What is an Embargo?

Published by Thomas Herold in Economics, Laws & Regulations, Trading

'Embargo' is explained in detail and with examples in the Economics edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

In its most straight forward form, an embargo represents a ban on trading. The word is derived from the Spanish word “embargo” which means obstruction or hindrance. Such trading bans are either entire or partial prohibitions on both trade and commerce on either one specific nation or several of them. These actions are intended to be intense diplomatic penalties which are deliberately imposed in order to garner a particular national interest result out of the nation which is the victim of the embargo. These acts are like economic sanctions in their effects and comprise legal barriers to free trade. They should never be confused with a physical blockade, which is an actual act of war.

With embargoes, nations are able to ban altogether or partially limit imports or exports, impose specific tolls or taxes, develop quotas for limitations of goods, seize or freeze freight, assets, and bank accounts, make illegal transport vehicles or freight, and restrict the transportation of a certain product or technology when it is considered to be a strategic or high technology.

An embargo proves to be a government order which limits commerce and the exchange of goods or services with a particular nation or for particular goods. It is typically because of a negative economic or political climate between two countries that it occurs. The idea behind such a restriction is to isolate the offending nation and therefore cause hardships for its governments so that it will address the issue which underlies the dispute.

Strategic embargoes stop a nation for dealing in or receiving any kinds of military goods or advanced technology with military applications. General trade embargoes keep any individual within a nation from exporting to the receiving country. The embargo has become a potent tool, still short of outright war, for impacting the policies and behaviors of a state. This is more and more the case since a great number of nations depend on international trade to prosper in the post modern age.

Such trade restrictions can cause massive negative results for the afflicted economy. When allied nations get together to sign joint embargo deals in order to restrict trade benefits for particular pariah nations, they often do this to cause positive humanitarian changes or to lessen perceived dangers to the peace of the globe.

The United States has utilized a few long lasting embargoes against other nations. These have included such rogue states as Iran, North Korea, and Cuba. South Africa also endured an extended embargo period from not only the U.S. but also Britain and much of the European Union because of these countries’ collective opposition to the government-mandated policy of apartheid. These American led embargo restrictions leveled against particular pariah states allow basic humanitarian goods to trade but prohibit military and technological hardware and luxury goods from arriving.

When an embargo is comprehensive, it is more punishing still since it cuts off all trade for that receiving-end nation. Since the 9/11/2001 terrorist attacks on the twin towers, the American embargo tool has been more often focused against nations like Sudan that possess obvious connections with terrorists and their financing and those who pose a danger to national and international security policies.

The street is not always one sided even for the United States. The U.S. has also been targeted by vindictive embargoes over the years. The decade of the 1970s saw the American economy suffer grave harm because of the infamous oil embargo. The OPEC Organization of the Petroleum Exporting Countries’ member states imposed this set of trade restrictions that led to rationing, fuel shortages, and roaring higher gas costs in the U.S.

It is actually the POTUS President of the United States who has full authority to level trade and strategic embargo weapons against other states in wartime, under the auspices of the Trading With the Enemy Act. The International Emergency Economic Powers Act also provides the President with the powers he needs to create and enforce restrictions relating to commerce in times of national emergencies. The Office of Foreign Assets Control actually handles the specific arrangements and details pertaining to an embargo within the U.S. This Department of the Treasury division engages in a mission critical role to find and freeze any funding sources for drug smuggling and terrorism as it relates to the internal borders and international interests of the United States.

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The term 'Embargo' is included in the Economics edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.