Time to Stop Sanctioning the World

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Congress has succumbed to the “bad country of the month” syndrome. Every month some member of Congress seems to decide that the government of yet another country is so bad that U.S. trade and investment there should be limited. The U.S. now engages in economic embargoes against Cuba, Iran, Iraq, Libya, and North Korea. And countries discussed as targets of U.S. unilateral sanctions include China, Burma (Myanmar), Nigeria, Indonesia, Pakistan, Angola, and Algeria, among others. For many major American corporations, U.S. sanctions policy is the number one impediment to expanding their business abroad.

There are two main problems with unilateral sanctions. First, they do not work. 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. The embargo against a tiny country 90 miles off our coast, Cuba, is over 35 years old and has yet to accomplish its goal.

Second, in the name of improving human rights in other countries, we restrict our own citizens’ rights to trade and invest. In the long run, we would do far more to improve other countries’ politics by contributing to their economic development and by exposing them to U.S. values via business. As satirist P.J. O’Rourke puts it, “Nothing undermines communism like a Big Mac.”

To slow down this troubling trend toward more and more sanctions, Congress should adopt a series of measures that will at least rationalize this important area of U.S. trade policy. The key is to substitute calculation and contemplation for the large doses of politics and emotionalism that currently surround the issue.

First, Congress should require a finding that any sanction be in the “national security interest” of the United States. That finding ought to describe in specific terms how the conduct of the target country poses a threat to the security of the American people and how sanctions would materially reduce that threat. That would raise the policy standard for sanctions beyond a show of distaste for another nation’s domestic policies.

Second, Congress should require an analysis that measures the economic cost to the U.S. economy of all current and proposed economic sanctions. Today, major decisions on sanctions are made without consideration of data that measure their economic impact on Americans.

Third, the American government should provide compensation to U.S. companies whose investments are lost or devalued as a result of a U.S.-imposed sanction. It is one thing to stop sending U.S. government dollars to a distasteful regime; it is quite another to prevent private individuals and companies from legally using their own property in another country. All future sanctions bills should contain appropriations for such compensation. That would make clear the real costs of sanctions and should encourage lawmakers to allow any ongoing company investment in a country to continue unmolested and to place no new restrictions on additional investment by such a company.

Fourth, Congress should establish a time limit on any new economic sanction so it does not continue indefinitely by force of inertia. The 1996 sanctions against Iran and Libya wisely carry a five‐​year sunset provision. Any sunset measure, however, should not interfere with the compensation paid to those whose investments are lost or devalued by U.S. government action.

It is vainglory to believe that by adopting unilateral sanctions America is “leading by example,” since nations throughout the world not only have refused to support recent U.S. sanctions but have actively opposed them.

Undoing current sanctions and refraining from imposing new unilateral sanctions against Burma, China, Nigeria and other nations is the best policy course for the United States. Such sanctions are ineffective, eschew normal diplomatic channels and undermine our international relations. U.S. companies are often hurt not only directly but also indirectly by gaining a reputation as “unreliable suppliers.” Congress should at a minimum adopt reforms that make clear to the public the costs of such sanctions to individual companies and the U.S. economy as a whole. We should abandon the practice of attempting to improve the conduct of other nations by restricting the freedom of our own citizens.

Stuart Anderson

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