Harvard European Law Working Paper no. 02/2006

Author: Yaraslau Kryvoi

Title: Why European Union Trade Sanctions Do Not Work

Abstract: This Article analyzes the role of legal, political and economic factors in determining the effectiveness of trade sanctions imposed in response to violation of labor standards. It begins by addressing the theoretical aspects of the linkage between trade and labor and then turns to the practical aspects by examining the application of the recently revised European Union's Generalized System of Preferences (GSP). The Article suggests that the reasons why countries fail to respect core labor standards are of critical importance in determining the potential effectiveness of sanctions. If the reason is principally economic the mere threat of sanctions may be enough to motivate a country to modify its policies to prevent economic damages resulting from sanctions.
Sanctions are less effective in changing the conduct of countries which violate core labor standards primarily due to political reasons. The European Union's decisions to terminate trade preferences for labor rights violations for Myanmar in 1997 and Belarus in 2006 did not have any significant impact on these countries and are unlikely to achieve their desired objectives in the future for two main reasons. First, the main motivation for these countries' violations is political and the cost of the undemocratic regimes' compliance with international obligations is greater than the cost of non-compliance. Second, both countries have powerful "sponsors", which undermine the economic impact of the European Union's sanctions. Despite the limited effectiveness against the target countries, the withdrawal of trade preferences may have other important effects, such as deterring other potential violators, demonstrating the European Union's commitment to promote core labor standards and strengthening the link between trade and fair labor practices.

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