01 October 1997
European-American Business Council
Press Release

Study Shows Harmful Effects US Sanctions Have on Companies

Washington, DC - US economic sanctions have had an enormous negative impact on both US and European companies, according to a study entitled "Is the Price Too High? The Cost of US Sanctions Policies," released today by the European-American Business Council. Existing US sanctions measures have hurt the global operations of 80 percent of the companies surveyed by the Council. Forty-four percent of companies have had to forego a business opportunity to comply with a sanction law.

The study finds that the most common effect of sanctions on US-owned companies is to harm their ability to form joint ventures. Companies that cannot form joint ventures cannot compete in international markets on a competitive basis, lose trade and investment opportunites, and ultimately employ fewer Americans.

For European-owned companies, the most common effects of sanctions are to reduce their level of US employment and to reduce their level of US investment. These effects pose significant risks for the US, as European-owned firms account for 54 percent of all foreign direct investment in the US (416 billion in 1996), supporting nearly 6 million US jobs.

"We hope this study will convice members of Congress, the Clinton Administration, and state and local governments that they should think long and hard about the costs to business before they impose economic sanctions," Council President Willard Berry said. "Although the intent of these measures is laudable, almost all economic sanctions have failed to achieve their goals. We feel the main impact of sanctions has been to hurt companies in the jurisdictions where they are enacted. When sanctions are imposed, the most likely effects are damage to US companies and fewer jobs for US workers."

The council surveyed a group of large companies about the impact of existing sanctions and the potential impact of new sanctions. Principal findings of the study include:

• Eighty percent of US- and European-owned companies have been harmed in some way by US sanctions. The US operations of 65 percent of companies have been injured.

• Of existing US measures, state and local sanctions, the Iran and Libya Sanctions Act, and the Helms-Burton Act have injured the greatest number of companies.

• Companies participating in the survey reported 18 cases in which US sanctions forced them to miss out on a total of $1.9 billion in business opportunities.

• The most common negative effects of sanctions are lost joint venture opportunities, reduced US employment, and lost supply relationships.

• The types of sanctions that pose the greatest risks to US economic interests are denying US entry visas to corporate executives, denying US bank loans and credits, banning US imports from overseas companies, and denying US export licenses.

• US-owned companies are more aware and more effected by sanctions than are European-owned companies, but both groups have been significantly harmed.

The Council believes that rather than cutting off economic ties with problem countries, the US should promote engagement. To ensure that sanctions are only implemented when they will be effective, and so that companies are not unnecessarily injured, the Council recommends that: (1) the Administration, Congress, and state and local governments develop guidelines to ensure that a broad range of US interests are considered before sanctions are imposed; (2) Congress enact legislation creating such guidelines that is now being developed by Senator Richard Lugar and Representative Lee Hamilton in cooperation with USA*Engage; (3) policymakers exhaust non-economic sanctions options before restricting trade and investment; (4) the US seek multilateral cooperation, rather than acting unilaterally.

The European-American Business Council is the only truly transatlantic business organization, supported by both European and American companies, that provides actionable information on government policies. Independaent of any government, the Council uses the collective strength and size of its membership to influence international trade, tax, and investment policy. The Council's goal is to ensure that it is the definitive source of knowledge and leading business advocate on US and European political activity affecting transatlantic companies.

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