| Unilateral Sanctions from 1993-96 |
The United States is resorting increasingly to unilateral economic sanctions against a broad range of countries for a wide variety of reasons. A new wrinkle in 1996, apart from the dramatic increase from previous years, was the use of secondary boycott measures, which extended the reach of U.S. law to overseas companies doing business in the targeted country, angering allies and provoking threats of retaliation. This growing resort to unilateral sanctions departs from a period in the late 1980s of relative restraint, due, in part, to the lessons learned during the abortive oil pipeline sanctions against the Soviet Union in 1982 and the grain embargo of 1980.
From 1993-96, 61 U.S. laws and executive actions were enacted authorizing unilateral economic sanctions for foreign-policy purposes. Thirty-five countries were specifically targeted. (See box below: Countries Subject to New U.S. Unilateral Sanctions 1993-96.) The sanctioned countries represent 2.3 billion potential consumers of U.S. goods and services (42 percent of the world's population), and $790 billion worth of export markets (19 percent of the world's total).(see pie charts)
The list of sanctioned countries includes Canada, Italy and Mexico, all of which were targeted under the Helms-Burton Act. (See Case Study: Helms-Burton Act) Admittedly, trade with these countries has by no means been embargoed. In addition, many of the sanctions measures involve directions to vote against loans from the international financial institutions, the outcome of which the United States does not necessarily control.
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Countries Subject to New U.S.
Unilateral
Economic Sanctions 1993-96
Afghanistan, Angola, Bosnia-Herzegovina, Burma (Myanmar), Brazil, Burundi, Canada, China, Colombia, Croatia, Cuba, Gambia, Guatemala, Haiti, Iran, Iraq, Italy, Libya, Maldives, Mauritania, Mexico, Nicaragua, Nigeria, North Korea, Pakistan, Qatar, Russia, Rwanda, Saudi Arabia, Sudan, Syria, Taiwan, United Arab Emirates, Yugoslavia and Zaire |
However, there are numerous reasons to believe that the economic implications of the unilateral sanctions have been seriously underestimated. First, the list does not include countries in which pre-1993 sanctions measures are still in effect (e.g., South Korea due to labor rights). Second, the list does not include all of the countries potentially affected by the secondary boycott measures adopted in 1996 (i.e., investors in Cuba, Iran and Libya), which would have added almost all of Europe, Latin America and Japan. Third, a number of generic sanctions measures were adopted, which target an undefined number of countries engaged in a specific activity. Fourth, a variety of sanctions measures have been adopted at state and local levels, the most recent of which involves a Massachusetts ban on state contracts with companies doing business in Burma. (Attempts are now being made to adopt a similar law for companies doing business in Indonesia.) Fifth, the list does not include all of the countries subject to trade sanctions for environmental protection purposes, which is a new national security objective (e.g., 24 countries whose shrimp has been embargoed by the United States due to failure to use turtle-excluder devices in shrimp fleets).
The catalog illustrates the dangers of what former Secretary of State George Schultz called "light-switch diplomacy"; the belief that foreign trade is a tactical instrument of foreign policy, and that major commercial relationships can be turned on and off like a light.
"It takes a long time to go abroad, get positioned and learn how to do things there," said Schultz. "A considerable investment is made on both sides of the transaction, and there emerges a certain interdependence that necessitates confidence in the continuing good faith of both sides. In this process of investment, a company develops what the government may regard as a bargaining chip. But if our government takes that bargaining chip and spends it, where does that leave the company? The company has lost out, and its commercial relationship deteriorates. Who wants to deal with an unreliable supplier, especially when the supplier is not the only game in town?"
Human Rights and Democratization
The promotion of human rights and democratization was the most frequently cited objective, with 22 measures adopted from 1993-96. Thirteen countries were specifically targeted: Angola, Bosnia-Herzegovina, Burma, Burundi, China, Croatia, Cuba, Gambia, Guatemala, Haiti, Nicaragua, Nigeria and Yugoslavia. Sanctions were also imposed against companies in Canada, Italy, and Mexico due to prohibited activities in Cuba under the Helms-Burton Act. (See table, Unilateral Economic Sanctions Promoting Human Rights and Democratization)
Anti-terrorism was the next most frequently cited foreign-policy objective. Fourteen laws or executive actions were imposed to combat terrorism. Eight countries were specifically targeted, including Cuba, Iran, Iraq, Libya, Nicaragua, North Korea, Sudan and Syria. (See Unilateral Economic Sanctions To Counter Terrorism, below.)
