U.S. Sanctions against Burma: A Failure on All Fronts

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The U.S. policy of imposing unilateral trade and investmentsanctions against Burma has proven to be a failure on all fronts.By forcing U.S. firms to disengage from Burma, that policy hasharmed American economic interests and done nothing to improve theliving conditions or human rights of the people of Burma.

Sanctions have denied Burmese citizens the benefits of increasedinvestment by American multinational companies--investment thatbrings technoloygy, better working conditions, and Westernideas.

State and local sanctions against Burma have compounded theproblem caused by federal sanctions and raised troublingconstitutional questions.

Unilateral sanctions have alienated our allies in the region andstrengthened the hand of China but achieved none of the statedforeign policy aims. If Washington had allowed the Association ofSoutheast Asian Nations to take the lead in setting policy towardBurma, the United States could have enjoyed a "win-win"situation--better relations with our allies and more influence overthe regime in Rangoon.

As an alternative to the failed policy of sanctions, the UnitedStates should allow U.S. companies to freely trade with andinvestment in Burma. A pro-business approach to engagement wouldmore effectively promote political, civil, and economic freedomaround the world. Congress should enact legislation requiring afull accounting of the cost of sanctions and explicit justificationon national security grounds before they can be imposed.

Introduction

The proliferation of unilateral economic sanctions by federal,state, and local governments against nations around the world hasbecome a central trend in U.S. foreign policy in the post-Cold Warera. Ironically, as the world moves toward a more liberal flow ofproducts, people, and ideas and the adoption of the Americanfree-market model, U.S. politicians--spurred by a coalition oflabor unions, environmental lobbyists, human rights organizations,and ethnic groups--have increasingly succeeded in impedingglobalization through an ever-widening array of economicsanctions.(1)Such intervention in the market undermines the competitive positionof U.S. companies by preventing them from doing business intargeted nations and damages trade the same way traditional tariffsand quotas do.(2)

The successful campaign by American groups to force the U.S.government to impose economic sanctions against Burma highlightsthe damaging strategic, economic, and moral consequences ofAmerica's new approach to determining foreign policy. It is a trendthat weakens U.S. ties with Asia, reduces American diplomatic andeconomic influence, and retards creation of a favorable balance ofpower in the region. Sanctions have already damaged the interestsof American companies operating in the region by undermining theirreputations as reliable suppliers and denied U.S. firms the abilityto compete aggressively with rival foreign firms for market shareand profitable investments.

Present U.S. policy toward Burma is not going to bringmeaningful change in the human rights practices of the regime andwill probably make the bad situation in Burma even worse. Sanctionsstrengthen the hand of the ruling authorities by creating ascapegoat for their own internal policy failures and narrowing theopportunity of private individuals in Burma to expand theireconomic, social, and cultural contacts with the citizens of theWest.

Sanctions: The New Tool of Choice of U.S. ForeignPolicy

Unilateral economic sanctions have become a staple of U.S.foreign policy. According to a study issued by the NationalAssociation of Manufacturers, from 1993 through 1996 the UnitedStates promulgated 61 laws and executive actions to imposeunilateral economic sanctions for foreign policy purposes. Morethan 35 countries have been targeted, including important tradepartners such as Canada, Mexico, and Italy. Cambodia and Sudanjoined the list in 1997. The NAM study found that the sanctionedcountries represented 2.3 billion potential consumers of U.S. goodsand services, or 42 percent of the world population, and $790billion worth of export markets, 19 percent of the world's total.It stated that "the economic implications of the unilateral actionshave been seriously underestimated" since the above figures did nottake into consideration all the countries affected by "secondaryboycott" measures, which apply U.S. law to foreign companies doingbusiness in a targeted country. And the study did not calculate theeffects of sanctions that have been adopted at the state and locallevel.(3)Another study found that since 1993 Washington, states, andlocalities combined have slapped 142 unilateral sanctions on 41countries.(4)And according to the U.S. Council on Competitiveness, more than $6billion in U.S. export sales and 120,000 jobs were put at risk byU.S. unilateral actions.(5)

Most worrying from a constitutional perspective has been theflurry of state and local trade curbs aimed at foreign countriesand companies. Massachusetts and more than a dozen counties andcities, including New York City and Berkeley, California, havealready adopted sanctions that bar government purchases fromcompanies that do business in China, Burma, and Nigeria.California, Texas, New York, New Jersey, North Carolina,Connecticut, and Rhode Island all considered similar sanctionsbefore rejecting or tabling them. In most of the cases in whichsanctions have been imposed, they go beyond barring the politicalentity itself from dealing with the targeted country to imposingthe dreaded secondary boycott on companies that do business in thetargeted country.

Indeed, with the collapse of communism and the Soviet Union, theideological and strategic challenges that helped to define the U.S.national interest and provide a driving force for Americandiplomacy and national security for almost five decades havedisappeared. In place of the old policy is a newinterest-group-based foreign policy in which the ideologicalconvictions and political agendas of small but vocal activistgroups have come to dominate the U.S. approach to the world.Economic sanctions have become the dominant weapon, to thedetriment of U.S. global economic and strategic interests.

Burma Becomes Public Enemy No. 1

Burma has not traditionally been a top foreign policy concernfor Washington, although it does have some limited effect on U.S.economic and strategic interests as well as on counternarcoticspolicy. (Burma is the world's largest grower of opium.)

Washington has sought to isolate Burma since the State Law andOrder Restoration Council came to power in 1988, and especiallysince it refused to transfer power in 1990 to the National Leaguefor Democracy, which had defeated the SLORC in an open election.(Burma's ruling junta officially abolished the SLORC in November1997, only to replace it with the equally repressive State Peaceand Development Council.)

