by linking the debts with trade. Creditors country can influence the international trade through foreign direct investment but they are required to follow international law and policy while making any sanctions.

Unilateral and multilateral trade sanctions

Where country individually imposed sanction on targeted country and these countries can make sanction through invocation of their domestic law and not require any authorization from foreign organization. these sanctions are mostly imposed by the United States, Canada and Australia and other country those are the part of United Nation.

International law scholars define countermeasures as “unilateral measures adopted by a State in response to the breach of its rights by the wrongful act of another State that affect the rights of the target State and are aimed at inducing it to provide cessation or reparations to the injured State.”

Unilateral sanctions include countermeasures by targeted country and by the third country, it could be done as response of or contrary to the violation of international law by the sanctioned country.

Where two or more countries are involved for imposing the sanction will be consider as multilateral sanctions. United Nations, European commission and foreign organization in which members are countries can impose such sanctions.

Legal appearance in the international trade sanctions

Political and Economical disturbance between the countries due to which trade that was legal become illegal or prohibit require rules or legal conditions that are obligatory to perform before any sanctions.

Article 41 provides wide range of enforcement options that does not involve the use of armed force. Before any sanction regime two factors must be satisfied:

Assure law and fact

Article 39 of the United Nations must satisfy that the purpose of the sanction whether there is threat to peace, breach of the peace or an act of aggression and sanction must be to maintain international peace and security.

Attainment of Policy and judgement

Sanction regime must be legitimate which follow international law and humanitarian consideration, that influence the targeted country and their population.

Resolution of the sanction

Country act according to the resolution which are drafted in the international law. Drafting of Resolution must be in clear word that impose sanction to the targeted country so that what change in behavior cause lifting of sanction.

Humanitarian concern

Human rights law recognizes right of life which can’t be denied by any sanctioned country. Before any sanction regime country should take into consideration those human rights which may influence the life of the targeted country.

India opinion on sanction

India is free to trade in all kind’s pf goods, services and technology except when there are any sanctions. The government of India only support sanctions imposed by United Nations. Sanctions made by individual countries are not assist by India. Country like India also face sanctions imposed by other and also imposed with other.

In 1974. India performs first nuclear test to which several countries-imposed embargos related to nuclear equipment and material.

India’s trade after Russia being sanctioned by other countries

India considers Russia an important an important source of defense, oil, nuclear energy and space exploration.
Normally Indian economy owned by private sector but defense and energy space are government companies who deals with Russia.
During Russia Ukraine war, India trade shot up by importing from Russia total $32.8 billion from April-dec 2022.
Indian Rupees and Russia Rubal become medium of exchange for export or import of goods. Despite there is an imbalance in bilateral trade.

Facing pressure from the United States and European nations, Prime Minister Narendra Modi told Mr. Putin in September, “Today’s era is not an era of war.” He said democracy, diplomacy and dialogue have kept the world together.

For more than one year after inversion of Ukraine, Russia become high source of crude oil for India.
World third largest consumer and import more than 85% of crude oil from Russia.
Demand for Indian steel rise due to sanction on Russia. Ukraine and Russia hold 10% of world total steel and due to war, it will influence Indian steel market.

International trade sanction impact on global trade

Penalty and Ban Usually does not provide any benefit to the country trade. International trade sanction reduces the export and import between countries. Other than trade sanction financial sanction may also reduce trade by dismissing foreign exchange, credit and also by raising cost of credit in the targeted country.

Effects on country that imposed sanction

When country-imposed sanction, it will also higher the price of goods in their own country. Imposed country also bear the invariable cost of goods.

For example – EU’s imposing sanction related to oil and gas on Russia will also increase the price for EU also.

If there is any credit provided earlier for trade before sanctions then it might not be regained from the targeted country.
Imposed country will be required to diversify their trade country or may switch to other substituted in relation to sanctions.

Effects on third country

Revalue the exchange rate. For example – when U.S. imposed sanction the countries like India was required to make trade in others country currency
Other countries may get benefits from sanctions by increasing their import and export of trading products from the targeted and sanctioned countries in respect of sanctions.

Effects on targeted country

Sanction increases the price or restraint goods that are imported from other country,
it will increase the unemployment in the country which also influence the GDP of the country. According to Okun’s law if there is 2% increase in unemployment will lead to 4% decrease in GDP of that country.
Sometime the targeted company may countermeasures which are uncertain and there is not specific statistics to determine whether it will be effect on sanction or not.
Sanction may change the policy and behavior of targeted country in relation to international trade.
Embargoes can reduce the export and import of trading products.

International trade sanction against Russia

After Russia’s inversion of Ukraine, many countries like United States, Canada, foreign organization, European union impose sanctions against Russia. Whereas Russia replaces sanctioned with other country and continue economic alliance and trade with countries like China, India, nations in Africa, South America and Middle East.

UK ban oil import from Russia in dec 2022 and follow by EU by imposing oil import in February 2023 which reduce Russia’s annual budget of 2023 of oil and gas. Russia also imposed to import of oil and gas to U.S.

These sanctions resulted to the collapse of Russia Rubal and impact on economic growth and GDP of the country. It also effects the economy of EU and US countries,

After imposing sanction, US government require to diversify to overcome the shortage to oil and consider new negotiation for import of crude oil from Venezuela,
EU partly imposed the restriction on the trade of oil and these embargoes by EU will affect the Italy’s largest refineries that produce petroleum products and electricity from Russia’s imported oil,

In April 2023, sanctions against Russia and war between countries effect the price in the global spot market of the food grain. In North Africa, Price of grains and other foods increase while price of Ukrainian wheat decrease in Eastern European market which create differently effect in global market. Such type of inflationary pressure may create political instability and let to immigration in other country.

Conclusion

Around the world numerous trade sanction are imposed which make institutional changes in the countries. Development and changes in technology could also be the reason of trade sanctions. Sanctions are not generally for the enforcement of international law but to restore international peace and security which is a part of international law.

Sometime sanctions are imposed to maintain international peace and to compliance foreign policy. Like Ukraine- Russia war was one of the reasons to implement sanctions on Russia by several countries.

From the above article is a quite difficult to say whether sanction actually used for international peace and security or then it is used to dominate or persuade condition from other country.

References