Commentary

A Chance to Rethink Sanctions

By Aaron Lukas
February 23, 1998

Chaos may be too kind a word to describe our trade sanctions policy. The Clinton administration recently appointed Stuart Eizenstat, the current undersecretary of state for economic affairs, head of a new task force designed to make sense of our sanctions. Given the ongoing proliferation of unilateral trade sanctions as the foreign policy tool of choice, it’s a move long overdue.

In today’s fluid global marketplace, the failure of unilateral sanctions has become apparent: sanctions simply alter trade patterns without seriously damaging the target nation. Unless multiple countries deploy trade sanctions, the targeted country can avoid their punishing effects by turning to alternative suppliers. Although the United States enjoyed near-monopoly status in the production of many goods earlier in the century, that is not the case today. Instead, sanctions transfer business from U.S. companies to foreign competitors in the same market.

While evidence mounts that such sanctions rarely accomplish their goal and are often counterproductive, Congress turns increasingly to them as a solution for foreign policy problems. Indeed, between 1993 and 1996 there were 63 instances involving 35 countries on which the United States imposed some kind of sanction.

The Reagan administration’s attempt to block construction of a natural gas pipeline between Western Europe and the Soviet Union in 1981 shows why sanctions don’t work. Japanese and European suppliers replaced U.S. firms and completed the pipeline.

The current sanctions on Burma are likely to produce an equally pointless outcome. U.S.-based Unocal (along with French and Thai firms) currently holds a large stake in a billion-dollar joint project: the construction of a 258-mile gas pipeline. If unilateral sanctions eventually force Unocal to pull out, Japanese and South Korean firms are ready to step in. The project will go forward; Americans will lose jobs.

Even when the U.S. enjoys a monopoly trading relationship with the target country, it is often possible to evade sanctions by substituting domestic output for formerly traded goods and services. Unilateral sanctions imposed against Libya in 1978, for example, were expected to weaken that country’s oil and petrochemical industry. But according to a report by the General Accounting Office, “The impact on Libyan oil and petrochemical industry has been minimal… . The departure of U.S. oil companies from Libya has had little effect because the oil previously produced and sold by these companies is now produced and marketed by Libyans.”

By providing an external focus for hostilities, unilateral sanctions also empower the targeted government in other ways. With the collapse of the USSR and the subsequent end of subsidies to Cuba in 1990, the Cuban military threat has disappeared; the sanctions have not. Indeed, many observers argue that continued U.S. antagonism toward Cuba has been the principal reason Castro has remained in power, despite the Cuban economy’s deterioration.

Elizardo Sanchez Santa Cruz, a leading dissident in Cuba, aptly sums up Castro’s strategy: “He wants to continue exaggerating the image of the external enemy which has been vital for the Cuban government during decades, an external enemy which can be blamed for the failure of the totalitarian model implemented here.”

Human rights and democratization were the primary goals in 22 of the roughly 70 uses of unilateral sanctions since 1993. Ironically, sanctions often harm those they are designed to help, while government officials survive unscathed. Particularly in countries that lack a strong and independent business or middle class, the government feels little pressure to alter its policies. In Cuba, Castro and his associates are perhaps the only ones not suffering under the decades-old embargo.

As Robert B. Oakley, a former ambassador to Pakistan, Zaire and Somalia, has noted, “The guys at the top are the ones that get what little there is to get and the guys at the bottom get stiffed.”

If unilateral sanctions fail so often and for so many reasons, why do the makers of foreign policy continue to rely on them? Often they are viewed as a convenient middle ground between diplomatic protest and the use of force. In addition, the true costs of sanctions are often hidden, allowing Congress to practice what one analyst has called “foreign policy on the cheap.”

In reality, however, unilateral sanctions are anything but cheap; rather, their profligate use entails very real costs both at home and abroad. Mr. Eizenstat has a unique opportunity to promote thoughtful analysis over the politics and emotionalism currently surrounding the use of sanctions. It will be in everyone’s best interest if he succeeds.

Aaron Lukas is a policy analyst at the Cato Institute’s Center for Trade Policy Studies.