The United States has refused, among other things, to recognizethe government's change of the country's name to Myanmar, but ithas maintained limited diplomatic and economic ties as well ascounternarcotics cooperation with Rangoon. In 1990 Washingtonwithdrew its ambassador from Rangoon, and since then it has opposedBurma's membership in various multilateral financial organizations,refused to approve licenses for the export of military-relateditems to Burma, and imposed limited economic sanctions on thatcountry (for example, suspending Burma from the U.S. GeneralizedSystem of Preferences).

Since 1990 the U.S. policy of isolating Burma has been rejectedby America's trade partners in Asia, who happen also to be Burma'smajor trade partners, but it has received some symbolic backingfrom Washington's Western allies.

Congress Targets U.S. Trade, Investment

Reflecting the U.S. frustration over the inability to forcedomestic political changes on Burma, Congress, supported by animpressive bipartisan political movement, launched a legislativeassault on Burma. Numerous resolutions, amendments, and billscondemned the military regime in Burma and threatened economicsanctions against it and funding for pro-democracy programs in thatcountry. Indeed, judging by the press attention and column inchesin the Congressional Record in the early 1990s, it appeared thatBurma had become one of Washington's top foreign policyconcerns.

In 1990 Congress passed the Customs and Trade Act, enabling thepresident to impose new sanctions against Burma, whichthen-president Bush declined to do. In 1993 the Senate passed aresolution calling on President Clinton to work for the immediaterelease of the Burmese opposition leader Aung San Suu Kyi and foradoption of a United Nations embargo against Rangoon. PresidentClinton expressed support for the resolution but did not take anyserious steps to implement it.

Finally, in the Republican-controlled 104th Congress of 1995-96,both the Senate and the House of Representatives threatened to dropa legislative "nuclear bomb" on Rangoon. The 1995 Free BurmaAct,(6)introduced by Sen. Mitch McConnell (R-Ky.), called for theimposition of stiff economic and trade sanctions on Burma, as wellas on countries that trade with and provide aid to that country (aprovision that was later deleted). Similar legislation, the BurmaFreedom and Democracy Act, was introduced in January 1996 by Rep.Dana Rohrabacher (R-Calif.).(7)Later in 1996 a successful amendment by Sen. Dianne Feinstein(D-Calif.) and then-senator William Cohen (R-Maine) to the fiscalyear 1997 Foreign Operations Appropriations Act permitted thepresident to determine if and when to impose sanctions againstBurma. The measure provided the administration the diplomaticflexibility to decide whether the SLORC had improved its humanrights policy.

Clinton Administration Reluctantly Joins theCause

The Clinton administration had earlier tried to respond tocongressional pressure by announcing various reviews of its Burmapolicy and sending State Department officials to Rangoon. It arguedthat some form of diplomatic cooperation with Rangoon on humanrights, democratization, and counternarcotics measures couldproduce positive results, asserting that the SLORC's response tothe U.S. approach was "mixed." For example, Aung San Suu Kyi andother political prisoners were released, and Rangoon agreed tocooperate with U.S. counternarcotics efforts, including a survey ofopium production.(8)

But rising political repression by the SLORC and growingcongressional pressure on the administration forced PresidentClinton--following months of public and intrabureaucratic debates,including leaks to the press warning the business community ofimpeding U.S. action--to finally "do something." And since theadministration concluded that, if anything, the military junta'spolitical repression had become harsher, it decided to move aheadwith the Burma sanctions.(9)

On May 20, 1997, President Clinton issued Executive Order 13047,which took effect on May 21, banning most new U.S. investment in"economic development of resources in Burma." To justify the ban,the president cited a "constant and continuing pattern of severerepression" of the democratic opposition by Burma's ruling junta.Clinton said the SLORC had "arrested and detained large numbers ofstudents and opposition supporters, sentenced dozens to long-termimprisonment, and prevented the expression of political views bythe democratic opposition." Clinton stressed that under Rangoon's"brutal military regime, Burma remains the world's leading producerof opium and heroin and tolerates drug trafficking and traffickersin defiance of the views of the international community." He addedthat relations between the Burmese government and the United Stateswould improve only if there was "a program on democratization andrespect for human rights."(10)

The decision to impose sanctions on Burma was championed bySecretary of State Madeleine Albright. Even before her appointmentas America's top diplomat, Albright had established close politicaland personal ties with Burma's opposition NLD and its charismaticleader, Nobel Peace laureate Aung San Suu Kyi. But PresidentClinton and his top economic and national security advisers werenot enthusiastic about the sanctions. The administration wasworried about the effect of the move on the position of U.S.companies operating in Burma as well as on Washington'srelationship with the Association of Southeast Asian Nations.

America's ASEAN allies argued that only a dialogue with theregime in Rangoon would lead to political changes in Burma. Withoutengagement with ASEAN, its members argued, there was a danger thatthe country would form closer ties with China, a development thatwould pose a direct strategic threat to Vietnam and an indirect oneto the United States. But none of those strategic considerationswas enough to dissuade the administration from imposingsanctions.

