August 1997
The American Chamber of Commerce in Japan Journal
Robert M. Orr, Jr.

Insights: Sanctions with political aims are self defeating

American foreign policy in a historical sense has not been without its sanctimony. In recent years, in particular, we have witnessed a proliferation of government commercial actions designed to address political questions. They have almost always failed. What's more, they have often provided our competitors with a winning hand in the global commercial poker game. In such cases we are not only shooting ourselves in the foot but often in the leg or stomach as well.

The list of idiocies emanating either from the executive branch, Congress or, more recently, state governments is worthy of a new hall of fame-or better yet, a hall of shame. This reminds me of a story. General de Gaulle, while inspecting Free French troops following the invasion of Normandy in 1944 came upon a tank bearing the painted slogan "Mort aux Con!" (Death to Idiots). "A vast project," was the general's succinct but dry comment.

Think of something as silly as the Helms-Burton law, which allows Cuban-Americans to sue in U.S. courts for damages if they can prove that an international company is profiting in some way from activities carried out on land they once owned but which was confiscated by Castro. How the U.S. Congress can set itself up as judge and prosecutor on issues affecting non-U.S. firms in a third country is beyond me.

In regard to China, some in Congress want to expand the reasons for not extending the status of most favored nation-the cornerstone of any normal bilateral trading relationship-to include religious persecution, labor, environment, etc. You name it, somebody on the Hill has a cause, and we in the business community have the honor of paying for each of these Congressional whims, which translate into less business for U.S. companies and fewer jobs for American workers.

U.S. business in China is a powerful force for positive change. One has only to see the changes that have taken place since the mid 1 980s when American business started flooding into China. Chinese workers have been exposed to market-driven business and management practices as well as to core principles such as respect for the individual and uncompromising corporate integrity. They have also benefited from thousands of hours in training. This approach is far more effective in passing on American values than heavy-handed political sanctions.

I don't want to sound callous. I think the human rights agenda of the United States is a shining example of our fundamental value system. The question is not one of whether we should promote human or religious rights or preserve the environment, the issue is one of methodology. I contend that if you alienate a country by appearing to impose your social philosophy, your influence comes to an end, especially if there is no international consensus. In South Africa to a large extent there was fortunately an international consensus to use a trade embargo to bring down apartheid.

But for the most part it is only the U.S. that invokes sanctions for non-commercial reasons. European and Japanese firms rarely use trade as a lever. So while the U.S. cloaks itself in the "holier than thou" cape, Japanese and European firms are delighted to pick up the business our companies lose. The net effect is that resentment toward the U.S. builds up, and the change which the sanctions sought is simply not forthcoming.

In addition to this we now have several U.S. states creating their own foreign policy. The first was Massachusetts, which passed legislation prohibiting f~rms from doing business in the state if they are also conducting business in Burma. Other states are lining up to follow suit by addressing other concerns such as the environment. Early in this century the state of Missouri tried to create its own foreign policy on migratory birds from Canada, which resulted in the landmark Supreme Court case known as Holland v. Missouri. In this case the Court established that international treaties constituted the ultimate law of the land and that independent states could not maintain their own foreign policies. Although the more recent state-based initiatives are somewhat different, I suspect that some sort of federal adjudication will be required to set the record straight again.

In April of this year about 440 U.S. companies and farm groups created an organization designed to campaign against the proliferation of punitive trade measures imposed by the United States. The organization, USA *Engage, includes many of the leading companies that are also in the ACCJ. USA *Engage released a study showing that U.S. sanctions on 26 countries in 1995 reduced American exports by as much as $20 billion and also resulted in the loss of some 250,000 U.S. jobs. While USA *Engage correctly tackles these absurd political sanctions, it is also very careful to note the following: sanctions to address trade barriers remain legitimate. As the organization's position paper states, "There are a number of tools that must remain available to the U.S. Government to open foreign markets to American products and services."

I hope USA *Engage succeeds in its agenda of pushing back sanctions that address political issues while maintaining the legitimacy of using sanctions to open up markets.

Robert M. Orr, Jr., is a senior executive with a major American corporation, a university professor and an ACCJ vice president. The views expressed are his own and are not necessarily those of the Chamber.

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