Multilateral Export Controls Outperform Unilateral Sanctions in Strategic Military Competitions, New NBER Research Shows

In the modern geopolitical landscape, trade policy has increasingly become a front-line instrument of national security. Governments around the world, particularly in Washington, rely on export controls to restrict foreign adversaries from acquiring dual-use goods—items with both commercial and military applications—that could enhance their defense capabilities. However, a comprehensive new working paper published by the National Bureau of Economic Research (NBER), designated as Working Paper 35898 and issued in October 2026, reveals that the strategic efficacy of these measures depends heavily on international cooperation. Titled Multilateral Export Controls Outperform Unilateral Sanctions in Strategic Military Competitions, the study demonstrates that multilateral export control regimes are vastly superior to unilateral policies in curbing adversaries’ military capabilities while minimizing economic inefficiencies, proving that even a total U.S. embargo cannot replicate the security outcomes achieved through coordinated international alliances.

Main Facts and Core Findings

The research paper, authored by a team of leading economic modelers and trade specialists, combines newly compiled datasets on United States export control classifications and licensing outcomes with an advanced quantitative general equilibrium model. This economic framework meticulously accounts for complex global variables, including dual-use production processes, intricate cross-border input-output linkages, and distinct categories for civilian versus military final expenditures.

The study’s central finding is that while export controls invariably introduce significant market frictions—manifesting as large export and entry barriers—the severity of these barriers is heavily conditioned by diplomatic alignment. Specifically, the trade-inhibiting effects of export controls are substantially smaller when U.S. goods are exported to members of established multilateral export control regimes (MECRs). The differential in trade friction between allied nations and non-allied adversaries is equivalent to an export cost of 15 to 29 log points.

When comparing policy outcomes, the research reveals a striking divergence in leakage rates—the degree to which restricted trade is simply rerouted through third-party nations. Under a unilateral U.S. policy framework, 28 percent of the reduction in controlled exports to an adversary is successfully replaced by alternative suppliers from other countries. In stark contrast, when controls are administered multilaterally through an MECR, only 7 percent of the reduced exports are replaced by other nations. This drastic reduction in substitution significantly elevates the cost of military inputs for targeted adversaries.

Consequently, multilateral controls drive up adversaries’ military price indexes, effectively shrinking their real military purchasing power. Measured as U.S. real military expenditure relative to that of adversaries, the security impact index rises by approximately 1 log point under a multilateral regime, compared to a mere 0.14 log points under unilateral U.S. actions. Crucially, both policy approaches impose a remarkably similar real economic cost on civilian populations, making multilateral cooperation a far more efficient instrument of statecraft. Most notably, the study highlights that even a complete, unilateral U.S. embargo against an adversary fails to reproduce the strategic security outcomes achieved through coordinated multilateral restrictions.

Historical Background and Evolving Context

To fully appreciate the significance of Working Paper 35898, it is necessary to examine the historical evolution of strategic trade restrictions. The modern architecture of export controls traces its lineage back to the Cold War era, most notably through the establishment of the Coordinating Committee for Multilateral Export Controls (CoCom) in 1949. CoCom was designed by Western allies to prevent the Soviet Union and its Warsaw Pact satellites from acquiring sensitive Western technology that could bolster their military-industrial complexes.

Following the dissolution of the Soviet Union in 1991, CoCom was dissolved, giving way in 1996 to the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies. Alongside other specialized regimes—such as the Nuclear Suppliers Group, the Australia Group for chemical and biological weapons, and the Missile Technology Control Regime—the international community sought to maintain a cooperative framework to prevent the proliferation of weapons of mass destruction and destabilizing accumulations of conventional military hardware.

However, the geopolitical realignment of the 2020s, characterized by intensifying strategic competition between the United States and peer competitors like China and Russia, has witnessed a resurgence of aggressive unilateral trade policies. The U.S. Department of Commerce’s Bureau of Industry and Security (BIS) has increasingly deployed sweeping unilateral export controls—particularly concerning advanced computing chips, semiconductor manufacturing equipment, and artificial intelligence development tools.

While these unilateral measures have demonstrated an immediate capacity to disrupt specific supply chains, policymakers and economists have long debated their long-term efficacy. Critics of unilateralism have argued that without the active participation of key manufacturing allies in Europe, East Asia, and elsewhere, targeted nations can easily source alternative components from non-participating jurisdictions, thereby neutralizing the strategic intent of the policy while inflicting self-harm on domestic industries. The NBER paper provides the first rigorous, quantitative general equilibrium proof supporting these long-held concerns regarding international trade deflection.