Nine measures were adopted to prevent nuclear proliferation. China, Cuba, Iran, North Korea and Pakistan were specifically targeted. Third-party countries who trade and invest with Iran and Libya were also targeted. Two broad non-proliferation measures were taken imposing comprehensive sanctions, including export and import bans. (See Case Study Pakistan and China, and see table Unilateral Economic Sanctions Promoting Nuclear Non-Proliferation, page 5.)
Eight measures were adopted to promote political stability. Targeted countries included Afghanistan, Angola, Bosnia-Herzegovina, Rwanda, the New Independent States of the former Soviet Union (including Russia), Yugoslavia and Zaire. (See table Unilateral Economic Sanctions Promoting Political Stability)
Eight anti-narcotics measures were adopted, targeted against Afghanistan, Burma, Colombia, Cuba, Haiti and Nigeria. Two were targeted against any third-party country engaged in prohibited dealings with Cuba. (See table, Unilateral Economic Sanctions Promoting Anti-Narcotics Efforts.)
Worker Rights/Use of Prison Labor
Six unilateral sanctions measures were adopted to promote worker rights or the prevention of prison labor. Targeted countries included China, the Maldives, Mauritania, Pakistan, Qatar, Saudi Arabia and the United Arab Emirates. (See table, Unilateral Economic Sanctions Promoting Worker Rights)
Former Secretary of State Warren Christopher recently proclaimed a new definition of national security that would encompass environmental protection, thereby establishing it as a major foreign-policy priority. (See Case Study: Voith Hydro, Inc.,) Three measures were adopted targeting Brazil, China and Taiwan. (See table, Unilateral Economic Sanctions Promoting Environmental Protection)
Case Study: Pakistan and China
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The Unintended Consequences Of Generic Sanctions Measures In addition to country-specific sanctions, Congress has included general sanctions provisions in a number of bills enacted over the past several years. The 1994 Nuclear Non-Proliferation Act, for example, contained a provision requiring the cut-off of Export-Import Bank support to any country selling equipment to certain types of nuclear facilities. Consequently, the U.S. government faced the very real dilemma in 1996 of imposing $10 billion in sanctions against U.S. companies in response to a $70,000 Chinese sale to a nuclear facility in Pakistan. A last-minute agreement between the United States and China made it possible to avoid those sanctions, which would have been a classic case of "shooting, ourselves in the foot." |
Case Study: Voith Hydro, Inc.
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Ex-Im Bank Decision Costs Pennsylvania Firm 240 Jobs The decision to make U.S. trade policy more responsive than ever to environmental concerns sometimes leads to bitter results for U.S. workers. Unionized machinists in York, Pa., criticized a Clinton Administration decision that will cost the equivalent of 240 jobs (over five years) and $100 million in exports over the next few years. That loss was all but assured after the German government announced in October 1996 that it will help finance exports of German-made goods to China's controversial Three Gorges Dam project. For the 550 workers at Voith Hydro, Inc., this means 12 hydroelectric turbines they had hoped to supply to Three Gorges will instead be made by German workers at Voith's parent company. In addition to Germany's move to assist its companies in exporting for the Three Gorges project, Brazil and Canada have said they will provide export financing to their manufacturers. Reprinted with permission from the publisher of the Journal of Commerce, Oct. 25, 1996. |
Why Manufacturers Oppose Unilateral Sanctions
The U.S. government and the American public are understandably frustrated by the inability to achieve major foreign-policy objectives that we all share, including rooting out terrorism, promoting human rights and preventing nuclear proliferation.
It is often asked, "Does American business support human rights?" The more appropriate question is whether or not denying American manufacturers the ability to export is an appropriate and effective response to human-rights violations abroad. The evidence indicates that U.S. sanctions outside a multilateral framework lead to lost American exports and jobs, with little or no impact on the targeted government.
