4 January 1997
National Journal
Chicken Soup Diplomacy
When America slaps economic sanctions on hostile foreign regimes, friend and foe alike often feel the sting. Business lobbyists, fearful of losing lucrative overseas markets, are trying to convince Washington that unilateral embargoes produce unwanted results more often than desired ones.BY DICK KIRSCHTEN
After nearly six months of intensive investigation, the midair explosion of TWA Flight 800 last summer remains a mystery. No evidence has yet been found to link the tragedy to a terrorist attack.
But in the emotion of the moment, Washington's political response was swift and sure: Terrorists must be punished. Stalled legislation to impose sanctions against Iran and Libya suddenly found new life. Efforts to soften the bill's impact were hastily abandoned. The measure was approved in less than a week and signed into law shortly thereafter.
A year earlier, in the wake of the bombing of a federal building in Oklahoma City, legislation to impose sanctions on Iran built up a head of steam in Congress. President Clinton intervened by announcing -- just 11 days after the blast -- an executive order imposing a slightly less extreme ban on trade with Iran.
To William C. Lane, these were classic cases of what he calls "chicken soup" diplomacy: Washington politicians grasping for a quick and easy response to public outrage without fully weighing either the merits or the consequences of their actions.
"Unilateral sanctions are a lot like chicken soup," Lane said, citing an explanation that a congressional aide offered. "We all know they don't work. But they make us feel good, and they don't really hurt anybody."
Lane is no neutral observer. As chief lobbyist for Caterpillar Inc., a major exporter of heavy construction equipment, he takes strenuous exception to the notion that sanctions do no harm to those who impose them. "Chicken soup," he said, "keeps you from going to the doctor and taking the corrective measures you really need." Worse yet, he added, "it really does a job on the chicken."
The growing popularity on Capitol Hill of proposals that seek to punish unfriendly foreign governments by penalizing those who do business with them has led Lane to conclude that "it's American workers and exporters who are increasingly becoming the chicken."
Corporate leaders and trade associations that share his view are currently trying to gear up for a high-profile lobbying and educational campaign to promote what they tout as a more effective brand of diplomacy--one that employs carrots, not just sticks, and that doesn't place U.S. firms at a competitive disadvantage in lucrative world markets.
More than 100 firms have been asked to join-and help finance-an anti-sanctions coalition spearheaded by the coalition spear headed by the National Foreign Trade Council (NFTC) and other major including the National Association of Manufacturers (NAM) and the U S. Chamber of Commerce.
The informally named NFTC Sanctions Project, after soliciting proposals for outside help, enlisted the services of the Washington and the Wexler Group, a Washington lobbying shop, both of them well regarded for their political connections and their expertise in orchestrating issues campaigns.
Hogan & Hartson, where Samuel R. (Sandy) Berger, Clinton's new national security adviser, used to head the trade practice group, appears well situated to pack a bipartisan punch. Its team will include Clayton K. Yeutter, the U.S. Trade Representative under President Reagan and the Agriculture Secretary under President Bush, and former Rep. Michael D. Barnes, D-Md., who has broad expertise in foreign policy.
Economic sanctions have long been nettlesome to the international business community, but the issue came to the fore in the 104th Congress with the enactment of two controversial laws-the Helms-Burton Act directed against Cuba and the D'Amato-Kennedy Act aimed at Iran and Libya-that assert America's extraterritorial reach by seeking to restrain the behavior not just of U.S. firms but of foreign businesses as well.
"It's the history of the last two years," NFTC vice president Daniel O'Flaherty explained, citing a steep rise in the number of sanctions proposals that have received serious consideration. "It began to appear to senior corporate officials and CEOs that this was a cascade that if unchecked, could very soon block them out of some really significant markets."
Alarms are being sounded in the policy community as well. The New York City-based Council on Foreign Relations has launched a sanctions study headed by Richard N. Haass, a former Bush Administration official who now directs foreign policy studies at the Brookings Institution. "Sanctions have increasingly become the foreign policy instrument of choice," said Haass, who hopes to produce a "users' guide" on the subject before the end of 1997. Sanctions, he said, are often the product of a don't just stand there, do something' mentality. "They satisfy the 'do something' desire, but that's not good enough."
