USA*ENGAGE - Statement of Position--free trade, unilateral and economic trade sanctions

USA*ENGAGE - Statement of Position

The End of the Cold War, globalization of commerce, and the information revolution pose new challenges and provide new opportunities for U.S. foreign policy. Engagement abroad at all levels - political, diplomatic, economic, charitable, religious, educational and cultural - is America's best tool to promote freedom, human rights, security and prosperity. Unilateral economic sanctions cut off the benefits of engagement, isolating the United States. While frequently failing to accomplish their objectives, they provide political cover for the target regime, and often jeopardize cooperation with our allies, undermining American leadership. The recent proliferation of unilateral economic sanctions at the federal, state and local level threatens American competitiveness, labeling American suppliers as unreliable, especially in emerging markets that are the future for American business and agriculture.
The United States should promote engagement, not isolation, and should set a standard of accountability for proposed unilateral economic sanctions. Accountability means examining whether a proposal actually can achieve its intended results, the potential sacrifice of other national interests, and the costs imposed on Americans. Before adopting unilateral sanctions that cut off American influence, policy makers should ask: how can America lead if it leaves the field?

American Engagement Promotes Core Values

American engagement with a country has profound implications. The whole range of American activity transmits values and ideals. U.S. government officials promote American views with the government and the broad spectrum of society. Businesses and farm organizations provide American products, stimulate business activity, and establish American practices in the market and workplace. Religious and charitable institutions provide material and spiritual support for the least advantaged, and cultural institutions establish links with the society's intellectual leaders.

Ideas flow through engagement. The internet, television, books, newspapers, copying machines, magazines, and popular entertainment spread ideas like democracy, human rights and the rule of law. In a growing economy these ideas fall on fertile ground - an expanding and assertive middle class that opposes corruption and abuse of power.

Economic activity is a core element of engagement. Trade and investment promote growth, and a growing, diversified economy is one of the pillars of democracy. Repeated studies have shown a strong relationship between economic growth and the development of democratic institutions.

American businesses, farmers and workers transplant American values and culture overseas. By just doing business Americans stimulate a country's entrepreneurial sector, train local managers and reward them based on initiative and merit, help develop economic and social infrastructure, promote respect for the individual and workplace safety, and stand for the rule of law and against corruption.

President Ronald Reagan said "the freer the flow of world trade, the stronger the tides of human progress and peace among nations." In the last decade democracy has ascended amidst economic liberalization in Taiwan, Korea, Poland, Hungary, Slovenia, the Czech Republic, Chile, Argentina, Bolivia, Peru, Brazil, Uruguay and Ecuador. The opportunities for American engagement and influence in the world are greater than ever before.

Unilateral Economic Sanctions Cut Off the Benefits of Engagement

The proliferation of unilateral U.S. economic sanctions at the federal, state and local level threatens the benefits of engagement. Such unilateral sanctions do not include legitimate actions to address obstacles to U.S. business abroad. There are a number of tools that must remain available to the U.S. Government to open foreign markets to American products and services.

For 50 years the United States has followed a policy of engaging with the world to promote peace and freedom. The far-sighted American leaders of World War II shunned isolationism and launched the Marshall Plan and NATO. But the United States has begun to depart from the long-standing preference for engagement. In just four years the United States has imposed 61 unilateral economic sanctions on 35 countries, according to a recent study. These countries - from which the United States is isolating itself - contain about 40% of the world's population.

The United States has an unprecedented opportunity to promote its values throughout the world by engagement. Reaching out through engagement - not withdrawing behind sanctions - is the best way to achieve change.

Unilateral Economic Sanctions are Counterproductive and Almost Always Ineffective

They are Counterproductive. Unilateral economic sanctions are a gamble that a foreign country will respond to punishment and threats. In fact, sanctions often lead to a nationalistic backlash against the United States, strengthening the regimes whose policies we oppose. In authoritarian countries the government-controlled press can use sanctions to fan popular resentment and deflect attention from the government's own economic bungling and human rights abuses.

The impact of sanctions frequently is greatest on those portions of society that the United States least wants to harm: the young, sick and aged and the professional and business classes that have a stake in the international economy and in the very reforms the United States seeks to achieve. The young, sick and aged also suffer disproportionately.

Professor Donald Losman of the U.S. Industrial College of the Armed Forces states:

[C]omprehensive economic sanctions ... almost always fail to achieve their political goals, while at the same time opening a Pandora's box of economic and international relations headaches. ...they tend to strengthen offending regimes and policies ... 'Pain without gain' is probably the best description....

Secondary Boycotts Impair U.S. Leadership. In the last year the United States twice has tried to coerce multilateral support by imposing secondary boycotts - threatening to boycott our allies' companies if they do not support and comply with our sanctions. These actions antagonize the very allies whose support and cooperation we need to manage future threats to world peace. Secondary boycotts focus attention not on the target's objectionable policies or human rights abuses, but on bitter disputes between the United States and its allies over U.S. sanctions.

U.S. policy is to oppose secondary boycotts: U.S. law prohibits American companies from complying with the Arab League's boycott of Israel. By engaging in secondary boycotts ourselves, we undermine our credibility in opposing such measures when they are threatened by other nations, such as the recent threat by the Arab Foreign Ministers to reinstate the Israel boycott.

Sanctions are Ineffective. Unilateral economic sanctions frequently fail to achieve foreign policy goals. They are ineffective tools for advancing American values and global peace, and rarely lead to positive change in the behavior of the target regime.

