September 27, 1999

by Peter J.M. Orvetti

Boomeranging Sanctions
Skipping Out On The Bill Of Rights
Exercising Religious Freedom?
An Unequal Exchange

Boomeranging Sanctions

U.S. trade sanctions against India and Pakistan imposed after both nations tested nuclear weapons have had minimal impact on the two nations, Reuters reports. A U.S. government report released last week concluded that European, Japanese and other Asian suppliers simply moved in to fill the void, taking business that used to be handled by U.S. firms. The U.S. International Trade Commission said the economic sanctions have cost India's economy as little as $320 million and Pakistan only $57 million. The U.S. economy has lost $161 million due to the sanctions.

In a 1998 commentary, "Two Cheers for Sanctions", Aaron Lukas warned of the risk, writing that "[i]t's time for Congress to realize that disrupting private business transactions is not an effective foreign policy tool. Sanctions damage domestic interests at least as much as the target country and have little chance of inducing policy changes. Acting unilaterally, Congress squanders U.S. diplomatic capital and punishes the wrong people. The United States has already strongly signaled its displeasure with India by cutting off aid and export financing. Those measures should be made permanent; anything more would be a mistake."

In another commentary around that time, "Nuclear Proliferation in South Asia: Coping with the Inevitable", Ivan Eland offered alternatives to sanctions: "Rather than impose sanctions, the United States should encourage India and Pakistan to adopt confidence-building measures similar to those established by Russia and the United States during the Cold War -- for example, creating a hotline connecting the capitals of the two nations and conducting a regular dialogue on security issues. In addition, the United States could share with both nations some of its technology for ensuring the safety and command and control of nuclear weapons. That technology transfer might reduce the chances of nuclear accidents or accidental launches. Finally, the United States might even share future technology developed to simulate nuclear explosions so that India and Pakistan would have no need for further underground weapons testing. Most of these recommendations would require changing U.S. law. Instead of taking actions that attempt to penalize proliferation already well under way, the United States should maximize its influence to mediate tensions and promote stability between two new members of the nuclear weapons club."

Skipping Out On The Bill Of Rights

Those who are charged with ensuring justice may face it themselves now that Senate Republicans have created a task force to investigate how President Clinton's Justice Department handled inquiries into the Waco standoff, campaign finance abuses and nuclear espionage. Senate Majority Leader Trent Lott (R-Miss.) appointed Sen. Arlen Specter (R-Pa.) to head the task force. Specter publicly asked, "What in the world is happening at the Justice Department? Why is there no justice at the Justice Department?" Numerous missteps by the Department of Justice and the renewed investigation of the Waco conflagration in 1993 have led some Republicans and even Democrats to call on Attorney General Janet Reno to resign.

The Cato Institute hosted a panel discussion on Waco and the Academy Award-nominated documentary Waco: The Rules of Engagement, on September 15. The panel discussion is also available for download in RealVideo format.

The 1997 Cato Policy Analysis "Dereliction of Duty: The Constitutional Record of President Clinton" examines Justice, and justice, under Clinton in great detail, finding that the problem starts at the top: "Although President Clinton has expressed support for an 'expansive' view of the Constitution and the Bill of Rights, he has actually weakened a number of fundamental guarantees, including those of free speech and the right to trial by jury and that against double jeopardy. He has also supported retroactive taxes, gun control, and warrantless searches and seizures. The president's legal team is constantly pushing for judicial rulings that will sanction expansions of federal power. The Clinton White House has, for example, supported the federalization of health care, crime fighting, environmental protection, and education. Clinton also claims constitutional authority to order military attacks against other countries whenever he deems it appropriate. President Clinton's record is, in a word, deplorable. If constitutional report cards were handed out to presidents, he would receive an F."

Exercising Religious Freedom?

China has issued new regulations to tighten control over the exercises on which the Falun Gong spiritual relaxation program is based, AP reports. Under the restrictions, published in the Chinese Health Ministry's official newspaper, the slow-motion exercises called qigong may not be practiced in government or military institutions, embassies, airports, train or bus stations, ports, streets or other "important public places." The government also plans to prosecute at least 10 publishers of books and materials on Falun Gong before putting leaders of the group on trial.

Ned Graham, president of East Gates International, spoke at the Cato Institute on "U.S.-China Trade Relations and Their Impact on Religious Activity in the PRC" in June: "We have been in an ongoing struggle to get our business partners, especially in the area of publishing, to become more transparent and to conform to internationally accepted standards of business practice. Over the years as our relationships have deepened, we have seen improvements in this area but there still needs to be greater consistency in how business is conducted in China from city to city and province to province. This is also true for the implementation of religious policy. We believe expanding U.S. economic ties with China and especially China's admittance into the [World Trade Organization] will continue to benefit religious organizations working in China by

1. Encouraging China's adherence to international law and a rules based trading system,



2. Facilitating China's civil society in developing its rule of law, and



3. Expanding personal freedoms for its population.

An Unequal Exchange

Securities and Exchange Commission Chairman Arthur Levitt has expressed support for the creation of a single, independent agency "to police the nation's stock markets," according to AP. Levitt has come out in support of a plan in which each exchange would police its own trading, but an umbrella agency would monitor member activities, sales practices and trading between the various markets. "While I certainly am not wedded to any particular model at this point - a great deal more thinking needs to be done - this latter approach is intriguing," Levitt said.

In an article published in Regulation, Wendy L. Gramm and Gerald D. Gay critiqued their own tenure running one of the regulatory agencies, the Commodity Futures Trading Commission. But as for the SEC itself, it is proving to be a failure in the most important new area in markets: online trading. In a 1998 Regulation article, "The SEC's Assault on Electronic Trading" (pdf), Dale A. Oesterle wrote, "In light of new developments in technology, the SEC's regulations on exchanges are truly antiquated. Yet rather than change its regulations with the times, the SEC wants to tie weights to the feet of the newer, faster, leaner market. If the SEC wants to protect investors in electronic markets it would do better to limit its role to informing the public about the details of whatever markets develop, so small investors understand the risks of the game. The SEC could, for example, provide investor education on the risks of trading in foreign markets. The SEC could also refocus on requiring large traders to be honest with their clients on how they trade-stopping those traders' current shameful practices that make it difficult for clients to determine whether they are receiving the best execution of their trades. The SEC's vision of securities markets is likely to be short-sighted and dangerous; dangerous because the SEC, despite its good intentions, may stifle the innovation that could allow America's markets to be envy of the world. At present traditional markets, the NYSE and most of the regional exchanges, are old-fashioned and resistant to change. Whenever the SEC strays beyond enforcing rules against basic fraud, as it is straying in its regulation of electronic trading, those participating in our secondary trading markets are rarely winners."