BUSINESS VS. NATIONAL SECURITY?
HAWKINS, WILLIAM R.
BIG BUSINESS VS. NATIONAL SECURITY? By William R. Hawkins On December 1, 1998, Vice President Al Gore told an audience of farmers that he favors a review of American use of economic sanctions....
...the target country is much smaller than the country imposing sanctions...
...But the vice president has something besides the U.N...
...military technology is not limited to missiles and satellites, but covers other military technologies" as well...
...firms...
...This is a higher success rate than one would gather from the business lobbyists...
...SHOULD WAR ENSUE, THIS COULD SAVE THE LIVES OF AMERICAN SOLDIERS...
...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...
...thus sanctions should be maintained...
...and vetoed the Iran Missiles Sanctions Act, which would have penalized firms that contribute to Iran's missile program...
...The business community cannot ignore the threat posed by rogue regimes, both to U.S...
...Big business agrees...
...Ding was not only chairman of China's Commission of Science, Technology, and Industry for National Defense but also a member of the "Local War" faction, which sees near-term conflict in East Asia as a real possibility...
...gains consist of private profits, while the gains to the regimes are increases in state power...
...Some foreign leaders are perfectly frank about this...
...companies will develop excessively close ties with foreign adversaries...
...The basic arguments used by the anti-sanctions business campaign were set out succinctly in Kit-tredge's congressional testimony last February...
...Saddam Hussein has been able to use the lure of economic gain to split the Gulf War coalition, turning France as well as Russia against U.N...
...So much for reforming China...
...The axiom is that both parties to a commercial transaction benefit...
...These same hard-currency reserves tempt firms around the world to sell China whatever it wants...
...It seems big business wants to run U.S...
...On matters of grave importance, governments rarely give in to economic pressure...
...Knowing the Clinton administration's softness on sanctions, USA*Engage and the Chamber of Commerce endorsed a bill to "reform" the sanctions process...
...For it seems that engagement has the opposite effect from what its proponents claim...
...major goal of China's trade policies: "China's approach to trade policy so far has been 'mercantilist,' i.e., motivated by achieving export growth for the sake of generating foreign exchange without sufficient regard to its cost...
...National security interests are endangered when certain kinds of "cutting-edge technology, infrastructure, and manufactured products" are supplied to hostile regimes...
...The chamber made the case for unfettered engagement even more sweepingly when it announced its opposition to the Freedom from Religious Persecution Act...
...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...
...We should seize every favorable opportunity to import advanced technology from abroad, especially new and high technology...
...Thus, it attempts to offer an alternative strategy that puts commercial activities in a favorable light: It offers the concept of "engagement...
...The political stakes simply dwarfed the commercial stakes...
...BIG FIRMS, EAGER TO MAKE MONEY OFF AMERICA'S ENEMIES, SEEK TO HAVE ECONOMIC SANCTIONS WAIVED, AND THE WHITE HOUSE OBLIGES...
...In 1994, a World Bank study concluded that this was the THE HOUSE SELECT COMMITTEE CONCLUDED UNANIMOUSLY THAT TRANSFERS OF TECHNOLOGY TO CHINA HARMED THE NATIONAL SECURITY...
...But Congress passed the Iran-Libya Sanctions Act unanimously two years ago, leaving the president little choice but to sign it...
...and Westinghouse, which has pressed hard for lifting the ban on nuclear power exports to Beijing...
...His main point was that unilateral sanctions have a dramatically unsuccessful track record in achieving their own objectives...
...Stronger measures signal that it is risky to invest in or trade with the target state...
...Although conducted for the pro-trade Institute for International Economics, this assessment found 35 percent of the cases reviewed to have been "at least partially successful...
...firms working with China's State Council to promote economic ties— placed a four-page advertising section in Business Week and Aviation Week & Space Technology...
...In September, chamber president Thomas J. Donohue called for repeal of the Iran-Libya Sanctions Act, which he deemed part of "a restrictive, isolationist model that has no relevance to the global community...
...The "big emerging market" in China is also cited...
...Even Mobil, in one of its advocacy ads, had to admit that "the waiver leaves the door wide open for further foreign investment in Iran...
...Together, they would steer U.S...