State and Local Governments Enter Foreign PolicyFray

Press and pressure-group attention spurred various state andlocal governments to pass laws that prohibited U.S. and foreigncompanies that trade and invest in Burma from receiving publiccontracts in their jurisdictions, or restricted their ability to doso. Mobilization of the state and local governments in the campaignagainst Burma was modeled on bills adopted by some 130 cities and28 states in the mid-1980s that targeted South Africa's apartheidregime. Among the state and local governments that joined the Burmacampaign by passing or considering "selective purchasingordinances" were the Commonwealth of Massachusetts; the cities ofSan Francisco, Oakland, and New York; and several other localgovernments, including those of the small, liberal college towns ofMadison, Wisconsin, and Berkeley, California. Altogether, at leasta dozen cities have passed anti-Burma legislation.(11)A number of universities and other academic institutions havejumped on the anti-Burma bandwagon by divesting themselves of stockin companies that do business in Burma.(12)

Legal scholars have challenged the constitutionality of thoselocal forays into foreign affairs. In a recent article in theVanderbilt Journal of Transnational Law, David Schmahmann and JamesFinch conclude that state and local sanctions against Burma runafoul of at least three constitutional principles.(13)

First, the sanctions appear to violate article VI of the U.S.Constitution, which declares that laws and treaties passed byCongress shall be "the Supreme Law of the Land." In a string ofcases, the U.S. Supreme Court has ruled that federal policy"preempts" any state or local authority in matters of foreignaffairs. By rejecting the McConnell bill that would have bannedU.S. investment in Burma, Congress established a policy thatclearly conflicts with, and preempts, the sanctions imposed byMassachusetts and other subfederal units of government.

Second, the foreign commerce clause in article I, section 8 ofthe U.S. Constitution grants explicit and exclusive power toCongress "to regulate commerce with foreign nations." By seeking toinfluence the direction of foreign investment, state and localsanctions against Burma violate the Supreme Court's interpretationof the clause as saying that the nation must "speak with one voice"on foreign commercial relations.(14)

Third, the supremacy clause of the Constitution in article VIgrants the federal government exclusive power to conduct foreignpolicy. In a series of rulings, the Supreme Court has struck downstate and local efforts to meddle in America's relations withforeign states.

Despite the strong legal case, U.S. firms have been reluctant tochallenge state and local sanctions on constitutional grounds. Theauthors of the Vanderbilt Journal article blame politics: "Fewcorporations would have been bold enough to challenge a community'scensure of apartheid, and not many more will want to be perceivedas supporting the SLORC regime in remote Burma."(15)

The main legal challenge to state and local sanctions has beenin the international sphere, where local communities that adopttheir own foreign policy are in conflict with international tradelaw as administered by the World Trade Organization. The EuropeanUnion has filed a complaint against the Massachusetts anti-Burmameasure before the WTO, and other challenges are in thepipeline.(16)

The growth of state and local sanctions places Washington on acollision course with foreign governments and firms and creates aheadache for U.S. companies. As one journalist described it,"Trying to monitor the foreign policy of 50 states and 7,284municipalities is, to put it mildly, a nightmare for companies andnational governments alike."(17)Considerable hypocrisy is apparent in some of those actions. Forexample, the city of Seattle is considering the imposition ofsanctions against economically marginal Burma but would neverponder a similar move against China, a major buyer of aircraftproduced by the Boeing Corporation, a local company.(18)

The Futility of Sanctions

One of the most powerful arguments against unilateral economicsanctions is that they rarely work. Sanctions are an inherentlyflawed strategy because the kind of regime likely to become thetarget of U.S. sanctions--an authoritarian regime in a lessdeveloped country such as Burma--is also the least sensitive tounilateral U.S. economic pressure. Indeed, by reducing theinfluence of U.S. companies in the target country and driving awedge between the United States and its allies, unilateralsanctions are likely to be counterproductive.

A Record of Failure

Economic sanctions have failed dismally in the past. The recordof U.S. foreign policy is chock full of sanctions that did notbring about the intended change in the target country. Since 1970unilateral economic sanctions imposed by the United States havefailed to work in 87 percent of the cases in which they have beentried.(19)Among the more spectacular fiascoes were the grain embargo againstthe Soviet Union in retaliation for its 1979 invasion ofAfghanistan and the 1982 sanctions against companies thatparticipated in building the Soviet natural gas pipeline to WesternEurope. In both cases U.S. exporters and investors lost business toforeign competitors while Soviet behavior was unaffected. After 35years the U.S. embargo against Cuba has failed to topple the Castroregime. Its only real impact has been to push the long-sufferingpeople of Cuba deeper into poverty.

Advocates of sanctions have pointed to Haiti, Iraq, and SouthAfrica as examples of success. But the political change in Haiticame about only after the United States prepared to invade theisland. And the United Nations-imposed embargo on Iraq did notforce Saddam to withdraw from Kuwait; it was the U.S. militarycampaign against Baghdad that achieved that goal. In South Africasanctions accomplished nothing until the end of the Cold Warchanged the political dynamic in that country. Furthermore, thosesanctions were imposed by a broad coalition of its major tradingpartners and were aimed at a government that was democraticallyresponsive to a sizable (albeit minority) segment of thepopulation. Neither of those conditions applies to the vastmajority of sanctions imposed by the United States in recent years,including those against Burma.

America's Limited Leverage

America's potential leverage over Burma has always been marginalat best. The United States is only the fifth largest foreigninvestor in Burma (Britain, France, Thailand, and Singapore leadthe list), with total investments of $226 million.(20)U.S. investment accounts for less than 10 percent of total foreigndirect investment, and the share may be even smaller because ofBurma's large black-market economy. For example, in 1993 totalimports and exports reached nearly $2 billion, but the value ofblack-market trade with India and China was about $1billion.(21)In 1994 the United States accounted for about 1 percent of Burmeseimports and took in about 7 percent of that country's exports.China, Singapore, and the rest of the Asian countries were theorigin of about 90 percent of Burma's imports; and India,Singapore, and China were the three main destinations for itsexports.(22)

Those figures suggest that the U.S. economic stake in Burma islimited and that Burma therefore is not susceptible to U.S.economic pressure. Cutting U.S. economic ties with Burma will onlyreduce the already limited leverage the United States has onRangoon. Consequently, the failure of U.S. unilateral sanctions tochange the behavior of Burma's rulers is inevitable.

