June 2000 Fraser Forum: Positive Inducements in International Statecraft

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David Cortright

There are many differences between sanctions and incentives that point to the advantages of an incentives-based strategy for achieving foreign policy objectives. One important difference between the two concerns relative costs. In narrow accounting terms, a sanction is not a cost.

When countries impose an embargo on an offending state, this does not show up as a line item in the national budget. As a result, some policymakers naively consider economic sanctions a kind of foreign policy on the cheap. In reality, sanctions impose significant costs on private companies and local communities. Because these losses do not appear as specific government expenditures, however, they are easily overlooked by political leaders. By contrast, foreign assistance, loan guarantees, and other forms of financial aid are listed as specific budgetary allocations, which can make them easy targets for budget cutters, especially in an era of fiscal austerity.

On the other hand, trade preferences and technology incentives appear to be relatively cost free to governments and have become a favourite tool of economic statecraft. Trade incentives have the benefit of opening up new opportunities for commerce that can benefit domestic constituencies.1 Whereas sanctions impose costs on particular industries and communities, trade incentives can bring benefits to these groups. As a result, domestic constituencies in the sender state may gain a stake in maintaining trade preferences and provide political support for sustaining the incentives policy.

Incentives can create similar dynamics within the recipient country. In contrast with sanctions, which cause hardships for both sender and recipient, trade incentives bring benefits to both. They are a classic win-win proposition. An important advantage of incentives is that benefits can be designed and targeted to ameliorate the root causes of conflict. Whether the primary needs are economic, political, or security-related, inducement strategies can be packaged and delivered to meet those needs and lessen the likelihood of conflict.

In the case of Ukraine, security assurances were added to the package of economic benefits offered to Kiev as a way of addressing concerns about Ukrainian vulnerability vis-a-vis Russia.

This targeting of resources to meet specific political objectives is an important way in which incentives differ from sanctions. Whereas sanctions take away resources or deny benefits to contending parties, incentives add resources. When these rewards are targeted strategically to address the sources of conflict, their effectiveness is enhanced.

Incentives also differ from sanctions in their relation to market forces. When incentives are offered, there is no natural tendency, as with sanctions, for black marketeers or third-party actors to step in and circumvent trade restrictions. As Eileen Crumm observes, "Where market forces work against negative sanctions, they can reinforce positive ones."2

Many scholars have noted that economic sanctions generate countervailing pressures that can undermine the effectiveness of such measures. A tightly enforced embargo will raise the price of imports in the target country and in the process create powerful motivations for cheating.3 By contrast, an offer of incentives such as foreign assistance or concessionary loans will not create market pressures for another party to do likewise. Competing offers of assistance may result from political motives, but they are not generated by market forces.

During the cold war, the United States and the Soviet Union vied to provide incentive offers, but such competition is less likely now. Positive incentives work in harmony with the natural forces of the market and thus have a significant economic advantage over negative sanctions.

Sanctions and incentives also have differing impacts on international trade and the prospects for economic cooperation. One of the most significant, some would say most hopeful, characteristics of the post-cold war world has been the widespread expansion of free markets and the substantial increase in international commerce. Richard Rosecrance has spoken of "the trading state" phenomenon as a powerful antidote to war and armed conflict.4

Expanding trade and economic interdependence can establish the foundations of peace and international cooperation. The use of economic sanctions runs counter to this trend. Peter van Bergeijk argued that the great use of negative sanctions threatens the expansion of trade, thereby weakening the incentive for political cooperation that comes with increasing economic interdependence.5 By contrast, positive measures encourage trade and international cooperation and thereby contribute to the long-term prospects for peace. Incentive policies provide a basis for long-term cooperation and understanding and create the foundations for international stability.

Perhaps the greatest difference between sanctions and incentives lies in their impact on human behaviour. Drawing on the insights of behavioral psychology, David Baldwin has identified key distinctions between the two approaches. Incentives foster cooperation and goodwill, whereas sanctions create hostility and separation. Threats tend to generate reactions of fear, anxiety, and resistance, whereas the normal responses to a promise or reward are hope, reassurance, and attraction. Threats send a message of "indifference or active hostility," according to Baldwin, whereas promises "convey an impression of sympathy and concern."6 Roger Fisher argued that "imposing pain may not be a good way to produce a desired decision" or to influence another's actions.7 Whereas threats and punishment generate resistance, promises and rewards tend to foster cooperation.8

These differences have important implications for the conduct of political communications. One of the drawbacks of sanctions is that they close off channels of commerce and interaction, which can intensify misunderstanding and distrust. Inducement strategies do not carry this burden. Because incentives create less resentment and obstinacy in the recipient, communication is clearer and more precise, and negotiations are more likely to succeed. Punitive measures may be effective in sending a message of disapproval, but they are not conducive to constructive dialogue.

There are ample grounds for concluding that incentives are preferable to sanctions as means of strengthening international cooperation and reinforcing global norms of human rights and democracy. This was the conclusion of the 1995 Commission on Global Governance which, although acknowledging the place of coercive sanctions, argued that noncoercive means are the preferred mode of ensuring compliance with international norms.

Roger Fisher likewise concluded, "the process of exerting influence through offers is more conducive to international peace than the process of exerting influence through threats." Although inducement strategies are not appropriate in every setting, and may be counterproductive if employed in the face of overt military aggression or gross human rights violations, they have many advantages over punitive approaches. A diplomacy that employs carrots more often than sticks offers hope for transforming the international system and creating a more cooperative and peaceful world order.

Notes

1. William Long, Economic Incentives and Bilateral Cooperation, (Ann Arbor, Mich: University of Michigan Press, 1996), pp. 19-33.
2. Eileen Crumm, "The Value of Economic Incentives in International Politics," Journal of Peace Research 32, no. 3 (1995): 326.
3. See William H. Kaempfer and Anton D. Lowenberg, "The Problems and the Promise of Sanctions," in Economic Sanctions: Panacea or Peacebuilding in a Post-Cold War World? ed. David Cortright, George A. Lopez. (Boulder: Westview, 1995), pp. 61-72.
4. Richard Rosecrance, The Rise of the Trading State (New York: Basic Books, 1987).
5. Peter van Bergeijk, Economic Diplomacy, Trade, and Commercial Policy (England: Edward Elgar, 1994), p. 12.
6. David A. Baldwin, "The Power of Positive Sanctions," World Politics 24, no. 1 (1971): 32.
7. Roger Fisher, International Conflict for Beginners, (New York: Harper and Row, 1969), p. 28.
8. Ibid., p. 35.

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