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A GROWING MENACE TO FREE TRADE: U.S
- Subject: A GROWING MENACE TO FREE TRADE: U.S
- From: sbillenness@xxxxxxxx
- Date: Sun, 16 Nov 1997 20:33:00
ECONOMIC VIEWPOINT: A GROWING MENACE TO FREE TRADE: U.S. SANCTIONS
Paul Craig Roberts
Business Week, p28
November 24, 1997
Free traders are alarmed by the defeat of ''fast-track'' legislation by
House Democrats. The defeated bill would have given President Clinton
authority to negotiate trade agreements that the House must vote up or down
but not amend. Free traders fear that fast track's defeat signals eroding
bipartisan support for free trade. But tariffs and quotas--the traditional
forms of trade restraints--are less damaging to trade than a new restraint
that even Republicans favor.
The new curb on free trade goes by the name of sanctions. Unlike tariffs,
which protect domestic industries from foreign competition, sanctions
undermine the position of our domestic companies in international trade by
prohibiting them from doing business in the targeted countries.
For example, in early October, as congressional committees were approving
authority for President Clinton to reduce tariff and quota trade barriers,
the Office of Foreign Assets Control in the U.S. Treasury Dept. was
occupied with implementing new barriers to free trade in the form of
regulations to implement the Cohen-Feinstein trade sanctions against Burma.
The U.S. government does not like Burma's politics and is trying to reform
that country by prohibiting U.S. companies from doing business there. The
effect is to hamstring American companies in Southeast Asia. As a result of
the sanctions, Unocal, a U.S. oil company currently involved in the
development of offshore Burmese natural gas destined for markets in
Thailand, cannot build its business beyond this single project. Within the
past month, Texaco Inc., developing another offshore gas field, sold its
interest to a British company.
MOVING TARGETS. In effect, the sanctions against Burma only hit our global
oil companies to the benefit of French and British competitors. Another
problem with sanctions is that businesses cannot foresee where Washington
will next strike. Indonesia is a possible target, as is any country that
offends environmentalists, unions, religious groups, legislators, or the
State Dept. Formerly, our multinational corporations worried about the
political and economic stability of foreign countries in which they had, or
were contemplating, investments. Today risk assessment has a new meaning as
our companies try to forecast where Washington will next apply sanctions.
Senator Arlen Specter (R-Pa.) and Representative Frank R. Wolf (R-Va.) are
sponsoring legislation that would apply trade sanctions against countries
in which there is religious persecution. They have in mind Syria, Sudan,
China, and Russia. Many countries might regard religious persecution as a
category applicable to the U.S., where school prayer is prohibited and the
Branch Davidian religious sect was massacred.
Unions want trade sanctions against countries that offend U.S. labor
standards. Greens want sanctions applied to countries that violate
environmental standards. Human rights sanctions to apply only to U.S.
companies but also want to target every company in every foreign country
that trades with the offending nation.
COLA CONTROVERSY. Even state and local governments and universities are
getting into the sanctions business. A dozen cities and the state of
Massachusetts have bans against purchases from companies with investments
in Burma. Harvard University and other wild-eyed universities turned a soft
drink company off their campuses for selling cola in Burma.
The European Union says that the Massachusetts sanctions against Burma are
against the World Trade Organization rules, but the EU itself, along with
the U.S. government, tried to prevent the Association of South East Asian
Nations from admitting Burma as a full member of the trade group.
Unilateral trade sanctions have grown rapidly and changed in nature. Once
a cold-war tool applied to the Soviet Union and Cuba, in 1988 sanctions
became a way to retaliate against countries that refused to open their
markets to our products. Today sanctions are an instrument with which U.S.
state, local, and federal governments attempt to rule foreign countries and
to coerce changes in the political, social, and religious policies of other
This is trade policy in chaos. U.S. markets are supposed to be opened to
all comers, but U.S. companies are then prohibited from operating in any
foreign country that incurs the wrath of an activist group or government
agency. The only certain effect of this policy will be to minimize the
presence of U.S. companies in global markets and to weaken them in their