21 March 1997
Business Times (Singapore)
Leon Hadar
US Sanctions Backlash
FROM China to Myanmar, the threat to deny US trade and investment as a way of affecting human rights policies is becoming very popular in Washington these days. The United States is resorting increasingly to unilateral economic sanctions against a broad range of countries for alleged human rights violations and other foreign policy reasons.
As trade analyst Stuart Anderson of the Washington-based Cato Institute puts it: "Congress has succumbed to the "bad country of the month' syndrome," noting that "every month, some member of Congress decides that the government of yet another country is so bad that US trade and investment there should be limited".
The last chapter in 1996 of this US economic assault was the use of secondary boycott measures, which extended the reach of US law to overseas companies doing business in the targeted countries, angering allies and provoking threats of retaliation.
The growing resort by US politicians to "punish" foreign countries through economic means is provoking angry responses not only from abroad, but also from Corporate America.
US businesses are arguing that sanctions do not work, that they retard economic and political reforms in countries like China or Myanmar and harm US economic interests.
Indeed, a 1995 study by the US Council on Competitiveness, "Economic Security; The Dollars and Sense of Foreign Policy", has estimated that more than US$6 billion (S$8.6 billion) in US export sales and 120,000 jobs were put at risk by US unilateral sanctions.
Moreover, non-US manufacturers are eager to fill the void left when American companies are denied the opportunity to export or invest. For example, following congressional adoption of two laws that bar US nuclear electric exports to China, Chinese leaders are reluctant to commit large-scale infrastructure projects in electric energy to US suppliers, fearing that during the project's life, US trade with China will become hostage to US politics.
That will allow France, Canada, Russia and other countries to dominate China's lucrative energy market.
And unilateral trade sanctions, imposed in the name of improving human rights in other countries, "end up restricting the rights of American citizens to trade and invest, and deny American consumers access to a larger choice of foreign products", says Mr Anderson of the Cato Institute.
It is not surprising, therefore, that American businesses are now mobilising political and financial support to contain the sanctions assault, trying to lobby Congress and explain to the American public that the widespread use of unilateral economic sanctions to pursue foreign policy objectives comes with a high price for US commercial interests, with apparently little or no impact on the targeted governments' behaviour.
According to a recent study by the US National Association of Manufacturers (NAM), just in the last three years, 61 US laws and executive actions were enacted authorising unilateral economic sanctions for foreign policy purposes.
Thirty-five countries were targeted for sanctions. Together, those countries represent 2.3 billion potential consumers of US goods and services, or 42 per cent of the world's population, and US$790 billion worth of export markets, or 19 per cent of the world's total.
The US now has economic embargoes against North Korea, Cuba, Iran, Iraq and Libya, and Congress is considering imposing sanctions against China, Myanmar, Indonesia, Pakistan, Nigeria, Angola, and Algeria.
But there are numerous reasons to believe the economic implications of unilateral sanctions have been underestimated, says Marion Marcich, a trade expert at NAM.
First, the list does not include countries in which pre-1993 sanctions measures are still in effect (such as South Korea due to labour rights).
Second, the list does not include all countries potentially affected by the secondary boycott measures adopted in 1996, such as investors in Cuba and Iran, which would have added almost all of Europe, Latin America and Japan. Third, various sanctions have been adopted by state and local levels. The most recent is a Massachusetts ban on state contracts with companies doing business in Myanmar, with attempts to adopt a similar law for companies doing business in Indonesia.
Fourth, the list does not include all the countries subject to trade sanctions for environmental protection purposes; for example, 24 countries whose shrimp has been embargoed by the US due to failure to use turtle-excluder devices in shrimp fleets.
In addition, "the economic effects of unilateral sanctions are often hidden and unquantifiable", explains Mr Marcich. He notes that as a result of the Helms-Burton Act, a US company that has leased aircraft to a Canadian airline was asked to provide assurances that the aircraft would not be operated in Cuba. The assurance was made, but as a result of the restriction, the value of the lease was reduced by US$1.5 million annually.
Not only do unilateral sanctions cause harm to US companies. They are also not very effective in changing policies in the targeted countries.
The association concluded, based on a study of 35 countries targeted for unilateral sanctions, that only a handful changed their policies as a result of pressure by the US on human rights, terrorism, nuclear non-proliferation and workers rights.
On the other hand, "maintaining active American business presence does more to advance reform and democratisation than a policy of retrenchment", says Mr Marcich. US companies contribute to conditions of life in targeted countries through increased employment and improved working conditions. One example of the beneficial social impact of US trade and investment is the Yadana natural gas pipeline project linking Thailand and Myanmar -a joint venture of Unocal of the US, Total of France, Thailand's PTT and Myanmar's MOGE. The project has provided significant benefits to 35,000 people who live near the pipeline area, a poor and underdeveloped region of Myanmar. Besides creating jobs, project investors have begun a three-year, US$6 million programme to provide medical care, new schools and electrical power in the area.
Congress' anti-Myanmar legislation could result in a ban on new US investment and, as a result, slow down social and economic development in that region.
Organisations representing US businesses recently formed a lobby to try to slow the troubling trend towards more US sanctions and force Congress to adopt measures that will at least rationalise this area of US trade policy. Among measures advanced is that proposed sanctions should satisfy specific criteria relating to effectiveness, availability from foreign suppliers and enforceability, and that provision should be made for such measures to be waived if the president determines it is in the national interest.
Businesses also request that the US government produce an annual report that analyses the impact of sanctions on the targeted governments and on US companies. Finally, some want the government to compensate those whose investments are lost as a result of US sanctions.
The writer is BT's Washington correspondent.
.
Home | About Us | Resources | Press Releases | Federal Activity & Legislation
State & Local Activity | NFTC Lawsuit | Contact Us | Site Index