December/January 1998
Worth
Jim Rogers

Sanctionmania

We only do harm when we cut ourselves off from our neighbors

Ineffectual, warlike, expensive, masochistic, shortsighted, two-faced, hypocritical, dangerous, and just plain dumb. These are all adjectives that could be accurately applied to U.S. trade policy - especially when it comes to the sanctions that we now seem willing to deploy against our neighbors at the drop of a hat. Since 1993, the government has authorized more than 60 unilateral economic sanctions against other countries, according to a National Association of Manufacturers survey. Every single one has been a mistake - no matter how well intended. Trade sanctions cost business and investors huge sums of money. They always fail to achieve their purposes. Worst of all, they undermine our efforts to make the world a better place.

Certainly we should be promoting political stability around the world, trying to end the drug trade, supporting workers' rights, protecting the environment, and halting the proliferation of nuclear weapons. I don't object to any of these goals. What I do object to is the way we try to achieve them. Let's take it one adjective at a time.

1. INEFFECTUAL. The failure of the grain embargo and the abortive oil-pipeline sanctions against the Soviet Union in 1980 and 1982, respectively, should have been all we needed to learn that these types of actions never accomplish their intended effects. Yet we continue to proceed from one trade fiasco to the next. In 1995, the Clinton administration, citing environmental concerns, persuaded the Export-Import Bank not to finance the export of 12 hydroelectric turbines destined for China's Three Gorges Dam project. The Journal of Commerce quoted business officials as saying that the decision cost 240 American jobs and $100 million in exports.

What did the Chinese do? They simply went ahead and bought everything they needed from Germany, Canada, and Brazil. In an increasingly diverse world economy, no nation has to trade with the U.S. There are too many other options. We achieve nothing by taking ourselves out of the picture.

2. WARLIKE. Trade sanctions aren't as conspicuous as smart bombs and missiles, of course, but that just makes them easier for angry, narrow-minded politicians to deploy. The sanctions that the U.S. has imposed since 1993 apply to 35 countries and target approximately 42 percent of the world's population. In effect, we're currently engaged in economic combat with more than four out of ten people on earth.

3. EXPENSIVE. The Institute for International Economics recently concluded that in 1995 our unilateral sanctions cost us between $15 billion and $19 billion in trade and between 200,000 and 250,000 export-related American jobs.

4. MASOCHISTIC. We sabotage ourselves. Conoco recently won a fierce three-year contest with companies from other countries for contracts to develop two offshore fields and construct a natural-gas pipeline in Iran. The company had repeatedly cleared the legality of its bid with the State Department. Yet at the 11th hour the Clinton administration blocked the Conoco bid, and Conoco had to abandon $2 billion in profitable business. The French company Total, which had lost the contract, was overjoyed at our stupidity. (I bought shares of Total after Iran awarded it the contract.)

5. SHORTSIGHTED. If we truly want to change the world, we need to engage the world. Our influence is always stronger when we are actively involved, not lobbing bombs from the other side of the fence. Suppose that, rather than placing Cuba in exile, we had continued doing business with this next-door neighbor. Don't you think that, exposed to all our country has to offer, the Cubans would have kicked Castro out on his ear by now? Cubans today are eager for Nikes, the New York Yankees, MTV, our movies, and Hershey bars. Exhibition baseball will change Cuba far more than any blockade of medical and food supplies, especially since other countries are actively trading with Cuba. Our armies of Pepsis and Cokes, our ministry of information in Hollywood, and our McDonald's outposts are our greatest diplomatic assets.

Looking like a pitiful, foolish giant, we unilaterally boycotted South Africa. South Africa was exposed to every influence of the Western world except that of the U.S. It was Toyotas, not Fords, that went to South Africa in that period, Michelin and not Goodyear tires, and the BBC instead of American films and TV shows. Our ineffectual boycott had nothing to do with speeding the end of apartheid.

6. TWO-FACED. Cuba has been inspected by and passed muster with human-rights activists from Europe, yet for "human rights" reasons we Americans are not allowed to travel there or sell to Cubans. Meanwhile, we ship mountains of dollars to Saudi Arabia, a result of our infatuation with gas-guzzling sport-utility vehicles. Yet the Saudis aren't about to open themselves to human-rights inspection. If the Cubans struck oil in Saudi-like quantities, would we then drop our sanctions?

7. HYPOCRITICAL. After much congressional investigation, no one doubts today that the CIA sponsored terrorist acts in the name of America's interests in Guatemala, Chile, Vietnam, Africa, and many other nations. The U.S. is guilty of having a massive drug trade, despoiling the environment, exploiting the poor, and building enough nuclear weapons to blow up the solar system. Yet I don't see other nations threatening us with blockades or embargoes.

8. DANGEROUS. While we are one of the great victors in the global push and shove of trade, this new practice of unilateral sanctions and isolationism - actually a form of protectionism under high-sounding names - can only backfire in the long run. It is a path that in the past has led to world war.

9. JUST PLAIN DUMB. It may be counter-intuitive, but eliminating tariffs and promoting trade does more to create jobs and enhance prosperity than engaging in restrictive practices. The nations of the world can operate as a vast cooperative enterprise in which the invisible hand of supply and demand allocates resources and the rule of comparative advantage makes the work assignments.

Take sugar, which has been protected here for decades, supposedly to help ensure our national defence. Sugar? Why do we need a domestic sugar industry to shore up our national defense? For decades, American consumers have been paying double the world price for sugar in such everyday items as soft drinks, cakes, candy, and bread. Our sugar industry has damaged the Everglades through its misuse of South Florida waterways. Meanwhile, our Latin-American friends, who need to export sugar as a principal crop, have been economically damaged. Now, that's what I call dumb.

Senior contributing editor Jim Rogers is an international investor and the author of Investment Biker (Adams).

Home |  About Us |  Resources |  Press Releases |  Federal Activity & Legislation
State & Local Activity |  NFTC Lawsuit |  Contact Us |  Site Index

.