Very few attempts have been made to determine the impact of unilateral economic sanctions on employment and exports. Those that have been carried out reached some startling conclusions. The issue was examined in a 1995 study, Economic Security: The Dollar$ and Sense of Foreign Policy, by the Council on Competitiveness. Analyzing just eight case studies, the report found that $6 billion in U.S. export sales and 120,000 jobs were put at risk. (See Case Study: Soviet Pipeline)
Case Study: Soviet Pipeline
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Unilateral Controls Lead
To $2 Billion in Lost
Exports
Unilateral controls on petroleum equipment exports to the former Soviet Union lasted from the early until the late 1980s. The Commerce Department estimated that the United States lost $2 billion in direct export sales over the lifetime of these controls. The indirect impact was probably even more serious. Up until the 1980s, U.S. companies dominated the world market in Arctic drilling largely because of the expertise gained in developing the Alaskan North Slope. Unilateral controls allowed foreign competitors to move in and take over a key market, but equally important, provided them with the chance to prove their equipment and convince customers all over the world that their products worked in these extreme conditions. Once these unilateral controls were in place, it took an extraordinary effort, lasting nearly five years, to get them lifted, despite widespread evidence that they were doing significant harm to U.S. industry, costing American jobs, and serving no purpose whatsoever, since the Soviets were getting the petroleum equipment they needed from sources in Western Europe and Japan. |
Foreign manufacturers are eager to fill the void left when American companies are denied the opportunity to export. (See Case Study: U.S. Industry Coalition for Civilian Nuclear Trade with China)
Case Study: U.S. Industry Coalition for Civilian Nuclear Trade with China (Babcock & Wilcox, ABB, Emerson, Stone & Webster, Sargent & Lundy, GE, Bechtel and Westinghouse)
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Opening China's $20 Billion Nuclear Electric Power Market China is the world's largest growth market for both electric generation and nuclear electric power equipment. All equipment and services that U.S. suppliers can offer to China's electric energy market are also available from a variety of global competitors. France, Canada and Russia have successfully entered this market. Three nuclear power plants are in operation and six more are being built. Future export orders to meet China's year 2010 goal are valued at $20 billion, which would translate into nearly 400,000 job-years of work. Two laws bar U.S. nuclear electric exports to China. The United States is the only nation in the world with such trade restrictions on China. Chinese leaders have indicated that they are reluctant to commit important large- scale infrastructure projects in electric energy to U.S. suppliers. They fear that over the course of the project's life, U.S. trade with China will become hostage to U.S. politics. |
Economic sanctions rarely work-even less so when they are targeted against friends and allies. They have yet to topple a targeted government. They provide an external scapegoat for well-entrenched regimes to compensate for domestic failings. Once launched, they are extremely difficult to terminate. In only a handful of the 35 countries covered in this catalog could an arguable claim be made that the sanctions changed the behavior of the targeted government. (See Case Study: Helms-Burton Act)
Case Study: Helmes-Burton Act
| In March 1996, the Cuban Liberty and Democratic Solidarity Act, more commonly known as the Helms-Burton Act (named after its chief sponsors), was signed into law. Its purpose is to facilitate the movement toward democratic rule in Cuba. It contains a mandatory denial of visas to individuals who "traffic" in confiscated property (Title IV) and permits a private right of action allowing U.S. citizens to sue in federal court any persons who traffic in expropriated property (Title III). The measures are targeted against mainly European and Canadian investors in Cuba. President Clinton has decided to suspend the effective date of Title III, as he is entitled to do under the law. Sanctions have now been in effect against Cuba under nine Presidents, to little or no avail. Because of its extra-territorial reach, however, the Helms-Burton Act has caused a whole new set of commercial problems with such allies as Great Britain, Canada and Germany. To repeal the extra-territorial provisions would require a new act of Congress. In addition to subjecting U.S. companies to retaliation, the measure is likely to be a perpetual irritant in U.S. relations with our major allies. |
Beneficial Social Impact of American Trade and Investment
Maintaining an active American business presence will do more to advance reform and democratization than would a policy of retrenchment. U.S. companies contribute to conditions of life in targeted countries through increased employment, growth and improved working conditions. Economic isolation has only caused chaos, suffering and hardship for the very people it was designed to help. (See Case Study: Burma)
Case Study: Burma
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Joint Venture Benefits 35,000 People
The Yadana natural gas pipeline project linking Thailand with Burma -- a joint venture of Unocal of the United States, Total of France, Thailand's PTT and Burma's MOGE -- is an example of economic development contributing to lasting social change. After 30 years of self-imposed isolation, which has brought poverty and misery to the nation's people, Burma is finally opening up to foreign investment. As is common with emerging markets, the transition to a more open market economy and society is not without difficulty. The project has already provided significant benefits to the 35,000 people who live near the pipeline area, an extremely poor and underdeveloped region of Burma. In addition to creating jobs, project investors have begun a three-year, $6million program to provide medical care, new and refurbished schools, electrical power and agricultural development in the pipeline region. The lasting, positive effects of the project will be felt long after the obstacles to democratization have been overcome. A recently adopted U.S. unilateral sanctions law, however, could result in a ban on new U.S. investment. |
Violation of Domestic and International Law
The United States rightfully took the lead against the Arab League's secondary boycott measures against Israel in the 1970s. Despite our own laws against secondary boycotts, the tendency has been to follow up a ban on U.S. trade and investment in rogue states by extending the reach of U.S. law to overseas companies doing business with the targeted country, angering friends and provoking serious talk of retaliation.
