Testimony of Mr. Bower--free trade, unilateral and economic trade sanctions

Testimony of Ernest Z. Bower
President, US-ASEAN Business Council, Inc.
Before the U.S. International Trade Commission

May 14, 1998
MR. BOWER: Thank you Madam Chairwoman, and I appreciate the opportunity to testify today. I am testifying as President of the USASEAN Business Council, which is a group of over 300 American companies ranging from Fortune 500 firms to smallmedium sized companies, and 18 U.S. states are our members. I will try to truncate my comments to fall in line with some of what's come before. I strongly endorse the panel this morning some of the comments of the panel this morning, that Mr. Kittredge and Mr. Lane were part of.
I want to talk a little bit about the impact of sanctions on ASEAN. And ASEAN, for the record, is the Association of Southeast Asian Nations. It now includes nine countries. I think you're familiar with those. But not many realize, perhaps, that ASEAN is the third largest overseas market for the United States, one in which our exports have increased 155% from 1990 to '97, to 48 billion dollars in '97. Our investment has increased U.S. investment has increased to those countries from 1990 to '96 by 201% to a total of 36 billion dollars, and those are based on U.S. Department of Commerce figures, and my own group estimates that U.S. investment stock in the region is probably double that, including oil and gas investments.
This has been our fastest engine for export growth in this decade. The only faster growing market has been China, and, actually we sell three times as much to ASEAN as we do to China. And, actually, we sell twice as much to Singapore than we do to China. Singapore with 3 million people, is a little bit smaller than the 1.2 billion in China.
This trade accounts for over 700 U.S. export jobs, and, I believe the economist in the earlier panel mentioned that these are higher paying jobs, in general, than most typical U.S. jobs. The job of my Council has been to adapt in the current format, to adapt to the massive financial crisis that's hit the region, and try to retain American competitiveness in that region.
I want to make the case that unilateral sanctions against Myanmar, which is now a member of ASEAN, and other sanctions proposed against other members of ASEAN, including Indonesia, Thailand and Petronas, in Malaysia, which we heard from Mr. Wagner this morning, could endanger our competitiveness in this market and actually could do so at a time when critical trading patterns are being established.
I think one of the results of the financial crisis in Southeast Asia are that these countries are in massive reform mode. You see that with the IMF programs in Indonesia and Thailand. And Americans are being looked to for ideas on how to increase transparency, and we see a lot of the market opening measures that we've been working on for years starting to come into play.
All that is in question, though, because we are seen as an unreliable partner because of many of the unilateral sanctions that have been mentioned here. One of the goals of our Council and I think we can help you quantify the impact of sanctions policy will be to try to improve our market share position in Southeast Asia.
We have not even though our exports have climbed 155% over the period to '97, we actually lost a point of market share from 15.6% of the ASEAN import market to 14.5% in 1996. And that's fluctuated about a percent in the years between those two points.
We seen an opportunity to greatly expand our market share in Southeast Asia, but, for reasons I'm about to mention, we believe that unilateral sanctions greatly threaten our ability to do that business.
The members of my Council believe that engagement is the wisest foreign policy strategy for the United States. This is true not just in traditional diplomacy, but as a means to advance and protect our political, and that includes, human rights, security and economic interests.
This was true before the advent of the globalization trend or the global economy, and it's even more fundamental in today's world and in our dealings with Southeast Asia.
I think earlier speakers have done good service to the point on reliable partner. This is a major issue for us in Southeast Asia and my Council has evidence which I can share with you later on our competitors using the U.S. as a nonreliable partner because of our sanctions policy, as a major competitive edge in competing for major projects. And I believe Mr. Wagner mentioned some of those related to gas and oil and chemical industry, this morning.
Further, U.S. companies are being vilified by fellow Americans, as part of the sanctions mania that's going on in this country. Boycotts and selective purchasing campaigns at the subfederal level, which I believe you'll hear more about in this panel, depict U.S. companies as part of the problem rather than realizing recognizing that U.S. companies advance worker rights and welfare in countries that they do business in. This is the case in Southeast Asia, and we have a report that I'd be happy to submit for the record, for kind of, the I don't think they're intangibles, I think they're actually very tangible results of U.S. companies' best practices efforts in some of the Southeast Asian countries. And I'd be happy to submit that for the record.
