2 June 1997
The Wall Street Journal Interactive Edition, Global View
George MelloanSanctions Are An Expensive Way to Win Votes
Congress in the weeks ahead will argue whether to grant Bill Clinton's request for a further one-year extension of "Most Favored Nation" (MFN) treatment to China. The debate will reflect the rising influence of lobbies with global interests and concerns. It will be part of something more holistic, a growing contentiousness over whether the U.S. is extending its reach too far in inflicting economic punishments on other countries, and whether such measures are mostly counter-productive. Clearly, they often are in an economic sense, but there is nothing at all simple about this question.
Just for the record, that misleading term, "Most Favored Nation," does not equate with "favorite son." It is a vow to spare the grantee from discriminatory U.S. trade and tariff practices, giving it equal treatment with other nations. Laura D'Andrea Tyson, former chief economic adviser to President Clinton, wrote on the Journal editorial page recently that removal of MFN would raise the average U.S. duty on Chinese goods to nearly 45% from the under 6% importers now pay, sharply cutting China's sales to the U.S. U.S. consumers and U.S. exporters to China would pay a price.
The Chinese government would of course resent withdrawal of MFN. China runs a huge trade surplus with the U.S., which of course feeds the argument by U.S. labor unions and other foes of MFN that the trade relationship is unfair to the U.S. Yet Hong Kong democrats, though concerned about their future after the July 1 handover to China, are nonetheless against MFN withdrawal. Because a high percentage of China trade flows through Hong Kong, it would inflict heavier damage on Hong Kong, in a relative sense, than on China itself.
Which raises the fundamental problem with economic sanctions. As the old Mills Brothers song goes, "You Always Hurt the One You Love." That, not infrequently, is yourself. The clearest case of a sanctions boomerang was the embargo the Carter administration put on U.S. grain shipments to the U.S.S.R. in 1979 as punishment for the Soviet invasion of Afghanistan. The embargo cut off an important market for U.S. farmers. Canadian, Argentine and European growers took up the slack. President Reagan lifted the embargo in 1981, saying that it had not inflicted any penalty on the Soviets. The Soviets did not get out of Afghanistan until years later, when the Afghans threw them out.
The administration has the better side of the argument when it observes that China is changing and that a policy of engagement is likely to produce better results than a policy of confrontation.
Pro-embargo arguments exist, but are less easy to quantify. Did the fact that the U.S. was willing to suffer a high cost with the grain embargo help stimulate the world-wide censure the Soviets suffered, and did it embolden the Afghans to fight back? Did the Reagan administration response to the Soviet-inspired declaration of martial law in Poland in 1981, an embargo on U.S. pipe for a Soviet gas project, provide moral support for the Polish Solidarity Union and the Catholic Church and thus fan the sparks in Poland that ultimately brought down the entire Soviet empire? In short, did the willingness of the U.S. to uphold principle at some cost help it win the Cold War? It's not an impossible idea.
But, of course, the old Cold War is over and there is something to be said for the argument that the U.S. and the West in general should strive mightily to avoid a new one, particularly with China. That is the larger issue surrounding the MFN debate in Congress.
Recent Asian interest in finding ways to contribute to the Democratic National Committee reflects the global awareness of what the administration and Congress are capable of doing for, or to, outlanders. But don't underestimate the domestic political dimension. House Democratic leader Dick Gephardt attacked the pro-MFN policy of a Democratic President in a speech in Detroit last Tuesday, accusing the administration of playing "business as usual" with a tyrannical Chinese regime. Detroit is a union town and U.S. unions don't like any country that exports products made with cheap labor. Rep. Gephardt is a union man and envisions himself running for the Democratic presidential nomination against Al Gore, the administration's leading soft-liner on China policy.
Yet, the administration has the better side of the argument when it observes that China is changing and that a policy of engagement is likely to produce better results than a policy of confrontation. China indeed affronts Americans legitimately concerned about human rights and nuclear and missile proliferation, matters of considerable importance to any progress towards a safer and more humane world. But just as trade doves have often predicted, trade and economic growth, not to mention the subtle influences of the large number of foreigners involved in China's development, seem to be working a change. Clearly, there is a rising Chinese middle class with a more enlightened view of the world than Chinese generations of the past. So long as that trend continues, arguments for punitive measures by the U.S. will remain weak.
As it happens, a rather muscular lobby is weighing in against the use of economic sanctions. Some 500 multinational corporations, concerned not only about federal sanctions but by the increasing use of this tactic by state and local governments to win popular support, has formed something called USA Engage. It is running an active lobbying effort, arguing that sanctions seldom get results, that they cost U.S. sales and jobs, and that they often alienate friendly nations, as in the case of the punishments that Helms-Burton authorizes against companies or individuals who have acquired assets in Cuba expropriated from Americans. These arguments are particularly potent against unilateral U.S. sanctions that receive no cooperation from allies, which is one reason why measures taken against Iran are widely regarded as a failure.
U.S. companies increasingly operate in politically sensitive places, such as Burma. The U.S. received a serious rebuff to its hard line Burma policy Saturday when the Association of Southeast Nations (Asean) voted to admit Burma to membership over U.S. objections.
It is a reasonably good bet that pressures from both at home and abroad will instill more cautiousness in the administration and Congress about using economic weapons in international politics. China probably will get MFN. U.S. policy toward Iran probably will be liberalized. The U.S. will continue to compromise with Europe and Canada on Helms-Burton. Will this reduce U.S. moral authority? Perhaps, but maybe it is time to try some new approaches to the world's problems.
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