Sanctions and Third-party Compliance with US Foreign Policy Preferences: An Analysis of Dual-use Trade

• Author: Timothy M. Peterson
• Published date: 01 November 2021
• Date: 01 November 2021
• DOI: http://doi.org/10.1177/00220027211014945
• Subject Matter: Articles

2021, Vol. 65(10) 1820 –1846

Article

Sanctions and Third-party

Compliance with US

Foreign Policy

Preferences: An Analysis

of Dual-use Trade

Timothy M. Peterson

1

Abstract

Ostensibly bilateral US foreign policy actions, such as sanctions, can influence third-

party compliance with US policy preferences. US sanctions simultaneously signal US

preferences and demonstrate leverage, which can motivate third parties to avoid or

change proscribed behavior proactively. Empirical testing of this strategic behavior

typically is difficult given that it predicts non-events in a noisy signaling environment.

However, I argue that the global trade of dual-use commodities—those with both

civilian and military purposes—is a phenomenon where we can observe this process

systematically. I isolate US sanctions that provide relevant context both by stig-

matizing the target and signaling that third-party dual-use exports to the target

would directly undermine US policy goals. Using newly-coded bilateral data spanning

the post-Cold War period, I find evidence that relevant US sanctions are associated

with lower third-party dual-use exports to US-sanctioned states. My findings have

implications for scholars and policy-makers, suggesting a broad yet shrouded ability

of sanctions to advance US foreign policy goals.

Keywords

economic sanctions, foreign policy, international security, trade

1

School of Politics and Global Studies, Arizona State University, Tempe, AZ, USA

Corresponding Author:

Timothy M. Peterson, School of Politics and Global Studies, Arizona State University, Coor Hall, Tempe,

AZ 85287, USA.

Email: tim@timothypeterson.org

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DOI: 10.1177/00220027211014945

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Peterson 1821

The control of trade in dual-use commodities—those with both civilian and military

uses—is a major aim of United States foreign policy.

1

Though geared primarily

toward weapons of mass destruction (WMD) nonproliferation efforts, trade controls

also hold implications for other contemporary problems such as terrorism, human

rights abuse, and armed aggression. The commitment to control dual-use trade is

codified in United Nations Security Council Resolution 1540, suggesting a broad

consensus on—or at least lip-service to—this US goal. Yet compliance with export

controls varies. The US departments of State, Energy, and Commerce aid non-

proliferation efforts via international outreach, for example by providing less-

resourced states with access to US expertise and training programs. While this US

assistance could facilitate international compliance via capacity-building, compli-

ance also depends on the willingness of states to institute export controls despite the

fact that they could stand to lose out on lucrative export markets by doing so.

2

In this paper, I explore the conditions under which US sanctions motivate third-

party willingness to comply with export controls. I demonstrate that a synthesis of

prior research on the strategic behavior inherent in the sanctions process (Drezner

2003; Krustev 2010), the third-party deterrent effects of sanctions (Peterson 2013,

2014; Miller 2014), the ability of sanctions to stigmatize targets (Peterson and Drury

2011; Biersteker 2015) and the emergent power of US financial sanctions (Drezner

2011, 2015; Farrell and Newman 2019) provides the theoretical grounding to explain

how US sanctions could influence third-party compliance with a variety of US

policy preferences. I argue that dual-use trade is a phenomenon wh ere one can

observe third-party compliance across issues (Gartzke and Lindsay 2019) despite

the challenges to inference inherent in empirical tests amid strategic behavior. US

sanctions over actions such as nuclear proliferation, sponsorship of terror, militar-

ized aggression, or human rights abuse inform third-party states of the US commit-

ment to end these proscribed behaviors, stigmatize the target as a violator of

international norms, and demonstrate US strength to punish individuals and states

acting contrary to its preferences. Relevant context applies because US-sanctioned

states can use dual-use commodities directly toward these proscribed ends. While

third-parties might not restrict other commerce with sanctioned states (Early 2009,

2015), I argue that they would engage in lower dual-use exports to avoid the percep-

tion that they are directly thwartin g US foreign policy efforts to deny se nsitive

commodities to prolific violators of international norms. There are two, comple-

mentary channels through which this process operates: a top-down mechanism

where US sanctions motivate third-party leaders to enforce export controls, and a

bottom-up mechanism where foreign firms perceive more risk and a higher cost of

doing business associated with dual-use exports to US-sanctioned states.

I test my expectations using mult iple sanctions data sources tha t incorporate

country-based US sanctions programs as well as yearly tallies of entities included

on the Specially Designated Nationals (SDN) list. I also create a concordance table

linking dual-use commodities to the commonly-used and thus widely available

Harmonized System commodity classification in order to identify the bilateral flow

2Journal of Conflict Resolution XX(X)