U.S. Policy Alienates Allies

The United States has failed to rally its allies to its campaignagainst Burma. In 1997 ASEAN admitted Burma as a member; theEuropean Union has imposed only limited and symbolic sanctions onRangoon, declining to go beyond suspending Burma's access toduty-free entry to its market,(23)and Australia has refrained from doing even that. Now those alliesare legitimately concerned that the United States, having failed topersuade them, will attempt to coerce them to follow its policiesagainst Rangoon.

That anxiety reflects the political realities of Washington.Congress was able, after all, to force the Clinton administrationto support both the Cuban Liberty and Democratic Solidarity Act andthe Iran and Libya Sanctions Act. Both of those acts threaten toimpose U.S. sanctions on or to take other actions against thecompanies of third countries if those countries fail to follow theU.S. line on sanctions.

Those acts of legislation represent the final stage of a nowfamiliar pattern. First, the United States adopts unilateraleconomic sanctions to force rogue regimes to change their behavior.When that does not work, Washington tries to convince its tradepartners and diplomatic allies to join in the sanctions crusade.And when they refuse to do that (as they usually do, with rareexceptions such as the case of Iraq), the United States raises theante by adopting secondary boycott measures against its reluctantfriends.

Since Rangoon is not expected to improve its human rightspolicies anytime soon and ASEAN and the European Union almostcertainly will continue to resist American pressure to applytougher sanctions, U.S. lawmakers may indeed decide to pressure theadministration to reinforce its Burma sanctions with secondaryboycotts. That move could bring the United States into a majorconfrontation with trade partners such as Japan and Singapore,which invest heavily in Burma, as well as with the entiremembership of ASEAN.

Indeed, the potential for long-term confrontation with ASEAN isone of the most troubling aspects of the Burma sanctions. Sanctionsare seen in the region as part of a general U.S.-led Asia-bashingcampaign, with Washington weighing economic sanctions againstanother ASEAN member, Indonesia, to punish it for its repression inthe former Portuguese colony of East Timor and for its lack ofAmerican standards of labor rights, as well as against China,Southeast Asia's neighboring economic powerhouse.(24)

U.S. Fumbles a Win-Win Opportunity

Allowing ASEAN to lead the way on policy toward Burma would havebeen a realistic and cost-effective approach on the part ofWashington. A more cooperative policy would have encouraged ASEANto exert diplomatic pressure on Rangoon while allowing the UnitedStates to avoid heavy-handed intrusion in regional politics. TheUnited States could have continued drawing the benefits of doingbusiness with Burma as it waited for the ASEAN governments todeliver the goods in the form of a growing willingness on the partof the regime in Rangoon to expand its political dialogue with theopposition NLD. It is the ASEAN members, after all, that have adirect interest in preventing China from bringing Burma into itssphere of influence and encouraging Burma to instead join theregional system.

One of the main reasons for ASEAN's opposition to the U.S.position stems from its members' adherence to the principle ofnoninterference in the internal affairs of other members,reflecting the fact that their political systems range fromdemocracy (the Philippines) to soft authoritarianism (Indonesia) tocommunism (Vietnam). That is a political reality that Washingtonshould recognize. The notion that diplomatic and economicrelationships with a decaying communist regime in Hanoi are properfrom a moral perspective, while similar ties with a military juntaRangoon are not, smacks of hypocrisy. In fact, a U.S. decision todelay sanctions might have persuaded ASEAN to delay the admissionof Burma to the organization.

As one expert put it, the dispute between the United States andASEAN "brought both the romanticism of the West and the pragmatismof Southeast Asia into sharp relief." It has pitted Washington'sunrealistic tactic of using sanctions to promote democracy inBurma, an "act of a country that doesn't have to live with theconsequences of its actions," against the more cautious strategypursued by nations that would have to suffer the consequences ofpolitical and economic instability in Burma that could result froma concerted policy aimed at isolating that country.(25)

After all, if American sanctions generate instability in Burma,it is ASEAN that will have to repair the damage. Even the toughesthawks would shrink from sending U.S. troops to Burma if thatcountry fell apart. As Foreign Minister Domingo Siazon of thePhilippines suggested, "Those who are far away, if this particularcase should not turn out to be successful, they do not reallysuffer the consequences. We are involved, we are near. You cannotleave [Burma] to collapse or to have an internalrevolution."(26)

A Strategic Boon for China

The U.S. policy of isolating Burma has had the perverse effectof strengthening China's hand in the region as it weakens our own.As former White House and State Department official Peter Rodmanhas pointed out, U.S. friends in ASEAN "disagree with the policy ofisolating Burma and are eager to bring Burma into their group--tocounter the Chinese attempt to suborn it as a military ally."America's sanctions on Burma "are thus a great boon to China,"suggested Rodman, adding that "the law of unintended consequencesis at work here, as in so many other instances where Americans seekmoral ends without all that much care as to the practicaleffects."(27)

ASEAN members share that concern. Although Burma shares borderswith other ASEAN states, in its isolation, it "has drifted towardBeijing, its major arms supplier."(28)It is indeed ironic that many people on both the left and the rightwho back the idea of containing China, for ideological or strategicreasons, also support isolating Burma, which of course playsdirectly into China's hands.

America's Self-Inflicted Wounds

No one denies that American-imposed sanctions on Burma or othercountries harm the interests of American companies in the countriestargeted for punishment. As noted, in addition to creating theimpression that U.S. companies are not reliable suppliers of goodsand services, sanctions damage the good reputation of Americanbusinesses in the region and around the world. Sanctions create anenvironment of political and economic uncertainty in which riskassessment is chaotic, a situation that is usually bad news forbusiness.

