Capping trade

Last week's Freedom Flotilla incident has highlighted an old truth.  Trade -- or, in this case, the forced closure of trade -- is an ineffective foreign policy tool.

The blockade of Gaza by Egypt and Israel is actually a massive trade and travel embargo.

Humanitarian supplies can be legally brought into Gaza, but also much more than that:  frozen salmon and low-fat yoghurt can come in too.  Coriander, margarine and A4 paper cannot.  Wood for doors or window frames, yes.  Wood for construction, no.  The list seems completely arbitrary.  Hillary Clinton had to personally intervene to have dried pasta allowed in.

That's because Egypt and Israel don't just want to force the end of weapons smuggling.  They want the trade embargo to undermine Hamas' support in Gaza.  One Egyptian politician said "Egypt will not accept the establishment of an Islamic emirate along [its] eastern border."

Gaza under Hamas is a rogue state.

That's a regional problem, not just an Israeli one.

Since coming to power, Hamas has led brutal attacks on opponents and civil society organisations.  In the days after the Freedom Flotilla, Hamas security forces raided six NGOs in Gaza.  Thuggish political violence and repression is an essential part of Hamas' program.

And despite the blockade, with Hamas acting as an Iranian proxy, they seem to be having no problem getting weapons.

That shouldn't come as a surprise.  There have been few occasions when trade embargos have succeeded.  Embargos rarely hurt those in power, who have the money and the political means to acquire things others do not.

Fifty years of economic sanctions have utterly failed to budge the Castro regime in Cuba.

And worse, they've given the Cuban dictatorship an easy excuse for its own failures.  Directing domestic attention towards the American trade embargo is simpler than dealing with the deep economic problems caused by a half a century of socialism.

The same holds true for North Korea, where isolation from the world economy supports rather than challenges the regime.  The state ideology of Juche -- socialist autarky -- is how the regime embraces this forced seclusion, and uses it to cement its control over the population.  And, as in Cuba, the responsibility for North Korean poverty is levelled solely at the West.

Restrictions on trade with Iraq failed to topple Saddam Hussein.  They were some of the toughest sanctions in history.  Yet before 2003, the only major destabilisation of the Iraq government came from the bombing in 1998.

Trade embargoes have failed in Burma, Iran, Zimbabwe, and Syria.

A 2007 study of 204 separate economic sanctions over the last century found they were successful in achieving regime change in only 31 per cent of cases.  Their success at disrupting military adventures was successful in just 19 per cent.

And they can have some terrible unintended consequences.

Certainly, humanitarian goods are getting into Gaza.  But simply sustaining the population isn't the main game.

The trade embargo stops Gazans from integrating themselves into the world economy.  Their domestic economy is busted.  It will remain busted as long as they are unable to trade.  Imports to Gaza may be strictly limited, but exports from Gaza are effectively banned.

The Palestinian Trade Centre claims that, as a consequence, the number of private sector firms has shrunk at least 70%.  In 2005, around 25,000 people were employed in Gaza's clothing industry.  That number is now around 230.  Unemployment in Gaza is nearing 50 per cent.  80 per cent of the population relies on aid.  Recent Iraqi history has taught us sudden mass unemployment is not a harbinger of peace.

There is little Israel and Egypt could do to divert hardline Hamas fighters from their path of violence.  But the blockade could convince many Gazans there is no prospect for mutually beneficial cooperation with its neighbours -- the sort of cooperation that open trade encourages.

The only peaceful future of the Middle East will be one with trade and economic cooperation.

History tells us the blockade is unlikely to budge their rule.  Worse, it could legitimise it, in the minds of some Gazans.

That's why what happened on the Freedom Flotilla has been such a massive win for Hamas.  The blockade hides the extraordinary repressiveness of the ruling regime.  Last week in Gaza there was a 2,000 person demonstration against new taxes being levied on smuggled commodities by Hamas.  But the Freedom Flotilla turned the attention right back on Israel, inside and outside the Gaza strip.

And of course, Egypt's role in the blockade has been popularly ignored.

Nations have an absolute right to defend themselves.  Egypt and Israel are unquestionably justified in inspecting for weapons entering Gaza, and taking action against aggression.  But rather than destabilising Hamas, the economic blockade might be only encouraging the violence.

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