Commentary

Too Many Sanctions

This article originally appeared in the Washington Times.

The Clinton administration’s decision to suspend U.S. lawsuits against foreign companies involved with expropriated Cuban property did not solve the key problems in the Helms-Burton legislation. The enforcement of that law and similar laws is already harming American companies and U.S. commercial relations with our major trading partners.

Imagine what would have happened if during the Cold War West Germany had forbidden American companies from doing business in East Germany, or if China entertained lawsuits against U.S. firms that invested in Taiwan or denied entry visas to the U.S executives of such companies. Members of Congress and the president would have justly considered such actions affronts to American sovereignty and retaliated. This is how other nations are reacting to the Helms-Burton Act, particularly the denial of visas to executives of a Canadian company operating in Cuba earlier this year.

Passed quickly in the wake of Cuba’s shooting down of two airplanes flown by Cuban-Americans, the Cuban Liberty & Democratic Solidarity Act, sponsored by Sen. Jesse Helms (R-NC) and Rep. Dan Burton (R-Ind.), bars entry to CEOs of companies that engage in commerce related to properties seized from Americans by Cuba 35 years ago. It also allows Americans to sue those foreign companies for triple damages in U.S. courts.

Canada and Great Britain already have laws against obeying another country’s imposition of a “secondary boycott,” and other nations, such as Italy, are preparing such legislation. The United States actually has passed its own law forbidding American companies to observe the Arab League’s secondary boycott of Israel.

The effort to sanction companies from other nations is an admission that unilateral U.S. sanctions simply do not accomplish their goals. That is why more recent legislation has sought to compel multilateral support. However, nations throughout the world are not only refusing to support U.S. sanctions against Iran, Cuba and other potential targets, they are actively opposing them. (Because of Helms-Burton, a coalition of Canadian groups is even urging a tourist boycott of Florida, putting at risk some of the $1.3 billion spent there each year by 2 million Canadian travelers.)

Leaders in France, Italy, Britain, Germany and much of the rest of the world view economic sanctions as counterproductive and favor them only in extraordinary circumstances, such as a war. Without multilateral support, American trade sanctions can succeed only if a U.S. company is a monopoly supplier of a good or service to the targeted nation. Perhaps many years ago such a situation existed, but today that is not the case virtually anywhere in the world. In the absence of a monopoly, U.S. unilateral sanctions simply transfer business from an American company to a foreign competitor in the same market.

When the House of Representatives debated new economic sanctions against companies selling oil technology to Libya or investing in Iran’s energy sector, only Rep. Toby Roth (R-Wis.) spoke out against them. He pointed out that at least 15 European countries had already announced they would continue to trade with Iran and Libya. He said the bill, which finally passed by an overwhelming margin, was more likely to isolate the United States than Iran and Libya.

To avoid becoming entangled by U.S. sanctions, many European oil companies and suppliers are likely to re-design their procurement policies to exclude American equipment makers. That will put at risk $600 million in U.S. exports and 12,000 export-related jobs, according to the Petroleum Equipment Suppliers Association.

Rather than introduce new unilateral sanctions, it is time to admit that current sanction policies have hurt American companies while accomplishing little else. For many years the U.S. government has prevented Cubans from drinking Coca-Cola and eating at Pizza Hut, yet those prohibitions have not made Cuba more democratic. A 1988 study from Johns Hopkins University estimates that over a 25-year period the embargo against Cuba cost American companies $30 billion in lost exports.

More engagement with the outside world, through increased tourism and a proliferation of trade and investment activity, is more likely to encourage the changes we would all like to see take place in Cuba, Burma (Myanmar) and elsewhere. A dictatorship thrives by controlling the populace and finding scapegoats for domestic problems. Greater Cuban interchange with the democratic, market-oriented United States would undermine Fidel Castro more than isolation.

Undoing the Helms-Burton Act and refraining from new unilateral sanctions against Burma, China, Nigeria and other nations is not necessarily politically popular. The proposed sanctions against Burma, soon to be voted on in Congress, are particularly unrealistic in that they expect a ban on U.S. company activity there to force the country’s leaders to relinquish all power. Sanctions such as these are ineffective, eschew normal diplomatic channels and actually undermine our international relations.

The Clinton administration’s 6-month suspension of lawsuits against foreign firms did not satisfy Canada and the European Union, which plan to retaliate against American companies if the United States persists with enforcing the law. The U.S. Congress can retaliate in kind against Canada and other nations, and pretty soon we will no longer be engaging in an economic war against countries like Cuba but against our own allies and leading trading partners.

Stuart Anderson is director of trade and immigration studies at the Cato Institute.