...and sanctions are imposed quickly and decisively...
...On October 19, the New York Times published a major study of Clinton's security-related trade policies by Jeff Gerth and Eric Schmitt...
...company presence and engagement abroad is critical to the inculcation of American civic values, including religious tolerance...
...foreign policy...
...China's economy, estimated at about $1 trillion, is in another league...
...Instead, the policy shift was driven by the president's desire to "fulfill his vision of a centrist Democratic Party with close ties to American business...
...Caterpillar, which operates, notably, in Burma, Sudan, Indonesia, China, Colombia, and Nigeria...
...that acting alone we can coerce them into making changes that they would not otherwise make...
...Relations may deteriorate further, to blockade, reprisals, subversion, or even war...
...unilateral economic sanctions are small because many of the countries targeted for sanctions are mainly low-income countries with relatively small markets...
...Among the active members of USA*Engage are Unocal, which owns a billion-dollar natural gas pipeline in Burma in partnership with the military dictatorship...
...These figures come from a 1997 Institute for International Economics study released at the debut press conference of USA*Engage...
...But what does China want...
...Indeed, even big business endorses the use of sanctions to win trade concessions beneficial to American firms...
...restrictions on high technology products...
...What, in fact, is the cost to the United States of employing economic sanctions...
...Kent Calder of Princeton University points out that, with Russia holding the greatest military yard sale in history, "the Chinese, flush with hard currency from their soaring, multibillion-dollar trans-Pacific trade surpluses, stocked up...
...exports in goods came to $678 billion...
...government must not consent...
...It is only when sanctions are employed to advance national security or human rights that the business community objects, myopically citing the negative impact on commerce...
...At the time he wrote this, Gen...
...Trade Representative Charlene Barshefsky speaks of "a new system of international relations" with international trade at its "heart...
...Like the 19th-century radical Richard Cobden, the business groups seem to believe that commerce is "the grand panacea" under whose influence "the motive for large and mighty empires, for gigantic armies and great fleets, would die away...
...This is particularly true in areas of advanced technology where the United States holds a global edge...
...Other analyses are more sanguine...
...Continuing U.S...
...Even if foreign firms move in to fill the gap left by American firms, the sanctioned regime will end up paying more and getting less...
...export market...
...To note that sanctions can weaken a target country is not to pretend that they will bring surrender on key issues...
...and actively developing weapons of mass destruction...
...This is the advantage of being a Great Power...
...The National Association of Manufacturers claims that in the last four years, the United States authorized "unilateral economic sanctions targeted against 35 countries that account for 42 percent of the world's population and $790 billion worth of export markets...
...But if the United States is missing out on export opportunities, what are they...
...It is a process through which relationships evolve, improving or deteriorating in sometimes subtle increments...
...Business objects to economic sanctions not only because they deny U.S...
...By their very presence and operations," it said, American companies and the expatriate communities that depend on them contribute mightily to economic, political and religious freedom in their host countries...
...The same year, the administration ended COCOM, the multilateral export-control system established during the Cold War to police the transfer of technology to hostile states (Communist regimes, originally...
...Both these regimes' determination to develop whatever weapons systems they can, however, suggests that any increase in their resources would only be invested in military buildups...
...Change is dangerous for those who have become collaborators...
...As the bill's sponsor, Rep...
...The business community's wooing of Gore is just one manifestation of its drive to curb the use of sanctions...
...Anthony H. Cordesman of the Center for Strategic and International Studies notes that neither Iran nor Iraq can afford to modernize its arsenal across the board because of "the focused poverty in the northern Gulf" attributable partly to sanctions...
...exporters, as well as investors, ready to replace excluded U.S...
...In a classified 700-page report filed with the speaker and minority leader on January 2, 1999, the members unanimously concluded that the transfer of sensitive technology to China has damaged national security...
...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...
...Each of the countries facing the heaviest U.S...
...And in this process, sanctions are useful bargaining chips...
...The Web site of USA*Engage is full of editorials and articles in support of Secretary of State Madeleine Albright's abortive gambit to develop "a road map leading to normal relations" with Iran...
...When business lobbies complain that sanctions cannot achieve ultimate U.S...
