15 September 1996
Wilmington Star-News
Louis Uchitelle

Other Nations Profit: Business Chafes At Our Trade Sanctions

Corporate America is beginning to grumble. Allied Signal Inc. says the latest sanctions against Iran are costing it several million dollars a year in lost sales of aircraft parts. Caterpillar Inc. is circulating a map that spotlights countries where, it says, U.S. sanctions throw up obstacles to the sale of Caterpillar's tractors and earth-moving vehicles.

Trade sanctions have become ever more difficult to enforce in the world's huge and fluid marketplace, but the United States is invoking them with increasing frequency anyway. It is even adding an onerous new twist: punishing foreign companies for breaching U.S. sanctions.

Now corporate America, usually unwilling to go against the nation's foreign policy, is preparing a rare formal protest against the latest trend.

What worries many companies is not only the potential loss of customers in the sanctioned countries but also the possibility of retaliation by foreign governments and companies facing penalties under the new strategy of punishing foreigners.

An organization representing 500 of the nation's largest multinational corporations, the National Foreign Trade Council, has been discussing the best ways to reverse or water down the latest sanctions.

The embargo against Iraq is not at issue. Although instigated by the United States, this is an embargo sponsored by the United Nations, in which nearly every nation has agreed not to do business with Iraq until Saddam Hussein bends. U.S. companies lose a market, but so do their foreign competitors.

The issue is unilateral sanctions against a number of countries, like Iran, Libya and Nigeria, under which the Clinton administration and Congress have closed off a market to U.S. companies, but no other nation participates. As a result, foreign suppliers replace the Americans.

The United States, as a superpower, has been the world's most frequent user of unilateral sanctions. The practice has been invoked more than 70 times since 1941, when the Roosevelt administration halted oil and scrap-metal shipments to Japan, hoping to curb that nation's military expansion. Pearl Harbor soon followed.

The heyday of the unilateral sanction came in the immediate postwar years.

But while sanctions against Iran in the early 1950s brought down the nationalist Mossadegh government, and those against Britain and France in 1956 helped force their withdrawal from the Suez Canal region, such actions gradually lost their effectiveness as other countries became able to supply goods, credit, foreign aid and a marketplace for an offending country's products.

President Jimmy Carter, for instance, embargoed grain sales to the Soviet Union in 1980, hoping to force a Soviet withdrawal from Afghanistan. But other nations broke ranks and sold grain to the Soviets, and the Afghan war continued.

Ronald Reagan and George Bush used unilateral sanctions frequently - ineffectively more often than not, according to the Institute for International Economics in Washington. Nevertheless, the Clinton administration, with bipartisan congressional support, has made the unilateral sanction an important foreign-policy tool again.

"Therein is the great paradox," said Gary Hufbauer, a senior fellow at the Institute for International Economics, who led the study of economic sanctions through the decades. "While unilateral embargoes are less and less of an effective force in an integrated world economy, American enthusiasm for them has not diminished."

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