Using evidence from the embargo against Qatar to estimate sanctions’ trade effects

Sammanfattning: While trade policies have been found to promote peace and international cooperation, they are also used in conflicts to punish or coerce the actions and behavior of one’s trading partners. In a globalized world characterized by interconnectivity and complex supply and value chains, their impact and relevance in political conflicts have become even more apparent. Such contemporary developments are reflected in the embargo against Qatar by Bahrain, Saudi Arabia, and United Arab Emirates (UAE) (the Tripartite) in 2017. Halting essentially all trade to/from Qatar in addition to banning Qatari traffic from using Tripartite land-, sea, and airspace, it marks an unprecedented regional event that is seldom observed. As a consequence, it warrants an investigation as to how impactful the embargo actually was on Qatari-Tripartite bilateral trade flows. In this paper, I quantify and analyze the trade impact brought by the embargo against Qatar over the period 1995 to 2019 using the synthetic control method (SCM) to estimate how trade flows would have developed in the absence of the embargo. Actual trade flows indicates that Qatari trade with the Tripartite-countries dropped to autarky-like levels whereas the constructed synthetic estimates suggests that bilateral trade flows would have been substantially higher had the embargo not been imposed. Moreover, the prevalence of anticipatory and spillover effects indicates that the effect of the embargo was extensive in terms of both time and space. A number of placebo and lag tests shows however that the credibility and accuracy of the synthetic estimates is questionable.