The Institute of International Economics (IIE) concluded that only one-fifth of all U.S. sanctions programs in the 1970s and 1980s had positive outcomes.

The Importance of Multilateral Cooperation

Unilateral economic sanctions - acting alone without the support of our allies - rarely generate real economic pressure. The target can almost always find a European, Japanese or other supplier or investor, whether the sanctions restrict sales of technology, farm products, or capital equipment, or prohibit American companies from investing.

There is intense competition even in industries where the United States is a world leader: Foreign competitors account for 80% of the world's exports of agricultural equipment and 84% of telecommunications equipment exports. Former Commerce Secretary Robert Mosbacher stated: "When an embargo is unilateral, no country, not even the United States, by itself can make it stick."

Success in advancing American interests depends greatly upon our ability to persuade our allies to support our policies and actions. While the United States is the world's only remaining superpower, we still cannot solve most overseas crises - Bosnia, Somalia, North Korea's efforts to secure nuclear weapons, terrorism - by acting alone.

Unilateral Economic Sanctions Undermine American Competitiveness

Lost Exports and Jobs. The Institute for International Economics estimates that unilateral economic sanctions cost the United States approximately $15-20 billion in lost exports in 1995. This translates into a loss of more than 200,000 high-wage American jobs. These figures do not take into account additional losses arising from lost U.S. investment opportunities, or the unreliable supplier concerns of countries that fear becoming overly dependent on unpredictable U.S. sources of supply.

The Soviet grain embargo cost the United States approximately $2.3 billion in lost U.S. farm exports and U.S. government compensation to American farmers. It is estimated that the increased cost to the Soviet Union of buying wheat, soybeans, and feedgrain from alternative suppliers was only $225 million. The sanctions failed utterly to force the Soviets to withdraw from Afghanistan.

A 1994 Council on Competitiveness report found that eight unilateral sanctions episodes cost the U.S. economy $6 billion in annual sales and 120,000 export-related jobs. This study examined specific export controls and targeted sanctions and did not reflect the full panoply of U.S. sanctions measures.

America as an Unreliable Supplier. The perception that America is an unreliable supplier - prone to using unilateral threats to cut off trade and investment - has emerged as a serious threat to U.S. international competitiveness.

When the United States cut off sales of American wheat to protest the Soviet invasion of Afghanistan, other suppliers - France, Canada, Australia, and Argentina - stepped in. They expanded their sales to the Soviet Union, ensuring that U.S. sanctions had virtually no impact. Russia and other purchasers to this day continue to restrict purchases of American wheat, fearing the United States may again use food exports as a foreign policy weapon.

Twenty-five years ago, Airbus Industrie's first line of jet aircraft contained over 50% U.S. parts and components. To escape U.S. foreign policy export controls, Airbus reduced its sourcing to below 20% U.S.-controlled components by 1992.

In 1980 Caterpillar dominated the Soviet market in heavy construction equipment, holding an 85% share. Then U.S. sanctions prevented the company from meeting its commitments on a Soviet gas pipeline construction project. As a result, Caterpillar was tainted as an unreliable supplier and forced to cede the Soviet market to its Japanese competitors.

A U.S. supplier of oil drilling equipment and technology recently was excluded from a contract to build an offshore oil rig in the North Sea. There is no realistic threat of U.S. sanctions against Great Britain, but the purchasers feared that U.S. law might preclude a future decision to move the equipment to other, more sensitive locations.

America Excluded from the Markets of the Future? America's prosperity is tied to our competitiveness in global markets. Trade accounts for over 30% of U.S. GDP. Over 12 million working Americans and their families depend on U.S. exports and access to global markets for their jobs.

The United States has targeted countries like India, Pakistan, China and Indonesia for economic sanctions. But these countries are rapidly emerging as the markets of the future. By 2010, the number of middle-class consumers in China, India and Indonesia is projected to equal that of the United States, Europe and Japan combined.

The initial choice of a capital equipment supplier drives follow-on sales, support services and parts - it is prohibitively costly to switch suppliers. Once lost, such markets can be lost forever. Because of the U.S. export ban, China has turned to France, Canada and the Russian Federation for a total of $15 billion in nuclear equipment since 1989. During the same period U.S. demand for major nuclear equipment has been essentially non-existent. Westinghouse, a world leader in the nuclear power industry, has cut 3,500 jobs, or one-third of its U.S. nuclear equipment workforce.

The United States Should Apply a Standard of Accountability Before Imposing Sanctions

U.S. policy should require accountability by the Congress and the Executive Branch before unilateral economic sanctions are imposed. Sanctions proposals should be judged by whether they actually can achieve their intended results, the potential sacrifice of other national interests, the harm to the civilian population in the target country and the costs imposed on Americans.

Both Congress and the Executive Branch should impose unilateral sanctions only after the United States has fully exhausted potential alternatives, such as multilateral sanctions or diplomatic initiatives to pressure the target regime. Even then, policy makers should undertake a sober and judicious review of the potential for unilateral sanctions to change the behavior of the target, to harm other U.S. interests, and to impose costs on Americans. Before adopting unilateral sanctions that cut off American influence, policy makers should ask: how can America lead if it leaves the field?

Existing unilateral economic sanctions programs should be subjected to meaningful accountability review every two years. Unilateral sanctions should be lifted unless they meet a standard of accountability that considers their effectiveness, harm to other U.S. national interests, and costs to Americans.

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