Trading With the Enemy: Smart, but Never Popular

Posted June 14, 2010

The recent and overdue debate about the Israeli blockade of Gaza raises an old, unresolved question: does shunning our enemies work or do we do them more harm by embracing them?

For me, this is not a theological or moral question, although I always loved the suggestion attributed to Mark Twain to “love your enemies — it’ll drive ‘em crazy”. It is a purely practical matter related to economic embargoes. Can we accomplish our goals more easily by trading aggressively with our enemies than by boycotting them? The answer appears to be that embargoes are politically satisfying but economically counterproductive.

Consider Cuba. Does anyone seriously believe that the embargo imposed by the US on Cuba and in place since February of1962 has served US interests? It is perhaps the longest economic embargo in recorded history. it remains in place not because it works but because of the Florida primary. Any politician, from Reagan to Obama, who wishes to be president must first swear fealty to the misnomered “el bloqueo” (the blockade) or forsake the Cuban vote in Florida, the state of Florida, and usually, the election.

Imagine that the US were to end the embargo (a blockade is not an embargo. We conducted a naval blockade of Cuba briefly during the Cuban missile crisis. A blockade is almost universally regarded as an act of war). Does anyone seriously argue that either Castro would still be in power had the US restored full commercial ties with Cuba? With investment pouring into Cuban resorts and an economy dependent once again on western tourism, sugar, and light manufacturing, Castro would have been forced to liberalize and Cubans today would be far, far better off. instead, the US embargo drove Cuba further into the Soviet hands. How, precisely, did this serve our interests?

Embargoes almost never work. One of history’s first comprehensive embargoes took place during the Napoleonic Wars. In an attempt to cripple Great Britain, the French created the Continental System, which prohibited European nations from trading with the UK. The result? The embargo was very hard to enforce and did more harm to Europe than it did to the British. But, one imagines, everyone felt much better turning up their noses at each other. A secondary embargo during this same time was enacted by Jefferson to prohibit US trade with either France or England, even though the US had no active dispute with either one.

But even though most embargoes fail, one famous embargo appeared to work: the oil embargo imposed by the United Nations on South Africa in November of 1987 with the support of 130 countries. The UN embargo reinforced several longshoremen union embargoes on loading or unloading freight bound to or from South Africa. The action appears to have hastened the end of apartheid. It also created the impression among a generation of politicians that embargoes have a place in the diplomat’s tool kit. They don’t, and South Africa is the exception that proves the rule.

Oddly, the US actually understands this. US law prohibits any US company from participating in a secondary embargo. These occur not when we have a dispute, but when an ally does and asks us to join them in embargoing trade with their adversary. Not only are American businesses prohibited from participating in a secondary embargo, a company is required to report any attempt to organize one! This law was enacted following attempts by Arab countries to prevent American companies from doing business with Israel. But why would America forgoe the weapon of secondary embargoes if we believed that embargoes worked? We wouldn’t, but we prohibit secondary embargoes because they are not only economically futile, they are useless politically.

Which brings us to Gaza. Does Israel have reason to impose a blockade against Gaza? Absolutely. Hamas has fired tens of thousand of rockets into Israel from Gaza and Israel wants to keep Gazans from acquiring more of them. Is a blockade or a trade embargo the right tactic? No — it backfires by strengthening Hamas and weakening forces likely to work towards peace.

Consider: the Israeli blockade has crushed Gaza’s business sector, which is essential if Gaza wants to end its dependence on foreign aid. Merchants in Gaza are an important source of jobs and one of the few sectors that promoted trade with Israel, one of the few constructive forms of contact Gazans had. Since the blockade, more than 3,000 factories and small businesses have closed, contributing to an unemployment rate of 44%, according to the United Nations Relief and Works Agency in Gaza. Who benefits? Hamas, not Israel.

The embargo has been a godsend for Hamas, which controls the tunnels in and out of Egypt — now Gaza’s lifeline. The blockade has enabled Hamas to expand its own payroll, become the source of new jobs in a wide variety of sectors. Gaza is poorer because of the embargo. Hamas is richer.

But do we really expect Israel to embrace people who fire missiles at it? No, but the blockade should be turned over to the EU and it should consist of searches for weapons and military parts that can be used to harm Israel. Several EU countries have offered to do the job, and Israel should accept the offer not out of altruism, but because it is a better way to weaken their enemy.

So to with Iran. Every speech that Obama gives threatening the moronic, nihilistic regime in Tehran serves to confirm the suspicions of Iran’s most paranoid clerics. Better that we trade with them — and trade heavily. The US and Iran have a lot more strategic and economic interests in common than separate. Trade is not “appeasement”, although political adversaries will use the word. We can and should be very tough-minded militarily with respect to Iran. But we should not fool ourselves into thinking that boycotts, embargoes, or blockades have any role to play in weakening the Iranian regime. History shows that more often than not, exactly the opposite happens.