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Section III.

SUMMARY OF CONCLUSIONS AND RECOMMENDATIONS FOR IMPROVED POLICIES AND PROCESSES

Summary of Conclusions

This report demonstrates that the sum of unilateral economic sanctions measures for achieving appropriate U.S. foreign policy goals now constitutes a complex and growing web of restrictions and legal impediments in the international trading system that extends well beyond the legislative intent of the individual statutes, executive orders, and regulations. This is at least in part due to a growing propensity for Congress to assume a direct role in the conduct of foreign policy by adopting highly specific legislation often without reference to previous laws and sanctions already in place.

There is no disciplined use of policy guidelines in a consistent process for creating, imposing, and maintaining rational foreign policy-based economic sanctions. Also importantly, there is no ongoing, systematic analysis directed at understanding whether sanctions are serving or damaging the interests of our nation, either individually or in the aggregate.

Concerns were expressed about the infringement of federal foreign policy and trade policy prerogatives by state and local government economic sanctions.

The information about economic impact that we have been able to add to that provided by others necessarily is qualitative and anecdotal. Nevertheless, we believe there is reason to conclude that a large portion of the negative impacts on U.S. economic interests could be reduced with no significant impact on foreign policy interests. In particular, we conclude that much improvement could be gained by more thoughtful consideration of optional approaches, and better design and implementation of sanctions when they are deemed to be required. Of greatest concern are measures that create undue uncertainty about the use of U.S. goods and services, that cause U.S. firms and their affiliates to be seen as unreliable, and that interfere with third-country trading partner relationships.

Policy Guidelines Recommended

The President should establish guidelines for the selection and implementation of unilateral economic sanctions and consult with Congress to ensure adherence to such guidelines. The following are recommended:

• Unilateral economic sanctions can be an appropriate tool of U.S. foreign policy and should be available to policy makers when used in conjunction with the effective implementation of the other policies and processes recommended herein.

• Unilateral economic sanctions must be justified in context of
  • other foreign policy and national interests, including security, economic, and international norms and policy obligations;

  • other appropriate foreign policy measures and their potential effectiveness for accomplishing the stated objective; and

  • failure of reasonable diplomatic efforts to obtain cooperation in multilateral sanctions.

• Compliance costs will be mitigated through a rational organizational structure for sanctions implementation with integrated regulations and licensing/outreach process.

• Inequitable impact on workers and economic sectors will be avoided.

• Extraterritorial measures and secondary boycotts will be avoided.

• Decisions will be preceded, except in emergencies, by consultations with affected private parties and the Congress.

• Unilateral economic sanctions will not be continued when the stated objectives are not being achieved after a reasonable period of time.

Process Improvements Recommended

The President should establish processes to assure disciplined adherence to the policy guidelines.

Organizational Structure and Methodology

First, we believe that it is important to establish an organizational structure and methodology to improve the effectiveness of measures employed to deal with target behaviors. We recommend the following steps:

• Create a Policy Review and Administrative Oversight Committee --

  • Under the joint leadership of NSC and NEC;

  • With standing membership of CIA, Commerce, Defense, Energy, State, Treasury, and USTR plus ad hoc membership of others, such as Agriculture, Labor, NRC;

  • Responsible to review all sanctions policy and implementation issues and, as necessary, provide Presidential decision review memoranda.

• Require that relevant decision reviews include the following considerations for each of the optional approaches:

  • Statement of foreign policy objective and assessment of likelihood of achievement;

  • Relationship to overall U.S. strategy vis-ˆ-vis the target;

  • Relationship to measures imposed multilaterally or by U.S. allies;

  • Comparison of likely impacts on the interests, as appropriate, of the target, the United States, allies, and other affected friendly countries, including political, security, military, economic, energy, humanitarian, and worker rights interests;

  • Description of milestones toward achievement of the stated objective;

  • Date for review and re-authorization requirement;

  • Criteria for success/failure measurement; and

  • Possible exit strategies if extension is not warranted.

• Direct the Oversight Committee to

  • Establish and direct a contingency planning process to develop approaches and decisions options for dealing with potential target countries and entities under alternative future scenarios.

  • Request the International Trade Commission to

    • conduct and update annually an analysis of the near and long-term economic impacts of existing sanctions, including direct and indirect effects; and

    • estimate economic impacts of proposed sanctions, including optional approaches associated with the contingency planning process.

Mitigation of Impacts on U.S. Economic Interests

Second, we believe it is possible and appropriate to mitigate inequitable impacts on U.S. citizens and unintended consequences for U.S. competitiveness without undercutting the foreign policy effectiveness of the sanctions. We recommend consideration of the following measures:

• Reduce uncertainty and unreliability of using U.S. goods and services.
  • Permit a limited form of contract sanctity by allowing performance of pre-existing contracts that are legally enforceable and which would be abrogated by compliance with the sanction Ð
    • until completion of the contract obligation if the date for construction or delivery and specification of quantity and price were agreed upon under the pre-existing contract, or

    • for open-ended contracts, only to the extent such performance does not extend beyond the date of the sanction by more than one year Ð unless the President determines that such permission would cause a significant threat to the national security of the United States. (Note: New or similar future business would not be permitted by such contact sanctity.)

  • Avoid unilateral controls on U.S.-origin goods and technology in transactions abroad by foreign persons when comparable, substitutable goods otherwise are available to the target.

• Reduce unintended negative consequences and inequitable impacts for U.S. persons.
  • If the permission of contract sanctity (as recommended above) is determined by the President in any specific circumstance to cause a significant threat to the national security of the United States,
    • permit a grace period for completion only of contractual obligations necessary to recover committed costs, or

    • reimburse, from general funds of the United States, the committed costs of the contracting parties.
  • Allow adjustment assistance for displaced workers;

  • Issue compensation plan at time of sanction implementation or, in emergency, within 30 days of sanction implementation;

  • Require that implementing agencies establish advisory committees comprised of parties typically affected by their regulations to permit ongoing assessment and removal of the unintended negative impacts of the regulations;

  • Publish implementing regulations in proposed or interim final form with opportunity for public comment.

State and Local Government Sanctions

We urge the Administration to make an early assessment of whether federal initiatives might be appropriate in respect to state and local government actions that may impinge upon federal responsibilities in the areas of foreign and trade policy.

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