Economic Sanctions and State Practice

Modern economic sanctions policy and regulation has been developed mainly by the world’s leading developed countries. Most of these countries have sophisticated market economies that expanded dramatically in the twentieth century based in part on high levels of international trade and foreign investment. The financial systems of these countries have provided a reservoir of capital and investment skills that have transformed today’s globalised financial markets (Kono and Schuknecht, 2000, 144–146). As discussed in Chapter 2, much of the economic growth in these countries has depended on high levels of cross-border trade, investment and portfolio capital flows. These developed industrialised economies compose the core economies of the global economic system, while smaller developed countries and most developing and emerging market countries constitute peripheral economies that are heavily dependent on the core economies for investment capital and international trade in goods and services. The states of the core economies have legal and regulatory regimes that allow policymakers to withhold benefits or impose restrictions on investment and trade with their economies in order to promote non-economic foreign policy objectives. The size and scale of these economies and the growing liberalisation of cross-border financial flows and international trade in goods and services have enabled these states to increase their political influence internationally by extending the application of their economic sanctions measures to more targeted areas of the global economy.