Chronology of the Research and Data Integration

The development of Working Paper 35898 represents the culmination of years of empirical data collection and advanced macroeconomic modeling. The chronological progression of the research reflects the expanding scope of modern economic trade analysis:

• Phase One (Data Compilation): Researchers integrated granular administrative data concerning U.S. export control classifications, licensing decisions, and enforcement outcomes from federal trade databases spanning multiple years up through the mid-2020s.
• Phase Two (Model Construction): The study team built a multi-country, multi-sector quantitative general equilibrium model. Unlike traditional trade models that treat all goods uniformly, this framework was specifically tailored to segregate civilian production from dual-use and dedicated military manufacturing.
• Phase Three (Friction Estimation): Using econometric techniques, the authors estimated the specific export and market-entry frictions generated by different tiers of export control policies, quantifying the precise cost differentials between allied and adversarial trade routes.
• Phase Four (Counterfactual Simulations): The researchers executed extensive counterfactual simulations comparing unilateral U.S. sanctions, multilateral MECR enforcement, and a hypothetical total U.S. embargo. This phase yielded the definitive comparative metrics on leakage rates, military price indexes, and relative security impacts published in the October 2026 report.

Supporting Data and Quantitative Breakdown

The empirical metrics provided in the NBER study offer a stark mathematical foundation for ongoing debates in international political economy. The data highlights several critical quantitative dimensions:

• Export Friction Differentials: The administrative and economic friction imposed by controls on U.S. exports to MECR members versus non-members exhibits a spread of 15 to 29 log points, underscoring the trade-facilitating nature of institutionalized security alliances.
• Trade Substitution (Leakage) Rates: Unilateral U.S. export restrictions suffer from a 28 percent leakage rate, meaning nearly a third of the restricted trade volume is backfilled by third-party nations. Multilateral controls successfully suppress this leakage to just 7 percent, effectively sealing off alternative supply channels.
• Relative Security Impact: When evaluating the shift in strategic balance—defined as U.S. real military expenditure relative to that of adversaries—multilateral frameworks achieve a 1 log point improvement. Unilateral policies yield a marginal 0.14 log point increase.
• Civilian Economic Cost: Significantly, the macroeconomic models indicate that the civilian welfare losses—measured through aggregate consumption and real income declines—are comparable across both policy types, demonstrating that unilateralism does not spare the global economy from friction, but merely diminishes the strategic return on that friction.

Official Responses and Stakeholder Reactions

While working papers published by the National Bureau of Economic Research typically serve as foundational research for academic debate rather than official policy pronouncements, the findings of Paper 35898 have quickly drawn commentary from trade policy experts, defense analysts, and international relations scholars.

Proponents of multilateral diplomacy have seized upon the study as empirical validation of traditional alliance management. "For years, trade hawks have argued that the United States can act alone and achieve the same national security goals faster," noted a prominent Washington-based trade attorney specializing in export regulations. "This study definitively proves that economic isolationism or unilateral overreach is mathematically flawed. Without allied buy-in, trade diversion simply defeats the purpose of the control."

Conversely, realist defense strategists point out that building and maintaining multilateral export control regimes is exceptionally difficult in an era of divergent national economic interests. Negotiating consensus within frameworks like the Wassenaar Arrangement often leads to the lowest common denominator, as participating nations balance their own export-driven economic models against collective security objectives.

"While multilateralism is clearly the optimal outcome in theory, the practical challenge lies in enforcement speed," observed a senior fellow at an international security think tank. "Unilateral actions can be implemented by executive decree in a matter of days, whereas building an effective multinational coalition takes years of diplomatic capital. The NBER paper highlights the price we pay when diplomacy lags behind technological competition."

Broader Economic and Geopolitical Implications

The release of Working Paper 35898 carries profound implications for the future architecture of global trade and national security strategy. As emerging technologies—such as quantum computing, advanced biotechnology, and hypersonic propulsion systems—continue to blur the boundary between commercial innovation and military dominance, governments face mounting pressure to protect their technological edge.

The study’s conclusions suggest that export control policy must evolve beyond simplistic, domestic-first paradigms. Policymakers in Washington, Brussels, Tokyo, and other allied capitals must prioritize institutionalized cooperation, harmonization of licensing criteria, and joint enforcement mechanisms to prevent clever adversaries from exploiting regulatory loopholes in non-aligned jurisdictions.

Furthermore, the finding that even a total U.S. embargo fails to match the strategic efficacy of multilateral controls challenges foundational assumptions of economic statecraft. It underscores the reality of the contemporary globalized economy: no single nation, regardless of its economic or technological preeminence, possesses absolute autarkic leverage over global supply chains. As long as alternative producers exist outside a unilateral sanctioning coalition, trade will naturally adapt to circumvent restrictions.

Ultimately, the October 2026 NBER study serves as both a cautionary tale against unilateral overreach and a strategic roadmap for alliance-based economic security. By demonstrating that cooperation multiplies strategic power without proportionally increasing civilian economic damage, the research provides essential empirical grounding for the next generation of international trade and defense policies.