Interdicting an adversary's economy viewed as a trade sanction inoperability input-output model
LeSeane, Cameron R.
Alderson, David L.
Carlyle, W. Matthew
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The United States has made use of economic sanctions to achieve political goals by limiting the relationship between trade, travel, and finance. However, economists are uncertain if the use of economic sanctions is effective and achieves the desired results. Applying the notion of demand-based inoperability, we present two nonlinear models to identify the optimal placement of sanctions and assess the sanctions' cascading effects to all sectors of an adversary's economy. For purposes of demonstration and validation, we pose a hypothetical scenario in which the U.S. considers trade sanctions on Canada. Specifically, our analysis proposes the Trade Sanction Inoperability Input-Output Model (TS-IIM). We devised this model to permit ranking of sectors by the order in which the greatest production loss occurs. Given the strong dependence of Canada on the United States, is it reasonable to expect that a sanction could result in economic repercussions? In response to this question, we also present the Inter-Country Inoperability Input-Output Model (IC-IIM), which extends the TS-IIM by considering the reduction in trade in value added (TiVA) the U.S. economy will experience. Our results from the TS-IIM and IC-IIM lead us to conclude that the proper design of a sanction considers not only the impact to an adversary's economy, but also sanction's associated repercussions at home.
Approved for public release; distribution is unlimitedReissued 30 May 2017 with Second Reader’s non-NPS affiliation added to title page. Reissued 4 Oct 2017 to apply non-NPS affiliation on title page to the correct Second Reader.
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