January 13, 1999

MEMORANDUM TO: OPINION LEADERS

FROM: GARY SCHMITT

SUBJECT: Sanctions

I would like to draw your attention to two recent articles: "What Sanctions Epidemic?" by Sen. Jesse Helms in Foreign Affairs (Jan./Feb. 1999) and "Big Business vs. National Security," by William Hawkins in the Weekly Standard (Jan.18, 1999). Sen. Helms, of course, is chairman of the Senate Foreign Relations Committee, while William Hawkins is a senior aide to Rep. Duncan Hunter (R-Calif.). Both pieces challenge key arguments made by those opposed to the use of economic sanctions by the U.S. for foreign policy purposes and raise a number of questions about the case being made by various business interests against sanctions. What follows are edited excerpts from the two articles.

"What Sanctions Epidemic?"
Sen. Jesse Helms

According to Sen. Helms, the prevailing view is that there has been a proliferation of sanctions legislation in recent years. This view is in good measure based on a set of statistics found in a study sponsored by the National Association of Manufacturers (NAM) and circulated by USA*Engage, an anti-sanctions business group. The core finding of the NAM report is that:

• From 1993 through 1996, the U.S. imposed sanctions 61 times -- 20 times by laws passed by Congress, 41 times by presidential order -- and that these sanctions affected 2.3 billion people (that is, 42 percent of the world).

At Sen. Helms' request, the Congressional Research Service (CRS) was asked to review this finding. The CRS concluded that it could not validate NAM's numbers. "We find the calculation used in...the NAM study to be flawed, even if the specific [sanctions] were fairly characterized, which is not always the case." Specifically,

• "Nearly three-quarters of the congressional measures were not sanctions at all but conditions, limitations, or restrictions on U.S. foreign aid." One sanction "barred aid or military or police training to Haitians involved in drug trafficking or human rights abuses.... Still another prohibited Defense Department aid to countries supporting terrorists." Page Two, Sanctions• Of the 41 presidentially-imposed sanctions, 5 are not unilateral, as NAM charges, but rather represent U.S. compliance with U.N. Security Council sanctions. In 7 instances, the NAM study counts the same sanction repeatedly. In 2 cases, there was no sanction ever imposed. In 8 cases, the "sanctions" are restrictions on U.S. foreign aid, which include bans affecting military exports to Zaire, Nigeria, Sudan, Haiti, and Angola. And, in 13 cases, the sanctions affect only a specific foreign company or person -- not an entire country, not an entire industry, but one specific entity (e.g., banning imports from Chinese companies that use slave labor or seizing the assets of individual Colombian drug traffickers).

• As for the claim that 42 percent of the world's population has been affected by U.S. sanctions, CRS’s review makes it clear that the NAM study greatly overstates sanctions’ reach. Repeatedly, the NAM study puts the entire population of a country -- for example, China or the Congo -- into its calculations even though the targets of the sanctions are often specific entities or goods, and even though, as CRS notes, “most people [in that country]...are not likely to experience significant impact from or awareness of [the] imposition."

Other points made by Sen. Helms touched on questions of the cost of sanctions and their effectiveness.

• "The lobbyists' cry that sanctions cost the United States vital access to large markets is a sham. According to Jan Paul Acton of the Congressional Budget Office, ‘to date, the cost of existing sanctions has been quite modest...[perhaps] less than $1 billion annually’.... The United States gave away roughly $13 billion in foreign aid during 1997.”

• "Unilateral sanctions...are the linchpin of our nonproliferation policy. According to a recently declassified analysis by the Arms Control and Disarmament Agency, ‘the history of U.S.-China relations shows that China has made specific nonproliferation commitments only under the threat or imposition of sanctions."

• Revealingly, while business lobbyists complain about unilateral economic sanctions for foreign policy purposes, “they conveniently omit discussing unilateral economic sanctions for trade purposes.

Retaliatory trade sanctions are not mentioned by NAM...a stunning admission of the efficacy of sanctions.” The fact is, they have “played a crucial role in trade disputes. The threat of unilateral sanctions on China over intellectual property rights and unfair trade barriers has forced China several times to yield.... No wonder business lobbyists are so keen to retain unilateral sanctions in the trade arsenal -- even as they campaign to remove them from our nation's foreign policy."

"Big Business vs. National Security?" by William R. Hawkins

William Hawkins argues that sanctions can be much more effective against target nations -- both large and small -- than critics suggest:

• Given its advantage in size, if the U.S. “were really to strangle commerce with the typical rogue state, its chances of doing substantial damage to the target economy would be quite high. Indeed, the GDPs of Iran, Cuba, Syria, Sudan, Iraq, Burma, and Libya add up to about $620 billion, a fraction of the $7.6 trillion U.S. GDP in 1996.”

• Moreover, “sheer size is not enough to compensate for” a country’s “technological underdevelopment. Chinese exports to the United States alone account for 7 percent of China's GDP, 15 percent of its industrial output, and 40 percent of its exports. American economic leverage even over China is thus significant.”

Hawkins also argues that the cost to the U.S. associated with the use of sanctions are exaggerated, especially given the limited markets offered by statist economies:

• “If foreign economies a fraction the size of ours can withstand the pain of sanctions, as business critics allege, then it would seem the massive and robust American economy should scarcely notice the cost of imposing them." As a recent International Trade Commission survey noted, “the economic effects...are small because many of the countries targeted for sanctions are mainly low-income countries with relatively small markets.”

And although it is true that sanctions are more effective when they are multilateral,

• "To put together multilateral alliances...requires leadership -- which the Clinton administration refuses to provide.... [It] waived sanctions on China for shipping to Pakistan 5,000 ring magnets, which can be used in gas centrifuges to enrich uranium; agreed at the 1998 G-8 summit not to apply to European firms the sanctions required under the Iran-Libya Sanctions Act and the Cuban Democracy Act; and vetoed the Iran Missiles Sanctions Act, which would have penalized firms that contribute to Iran's missile program. These actions signaled to other governments that the United States is not interested in limiting the military-industrial expansion of rogue states until they become dangerous enough to warrant a visit by cruise missiles."

Finally, Hawkins questions the anti-sanction premise that trade and technology transfers create mutual benefit, interdependence, and peace:

• "The axiom is that both parties to a commercial transaction benefit. But in the case of trade between American corporation and rogue regimes, the U.S. gains consist of private profits, while the gains to the regimes are increases in state power. Each of the countries facing the heaviest U.S. sanctions has a socialist command economy, whose principal economic actor is the regime itself. Strengthening such regimes so that U.S. companies can prosper is a Faustian bargain."