15 July 1997
Journal of Commerce
Editorial

Bull in a china shop

Congress is dabbling in diplomacy again, and making a mess of it.

The House last week overwhelmingly approved a bill that would ban financial transactions with countries the government views as supporting terrorism. The Senate passed a different version last month.

The House bill, a bipartisan effort of Reps. Charles Schumer, D-N.Y., and Bill McCollum, R-Fla., would affect U.S. trading and investing in Syria and Sudan - the only two countries on the State Department's terrorism list that are not already subject to U.S. embargoes. Like other unilateral U.S. sanctions laws - involving Cuba, Iran, Libya and Burma, among others - this measure would be counterproductive, harming Americans more than anyone else and failing to make much of a dent in international terrorism.

The Sudan-Syria measure is the latest in a long roster of unilateral American sanctions programs: 61 measures imposed on 35 nations in the past four years, according to USA*ENGAGE, a business coalition. The best-known example - the U.S. embargo against Cuba - has alienated America's allies and trading partners while doing nothing to remove Fidel Castro from power. Meanwhile, state-imposed sanctions, such as the Massachusetts boycott against firms doing business with Myanmar, are causing damage as well; Japan says it is considering filing a complaint at the World Trade Organization against the Massachusetts ban.

Contrary to the claims of sanctions boosters, such measures are not cost-free. Without concerted international action, U.S. trade embargoes simply divert business from U.S. companies to their competitors, and tarnish U.S. companies as unreliable suppliers.

The proposed ban on trade with Sudan and Libya also would complicate U.S. diplomacy in the Middle East. Under a related Senate measure, trade with Syria - a key component of any Middle East peace plan - could take place only under a U.S. government waiver, if the president decides such trade is vital to U.S. national security. That puts the president in the uncomfortable position of having to designate Syria, sponsor of radical groups such as Hezbollah and Hamas, as vital to U.S. security.

Certainly, rooting out international terrorism is a worthy goal. But adopting a rigid ban on all financial transactions with rogue governments would mean, among other things, that U.S. nationals could no longer work on humanitarian programs in those countries, or receive payment from those nations even for claims related to terrorist acts. Economic sanctions have never proven to be an effective substitute for diplomatic solutions.

To its credit, the Clinton administration is fighting the proposed ban, rightly pointing out that sanctions are ineffective when unilateral and that this measure would damage U.S. diplomatic interests. Yet the administration also has itself to blame for the proliferation of trade sanctions. It has never taken a principled stand against such measures, and has pushed some sanctions bills of its own. As a result, it is much less convincing in opposing the Syria/Sudan ban as an obstacle to peace.

Still, it's not too late to take a stand. If this measure reaches Mr. Clinton's desk, he should veto it forthwith.

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