IMPACT OF TERRORISM ON INTERNATIONAL TRADE

INTRODUCTION:

The Oxford English Dictionary defines terrorism as furthering one’s views through acts
of coercive intimidation. It is self evident that terrorists want to disrupt the economic and
political process of a nation. Acts of terrorism are costly in that they require governments
to incur immediately rescue, cleanup and reconstruction expenditures. In the longer term,
terrorism raises anxiety and uncertainty in the community; this, in turn, adds to cost and
prices of goods and services, e.g., the terrorist premium on crude oil prices and reduces
the propensity to invest in projects. Finally, terrorism prompts governments to set-up
costly policies of counterterrorism.

TERRORISM AND THE MARKET

Terrorism is a real threat to all nations in the world. Wherever there are different groups
of people, there are sure to be conflicting ideas. Some of the differences in opinions and
beliefs lead radicals to turn to terrorism to push their ideas onto others and to send
messages that result in the death or injury of many. While this tactic is frowned upon by
society as a whole, it is all too real a danger to ignore. The human tragedies that result
from terrorist acts are horrifying and the economical impacts that follow terrorism can be
almost as devastating.
Terrorism can bring an economy to its knees because of fear. Businesses may be afraid to
operate as normal because of fear that another attack will happen. Increased costs in
security can cause companies to fall on economic hard time ultimately decreasing the
value of their stocks and hurting shareholders. One such example of this phenomenon is
the resulting collapse of small or floundering airlines after the September 11th attacks on
Americans in 2001. Fear can often lead to erratic stock market behavior. Those that play
the stock market are looking for predictability and a terrorist attack provides anything but
a stable market.

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Although the typical reaction of the market to a terrorist attack is an immediate downturn,
the initial panic, fear, and shock does wear off. This has historically resulted in markets
recovering from their short term slumps and even going on to long term bull periods.
Such turnarounds were witnessed after terrorist acts like the Kennedy assignation, the
World Trade Center Bombing, and the Oklahoma City Bombing. The market turnaround
is attributed to many things ranging from a society that bonds together to overcome
tragedy to changes in security that make people feel more secure and more confident than
before.
The loss of human life is undoubtedly the tragic side of terrorism. The effects of the
deaths of loved ones are tremendous. The business world does not go unaffected by these
human losses; the loss in labor force and other key players in a company can cause
significant negative effects. During the September 11th attack, the lives of many were lost,
including top level executives from Morgan Stanley, Merrill Lynch, American Express,
and many other publicly traded companies. Not only did these companies lose a corps of
wonderful human beings, but many lost their most important leaders and thinkers. The
result was a tragedy for the victims’ families and the companies, as well.

IMPORTING AND EXPORTING

Every country has its own special blend of natural resources that are indigenous to its
particular region of the globe. These resources help to drive a country’s economy and
fuel the markets around the world. However, very few countries can be entirely self-
sufficient in every aspect of the marketplace. Even if a country does have the resources to
produce all its basic products domestically, there is always a market for imported luxury
items. The following highlights some of the ways in which terrorism impacts how
importing and exporting is done throughout the world.

 Disease

The threat of biological terrorism raises fears in regards to the importing and exporting of
products from one country to another. Terrorists could possibly contaminate a shipment
with a biological weapon, such as anthrax, in order to infect those that will receive the

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contaminated shipment. This has led to many countries making stronger regulations and
taking security precautions to help deter the threat of biological contamination.
The United States has responded to such threats by passing the Bio-Terrorism Act in
2002 which mandates that manufacturers of products that are considered food or
beverage be registered with the Food and Drug Administration (FDA) before any
shipments will be allowed to enter the United States. Along with the manufacturers being
required to have registered with the FDA, notice of the actual shipment must be given to
proper authorities before any foreign import will be allowed across the borders of the
United States.

 Market effects

The effects of heightened security surrounding the importing and exporting of goods
result in higher costs passed onto the consumer. Such price increases serve to shape the
financial world of importing and exporting. Due to higher costs, companies may decide
that importing or exporting a particular product is no longer cost effective. If importing
and exporting continues to occur, profit margins may be effected which will in turn hurt
the overall performance of the company and its value on the market. This is how
terrorism serves to shape the world economy by affecting the importing and exporting
habits of virtually every nation around the globe.

