23 July 1996
The Journal of Commerce
Stuart Anderson
Stop the Sanctions Game
If some members of Congress have their way, there soon may be relatively few countries in the world where U.S. companies can safely do business without fear of reprisal from their own government.The latest case is Myanmar, formerly Burma, where Sen. Mitch McConnell's amendment to the foreign operations appropriations bill would ban all U.S. companies from operating.
The proposed sanctions against Myanmar are unrealistic, since they assume the threat of a U.S. economic boycott will force the country's military rulers to relinquish power. No American political figure would accede to such demands from a foreign country, and we should not expect leaders in other parts of the world to react differently.
The law of unintended consequences can apply with a vengeance to any move that links trade with human rights.
The 1974 Jackson-Vanik Amendment, the legislation that most clearly tied U.S. trade activity to other countries' human rights policies, proved ineffective. It actually led to a sharp decrease in Jewish emigration from the former Soviet Union, the opposite of its intended purpose.
Behind-the-scenes diplomacy by the Nixon administration had helped increase Jewish emigration from 13,022 in 1971 to 34,733 in 1973. But Sen. Henry Jackson and Rep. Charles Vanik believed they could force Soviet leaders to allow even more Jews to leave by threatening to deny the U.S.S.R. most-favored-nation trade status if such emigration was not permitted.
Instead, Jewish emigration plummeted by 62% between 1973 and 1975. It wasn't until 1978, when overall U.S.-Soviet relations improved, that the numbers rose significantly.
Jewish emigration later dropped to less than 1,000 a year in the early 1980s, despite the Jackson-Vanik Amendment.
Such a sobering experience suggests that economic sanctions typically cause more problems than they solve. That is likely to be the case with the attempt to coerce Myanmar.
Allowing more Jews to leave the Soviet Union would have been a relatively simple policy change by that country's leaders, since it did not require them to relinquish power. The enforcement mechanism in the legislation on Myanmar actually requires the current leaders to leave office, a far more ambitious and unrealistic goal.
More worrisome, the legislative language of the sanctions against Myanmar sets a dangerous precedent for U.S. trade relations around the world The bill prohibits any U.S. national from investing in Myanmar "until such time as the President determines and certifies to the Committees on Appropriations that an elected government of Burma has been allowed to take office."
Requiring a trade partner to have an elected government would prevent U.S. companies from doing business in the vast majority of countries in Africa and the Middle East and much of Asia, including China. Fifteen years ago, such a law would have prevented most U.S. trade with Latin America, and as recently as 1989 it would have prevented U.S. companies from operating in Eastern Europe or the Soviet Union.
Prohibiting American trade and investment in nondemocratic countries is shortsighted U.S. corporations act as a liberalizing force, helping to strengthen the private sector, establishing alternate centers of power, and creating subtle but important pressures for democratic reforms. They also tend to raise wages and labor standards in the countries in which they operate. Companies with long-term investments in Myanmar and elsewhere build schools, hospitals and roads that local governments often cannot afford. For example, U.S. companies operating in Nigeria donate more money to help poor residents than does the U.S. government, according to the Corporate Council on Africa.
Our major trade partners are unlikely to support a ban on doing business in Myanmar. To have any hope or effectiveness any ban would especially need the cooperation of China, Singapore and other Asian nations. But the chances of those regimes supporting the McConnell legislation are close to nil.
As has happened elsewhere in the world, unilateral sanctions against Myanmar will only result in transferring business from U.S. companies to their foreign competitors. To date U.S. corporations that have pulled out of Myanmar have seen their investments promptly replaced by companies from Singapore and Western Europe.
The U.S. government should not provide financial assistance to repressive regimes. And we should maintain a flexible asylum policy to help victims of persecution from any country. But America cannot force other governments to become democratic.
Although we should encourage, primarily through diplomatic means, democratic values and respect for individual rights, restricting the freedom of our own citizens to do business is an unfortunate and impractical way to improve the conduct of other governments. The proposed sanctions against Myanmar are simply the latest manifestation of a fatally flawed strategy.
Stuart Anderson is a visiting policy analyst at the Cato Institute in Washington.
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