But we find the U.S. Government is actually encouraging this negative image by targeting the U.S. companies, in its sanctions actions. State and local sanctions undermine the credibility and the effectiveness of U.S. negotiators as foreign partners, and that undermines the competitive position of U.S. companies.
We'd actually been having, I think the point was made earlier, that we've been having fairly good results in terms of progress on trade knocking down trade barriers and nontrade barriers nontariff barriers, in Southeast Asia through fora like the ASEAN freetrade area, APEC initiatives and GATTs. It's unfortunate that our new barriers are faced more here at home than they are in the foreign countries that we're dealing with.
In the case of ASEAN, the effects described are particularly devastating. The image of an uncontrolled U.S. drift toward sanctions undermines our credibility, even as we attempt to support the recovery of ASEAN countries from the financial crisis. Talk of conditions and further sanctions surrounds the debate, for instance, on IMF funding.
In spite of the shortterm economic problems, ASEAN is facing, governments and companies are taking first steps to put together regional projects and infrastructures, such as, a natural gas grid, a telecommunications projects and others. The U.S. sanctions banning new investment in Myanmar, which Mr. Downey covered to some effect this morning, creates serious doubt as to whether U.S. companies should be part, or could be part of these regional plans.
I might mention here, parenthetically, that the infrastructure market in Southeast Asia is estimated by the World Bank to be somewhere between 200 and 500 billion dollars over the next ten years. So this is we're talking about major market opportunities here.
This trend is exacerbated by U.S. Government hostility toward ASEAN over its desire to bring Myanmar in as a member, pursuant to ASEAN's policy of constructive engagement, which is very like our current approach to China, by the way. Sanctions have been also imposed and suggested, as I mentioned, against Indonesia, Malaysia and Thailand.
I think I'll skip through some of this because I think the points have been wellmade by others, and it's on the record. But I'd like to conclude by saying that sanctions don't work. If they did, I think we'd take the position that Mr. Lane took, that U.S. companies would certainly back them. They made sense for U.S. Foreign policy.
I think Myanmar is a good example. The U.S. policy of isolating and cutting off economic aid from Myanmar has brought nothing in the way of positive political change, but it has, indeed, increased the misery of the people of that nation.
Since 1997 it has been compounded by the U.S. Government's ban on new investment which cuts of job opportunities and slow economic growth, even as Myanmar's neighbors cut back their investment because of the economic difficulties that they're facing at home.
As investment slows in the Burmas As investment slows, Burma's government role becomes larger and more controlling, and the benefits of investment and trade for the average citizen wither away. Even democracy advocates within Myanmar are frustrated by the willingness of democracy leaders to support the investment cutoff.
And I've got a story attached to my testimony, in which of the leading proponents of democracy in Burma quotes, and this woman was in jail for opposing the current government. She says, "Instead, the NLD," which is the group supporting sanctions, "chose the opposite, putting pressure on the government by telling foreign investors to stay away and asking foreign governments to withhold aid.
Many of us cautioned her that this was counterproductive. Why couldn't economic development and political improvement grow side by side? People need jobs to put food on the table, which may not sound grand and noble, but is a basic truth that we face every day." It's certainly a truth for our economy also. We would hate to lose the engine of growth that could be ASEAN.
I'd like to end with one anecdote, which is a true story that I overhead a conversation while I was in Vancouver for the APEC meetings last November. One CEO of a major American company asked another, "Where do you see the most serious political risk for your business in Asia?" And this was during the time when Yamaichi Securities was going bankrupt in Japan, and Korea was on the table with IMF emergency wagons rushing in. And he responded the other responded with a grim and serious monotone, "Capitol Hill."
Thank you very much for your opportunity.

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