The imposition of sanctions provides competitive advantage toforeign companies that end up exploiting the trade and investmentopportunities denied to American companies. For example, beforesanctions were imposed on new investment, White Plains, N.Y.-basedTexaco was the operator of the Yetagun field, located about 125miles off the coast of Burma, that is believed to hold 1.1 trillioncubic feet of gas. But following the sanctions decision, thecompany moved to sell its interest to a British company. "Ineffect, the sanctions against Burma only hit our global oilcompanies to the benefit of French and British competitors,"concluded economist Paul Craig Roberts.(29)Even when sanctions have been part of a concerted and enforceablemultilateral regime, they have usually failed to forcechanges.(30)

Before the Clinton administration decided to impose sanctions onBurma, separate anti-Burma moves by state and local governments hadalready produced negative effects on American companies. Forexample, when San Francisco attempted to upgrade its 911 emergencytelephone system in 1996, the only two bidders with thetechnological wherewithal to handle the $40 million project,Motorola and Erricsson, had both run afoul of the city'sBurma-or-us law banning contracts with companies that deal withthat country's military regime. Facing such pressure, Motoroladecided to clear out of Burma. Similarly, in October 1996, Appleannounced that it would stop selling computers in Burma as a resultof a Massachusetts selective purchasing law; Eddie Bauer andPepsiCo also pulled out of that country under pressure from stateand local governments.(31)

This is clearly a self-inflicted punishment of Americancompanies and workers. And when U.S. companies lose markets andinvestment opportunities abroad, the wealth of the United States isdiminished. One study estimates that U.S. companies were losing $15billion to $19 billion annually in exports in 1995 because ofsanctions imposed by the U.S. government against 26 target nations.Sanctions may cost the U.S. economy $1 billion a year in lost wagepremiums in the export sector.(32)

Sanctions Fall Hardest on People of Burma

What really matters is that the Burma sanctions have not workedto achieve their political goals of domestic change. The SLORC/SPCDjunta remains in control and is not facing any serious challenge toits power. As many of the businesses operating in Burma havepointed out, the sanctions' main victims are the Burmese peoplethemselves.

When it comes to advancing political and economic reforms, U.S.companies in Burma are part of the solution, not the problem. "Thepresence of U.S. companies abroad helps to promote the values we asa nation espouse, including human rights and fair labor standards,"noted Ernest Bower, president of the U.S.-ASEAN Council and one ofthe leading opponents of sanctions. U.S. companies train workersand transfer technology more readily than do their Asian andEuropean competitors. They promote democratic values, set apositive example, and improve the general quality of life byproviding fair pay, safe working conditions, and health andeducation benefits. American foreign investment in Burma "is anextremely effective means of advancing economic and socialdevelopment, and should not be abandoned in favor of measures whichhave no chance of success," argued Bower.(33)

One objection raised to U.S. investment in Burma is that foreigncompanies are often required to deal directly with governmentministries and state-owned enterprises, including those tied to thedefense ministry. Advocates of sanctions argue that those jointventures do more to prop up the government than to nurture analternative private sector. Dealing with the government isdifficult to avoid in a country where socialism has guidedgovernment economic policy for decades. Even when working jointlywith state-tied companies, American-owned investment brings higherwages, new technology, and Western-style labor practices to workersin Burma. Outside investment strengthens private institutions whileexerting influence on the government to liberalize its economicpolicies. The same influence has been at work in China, whereforeign direct investment, even when in partnership withstate-owned enterprises, has profoundly and positively affected thelives of Chinese workers.

Unocal's Positive Impact in Burma

One of the most prominent investors in Burma has been UnocalCorporation. Based in El Segundo, California, the company ishelping to develop the offshore gas field in the Andaman Sea and tobuild, in a joint venture with Total of France, Thailand's PTT, andBurma's MOGE, a $1.2 billion, 254-mile natural gas pipeline totransport the gas to Thailand. The Yadana field is believed tocontain 5.7 trillion cubic feet of gas. Production from that field,which is to begin in 1998, will reach 525 million cubic feet of gasa day during the first phase and probably 690 million cubic feet aday later on.

Since the Yadana project was well under way when the ban wasissued in May, Unocal's Burmese operations are grandfathered underthe sanctions. But officials in the company said that the ban couldhinder Unocal's agreement to bid for oil and gas exploration rightsnearby and create doubts about the commitment of the company toremain active in Burma if, for example, Congress decides to adopttougher sanctions, such as those in the McConnell bill. In anycase, the company cannot build its business in Burma beyond itscurrent single project.

Unocal's investment benefits the people of Burma in a number ofways. Its project is bringing natural gas to Thailand from offshoreBurma, providing a clean source of energy for a region suffering,like the rest of Southeast Asia, from pervasive pollution. Theconstruction of the onshore section of the pipeline that thecompany is erecting in Burma is creating jobs, new opportunitiesfor the 35,000 people who live in the area, which is one of thepoorest regions in the country. Unocal and its partners in theproject have begun a three-year, $6 million program to provideimproved medical care, better schools, electrical power, andsustainable development of livestock and farming in the pipelineregion.(34)The project "is an example of economic development contributing tolasting social change," according to the NAM study onsanctions.(35)Or as Unocal president John F. Imle Jr. wrote, "Sanctions arecounterproductive. They hurt people, not regimes." Noting thefailure of U.S. sanctions to depose Fidel Castro, Imle asserted,"Economic progress, fueled by foreign investment, provides thefoundation for more-democratic and open societies."(36)

Some of the advocates of sanctions against Burma charge thatforced labor has been used to help build the pipeline. Although thegovernment of Burma routinely conscripts civilians to work on stateconstruction projects, the evidence is strong that forced labor hasnot been used on the Unocal pipeline project. In a January 1997human rights report on Burma, the U.S. Department of Stateacknowledged the allegations of forced labor but concluded, "Thepreponderance of evidence indicates that the pipeline project haspaid its workers at least a market wage."(37)In other words, there is no persuasive evidence that forced laborhas played any role in building the pipeline. Instead, as have mostother foreign investment projects in developing countries, thepipeline project has paid wages at or above those in the prevailinglabor market.

