Testimony of Frank Kittredge--free trade, unilateral and economic trade sanctions

Testimony for Frank Kittredge
Vice Chairman of USA*ENGAGE

BEFORE THE SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY AND TRADE HOUSE COMMITTEE ON INTERNATIONAL RELATIONS

September 10, 1998
Madam Chairwoman and Members of the Subcommittee, I am Frank Kittredge, President of National Foreign Trade Council, an association of 550 U.S. companies engaged in international trade and investment.
Early last year under NFTC leadership a number of companies, agricultural groups and associations formed a coalition called USA ENGAGE. This coalition represented a new and important initiative in the longstanding debate over the use by the United States of unilateral sanctions to achieve foreign policy objectives. It came together to encourage policy-makers to find alternatives to unilateral sanctions as a foreign policy tool in light of their demonstrated ineffectiveness and cost to the U.S. economy.
The private sector undertook this major, multiyear effort because the companies and organizations that comprise the NFTC and USA ENGAGE had become seriously alarmed at the overall proliferation of unilateral sanctions at the federal, state and local level. We were convinced that by working with Members of Congress, officials of the Executive Branch, state and local legislators, and opinion leaders in non-governmental organizations and the media, we would arrive at better procedures for making decisions about unilateral sanctions, discover new ways for the public and private sectors to work together toward common goals, such as respect for the rule of law and human rights, and reach a better understanding of the true economic and political cost to the U.S. of the undisciplined use of unilateral sanctions for an ever-increasing number of reasons. More specifically:
--The NFTC and USA ENGAGE companies and organizations do not in anyway condone the behavior of the foreign governments in question. The 62 federal sanctions measures imposed by the United States since 1993 were undoubtedly intended to serve a wide range of objectives with which few Americans would disagree. We do object to the fact that the means that has been selected to achieve these ends is deeply flawed and often is counterproductive. In many ways it is a "boomerang" approach to foreign policy;
-- unilateral sanctions have a dramatically unsuccessful track record in achieving their own objectives. This is in contrast to multilateral sanctions programs that can show greater impact in some cases such as South Africa, and in certain respects Serbia and Iraq. There are few, if any, countries today that are so economically dependent on the U.S. that acting alone we can coerce them into making changes that they would not otherwise make. This results from the obvious fact that in a globalized economy, there are abundant non-U.S. exporters, as well as investors, ready to replace excluded U.S. firms. Likewise, there are few countries that are crucially dependent on the U.S. export market;
-- often unilateral sanctions merely serve to create greater resistance to change in authoritarian regimes by stiffening their opposition to outside pressure and mobilizing their internal support for standing up to it;
-- unilateral sanctions also provide an easy excuse for the failures of authoritarian regimes that need a scapegoat and find one readily provided by the United States;
-- government officials and ruling elites in sanctioned countries can almost always find ways of circumventing the effects of sanctions on themselves. Ordinary citizens, however, are less lucky and it is they, whom we would most like to help, who often feel the greatest pain of deprivation without any offsetting benefits in changing the policies or character of the regime;
-- the cumulative impact of unilateral sanctions constitutes a significant cost to the U.S. economy. This cost was calculated last year by the Institute for International Economics to be $15 to $20 billion a year in lost exports at the cost of 200-250,000 well-paying export-related jobs. Permit me one example: because of unilateral sanctions imposed following the 1989 Tiananmen Square crackdown, the U.S. power generation industry was not allowed to bid on $15.8 billion of nuclear power business in China. The award was given to Canada, Germany and Japan. Beyond losing this significant business opportunity and the thousands of U.S. jobs associated with it, the award to non U.S. suppliers had the effect of completely isolating the U.S. from the Chinese nuclear energy program, which has progressed very well without U.S. involvement.
-- there are also "unreliable supplier" costs that may result from business lost because foreign companies do not believe that they can count on an American company or partner not to be removed from a project in midstream by a unilateral sanctions imposition.
--there is a longstanding American tradition of "people-to-people" contact based on the belief that individual Americans and private American organizations, be they educational, commercial, philanthropic, religious, or emergency relief institutions, present to the world the true face of our country and best reflect the core values that have always inspired the world. This is what "engagement" is all about.
--unilateral sanctions, on the other hand, assume that we can have more influence abroad by isolating and coercing governments and inflicting pain on their populations than through reaching out to them and proving by example and direct involvement that free market democracy and tolerance are the firmest foundation for prosperous and peaceful development.
-- Increasingly, during the post Cold-War era, trade and investment have proven to be the primary means of influencing economic and political change throughout the world. Much more often than not, the presence of American business has prompted the movement toward liberalization. American companies directly encourage legal reforms, introduce enlightened workplace practices, and provide education and training to local employees. Market-oriented trade and investment leads to the emergence of an independent and educated population, one which depends less on the state for economic advancement and is, as a result, less tolerant of a government's repressive policies.
-- At the same time, economic disengagement can undermine the humanitarian and religious groups whom sanctions supposedly benefit. Many religious and humanitarian groups, especially those that are actually operating in the countries like Nigeria, believe that economic engagement has opened the door for their presence and made local people more receptive to their message.
Madam Chairwoman, let me summarize by saying:
+ The NFTC has been leading the USA ENGAGE coalition since April of 1997 to reduce the frequency with which elected officials and policy-makers resort to unilateral economic sanctions for foreign policy purposes. This is to distinguish these sanctions from multilateral measures in which other trading partners of the target country participate, as in the Iraqi sanctions. It is also to distinguish them from export controls regarding military and dual use technologies and goods, as well as the trade remedy laws, such as Section 301 of the 1974 Trade Act.
+ USA ENGAGE and the NFTC are comprised of U.S. companies that employ hundreds of thousands of American workers. Many of these firms are major exporters. Jobs in the export sector pay 12-15% more than other jobs; yet the IIE estimates that about $1 billion in wage premiums are lost each year as a result of unilateral sanctions.
+ The historical record on unilateral sanctions is very clear -- they do not work. The U.S. may be the lone remaining military superpower, but we are no longer in a sufficiently dominant economic position to impose our will through unilateral economic sanctions. We are simply not the sole supplier of enough products to enough countries to pursue our interests in this way. The President's export Council enumerates some sort of U.S. sanction on 75 countries, representing more than half the world's population.
+ What do the NFTC and USA ENGAGE believe should be done? First, we support greater reliance on the areas of strength that our country has in dealing with foreign problems and problem regimes. First among these is diplomacy -- both direct diplomacy and strong relations with our allies, so that we carry maximum influence. Secondary boycotts, such as the Helms-Burton and Iran-Libya Sanctions Act have the opposite effect by making it harder to get cooperation from our allies. Across the board, private and public engagement -- what President Eisenhower called "People to People" programs, and the effect of direct exposure to American institutions and values -- are our strong suit. Finally, we recognize that there will be times when sanctions will be used. We believe that we should make them as effective as possible -- give the President maximum flexibility in imposing them, do not devalue sanctions by overuse, and use common sense tests as to their costs and effectiveness so that they are based on informed judgements and not reflexive reactions.
Finally, we believe that the U.S. private sector makes its greatest contribution to free market democracy through constructive involvement in economies and societies around the world. The business community does have a major role in ensuring that the kind of world that will evolve following the Cold War respects the rule of law, the rights of individuals, and international norms. This is the kind of world in which most of the peoples of the world and certainly the American people aspire to live. Yet, it will not be achieved by the absence of private American institutions, but only by deeper commitment and engagement in the world by the United States.

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