The Geopolitics of Supply: Why Multilateral Export Controls Outperform Unilateral Embargoes

October 2026 | Economic Policy Analysis

In an era of intensifying global competition, the U.S. government has increasingly relied on export controls as a primary instrument of national security. By restricting the flow of high-technology goods, dual-use components, and sensitive software, Washington seeks to degrade the military modernization efforts of strategic adversaries. However, a landmark working paper (NBER Working Paper 35898, DOI 10.3386/w35898) released this October suggests that the efficacy of these measures is not merely a function of U.S. policy, but rather a testament to the power of global coalition-building.

The research, which employs a sophisticated quantitative general equilibrium model and newly synthesized data on U.S. export licensing, concludes that unilateral action is a blunt instrument. When the United States acts alone, market forces often undermine its efforts, with other nations stepping in to fill the supply void. Conversely, when export controls are synchronized through Multilateral Export Control Regimes (MECRs), the impact on an adversary’s military capacity is profound, efficient, and significantly more difficult to circumvent.

Main Facts: The Anatomy of Control

The core finding of the research is that export controls are not monolithic; their effectiveness is dictated by the breadth of the underlying political coalition. Using a model that accounts for complex input-output linkages, the authors distinguish between civilian and military final expenditure. They demonstrate that export controls create significant "friction"—a metaphorical wall that raises the cost of trade and deters market entry.

When the U.S. imposes unilateral restrictions, it faces a "leakage" problem. Approximately 28% of the reduction in U.S. exports to adversaries is quickly replaced by goods from other countries. This effectively renders unilateral policy a "leaky bucket" strategy. However, when controls are applied through multilateral regimes, this replacement rate drops to a mere 7%.

The data highlights a startling disparity in security outcomes. Multilateral controls are roughly seven times more effective at tilting the military balance of power in favor of the United States than unilateral controls, all while imposing a similar level of economic cost on the domestic civilian sector.

Chronology: The Evolution of Modern Trade Warfare

To understand the weight of these findings, one must look at the recent trajectory of global trade policy.

• Pre-2020: Export controls were largely surgical, focused on specific nuclear or chemical non-proliferation goals. The framework was relatively stable, governed by long-standing international agreements like the Wassenaar Arrangement.
• 2020–2024: The "Great Pivot." Following supply chain disruptions and escalating geopolitical tensions, the U.S. transitioned from targeted restrictions to broader "technological decoupling." This period saw the surge of unilateral controls, particularly regarding advanced semiconductors and AI-related hardware.
• 2025: The period of evaluation. As data began to accumulate on the efficacy of these sweeping unilateral bans, policymakers and economists noted that adversaries were finding workarounds, utilizing third-party intermediaries to acquire critical components.
• October 2026: Publication of Working Paper 35898. The findings provide the first comprehensive, model-based evidence that the "unilateral phase" of modern trade warfare has hit a point of diminishing returns. The report serves as a wake-up call for the U.S. Department of Commerce and the State Department, advocating for a return to intensive multilateralism.

Supporting Data: The Mechanics of Friction

The strength of this research lies in its empirical foundation. By analyzing specific licensing outcomes, the authors calculated that the difference in export friction between unilateral and multilateral regimes is equivalent to an export cost of 15 to 29 log points.

The "Leakage" Metric

The study identifies the "substitution effect" as the primary inhibitor of unilateral policy. In a globalized economy, if the U.S. refuses to sell a high-end sensor, an adversary looks to the international market. If that market is not unified in its restrictions, the adversary simply buys from a different supplier.

The Security Impact

The researchers measured the security impact as the ratio of U.S. real military expenditure to that of the adversary.

• Unilateral Controls: Led to a modest gain of 0.14 log points.
• Multilateral Controls: Resulted in a gain of approximately 1.0 log points.

The authors note that the "military price index" for the adversary rises sharply under multilateral regimes. Because the adversary is forced to pay a premium for black-market goods or settle for inferior alternatives, their overall military procurement capacity declines. Crucially, the model shows that even an absolute U.S. embargo—a total cessation of trade—fails to achieve the same security results as a well-coordinated multilateral regime.

Official Responses: The Policy Dilemma

While the study has not yet been formally codified into legislation, it has sparked significant debate within the Washington policy community.

The Department of Commerce Perspective:
Internal sources suggest that the Bureau of Industry and Security (BIS) is increasingly aware of the "substitution effect." The findings in the working paper support the current administration’s push to expand the "Entity List" not just within the U.S., but through diplomatic pressure on G7 partners to harmonize their own export control lists.

The Diplomatic Challenge:
State Department officials have long argued that multilateralism is "slow and cumbersome." Critics of the research argue that the paper ignores the political time-cost of building coalitions. "We can act in a day, or we can negotiate for a year," one trade policy analyst noted. "The study proves that waiting for a coalition is better, but it doesn’t account for the crisis-response needs of the Pentagon."

Academic Consensus:
Independent economists have praised the paper for its rigor in separating civilian and military impacts. By proving that the "civilian cost" (the damage to domestic businesses) is similar regardless of whether the policy is unilateral or multilateral, the researchers have effectively removed the "domestic economic pain" argument as a reason to favor unilateralism.

Implications: The Path Forward

The implications of this research are profound for the future of international relations and global supply chain management.

1. The Death of "Go It Alone"

The data suggests that the U.S. can no longer rely on its own market dominance to force geopolitical outcomes. The existence of alternative global suppliers—even if they are less advanced—is enough to negate the strategic advantage of unilateral export bans. If the U.S. wants to restrict an adversary’s military growth, it must invest in the diplomatic capital required to build a "multilateral fence."

2. The Military Price Index as a Strategic Tool

Moving forward, policymakers should shift their focus from "export volume" to the "adversary’s military price index." By targeting components that are vital for military hardware but have no easy substitutes, and then ensuring those specific items are covered by multilateral agreements, the U.S. can achieve greater security gains with less total economic disruption.

3. Strengthening Multilateral Regimes

The study implicitly calls for a revitalization of institutions like the Wassenaar Arrangement and the creation of new, tech-specific regimes. These regimes must move beyond simple list-sharing and toward real-time, shared enforcement mechanisms. The 7% leakage rate of multilateral regimes, while superior to the 28% of unilateral policy, is still a gap that needs to be closed.

4. Strategic Patience

Perhaps the most difficult takeaway for the political establishment is the need for patience. The research suggests that the benefits of multilateralism are cumulative. While a unilateral embargo might offer a brief, satisfying sense of "doing something," the long-term security architecture requires the slow, deliberate work of aligning the trade policies of allies.

Conclusion

As the global economy becomes increasingly fragmented, the findings of NBER Working Paper 35898 provide a sobering assessment of modern trade power. The era of the unilateral "technological blockade" is effectively over, at least in terms of achieving sustained strategic superiority. The future of national security will not be written by the depth of a nation’s own sanctions, but by the breadth of its alliances. The data is clear: to limit an adversary’s reach, one must not only close one’s own gates but also convince the rest of the world to lock theirs. Anything less is merely a temporary disruption that the global market will inevitably, and efficiently, correct.