But Anthony H. Cordesman, a senior fellow at the Center for Strategic and International Studies, a Washington think tank, is skeptical about corporations ability to form a united front against sanctions. especially where the trade stakes are relatively low. Where the stakes are highest-in China-"the business community has won more than it has lost," staving off repeated attempts to deny equal trading status to Beijing, he said.
In most instances, Cordesman argued, sanctions are aimed at rogue regimes that "we don't trade seriously with" and where "the national security dimension is critical." Political factors are also important, he noted. "More businesses do not want to cross Israel over sanctions to a bunch of countries they don't trade with anyhow than are willing to get actively involved."
An Unexpected Enemy
At a Dec. 16 meeting of the sanctions project's 30-member steering committee, two influential Democrats offered strategic advice: Rep. Lee H. Hamilton of Indiana, the ranking minority member and former chairman of the International Relations Committee, and Commerce undersecretary for international trade Stuart E. Eizenstat, who is Clinton's special envoy in charge of placating European allies angered by recent unilateral U.S. sanctions.
Although the corporations-some of America's largest-that belong to the anti-sanctions coalition are generally run by Republicans, they find themselves aligned at this juncture with the Democratic White House against the Republican-controlled Congress. "Yeah, that is irony," chuckled a Republican congressional aide who follows the issue closely.
A corporate lobbyist who asked for anonymity explained that the Republican takeover of Congress in 1994 brought a rude surprise to the international business community. "At first, the guys I work with thought they had died and gone to heaven, that all of their problems were over," he said. "What they didn't realize is that this is an entirely different Republican Party. This is a Congress of termite exterminators and small-businessmen. They have no interest in or understanding of international commerce."
That's probably a bit overstated. There are still Republican internationalists on the Hill, such as Indiana Sen. Richard G. Lugar, whom the coalition claims as an ally. But other supporters, such as Wisconsin Rep. Toby Roth, have left Congress. Roth, before retiring, criticized the Iran-Libya sanctions in an Oct. 30 op-ed piece in The Journal of Commerce as "good politics, but . . . bad law."." Its only effect "so far has been to unify the European Union, all 15 members, against the U.S. policy toward Iran and Libya."
In a similar article in the same newspaper, Democrat Hamilton warned of the risks posed to American foreign policy by attempts to impose U.S. sanctions on foreign firms that invest in Cuba, Iran and Libya. Such actions, he said, could "reduce, not increase, multilateral cooperation" to rein in rogue regimes. They also bring the threat of "retaliation [that] could hurt U.S. workers and firms" and jeopardize American investments worldwide, he added.
Eizenstat's task as the President's special envoy is to forestall an ugly confrontation before the World Trade Organization. Europe objects to the Helms-Burton Act's provisions aimed at punishing foreign firms with business activities in Cuba that involve properties that were once owned by Americans but were confiscated more than 30 years ago by the Castro government. (For background, see NJ, 6/29/96, p. 1422)
Eizenstat's shuttle diplomacy paid an initial dividend on Dec. 2 with the European Union's adoption of a resolution urging Cuba to improve its policies on human rights and political freedoms. The resolution will apparently supply Clinton with the grounds he needs to declare a second six-month waiver of the right to file suits in U.S. courts seeking compensation from "traffickers" in confiscated Cuban properties. But another bitterly contested provision of the Helms-Burton Act that permits the United States to deny visas to executives of "trafficking" firms and their families remains in full force.
To Caterpillar's Lane, the problem on Capitol Hill has less to do with the shift in partisan control than with congressional turnover. "There are very few Members on the Hill today who remember being yelled at a Grange meeting because they supported the Russian grain embargo," he said. Lane's reference was to the unilateral sanctions the United States imposed following the December 1979 Soviet invasion of Afghanistan, the sanctions allowed foreign suppliers, including Argentina, Brazil and Canada, to displace American exporters.
"The lessons learned in the early 1980s have been forgotten," NAM vice president Howard Lewis lamented. Congress is now embarked on "a new binge of unilateral sanctions," he declared, adding that the business community will have to conduct an extensive educational campaign to alert new Members to the potential for go-it-alone sanctions to backfire.