...Clinton's indifference to alliance building is also evident in regard to Iraq...
...market foreign companies that operate in Iran or Libya...
...That Gore chose to thus opine at the very time the administration he serves was under pressure at the United Nations to lift sanctions on a still defiant Iraq is disturbing...
...One Mobil ad, from last June, praises Iran for having "muted its opposition to the Middle East peace process, stepped up its war on drugs, and earned high marks for its treatment of Iraqi and Afghan refugees...
...But even if the $20 billion figure is right, it points to minimal impact on a $7.6 trillion economy at full employment...
...Yet for most states, especially those with expansionist ambitions, other principles are decisive...
...Chinese exports to the United States alone account for 7 percent of China's GDI, 15 percent of its industrial output, and 40 percent of its exports...
...In many cases, the purpose is to withhold the trade revenues that fuel military expansion...
...When Commerce Secretary William Daley called on China to open its market to increased U.S...
...Its chairman, Rep...
...Strengthening such regimes so that U.S...
...Signs of this alliance are everywhere...
...The CEOs of 53 major transnational corporations endorsed the bill, but the Senate killed it on a vote of 53-46...
...Trade Representative...
...Christopher Cox, stated that Beijing's "targeting of sensitive U.S...
...The way to avoid that is to band together in a coalition...
...The breadth of support in the business community for the anti-sanctions campaign demonstrates that the mere lure of possible profits, let alone the defense of actual profits, is enough to draw leading corporations and business groups into political partnership with tyrants...
...the target is economically weak and politically unstable...
...ican economic leverage even over China is thus significant...
...The USA*Engage statement of principles insists, "America has a vital interest in being a reliable supplier of cutting-edge technology, infrastructure, manufactured products, services, agricultural commodities, and food products throughout the world...
...The committee looked beyond the use of Chinese missiles for launching American satellites...
...Useful though sanctions are as tools for denying resources to hostile states, they may be even more valuable for heading off a danger exemplified by the anti-sanctions campaign itself: the danger that U.S...
...Senior officials acknowledge," they wrote, "that President Clinton decided to change the rules [restricting security-sensitive exports] without a rigorous review by intelligence officials or other national security experts...
...Though the council claims 674 members from industry and agriculture, Frank Kittredge, council president and vice chairman of USA*Engage, admits that only 50 to 100 companies actively participate...
...Yet when the first major test of this provision came up, President Clinton used his waiver authority to escape having to impose sanctions on France's Total, Russia's Gazprom, and Malaysia's Petronas, three corporations planning to help develop Iran's offshore oil...
...Yet China's sheer size is not enough to compensate for its technological underde-velopment...
...Gerth and Schmitt found that the shift had brought the desired results, as "grateful high-technology companies showered the Democratic Party with campaign contributions, cementing a new financial base for a party that has historically struggled to raise money from corporate America...
...The ad contained the following statement: "China continues to operate a socialist command model, but unlike the old Soviet model, this one works...
...then starting in the 1980s, "rogue" and "terrorist" states, too...
...The big-business lobby warns that sanctions cost $15 billion-$20 billion in U.S...
...Firms with investments in or trade ties to existing regimes, instead of influencing the regimes to change, seek to protect their own interests: They lobby Washington to appease the regimes...
...This crucial political purpose transcends economics...
...At a U.S...
...The development of the oil industries in Iran and Libya has already been mentioned...
...Engagement has become the central tenet of the Clinton administration's worldview...
...Indeed, the GDPs of Iran, Cuba, Syria, Sudan, Iraq, Burma, and Libya add up to about $620 billion, a faction of the $7.6 trillion U.S...
...The bill would have effectively shifted sanctions policy out of Congress, where foreign policy hard-liners and social conservatives have strong voices, to the White House...
...companies can prosper is a Faust-ian bargain, to which the U.S...
...Likewise, there are few countries that are crucially dependent on the U.S...
...sanctions and leaving the United States increasingly isolated as the advocate of stronger measures...
...A survey of 492 firms and trade associations released by the International Trade Commission in September found "most respondents [indicating] that the economic effects of U.S...