The very presence of American companies like Unocal, "groundedin American traditions, pressured by the human rights expectationsof the U.S. public and monitored by the Western media, probablyworks as a speed bump to slow down SLORC," agreed University ofCalifornia-Los Angeles professor Tom Plate in a Los Angeles Timescolumn. "But because Burma leads the evil-empire league of themoment, Unocal becomes the cause celebre of the year in the U.S."If the human rights lobby gets its wish and American investmentcontinues to run away from Burma, "the Burmese people could wind upin far worse shape." If anything, there is a need for more, notless, U.S. investment in the country, and a guilt-ridden exit byAmerican companies "could well mean no exit, at least in theforeseeable future, for the people of Burma," Plateconcluded.(38)

As a former Bush administration official has argued, "Tradesanctions can function like a neutron bomb, destroying the economy,wreaking misery on the general population but leaving the policyestablishment intact."(39)If anything, the collapse of authoritarian regimes or anyimprovement in their behavior is "more likely to be delayed bysanctions, which provide governments with an external scapegoat fortheir own failings, serve as an excuse to repress politicalopposition and often ignite a popular will to resist" externalpressure.(40)

Sanctions Slow Burma's Liberalization

Burma is a nation with huge potential human resources. Its 45million people "are highly literate, skilled, and fully capable ofmaking a significant contribution to the economic growth in theregion."(41)Burma is also a country with plentiful natural resources includingnatural gas, mineral deposits, precious metals and gems,high-quality tropical hardwoods, and freshwater and marinefisheries.

In recent years, while continuing to maintain tight politicalcontrol over the country, the military regime has allowed Burma togradually emerge from decades of self-imposed isolation and openitself economically. Indeed, its economy has begun to grow andattract foreign investment. After several years of stagnation inthe late 1980s and early 1990s, Burma's economy grew by anestimated 6 percent in 1994 and by an estimated 8.2 percent in1995. Similarly, per capita income has risen modestly, from about$198 in 1993 to $224 in 1995. Under the regime's economic reformprogram, exports were expected to increase by 30 percent from 1994to 1997. And the Privatization Commission led by the government'sfirst secretary, Lt. Gen. Khim Nyunt, is responsible forprivatizing government-controlled enterprises. According to somefigures, the private sector now accounts for close to 80 percent ofgross domestic product and is expected to grow in the coming years.Japanese and South Korean experts are assisting in the creation ofa stock exchange, and foreign currency regulations and taxregulations are being liberalized as the regime is approving largeramounts of foreign investment in the country. Such investmentsreached more than $2.5 billion in 1995, up from $735 million in1992.(42)

Burma's integration into ASEAN is expected to accelerate theprocess of economic growth and provide new opportunities forforeign businesses, although the economy will continue to facemajor problems. U.S. unilateral sanctions against Burma will haveonly a limited effect on that process, since other nations thatalready have substantial foreign investment in Burma will proceedwith that investment. In fact, since a lack of managerial skillsseems to be one of the major obstacles to the growth and reform ofthe Burmese economy, U.S. economic disengagement from that countryis preventing Burma's Western-oriented business elite fromacquiring the expertise needed to integrate Burma into the globaleconomy. Hence, while Congress and the Clinton administration singthe praises of globalization, their policies toward Burma runcontrary to that goal.(43)

Advocates of sanctions point out that opposition leader Aung SanSuu Kyi supports sanctions against her own country. If she favorssanctions, who are we to decide that sanctions would be bad for hercountrymen? But that line of reasoning dodges the all-importantquestion of whether sanctions are good policy. Aung San Suu Kyi'scourageous opposition to a repressive regime deserves respect, butthat does not necessarily mean that Western nations must endorseher choice of tactics. The fact that the opposition within acountry has endorsed a policy that hurts nearly everyone involvedand has little prospect of succeeding does not require the UnitedStates to follow the same questionable path.

Challenging the Sanctions Mentality

The proliferation of sanctions has led to a debate in Congressand the media over the diplomatic utility of economic sanctions.Sen. Richard Lugar (R-Ind.) and Reps. Lee Hamilton (D-Ind.) andPhil Crane (R-Ill.) have drafted a bill to require that Congressstudy and consider the effects of unilateral sanctions beforemoving to impose them on this or that country. The bill would alsorequire a determination of whether sanctions would achieve theirdeclared goals of changing the target country's foreign or domesticpolicies and of the costs of the sanctions to the U.S.economy.(44)Still other proposals aimed at stemming the sanctions onslaughtinclude a requirement that Congress determine that any sanctions bein the "national security interest" before they can be imposed andthat the U.S. government provide compensation to U.S. companieswhose investments are lost or devalued as a result of U.S.-imposedsanctions.(45)

Now, Congress exercises caution only if the potential cost ofsanctions is relatively high. Despite the fact that Saudi Arabia isone of the world's leading abusers of human (especially women's andreligious) rights, Congress has not seriously considered imposingtrade sanctions against the world's largest oil-exporting economy.Nor did the effort to impose trade sanctions against China, one ofAmerica's major export markets, move beyond the stage of draftingbills and bashing Beijing on Capitol Hill. Lawmakers recognize thepolitical backlash that they could suffer as a result of rising oilprices, as a result of sanctions against Saudi Arabia, or loss ofAmerican jobs, as a result of sanctions imposed on China. So it isthe small or economically vulnerable kids on the global bloc, likeBurma and Cuba, Iran and Iraq, that will continue to be the targetsof sanctions. Meanwhile, innocent civilians living in thosecountries will suffer as a result of American politicians' newpolicy.

