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Economic Rewards and Coercion

Economic Rewards and Coercion. International economic transactions . Have become critical components of modern life and of the welfare goals of governments. Governments seek access to markets and sources of supply to enhance their domestic economic growth.

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Economic Rewards and Coercion

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  1. Economic Rewards and Coercion

  2. International economic transactions • Have become critical components of modern life and of the welfare goals of governments. • Governments seek access to markets and sources of supply to enhance their domestic economic growth. • Only few states endowed with full range of natural resources, foods, and energy to sustain modern or modernizing economic establishments. • For others, trade, foreign investment, and sometimes foreign aid crucial for survival.

  3. Economic opportunities and transaction also create vulnerabilities. • Disruptions of transaction flows can entail serious costs, even cripple economies. • Countries that export to only a few countries or rely heavily on single countries for supplies are particularly vulnerable. • Structure of economic relations in contemporary world is such that developing countries are more vulnerable. • Developed countries that rely on trade have trade profiles characterized by wide range of imports and exports, diversified markets and sources of supply.

  4. Techniques of Economic Coercion and Reward

  5. 1.Tariffs • . Tariff structure can be used as inducement or punishment.

  6. 2. Quotas • Supplier allowed to sell only certain amount in a given time period. Shift in size of quota can assist or damage economies of suppliers

  7. 3. Boycott • Specific commodity or total range of exports. Normally enforced by licensing.

  8. 4. Embargo • Attempt to deprive a country of goods. Specific category (e.g. strategic materials) or total range of goods.

  9. 5.Loans, Credits, and Currency Manipulations. • Favourable tariff rates and quotas, granting loans, extending credits, manipulating currency rates.

  10. 6. Blacklists • Effective way of controlling exchanges of particular types of goods without risks and costs of general boycotts and embargoes

  11. 8. Freezing Assets • In open world economy, companies, governments, and individuals often maintain assets abroad. Assets become hostages.

  12. 9. Granting or Suspending Aid, Including Military Sales or Grants.

  13. 10. Expropriation

  14. 11.Withholding Dues to an International Organization.

  15. Comparative costs and risks: dependence is bilateral. • Purely symbolic acts may be good for feelings of rectitude or for propaganda, and cost little. • Sanctions like boycotts or embargoes may lead to massive unemployment at home, or may be ineffective if target can obtain alternative supplies.

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