Such measures clearly violate numerous international agreements to which the United States is a party. Many countries, including Canada and the European Union, have enacted "blocking statutes" obligating both European companies and American subsidiaries located there not to comply with recently adopted U.S. laws concerning Cuba, Iran and Libya. American companies are thus in the precarious position of facing conflicting legal obligations.
Moreover, the new WTO dispute settlement rules make it more likely that the cost of secondary boycott measures will hit sectors unrelated to the case at hand. The European Union has decided to bring the case before the WTO. If the challenge succeeds, the United States might have to remove the extra- territorial provisions of the law (unlikely, given that an act of Congress would be required), offer trade compensation (such as lower tariffs), or do nothing. In the latter case, the complainant could retaliate by suspending trade concessions equivalent to the trade benefits it has lost.
Case Study: Manufacturing
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'De-Americanizing' Products That
Once Used U.S. Components
In the same way as an ordinary consumer avoids buying
an appliance from a company that has a reputation for
unreliable service and parts supply, foreign purchasers
avoid becoming dependent on global suppliers who reperesent a political
risk. Under various U.S. laws,
American components suppliers are obligated to obtain a
certification that the end-product will not be exported to
a country subject to a U.S. embargo.
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U.S. Companies as Unreliable Business Partners
American manufacturers are involved in major infrastructure development projects around the world, frequently as part of a joint venture or consortium with foreign and domestic companies. Foreign companies and governments are understandably reluctant to enter into any long-term commercial relationship with U.S. companies if the threat of sanctions looms. (See Case Study: Manufacturing) And mere threats do matter. What may not be front-page news in The Washington Post is frequently headline news in developing countries, even if the threats were "off-the-cuff" remarks from a lone member of Congress. The unquantifiable "chilling effect" of unilateral sanctions on the ability to secure contracts should not be underestimated. (See Case Study: Agriculture)
Case Study: Agriculture
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Frequent Target of Trade Sanctions
U.S. agriculture exports are especially vulnerable to fallout from unilateral trade sanctions. Food is among the most frequently targeted exports for retaliatory action by a target country. U.S. food exports are readily available from alternative sources shifting the impact of any sanctions onto U.S. growers and processors. In the long term, however, unilateral sanctions can encourage market shifts that deter future agricultural trade. When the United States imposed a grain embargo on the former Soviet Union in 1980 in response to the invasion of Afghanistan, Argentina, Brazil and other countries dramatically expanded planted acreage and grew to become significant long-term competitors for global customers. Unilateral sanctions also can create the impression that the United States is an unreliable supplier and foster self-sufficiency strategies in target countries as well as in any country that is predisposed to trade barriers. Japanese officials still point to the 1973 soybean embargo as evidence of the risks associated with doing business the United States. More recently, U. S. sanctions against Iran have turned over to Southeast Asian producers a new market for rice that U.S. growers and millers had developed. The expanded embargo against Cuba has interfered with U.S. participation in international food trade: U.S. traders must now put costly language in contracts prohibiting Cuba as a destination or, in the case of sugar, an origin. |
The data in this report indicates that, since 1993, the United States has resorted to the widespread use of unilateral economic sanctions to pursue foreign-policy objectives. As tempting as this course of action may seem, it comes with a steep prices tag for U.S. commercial interests, with apparently little or no impact on the targeted governments' behavior. A wide variety of alternative policy options short of unilateral economic sanctions should be more effective and narrowly tailored to the targeted regimes' unique vulnerabilities. All economic sanctions should be multilateral, except in the most unusual and extreme circumstances.
| Recommendation 1: The United States should pursue a continuum of measures, starting with multilateral approaches and including diplomatic, political and military isolation, that more effectively target a country's unique vulnerabilities. (See Sanctions Policy Hierarchy) |
The United States has learned painful lessons about the costs of unilateral economic sanctions, and it needs to remember those lessons. Indeed, Congress, in passing the 1988 Omnibus Trade Act, stated, "the President should, through diplomatic means, employ alternatives to export controls." Passed by Congress in 1985, the last Export Administration Act (EAA) set forth criteria for imposing sanctions that, if followed, would have probably eliminated many difficulties surrounding recent actions in this area.
