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Interdicting an Adversary's Economy Viewed As a Trade Sanction Inoperability Input Output Model

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Technical Report

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Naval Postgraduate School Monterey United States

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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 adversarys 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 adversarys economy, but also sanctions associated repercussions at home.

Subject Categories:

  • Government and Political Science

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