Washington Director -- Governmental Affairs
Caterpillar Inc.
On Behalf of USA*Engage
Before Subcommittee on
International Economic Policy, Export and Trade Promotion
Senate Foreign Relations Committee
Honorable Chuck Hagel, Nebraska, Chairman
March 25, 1998
Caterpillar chairs the USA*Engage effort in part because we have a special standing to discuss the issue of unilateral sanctions. We still recall that as a result of the Soviet pipeline sanctions during the 1980s. Caterpillar was forced to cede the Soviet market to our Japanese competitors. As a result of that policy:
- 12,000 man-years of work was transferred from Illinois to Japan.
- Caterpillar and other U.S. exporters were tainted as unreliable suppliers.
- Komatsu of Japan grew in strength which allowed them to more effectively compete against Caterpillar on a global basis. A legacy that's still with us today.
- And the Soviets completed their pipeline ahead of schedule.
Between the Soviet pipeline embargo and earlier grain embargo, we thought the notion of unilateral sanctions and secondary boycotts was so discredited that they would be rarely used as a foreign policy tool. Unfortunately, that's no longer the case.
We note with concern that the President's Export Council reports that U.S. unilateral sanctions now threaten 75 countries or 52 percent of the world's population. The National Association of Manufacturers further documents more than 60 U.S. unilateral sanctions in just the past five years. Increasingly, these policies are having serious trade and foreign policy implications.
For example, at a time when we are trying to maintain multilateral support for a united policy toward Iraq, we find that the United States has imposed or threatened sanctions against all Arab members of the gulf war alliance -- except Kuwait -- and 3 of the 4 other permanent members of the UN Security Council. While I am not a foreign policy expert, these sanctions may be one of the reasons why it has been so hard to win an agreement on a multilateral sanctions policy toward Iraq.
We are concerned that in Asia, at a time when the IMF is working diligently to stabilize the financial crisis there, the U.S. is maintaining sanctions against South Korea over the issue of worker rights and threatening sanctions against Malaysia. In addition, several U.S. state and local governments are further complicating U.S. foreign policy by targeting sanctions against Indonesia.
On the USA*Engage web site (www.usaengage.org), we are currently monitoring over two dozen federal sanction proposals and a score of state and local bills. We also have collected 19 authoritative studies: 23 journal articles and 121 editorials that discuss the issue of unilateral sanctions in considerable detail.
From these writings several conclusions can be drawn: (1) most people believe it is important for the U.S. to keep sanctions as "a" tool of foreign policy; (2) there is strong consensus that unilateral sanctions are being grossly over-used by the U.S. and (3) the recent track record of unilateral sanctions demonstrates that they rarely work, are often counterproductive, and almost always costly.
Let me give you an example of how an American company has been affected by a recent sanction. You will recall that on November 4, 1997 President Clinton declared a "national emergency." At that time the President imposed a comprehensive trade and investment embargo against a country that he declared "constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States."
Last month, we discussed this issue with more than 30 members of a House of Representatives and asked if any of them could name the target country. We didn't have a single correct response.
While few in Congress took notice of America's new Sudan policy, regrettably our biggest worldwide competitor -- Komatsu of Japan -- did. Immediately after the announcement, Komatsu took out newspaper ads in Khartoum announcing its new Sudan sales and support locations. Three weeks ago their initiative paid off when Komatsu won an important contract: to sell Sudan hydraulic excavators. Caterpillar also lost a $35 million engine contract to a Malaysian company that is doing business in Sudan.
On December 19, 1997. we asked the President permission to just sell agricultural products in Sudan so there would be enough commercial activity for our Sudan dealer to weather this difficult period. To date we have not received a substantive response. Consequently, our Sudan dealer now faces a tough choice: layoff 600 employees or affiliate with a Japanese company.
Perhaps what is most disappointing is that we learned from both USTR and State that following the imposition of the embargo, at the APEC conference in Vancouver, the U.S. didn't even mention the Sudan "threat" nor attempt to win multilateral support for sanctions. If the U.S. government truly believes Sudan represents a "national threat" shouldn't there be a serious effort to enlist help from our allies and trading partners?
Of course, our concern about the proliferation of unilateral sanctions goes far beyond Sudan. Today, the U.S. is threatening sanctions against some of our biggest markets. Current sanction targets include Gazprom of Russia, Total of France, and Petronas of Malaysia. These companies are huge enterprises and important customers to many U.S exporters.
At Caterpillar, we are still perplexed why the U.S. discourages the export of American-made products to the world's largest construction project -- China's Three Gorges Dam.
Allow me to conclude by emphasizing that the members of USA*Engage fully recognize that much of the world remains a dangerous place. We realize, that at times, sanctions may be necessary.
If that appears to be the case, we believe that unilateral sanctions should be considered only after Congress and the Executive Branch have exhausted potential alternatives such as diplomatic initiatives and multilateral pressure. If unilateral sanctions must be considered, they should be judged by:
- (1) whether they actually can achieve their intended results;
- (2) the harm they will cause to other national interests;
- (3) and the costs imposed on Americans.
Finally, we believe future unilateral sanctions should be subject to a meaningful accountability review every two years.
Mr. Chairman, USA*Engage is unapologetic in its belief that engagement can be a powerful force for positive change when pursued at all levels - political, diplomatic, economic, charitable, religious, educational. and cultural. In contrast, a unilateral sanction can isolate America -- taking away the influence and credibility we gain by being there. It's time that we stop using unilateral sanctions as America's foreign policy "weapon of choice."
The Hamilton-Crane-Lugar Sanctions Reform Act (S.1413) provides reasonable. common-sense reforms that would provide a more disciplined, deliberative process for considering unilateral sanctions. With greater focus on prevention, process and accountability, we believe the U.S. will have a more effective foreign policy. We ask that you make passage of S.1413 a top priority for this year.
Thank you. At this time. I'd be pleased to answer your questions.