Another alternative to the current abuse of sanctions is avoluntary code of conduct for foreign companies operating in Burmaor other countries that violate human rights principles. Such acode would be modeled on the Sullivan Principles that were adoptedby American companies that did business in apartheid-era SouthAfrica.(46)

The pro-business approach to human rights is based on the notionthat the effects of U.S. investment in and trade with Burma (or,for that matter, China or Cuba) would be conducive overall toeconomic and political reform, and by extension to thestrengthening of human rights. U.S. companies act as a"liberalizing force, helping to strengthen the private sector,establishing alternate centers of power, and creating subtle butimportant pressure for democratic reforms."(47)They also help raise wages and labor standards in those countriesand participate, as in Burma, in the building of schools,hospitals, and roads that local governments cannot finance. Theonus lies on supporters of sanctions to prove that the citizens ofBurma, and those of other nations targeted for sanctions, would bebetter off without American investment and trade. Up to now, theyhave failed to do that, requesting that we all join them in ajourney to the unknown, at the end of which, we are promised,sanctions will bring us to the promised Jeffersonian land ofdemocracy and freedom.

We have already taken the pro-business road in China, SouthKorea, the Philippines, and Latin America; and the process ofeconomic and political reform has, indeed, been accelerated and notretarded by U.S. business engagement. China has clearlydemonstrated the positive effects of U.S. investment. As anAmerican investment banker points out, the areas of China whereU.S. investment has been highest, coastal Guangdong and FujianProvince, are also the most politically progressive.(48)

Instead of trying to reform the sanctions process by making itmore "goal oriented" or by forcing the U.S. business community tosupport campaigns to isolate other nations, Washington policymakersshould realize that economic sanctions are bad policy and that anyattempt to make them work better is a contradiction in terms. Asnoted, most studies suggest that unilateral economic sanctions havedone almost nothing to change the domestic balance of power intargeted nations, such as Iran, Iraq, Libya, or Cuba, where themullahs, Saddam Hussein, Muammar Kaddafi, and Fidel Castro,respectively, remain in control. If anything, their power has beenstrengthened by the economic and diplomatic isolation imposed onthem by the United States. Their policies toward the United Stateshave been determined primarily by strategic considerations, inparticular, American military power, and have nothing to do withthe U.S. economic embargoes imposed on them.

Conclusion

The sanctions policy against the government in Rangoon never hadany chance of working because of the refusal of ASEAN, Japan,China, and the European Union--Burma's largest trading andinvestment partners--to support it. The policy has createddiplomatic and economic tensions between the United States and itsallies in ASEAN and deprived Washington of the option of adoptingthe policy of working with those nations to integrate Burma intothe regional system and the global economy and trying to influencethe political balance of power in Rangoon through quiet,behind-the-scenes diplomacy. The chaotic campaign to isolate Burmaby a mishmash of federal, state, and local sanctions is hurtingAmerican companies by increasing the risk to their businesses inBurma, Southeast Asia, and around the world. It forces Americanfirms to operate in an unstable and uncertain business environment,providing a competitive advantage to foreign companies in Burma andSoutheast Asia.

Unfortunately, things will only get worse if Congress decides toadopt some form of secondary boycott legislation to punish foreigncompanies, including those based in Singapore and Japan, that tradewith and invest in Burma, or if there is a serious attempt byCongress to impose sanctions against Indonesia. Indeed, one lessonof the history of economic sanctions is "that once launched,sanctions are very difficult to terminate, with domestic politicsmilitating against an administration's attempt to 'backdown.'"(49)Hence, one can expect a self-perpetuating cycle of Burma sanctions,with the inevitable refusal of Rangoon to implement politicalreform (strengthened by internal resistance to U.S. sanctions),leading to new and harsher sanctions against Burma.

Conflict created by U.S. policy toward Burma will only raise thecost of promoting U.S. economic and strategic interests in theregion, at a time when the rise of China and changing U.S. militaryand diplomatic relationships with Japan and South Korea arecreating a sense of growing strategic uncertainly in East Asia, andwhen the financial turmoil in Southeast Asia, South Korea, andJapan is slowing economic growth in the Pacific Rim.

In the final analysis, U.S. policy toward Burma is anirresponsible moral posturing. Supporters of sanctions want to feelgood that they are doing something to improve political andeconomic conditions in Burma by forcing someone else--Americanbusinesses, the ASEAN nations, and the Burmese people--to bear thecosts. The result will be reduced access of the Burmese people toAmerican products, people, and ideas; worsening economicconditions; and potential political and regional instability. It isindeed ironic that some members of America's cosmopolitan knowledgeclass, who are the main beneficiaries of the process of economicglobalization, are supporting policies that run contrary to freetrade and open markets and deny the Burmese people the ability toenjoy the fruits of the global economy.

Notes

1. Robert Corzine and Nancy Dunne, "U.S. Business Hits at Use ofUnilateral Sanctions," Financial Times, April 16, 1997; DavidKirschten, "Chicken Soup Diplomacy," National Journal, January 4,1997; and David Kirschten, "Economic Sanctions: Speaking Loudly . .. But Carrying Only a Small Stick," National Journal, January 4,1997.

2. Paul Craig Roberts, "A Growing Menace to Free Trade: U.S.Sanctions," Business Week, November 24, 1997.

3. National Association of Manufacturers, A Catalog of New U.S.Unilateral Economic Sanctions for Foreign Policy Purposes, 1993-96(Washington: NAM, March 1997), pp. 1-2.

4. "Going Slow on Embargoes," editorial, Rocky Mountain News,August 11, 1997.

5. Leon Hadar, "U.S. Sanctions Backlash," Business Times(Singapore), March 21, 1997.

6. Congressional Record 141, 104th Cong., 1st. sess., daily ed.(July 28, 1995): S10892-95.

7. Mya Saw Shin, Alison Krupnick, and Tom L. Wilson, Burma orMyanmar? U.S. Policy at the Crossroads (Seattle: National Bureau ofAsian Research, 1995), p. 20.