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Recommendation 2: All proposed sanctions should satisfy
specific criteria relating to effectiveness, availability from
foreign suppliers and enforceability. Provisions should also
be made for such measures to lapse absent reauthorization
by Congress, or be waived if the President determines that
it is in the nations interest. (See Sanctions Policy Hierarchy) |
In addition, our research on this report has demonstrated that there is no system for recording, in a comprehensive fashion, the unilateral sanctions measures taken by different parts of the U.S. government. The Commerce Department issues an annual report on foreign-policy controls, but this report, for the most part, does not pick up actions of other government agencies. It should be noted that virtually all the sanctions in this catalog arose from outside the Commerce Department and are administered by other agencies.
| Recommendation 3: The U.S. government should produce an annual report on all unilateral sanctions, analyzing both the impact on the targeted government and on U.S. companies. |
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Step 1: Diplomatic Isolation Publicly warn about nature of offensive behavior and that the United States is considering retaliatory action. |
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Step 2: Consultations With Allies on Multilateral Sanctions
Consider multilateral approach with like-minded allies; raise issue in bilateral, regional and international forums. |
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Step 3: Limited Counter-Measures
Postpone, scale back or terminate cultural, scientific and educational exchanges; restrict travel of offending country government representatives; restrict official contacts with government officials. |
Step 4: Consider Sanctions Only if Specific Criteria Are Satisfied1. A determination must be made, in writing and prior to its adoptions, that--
2. Provisions is made for --
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Introduction: Scope of Sanctions Catalog
This study provides a summary compilation of relevant new U.S. laws authorizing, and Executive Branch decisions imposing, unilateral U.S. economic sanctions from 1993-1996.
Constructively drawing up lists of these new U.S. laws and Executive Branch decisions requires a workable definition for an economic sanction. These lists include economic sanctions that limit exports from the United States, imports to the United States, investment in the target country and private financial transactions between U.S. citizens and the target country's government or citizens. They also include directions for the United States to vote against loans in international financial institutions (IFIs). Finally, the lists include restrictions on U.S. government programs (e.g., U.S. Ex-Im Bank and OPIC programs) that can have a definite impact on U.S. companies and the target countries.
The definition of unilateral economic sanctions for this study also takes into account the purposes of the sanctions. The focus is on sanctions for foreign-policy purposes, where foreign policy is defined broadly to include national security, non-proliferation, anti-terrorism, human rights, democratization and anti-narcotics efforts.
On the other hand, the definition here of foreign policy does not include the use of economic sanctions as a tool in trade disputes or trade negotiations. Although interesting and important, the use of economic sanctions for such economic purposes brings in a host of other situations (e.g., intellectual property protection), raises new and difficult issues and often involves different laws. As a result, the lists of economic sanctions laws and decisions following include only those that were undertaken for non-economic foreign-policy purposes.
The focus here is also on U.S. unilateral economic sanctions. These are sanctions that the United States is authorized, under U.S. law, to impose or already has imposed without comparable actions by other countries against the target country. These sanctions are the most controversial, in part because the impact of the sanctions might be diluted by foreign companies filling any gaps and because U.S. companies lose business to foreign rivals. The United States also participates in multilateral sanctions, such as those now in place against Iraq, Libya, Rwanda and UNITA in Angola, and it has participated in those sanctions recently relaxed against parts of former Yugoslavia (Serbia-Montenegro and Serb-held parts of Bosnia). These are usually the result of UN Security Council resolutions. The United States also participates in international control regimes that envision some form of collective action against exports of sensitive goods and technology, (i.e., the Wassenaar Arrangement [the successor to COCOM] the Nuclear Suppliers Group, the Missile Technology Control Regime and the Australia Group). The accompanying tables briefly note the start of UN multilateral sanctions against a country, but they do not try to trace the changes in the sanctions over time against a particular target.
Description of the Lists. The emphasis of this study is on recent laws and Executive Branch decisions. Accordingly, the compilation begins with Table 1, which identifies and briefly summarizes U.S. laws authorizing new sanctions during the past four years (i.e., the 103rd and 104th Congresses). Often, a provision will be repeated in later laws, such as the annual Foreign Operations Appropriations Acts. Only the initial appearance of a provision is recorded in Table 1.
Table 2 includes major Executive Branch decisions that imposed unilateral economic sanctions for the same period. For example, in 1996, the President decided to add Colombia to the list of countries denied certification for their anti-narcotics efforts under the existing Foreign Assistance Act. This led to the denial of new Ex-Im Bank and OPIC support and certain other U.S. government assistance and negative U.S. votes against Colombia in the IFIs.
Table 3 provides a historical overview of some major U.S. laws that existed prior to 1993, such as International Emergency Economic Powers Act (IEEPA) of 1977. This table is provided because these laws are often the basis for later Executive Branch decisions, such as those listed in Table 2.
