DO EU ECONOMIC SANCTIONS THREATEN EU’S TRADE IN GOODS? A yearly panel regression analysis

Abstract

Previous research at the intersection between economic sanctions and trade relations points that economic sanctions are expected to quantitatively decrease the bilateral trade between the sanction sender and the sanction receiver. If this expectation would seem obvious at a first glance, the data we analyse does not completely match this preconception. Indeed, we integrate some economic sanctions that are not meant to directly decrease trade, as well as some country observations that were sanctioned for the first time prior to the start of the time sample, thus not only studying the initial effect of sanctions. However, none previous research clearly focuses on the EU as the only sender while studying the overarching quantitative effect of its economic sanctions, on its trade with a substantive panel of sanctioned countries. Arising from a methodological gap pointing to a lack of time-varying sanctions studies, we perform random effects panel regression analyses, with the research aim to capture the overarching effect of EU economic sanctions on the Union’s yearly trade with sanctioned countries. The trade relations are depicted by the trade share that the EU held in the sanctioned country’s total yearly trade. We find that, because of a too small country population, we cannot provide empirical evidence that EU economic sanctions decrease the EU Member States’ yearly trade with sanctioned countries. However, we found that the directionality of the effect consistently points towards a potential decrease, which suggests to reproduce our analyses with larger samples in order to issue matter for policy decisions.