8. "U.S. Policy towards Burma," U.S. Department of StateDispatch 6, no. 30 (July 24, 1995), electronic version.

9. Peter Baker, "U.S to Impose Sanctions on Burma forRepression," Washington Post, April 22, 1997.

10. Quoted in Steven Erlanger, "Clinton Approves New U.S.Sanctions against Burmese," New York Times, April 22, 1997.

11. Robert A. Manning, "U.S. Bullying Tactics Alienating AsianAllies," Los Angeles Times, July 27, 1997; and Allan Wendt,"Futility of Sanctions against Burma," Washington Times, June 29,1997.

12. See, for example, "American University Restricts BusinessTies to Burma," American Scene, Fall 1997.

13. David Schmahmann and James Finch, "The Unconstitutionalityof State and Local Enactments in the United States RestrictingBusiness Ties with Burma (Myanmar)," Vanderbilt Journal ofTransnational Law 30, no. 2 (March 1997): 184-202.

14. Ibid., p. 189, citing Michelin Tire Corp. v. Wages, 423 U.S.285 (1976).

15. Ibid., p. 179.

16. "Europe Takes Massachusetts Law to WTO," Agence FrancePresse, June 20, 1997; and Frank Phillips, "Massachusetts to BeWarned on Burma Law," Boston Globe, April 15, 1997.

17. Kevin Whitelaw, "The Very Long Arm of the Law: Is the WorldReady for 7,284 Secretaries of State?" U.S. News & WorldReport, October 14, 1996.

18. "City's Burma Policy an Endless, Bad Idea," editorial,Seattle Post-Intelligencer, August 18, 1997.

19. Kimberly Ann Elliott, Institute for International Economics,"Evidence on the Costs and Benefits of Economic Sanctions,"Statement before the Subcommittee on Trade of the House Ways andMeans Committee, October 23, 1997. The text of her statement can befound at http://www.iie.com/sanctns.htm.

20. Economist Intelligence Unit, "Myanmar (Burma) CountryReport," 2d quarter, London, 1995.

21. Shin, Krupnick, and Wilson.

22. International Monetary Fund, Direction of Trade StatisticsYearbook (Washington: IMF, 1995), various country tables.

23. Wendt.

24. 24. Bunn Nagora, "Home Issues Shape U.S., ASEAN Policies onMyanmar," Asiaweek, July 4, 1997.

25. Stephen Brooks, "ASEAN Has No Choice but to Ignore U.S. onMyanmar," Asia Times, May 3, 1997.

26. Quoted in Brooks.

27. Peter Rodman, "The Burma Dilemma," Washington Post, May 29,1997.

28. Manning.

29. Roberts.

30. See Gary Clyde Hufbauer, Jeffrey Schott, and Kimberly AnnElliott, Economic Sanctions Reconsidered: History and CurrentPolicy (Washington: Institute for International Economics, 1990);and Bruce Bartlett, "What's Wrong with Trade Sanctions?" CatoInstitute Policy Analysis no. 65, 1985.

31. Whitelaw.

32. Gary Clyde Hufbauer et al., "U.S. Economic Sanctions: TheirImpact on Trade, Jobs and Wages," Institute for InternationalEconomics, at http://www.iie.com/sanctnwp.htm, 1997.

33. Ernest Z. Bower, president, U.S.-ASEAN Council for Businessand Technology Inc., Statement before the Senate Committee onBanking, Housing and Urban Affairs, May 22, 1996. Some of the otherfigures and information referred to in this section were mentionedin the testimony and related material issued by the council.

34. "Why Unocal Ignores Calls for Myanmar Sanctions," AsiaTimes, August 13, 1997. See also Unocal's Web page, "Unocal inMyanmar Background," which includes information on the company'sefforts to improve education, health, and development in thatcountry. http:/www.unocal.com/myanmar/brmabkgd.htm.

35. National Association of Manufacturers.

36. John F. Imle, "A Case for Investment in Burma,"International Herald Tribune, February 6, 1997.

37. U.S. Department of State, Bureau of Democracy, Human Rights,and Labor, "Burma Report on Human Rights Practices for 1996,"January 30, 1997, at http://www.usis.usemb.se/human/burma.html.

38. Tom Plate, "Capitalism vs. Moralism in Burma," Los AngelesTimes, September 24, 1996.

39. Frank L. Lavin, "Asphyxiation or Oxygen? The SanctionsDilemma," Foreign Policy 104 (Fall 1996): 146.

40. Donald L. Losman, "Good Intentions Gone Bad," WashingtonPost, October 6, 1996. See also Richard Saluto, "Second Thoughts onSanctions," Asiaweek, August 9, 1996; and Bruce Bartlett, "TradeSanctions Normally Don't Work," Detroit News, March 19, 1997.

41. Bower.

42. Shin, Krupnick, and Wilson, p. 14.

43. 43. Bertil Lintner, "Paper Tiger," Far Eastern EconomicReview, August 7, 1997.

44. "Think before Sanctioning," editorial, Chicago Sun-Times,September 17, 1997.

45. Stuart Anderson, "Self-inflicted Wounds," Journal ofCommerce, February 18, 1997.

46. James Finch, "Investors Can Help Break Myanmar's PoliticalGridlock," Asiaweek, June 6, 1997.

47. Stuart Anderson, "Stop the Sanctions Game," Journal ofCommerce, July 23, 1996.

48. William Overholt, The Rise of China (New York: W. W. Norton,1993), p. 392.

49. Losman.

Leon T. Hadar

Leon T. Hadar is an adjunct scholar of the Cato Institute and a Washington, D.C.-based journalist who covers international politics and economics with a special interest in East Asia and the Middle East.