...If the United States is to maintain its strategic independence in dealing with rogue states and emerging rivals—and so fulfill its responsibility to advance the national interest—it must act to prevent influential sectors of its own society from becoming the allies of adversary regimes...
...Clinton also: waived sanctions on China for shipping to Pakistan 5,000 ring magnets, which can be used in gas centrifuges to enrich uranium...
...objectives—cannot transform the target government's behavior or replace its leaders—they set the bar too high...
...The purpose of sanctions, however, is not to inflict economic damage for its own sake...
...In 1997, U.S...
...firms the chance to make money off America's enemies, but also because they leave foreign rivals free to do so...
...Were some foreign regime or international tribunal to impose sanctions on the United States, public opinion here too would support defiance...
...The Clinton administration first embraced engagement in 1994, when the president de-linked human-rights concerns in China from trade, largely as a result of intense business lobbying...
...Another item praises President Clinton's message to fans during the U.S.Iran World Cup soccer match, calling on both countries to "take another step to end the estrangement between our two nations...
...firms...
...As passed by Congress, however, the Iran-Libya Sanctions Act was intended to curtail investment by foreign as well as American firms: It penalized in the U.S...
...USA*Engage was formed because a lot of companies are not anxious to be spotlighted as supporters of countries like Iran or Burma," he says...
...exports annually and 250,000 jobs in export industries...
...The study of the effectiveness of economic sanctions cited most often by the anti-sanctions campaign is Economic Sanctions Reconsidered: History and Current Policy (1990), by Gary Clyde Hufbauer, Jeffrey J. Schott, and Kimberly Ann Elliott...
...Chamber of Commerce briefing in September, Willard Workman, the chamber's vice president for international affairs, castigated Congress for enacting sanctions against Iran and Libya...
...These restrictions exist, of course, because of China's record of applying imported technology to military projects, both in China and in cooperation with Iran, Syria, Libya, North Korea, and Pakistan...
...But in the case of trade between American corporations and rogue regimes, the U.S...
...As Chinese general Ding Henggao has written, World competition is essentially about comprehensive national power, and the key is the competition in science and technology...
...It turns out the chamber wants to do business with both of those notorious regimes...
...Thus, sanctions serve the purpose of reducing the hostile state's capabilities...
...The law punishes any entity that invests in the development of the Iranian or Libyan oil industry, the principal source of wealth for both governments...
...yet economic sanctions are uniquely well adapted to achieving it...
...Duncan Hunter (R-Calif...
...business...
...In October 1996, the Clinton administration transferred primary responsibility for approving the export of commercial communications satellites from the State Department to the Commerce Department, thus placing the desires of business ahead of the concerns of the security community...
...Mobil endorsed the waiver anyway, out of principle—the principle that governments should not "disrupt the free flow of capital, people, products and ideas" in pursuit of international goals...
...Sanctions are most likely to be effective, Kimberly Elliott told a congressional committee in October 1997, when the goal is relatively modest...
...China is looking not for American consumer goods, but for technology and investment to build up its military-industrial base and to aid its anti-Western allies...
...Even in the midst of controversy over a breach in national security, the Chamber of Commerce sent a letter to President Clinton stating, "While we support a full investigation into the recent allegations of improper satellite technology transfers to China, we continue to believe that national security interests are best served by engagement with China...
...The U.S.-China trade imbalance allows China to build up hard-currency reserves and thus feeds Beijing's ambitions...
...on his mind—namely, courting campaign contributions for his White House bid in 2000, and the eagerness of potential business donors to trade with rogue regimes is pushing him toward embracing "sanctions reform...
...In the past, when corporations were more rooted in national ground, commerce tended to follow the flag...
...A bipartisan House select committee that spent six months investigating the allegedly improper transfers saw the matter differently...
...It would be more accurate, of course, to say that some firms have an interest in being considered reliable suppliers...
...It is certainly true that sanctions are most effective when they are multilateral...
...The reason the threat of sanctions did not deter Pakistan and India from conducting nuclear tests is that they deemed their national security to be at issue...
...In fact, most economic sanctions take the form of conditions attached to foreign aid or to Export-Import Bank financing or requirements that certain topics be discussed when decisions are made about multilateral financial assistance...
...Nevertheless, American exports increased by 54 percent from 1992 to 1997, according to the Office of the U.S...