Emphasizing that "the chamber has been opposing unilateral sanctions since 1922," Willard Workman, the chamber's international division vice president, said that his organization will commit its size, its bankroll and its grass-roots lobbying capability to the effort to reeducate Congress.
Punishing Peoria
Lane, in an interview, insisted that the business community supports efforts to condemn and isolate nations that offend the international community at large. "I have never heard of any criticism of multilateral sanctions against countries like Iraq," he said. "Where the business community has complaints is where the U.S. government takes a market away from one company and gives it to their [foreign] competitors."
Lane's favorite example is Reagan's attempt in 1981 to block construction of a Soviet natural gas pipeline to Western Europe in retaliation for Moscow's role in the imposition of martial law in Poland. "The Europeans refused to cooperate.... Indeed, they wondered who the real target of the sanctions was," noted a 1990 report, "Economic Sanctions Reconsidered," that a Washington-based think tank, the Institute for International Economics, published.
As the Soviet pipeline went forward, the pinch of the unilateral American sanctions was felt particularly sharply in Peoria, Ill., the headquarters of Caterpillar, which was forced to cancel lucrative contracts for pipeline-laying equipment."
In a very short period of time, [Caterpillar] went from being the industry leader with 85 per cent of the Russian market to being termed an unreliable supplier," Lane said. "The entire market was turned over to the Japanese.... The pipeline was built. It was built ahead of schedule, and we saw communities like Peoria go from experiencing a recession in the early "80s to really going into what would you have to term a depression."
Similar fears have been raised by the new sanctions against Iran and Libya. Ardon B. Judd Jr., Washington counsel for Dresser Industries Inc., the Dallas-based oil field services giant, noted that U.S. firms already are barred from participation in projects in either Iran or Libya. The concern, he explained, is about the possible loss of business elsewhere, such as in the North Sea, if European or other firms are sanctioned under the new law.
Under the terms of the Iran-Libya sanctions, foreign firms that engage in major new energy ventures in either of those countries can be kept from doing business in the United States and can become ineligible-wherever they operate-for loans and other forms of U.S. trade assistance that are necessary to facilitate deals with American firms.
The sanctions nonetheless have strong political supporters. At a recent Cato Institute policy forum, Keith Weissman, senior Middle East analyst for the American Israel Public Affairs Committee (AIPAC), argued that extraterritorial trade legislation "has been a long-held foreign policy tool," particularly in the attempt to curb the proliferation of weapons of mass destruction.
"I would say that nonproliferation-and Iran is a major proliferater--is an extremely important foreign policy goal-and often can be viewed as superseding the narrow business concerns of United States companies and European companies," Weissman said.
AIPAC's initial aim, expressed in the legislation that Sen. Alfonse M. D'Amato, R-N.Y., introduced, was to narrowly target Iran's pressing need to refurbish its petroleum industry and develop its extensive natural gas fields. The issue became more complicated when Sen. Edward M. Kennedy, D Mass., urged on by families of victims of the bombing of Pan Am Flight 103 over Lockerbie, Scotland, in 1988, succeeded in adding sanctions against Libya to the measure.
The Libyan sanctions, potentially affecting many Italian and other European trading partners of U.S. firms stalled the measure for a while. Despite well-orchestrated lobbying by the Lockerbie victims" families, who want Libyan intelligence officials who are implicated in the incident brought to justice, House Ways and Means Committee chairman Bill Archer, R-Texas, insisted that the Libyan sanctions be made nonmandatory.
Archer's position collapsed, however, on July 17 when TWA Flight 800 exploded in midair off Long Island. "Observers Say Crash Assures Passage of Iran-Libya Bill," a Journal of Commerce headline trumpeted six days later.
Many specialists worry that as sanctions proliferate, other, more effective, tools of diplomacy are being permitted to languish. ( For a review of the effectiveness of sanctions, see box, pp. 14-15. )
The concern extends to the arms control community as well. "Sanctions legislation in many cases either drastically limits the number of carrots or eliminates them completely," said Michael Krepon, president of the Henry L. Stimson Center, a Washington think tank. "My personal view is that you need carrots as well as sticks, especially in South Asia, where many of the sanctions are directed."