ETHNIC BUSINESSES

There has always been some level of distrust or prejudice between two peoples who are
from different ethnic backgrounds. The United States’ history is an excellent example as
blacks were forced to endure decades of unfair treatment as minorities. Practices such as
ethnic cleansing can be found in places around the globe throughout the world’s history
with the most publicized and large scale example coming from the Nazi Germany era
when thousands of Jews were killed during Hitler’s terrorizing reign. Since the days of
Nazi Germany and pre-Civil Rights America, many would like to think that society as a
whole has moved forward from the primitive thinking that one race is superior to another.
While this may be true to some extent, the fact remains that terrorist attacks can have a
large impact promoting prejudices against certain ethnicities.

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After the events of 9/11, the American public was looking for someone to take the blame
and the group that was deemed responsible for the terrorist actions was slated as radical
Muslims that were bent on destroying America’s way of life. This triggered an across the
board reaction against all Muslims. Muslims in America suddenly felt themselves being
alienated from their communities and as a result, Muslim businesses suffered. Some
American’s believed that all Muslims were in some way linked to the events of 9/11 and
responded by boycotting or protesting against Muslim businesses.
The financial difficulties that were faced by Muslim business owners and workers serve
as an example of how today’s society is not immune to prejudice and how this prejudice
can affect the economic structure of a whole society.

TERRORISM AND ALLIANCES

Terrorism will generally result in a retaliatory response by the nation that is attacked.
This response may or may not be seen by other nations as proper and may or may not be
supported. Thus, countries that support a retaliatory action seem to be on the same side as
the nation retaliating. Such an alliance signifies good will and can even help to perpetuate
a positive relationship when such a retaliatory campaign finally comes to a close.
The economic effect of a strong alliance assures that there will be future strengthening
and cohesion between the economies, often growth in trade, among other things. The
result is often a strengthening of both of the nation’s respective economies. In essence, a
traumatic event such as a terrorist attack can bring two or more nations together to fight
side by side with a common goal in mind. This military alliance often lays the ground
work for an economical alliance which can be beneficial to all parties involved. Such an
alliance is often seen between the United States and Britain as the two nations typically
share both an economical and a military alliance in today’s modern era.
Those countries that do not choose to takes sides with the eventual winner of a military
struggle are often left with less of an economic advantage. For example, countries that
allied themselves with Nazi Germany during World War II suffered the economic
consequences once the Nazi alliance was defeated. In much the same way, countries that
allied themselves with Britain and the United States in response to 9/11 attacks have had

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much more economic opportunity available to them through trade as a result of their
military stance on terrorism.
It seems that alliances against terrorism adhere to the old adage that states, “to the victor
go the spoils.” It is historically advantageous for a nation to align themselves with the
eventual winner of a military struggle if they wish to see economical reward for their
military actions. Throughout history, those that align themselves with small terrorist
organizations stand less of a chance to prosper financially than those that side with the
larger and more powerful nations of the world. This is sound evidence that terrorism can
be a rallying point around which nations can ban together to establish alliances in many
areas of the political world.

OIL AND TERRORISM

Terrorists typically have a cause that they believe in very strongly and they commit
terrorist acts because they feel it is the most effective way to get their message heard.
Terrorists believe that if they can cause enough devastation, that they will be taken
seriously and that their message will reach the most people possible. They send strong
messages to outsiders by the killing of innocent people and often capture the attention of
many with these actions. However, as terrible as these human losses are, they are often
not as effective as hurting others economically over long periods of time. When the anger
of such attacks has faded, the financial aspects of an attack are left that continue to send
out ripples. For this reason many terrorists have turned to oil as a weapon of terror.
Terrorists recognize the dependency of much of the civilized world on oil. Terrorists
know that entire economies are based on the importing and exporting of oil and realize
that in order for many businesses to operate, transportation is needed and in order to have
transportation, there must be oil. This is why terrorists have turned to suicide bombings
and other horrific measures to destroy oil supplies. Attacks on oil sources force the price
of oil upward, increase erratic market behavior and gets the attention of oil dependent
countries.
The reaction to such attacks on oil supplies is always to increase security. In recent years,
there has been a movement towards finding alternative forms of energy. This would
result in less harm to the environment due to the reduced amount of fossil fuel usage as

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well as take away this key weapon that is often used by terrorists. Terrorists may be able
to destroy hundreds of oil drums, but it is next to impossible to take away an energy
source such as solar power.
An increase in oil prices means an increase in shipping costs. This hurts virtually every
business that relies on the producing of products to make profits. Oil products must be
shipped in order to reach consumers. The increase in shipping costs can eat into a
company’s bottom line and cause a decrease in stock value on the market. Thus, the
company makes less money, the stockholders suffer, and the market as a whole takes a
hit. With so many negatives associated with terrorism on oil supplies, it is easy to see
why measures are being taken to stop such acts as well as reduce the economies of the
world’s dependence upon oil.