The issue of economic sanctions by Western countries, especially the United States, is being discussed vigorously around the national elections of Bangladesh. The largest single market for Bangladesh’s exports is the United States. In 2021-22 Bangladesh’s total export aggregated 5 thousand 208 million dollars, of which 1 thousand 42 million dollars has been bought by the United States. In the next year i.e. 2022-23 fiscal year, total exports to the United States were worth 9.7 billion dollars. Based on the quota allocated by the United States to Bangladesh’s garment sector in the late eighties and early nineties, domestic investors invested a lot of money in the ready-made garment sector, the benefits of which are now being reaped by Bangladesh. Immediately after the corona epidemic, the export of clothing from Bangladesh to the United States increased tangibly. Meanwhile, due to deteriorating relations with China, US importers increased their purchases from Bangladesh.
US embargo and its multifaceted effects
According to the United States Office of Foreign Assets Control, they impose economic and commercial sanctions on one or more countries (Targeted Country) to achieve Washington’s foreign policy and national security goals. When Cuba nationalized three US petroleum refining companies in 1960, President Eisenhower imposed economic sanctions on Cuba. About 23 countries are now under US economic and trade sanctions. Some of them are – Myanmar, North Korea, Iran, Venezuela, Cuba, Belarus, Russia, Zimbabwe and Syria. This restriction means complete or partial stoppage of trading with the targeted country. Former French diplomat, Economist Intelligence Unit distinguished researcher Agathe Demarais in her book ‘Backfire: How Sanctions Reshape the World Against U.S. Interests’ published last year, discussed some issues. She said the US sanctions can cause substantial damage to a country’s economy, but sometimes this policy also damages the US herself. In this book she says that economic sanctions are like antibiotics which are sometimes needed but must be applied very carefully. In this context, Demarais, who is now a senior researcher on foreign relations at the European Council, says that after imposing economic sanctions on Iran, the United States also imposed sanctions on European companies that were doing business simultaneously with Washington. Due to this peculiar restriction, the relationship between Europe and the United States is under stress. Several studies show that long-term U.S. sanctions tend to lead target countries to resort to alternative measures. By doing this, the commercial and diplomatic relations of those countries with the adversaries of the United States improved. As such, it can be said that US sanctions on North Korea and Cuba have not been effective enough. On the contrary, the trade of these countries with China and Russia has substantially expanded. And, North Korea has pulled itself out of the Nuclear Non-Proliferation Treaty. Later, it was seen that Pyongyang could not be brought to terms with the mere trade restrictions. In other words, US sanctions have failed here. While U.S. embargoes apply to specific countries, traders and institutions, “secondary sanctions” could be imposed on citizens or institutions to deter them doing businesses with the targeted countries. Many businessmen of Bangladesh themselves directly export clothes to the United States. But it is also true that some traders in Hong Kong ship Bangladeshi cloth to the United States. Now if Washington imposes a “secondary Ban” then that company will not be able to buy clothes from Bangladesh and export them to the United States. Even that company can refrain from donating money or humanitarian aid to any NGOs in Bangladesh. Demarais says many European companies have come under US trade sanctions because of economic and trade sanctions against Russia. The sanctions that are already in force on Russia have had a negative impact on the European economy. Many fears an economic recession in Europe in the coming years. Due to this, there is a fear of deterioration of Europe’s relations with the United States. As a result, it is ultimately harming the United States itself. It is like cutting a canal and bringing in a crocodile by the U.S. The United States initiates the process of trade and economic sanctions in two ways—through the executive order (by the US President) or through legislative process in Congress. However, usually the US President initiates this process based on an executive order. In this case, a state of emergency would be declared at the beginning. Amid such an emergency and under his own authority, the US President can issue an embargo order for a specific period on the country concerned.