The issue came to a head in 1995 when Congress, at the Clinton Administration's urging, agreed after prolonged debate to dangle some carrots in front of Pakistan in the form of patrol planes, Harpoon missiles and other defensive arms. A proposal to sell F-16 fighters -- with potential nuclear capability--was stripped from the package. The action required an exemption to the so-called Pressler Amendment, which bars military sales to Pakistan because of its nuclear weapons program.
"I personally weighed in favor of a onetime lifting of Pressler," Krepon said, because he felt that the military equipment involved was not significant and because the sale was aimed at deterring weapons-grade fissile material production in Pakistan and new deployments of longer-range missiles. "For this," he said, "I incurred the displeasure of some of my friends in this community who feel very strongly in favor of sanctions."
According to Lane, the NFTC Sanctions Project will aggressively articulate the case for greater reliance upon traditional diplomacy and attempt to revive support for foreign assistance. "The United States needs to be in the position to offer carrots, which means playing a leadership role for the multilateral development banks" and exerting leverage through the Agency for International Development.
"We should in actuality be increasing funding for diplomacy rather than closing consulates all over the world," he said.
ECONOMIC SANCTIONS: SPEAKING LOUDLY...
BUT CARRYING ONLY A SMALL STICK?Pope John Paul II's planned trip to Cuba this year will take place during the 37th year of the unilateral American trade embargo aimed at dislodging Communist dictator Fidel Castro.
Though bereft of Soviet foreign aid and bedeviled by recent moves to stiffen the U.S. sanctions, the 70-year-old Castro is nonetheless still in power and poised to bask in the world attention that will be generated by the pontiffs historic visit to his country. Although it's a major concession to admit the Pope, it doesn't hurt that the Vatican condemns America's newly enacted Helms-Burton law that's intended to discourage foreign investment in Cuba.
The failure to topple Castro after nearly 40 years of excluding Cuba from the U.S. marketplace is frequently cited -- along with the early 1980s fiascoes of canceled grain sales to the Soviet Union and the attempt to block a Soviet natural gas pipeline to Western Europe -- as proof that sanctions don't work and often backfire.
Such criticisms come mostly from American business interests that resent being shut out of markets where foreign firms can compete. But when sanctions are tailored to clip the wings of overseas competitors, foreign governments squawk loudly about what they call extraterritorial overreaching. None of the complaints appear, however, to dampen American politicians' enthusiasm for brandishing the so-called economic weapon as a favorite tool for trying to influence foreign policy, or sometimes just to express moral indignation.
A second front against sanctions is mounted by humanitarian activists, who argue that the imposition of economic penalties works greater hardship on poor people in targeted countries than on the ruling despots. Witness the recent U.N. decision to partially suspend its embargo against Saddam Hussein to permit Iraq to sell $2 billion worth of oil to buy food and medicine for its suffering population.
But not all sanctions fail. The Institute for international Economics, a Washington think tank supported primarily by foundation grants that tries to keep score dispassionately, says that sanctions have worked about a third of the time since the advent of World War I. When it last updated its count in 1990, the institute reviewed 120 sanctions initiatives that individual nations and multilateral coalitions had imposed; 79 were rated as failures, and 41 were deemed to have been successful.
The institute's Gary Clyde Hufbauer said that the ratings were calculated using "a rather antiseptic and rather scholarly" methodology to determine whether intended policy results were achieved and, if they were, the extent to which the sanctions had anything to do with the outcome. The process, he added, is viewed as "fairly forgiving" by experts in the field.
Forgiving or not, the findings are quite bleak. Hufbauer, a professor of international financial diplomacy who served as a Treasury Department official from 1974-80, observed that the results since 1990 have been even worse although the popularity of sanctions measures has not waned. "We find a dwindling success rate," he said of recent examples.
Hufbauer, who was not involved in sanctions decisions while in government, has been studying the issue since the early 1980s and contributed to the institute's initial report, published in 1985. Interest in the subject at that time had been whetted in part by the vigorous use of sanctions during the Carter Administration to protest human rights violations, combat international terrorism and respond to the Soviet Union's invasion of Afghanistan.
