Statement of Ranking Subcommittee Member Carolyn McCarthy

Statement of the Honorable Carolyn McCarthy

Testimony Before the Subcommittee on on Tax, Finance, and Exports
of the House Small Business Committee

"Do Unilateral Economic Trade Sanctions Unfairly Penalize Small Business?"

June 24, 1999

Thank you Mr. Chairman for scheduling this hearing to assess the impact unilateral economic trade sanctions have on small businesses. I would also like to thank Congressman Crane and Congressman Dooley as well as our second panel of guest witnesses for taking time out their busy schedules to be with us here today.

As you are all aware, the United States uses economic sanctions as one of its tools for addressing the behavior of other countries. Specifically, they are used to focus attention on economic problems, humanitarian concerns, weapons proliferation, or other political goals. While their use is often times effective, it is not without costs.

These costs tend to vary depending upon which study is discussed, but what they all have in common is that there ARE costs involved; whether it involves the tourism industry or exportation of food and other agricultural products.

Although sanctions can take many forms, unilateral sanctions are much more controversial than multi-lateral sanctions. When the United States takes unilateral action, foreign companies often gain competitive advantages while U.S. businesses suffer.

A 1997 report by the Institute for International Economics concluded that unilateral economic sanctions in 1995 cost the economy between $15 and $19 billion.

In comparison, a study conducted by the Congressional Budget Office concluded that sanctions in 1997 caused losses of approximately $1 billion. Although these figures vary significantly, it's important to realize that there are secondary consequences involved when sanctions are implemented..

Both large and small businesses alike are effected by unilateral trade sanctions. Small businesses, especially, are unable to absorb the financial loss that occurs when unilateral sanctions are imposed without full consideration.

Small businesses are the backbone of our economy. The Federal government allocates a substantial portion of its budget to provide assistance for them; either in the form of loans or management advice. It does not seem logical to frivolously impose trade sanctions without recognizing the secondary effects, while at the same time, providing financial assistance to the business community so they can expand their business.

Currently, there is legislation pending before the House and Senate that address the concerns raised when sanctions are imposed. We are lucky enough to have the author of one of these bills testifying before us today.

I thank the Chairman for recognizing the importance of this issue and look forward to hearing testimony from our witnesses on the impact trade sanctions as well as potential legislative remedies needed to address concerns raised by small.

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