Transactions denominated in US dollars are declining
The fallout of several sanctions has started affecting the US itself. About half of the US dollars are held by other countries. As of 2022, about one trillion or $1,000 billion is outside the United States. But according to many, this amount is actually much more. The average GDP of the whole world is growing at a rate of 3 percent this year. And, this year the amount of global trade will stand at 25 trillion dollars. Nearly 80 percent of its trade will be through US dollars. And, besides, about 58 percent of global reserves (7.5 trillion dollars) are kept in US dollars. However, the most alarming thing is that due to various economic and commercial sanctions, many countries are thinking about alternative currencies or currency swaps to trade. The Federal Reserve Bank prints dollars keeping in mind the economic growth and volume of world trade around the world. Therefore, it is likely minting dollar would shrink these days.
Initiative to popularize China’s Yuan
In order for China to be able to cope with the situation if it is hit by major sanctions, they are signing agreements to do business in dual currency (currency swap) with the central and commercial banks of various countries. China named it Cross-Border Interbank Payment System (CIPS). China has such agreement with 1,300 banking institutions of about 100 countries of the world. However, about 200 countries trade in US dollars through SWIFT or the Society for Worldwide Interbank Financial Telecommunications. About 11,000 banks have this agreement with SWIFT worldwide. There are about 600 banks in China linked with SWIFT. China has developed this CIPS system for itself and for other sanctioned countries. In 2012, when SWIFT stopped Iran’s international trade due to US sanctions, Tehran approached Beijing. Day by day, China’s CIPS is becoming popular in different parts of the world. China has been Iran’s largest trading partner for the past ten years. In 2022, Iran’s trade with China stood at 16 billion dollars. China’s crude oil imports from Iran reportedly set a new record in December 2022. Needless to say, Russia’s trade with China has increased manifold. In 2021, China exported goods worth 67.70 billion dollars to Russia. China’s exports to Russia have grown at an annual rate of 15.30 percent over the past 26 years. Meanwhile, in 2021, Russia exported goods worth 70.90 billion dollars to China. Russia’s exports to China have grown at an annual rate of 12.70 percent over the past 26 years. Meanwhile, BRICS was formed in 2010 with the aim of reducing the influence of the US currency and creating a new geopolitical alliance. Brazil, Russia, India (India) and China were the initial members. Later South Africa joined this alliance. Since its formation, the members of this alliance have been trying to create an alternative currency to the dollar. Until this currency is approved, member states can continue to trade in their own currency. Bangladesh, Argentina and many other countries have supported formation of the BRICS currency. Basically, many countries of the world are looking for an alternative currency to the dollar for three reasons. The first reason is that other countries cannot do anything outside of US monetary policy because of the monopoly influence of the Federal Reserve Bank on the value of the dollar. The second reason is that it becomes difficult for small and poor or developing countries to trade in dollars. Because it is worth a lot. And, the third reason is that the characteristics of world trade and demand for petroleum are constantly changing and diversifying. This is disrupting energy supply in developing countries. Many countries are no longer able to accept the unilateral influence of the dollar in world trade. Many say that the United States has equated the dollar to a weapon. As a result, Washington is after its own objectives by focusing on trade in dollars.
Bangladesh
Meanwhile, in a recent seminar of the Bangladesh Institute of Development Studies has expressed its fear that if the US sanctions are imposed around the elections, it may seriously affect the overall food security of the country. Besides, there is no doubt that Bangladesh’s apparel exports will be at a great risk.The discussion says: Corona pandemic has increased the global negative growth enhancing poverty rate. Due to covid, in 2022, some 2.8 million people fell below the poverty line again in Bangladesh. Slow global growth could push another 50,000 people into poverty this year. Malnutrition rate will also increase this year.The biggest thing that can happen is that Bangladesh can become more and more dependent on China. That is, Beijing’s relationship with Dhaka can be deepened to deal with any kind of situation.Finally, it can be said that if the US economic and commercial sanctions are imposed on Bangladesh, the country’s development will undoubtedly be disrupted. However, the question is: Will the United States be able to achieve its goals in Bangladesh?
Govinda Shil, Freelance Journalist.