...The U.S...
...Their purchases have included everything from tanks and fighter planes to submarines and missile-armed warships...
...But diplomacy is not a go-for-broke business...
...No business will consider it rational to work against the government of a country where it is making money...
...This results from the obvious fact that in a globalized economy, there are abundant non-U.S...
...foreign policy in directions that benefit overseas regimes, while protecting the assets and aspirations of U.S...
...GDP in 1996...
...Benjamin Gilman, said at the time, the act is essential to "cutting off the key sources of funding to those regimes aiding and funding these acts of terrorism William R. Hawkins is senior research analyst for Rep...
...Introduced in the Senate by Richard Lugar and in the House by Phil Crane and Lee Hamilton, the legislation would have made the imposition of sanctions more difficult by requiring an assessment of whether the sanctions would "work" and how much they would cost U.S...
...government should promote engagement at all levels—political, economic, charitable, religious, educational and cultural—as the best tool to advance America's interests overseas," says the USA*Engage statement of principles...
...Thus, the French government encouraged French firms to develop the infrastructure and industry of Russia, France's major ally, in the years before World War I. Today, corporations are global in their thinking...
...sanctions has a socialist command economy, whose principal economic actor is the regime itself...
...There are few, if any, countries today that are so economically dependent on the U.S...
...To put together multilateral alliances, however, requires leadership— which the Clinton administration refuses to provide...
...Faced with alluring opportunities, transnational firms are not about to exercise self-restraint...
...AmerSANCTIONS SERVE THE PURPOSE OF WEAKENING A HOSTILE STATE...
...Their attitude exposes an imbalance of will that would work to the benefit of foreign despots, should the business view become the basis of U.S...
...The views expressed here are his own...
...Sanctions curtail the flow of resources to the target or require it to pay a "risk premium" to do business...
...Indeed, its waiver of the Iran-Libya Sanctions Act was characteristic...
...Yet, business lobbyists constantly whine about the intolerable burden sanctions impose on the United States...
...Boeing, for which China is a major market and an increasing source of aircraft components...
...They would surely agree with Neville Chamberlain when he said, in support of economic engagement with the rogue states of his day, "Trade, like religion, should recognize no frontiers...
...In this formulation, American engagement abroad is a powerful tool for change, and economic engagement is a key element...
...The leader in this campaign is USA*Engage, an organization created in April 1997 by the National Foreign Trade Council specifically to fight sanctions...
...They are forming their own alliances with foreign firms and foreign governments, which may not parallel the alliances of their "home" country...
...Some 1,500 Russian engineers and technicians are working in China, and hundreds more are on retainer, using an e-mail network between Russian and Chinese defense research institutes...
...One of the most underreported stories of the 105 th Congress was the business groups' assault on the use of sanctions...
...In the same vein, just after the 1996 vote renewing Beijing's MFN trade status, the China Business Con-gress—an umbrella group of U.S...
...In addition, all sanctions would have expired at the end of two years unless reauthorized following a new cost-benefit analysis...
...Louis XIV's finance minister, Jean Baptiste Colbert, saw that "trade is the basis of finance, and finance is the sinew of war...
...Businesses and farmers—exporting, investing, purchasing—promote safe working conditions, social infrastructure, human rights and economic growth—which leads to greater personal and political freedom...
...Should war ensue, this could save American lives...
...The institute's research found that the average economic cost to the target country when sanctions were successful was 2.4 percent of GNE This suggests that if a country with the size advantage of the United States were really to strangle commerce with the typical rogue state, its chances of doing substantial damage to the target economy would be quite high...
...exports and reduce the nearly $60 billion trade deficit expected this year, the official China Business Weekly replied that Beijing's efforts to make large-scale purchases have been frustrated by U.S...
...national security and to American values, without losing its credibility...
...Earlier this year, President Khatami denounced terrorism...
...All this excessive use of sanctions in willy-nilly form should be reevaluated," he said...
...policy...
...The United States has already had military confrontations with many of the states that are the targets of the heaviest sanctions (Iran, Iraq, Serbia, Cuba, Libya, Sudan...
Vol. 4 • January 1999 • No. 17