According to the institute's study, economic sanctions were imposed 15 times during the Carter years against 13 nations But only four of those episodes met the study's minimum threshold for achieving success. And one of those "successes," the release of American hostages held by Iran, didn't occur until moments after Carter's term had expired.
The election of a Republican President in 1980 caused many observers -- in the business community and elsewhere -- to expect a marked change in the U.S. stance on sanctions. "What surprised us in the first edition of our book," Hufbauer recalled, "was that with the election of Reagan, we thought that was the end of the policy. If you listened to his [campaign] speeches, that was the end of the policy."
But as Hufbauer pointed out, Reagan -- often in the interest of curbing leftist movements -- "turned out to be a big sanctioner." The institute lists 16 cases of U.S.-- backed sanctions against 15 nations during Reagan's tenure. Only four of them are now seen as successes.
The drumbeat continued during the Bush and Clinton Administrations. The United States-either individually or through the United Nations and other multilateral arrangements-backed more than two dozen major efforts to impose or revise economic penalties affecting 24 countries, Hufbauer said.
An even longer list, including administrative actions taken by individual government agencies, was compiled in a recent Georgetown University Law Center study that the National Association of Manufacturers commissioned. "Since 1993 roughly, there have been 50 different laws or executive branch actions imposing unilateral sanctions against 31 different countries," said Howard Lewis, the association's vice president for trade policy. (For a selective list of countries that are or might be targets of U.S. sanctions see box, at right)
Hufbauer, whose institute is updating its analysis of sanctions initiatives, said the most notable recent cases don't appear to have played decisive roles in influencing events. In Haiti, Kuwait and the former Yugoslavia, U.S. and allied policy objectives were achieved less because of sanctions, he said, than because of the willingness to use military force.
"If ever economic sanctions were going to work, Haiti, in a way, was an ideal situation," Hufbauer said, "because it was so poor, so dependent on the United States and the impact was so great. And still [the ruling junta] was able to hang on" until threatened by a U.S. invasion force.
Although food and medicine were exempt from an embargo aimed primarily at preventing the shipment of oil to Haiti, the resulting disruption in transportation kept those imports from reaching rural areas and made it impossible for locally grown crops to reach Haitian markets.
"The oil embargo is a de facto embargo on medical and preventive care for rural Haiti," a team of American doctors who visited there in early 1994 reported. "The deliberate promotion of malnutrition and disease in Haiti is morally unacceptable," the physicians wrote in a letter published by The New York Times in February 1994.
Sanctions played a "very modest" role in the peace agreement hammered out for Bosnia, Hufbauer said. "They helped move the Serbs along to the point where they were urging the Bosnian Serbs to negotiate." And before the Persian Gulf war, he said, President Bush's initial support of sanctions against Iraq was "from the beginning just a time-killer" while a coalition military force was being pulled together.
But for the countries that are the targets of sanctions and for the firms whose business transactions they disrupt, the penalties can be a very big deal. Hufbauer estimated that sanctioned nations are currently being denied well over $25 billion a year in trade.
When viewed in the context of over all international trade flows, however, sanctions amount to "barely a ripple," less than 1 per cent of total world exports, Hufbauer said. That may explain why politicians continue to find it so easy to brandish the economic weapon.
TARGET PRACTICE There's more than one way to calculate how many sets of economic sanctions the United States has imposed for foreign policy purposes. Here's the Haliburton Energy Group's count as of last November of sanctions that apply to countries "whose economies ore of interest to some U.S. suppliers." Haliburton, a Dallas -- based international oil field services firm, lists 12 countries that are targets of U.S. sanctions and 11 "mentioned as possible targets . . . by either the Congress or the Administration." The reasons include human rights violations, drug trafficking, sponsorship of terrorism and, in the cases of China and Japan, unfair trade practices.
Current Targets Possible Targets Azerbaijan Algeria Burma Angola China Indonesia Colombia Japan Cuba Liberia Iran Malaysia Iraq Mexico Libya Nigeria Russia Pakistan Syria Sudan Vietnam Turkey Yugoslavia
.
Return to Top
Home | About Us | Resources | Press Releases | Federal Activity & Legislation
State & Local Activity | NFTC Lawsuit | Contact Us | Site Index