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On February 24, 2022, Russia launched an unprovoked attack on Ukraine, committing war crimes and setting off the largest conflagration in Europe since the Second World War. Yet despite the obvious justification for an international response to naked aggression, the economic sanctions undertaken against Russia have garnered tepid support. Two-thirds of the world’s population resides in countries that have chosen not to join the sanctioning coalition, and the impact of the sanctions has fallen short of what advocates envisioned.
Countries may be reluctant to join a sanctioning coalition for both economic and diplomatic reasons. Economic sanctions impose costs on sender countries as well as the target. Beyond immediate economic costs, if the target country is large, potential sanctions coalition partners may fear future retaliation in the form of economic (or noneconomic) coercion. The tools that the United States currently has to encourage countries to join a sanctions coalition, such as prioritizing EXIM Bank or International Development Finance Corporation financing to potential sanctions coalition members, are relatively smallbore, and significant expansion of these programs would have direct budgetary implications. Preferential market access is an economic statecraft tool that could incentivize fence sitters to join the sanctioning coalition by at least partially offsetting the economic losses associated with sanctions implementation. Doing so would also provide these governments with domestic political cover.
The US Congress could establish a unilateral system of trade preferences, an Economic Statecraft Preference (ESP), somewhat akin to the Generalized System of Preferences (GSP). The president would declare an international sanctions event that would allow the extension of duty-free access to the US market to countries joining the sanctions coalition. These preferences would not be open-ended: They could be for a specified period, say one year, subject to renewal, or could last until the president declared the international sanctions event over. This approach would be broader than the Countering Economic Coercion Act of 2023 proposed by Senators Todd Young (R-IN) and Chris Coons (D-DE), which would allow the president to cut duties on imports from a country assessed to be the target of economic coercion.
Presumably, Congress would want to impose some means-testing on the program. One possibility would be to exclude members of the Organization for Economic Cooperation and Development (OECD) or those classified as high-income countries by the World Bank. Another approach, compatible with World Trade Organization (WTO) tenets, would be to limit the preferences to developing countries currently eligible for special and differential treatment under the WTO’s rules. Or these rules could be used in tandem with excluding high-income countries or OECD members still claiming developing-country status within the WTO. In terms of broader WTO conformity, one might also justify the action in the WTO through appeal to the General Agreement on Tariffs and Trade’s (GATT) provisions on nullification and impairment. The practical relevance of this consideration is unclear at present, given the disablement of the WTO dispute settlement process, though it could become more salient in the future.
Congress would also want to establish a process for the administration to assess partner-country sanctions implementation and authorize the president to withdraw the preference if sanctions compliance fell short.
Unlike GSP, which was a fairly open-ended program to promote economic development in poor countries, ESP would have a more narrow, foreign policy focus. In the case of GSP, Congress excluded import-sensitive products, particularly textiles and apparel, limiting the program’s scope and lessening its value as an economic development tool. Congress might also choose to impose a ceiling on coverage or exclude certain product categories from ESP. But ESP would not be targeting the somewhat amorphous goal of economic development. It would be more narrowly aimed at expanding sanctions coalitions and strengthening the implementation of international sanctions. While it is possible that Congress would decide to exclude certain product categories from the program, given the different context and presumably more limited time horizon, it is not obvious Congress would act in the same way as it did in the case of GSP. And in any event, the relevant metric for success would not be raising incomes in partner countries, but rather inducing their diplomatic support.
That raises the broader point of how much of an incentive this would be and for whom. US tariffs are generally low but are not negligible, and some sectors such as shoes and apparel continue to receive considerable tariff protection. Depending on how eligibility was determined, geographically, the proposal could potentially apply to large swaths of South and Southeast Asia, Latin America, and Sub-Saharan Africa. Many African countries are currently eligible for preferential treatment under the African Growth and Opportunity Act (AGOA), which runs through 2025, so the degree of additionality conferred by ESP would have to be assessed on a case-by-case basis, at least as long as AGOA remains in effect.
Those incentives would be greatly expanded if the president were authorized to suspend countervailing duty or antidumping determinations, though the direct connection to injury suffered by domestic producers under these remedies would likely make that a political nonstarter.
In principle, countries might try to game the system by holding out for compensation when they would have been willing to join the sanctions coalition without it, but the narrowness of the Russia sanctions coalition does not suggest much practical relevance for this objection.
In short, ESP could provide both some economic compensation and domestic political cover for countries contemplating joining a US-led sanctions coalition. It is a device that the United States should add to its economic statecraft toolbox.
Data Disclosure
This publication does not include a replication package.
