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 REMARKS BY TREASURY DEPUTY SECRETARY STUART E. EIZENSTAT COMMERCE DEPARTMENT BUREAU OF EXPORT ADMINISTRATION UPDATE 2000


7/10/2000

FROM THE OFFICE OF PUBLIC AFFAIRS

LS-760


I am very happy to be here today. I have a deep and continuing interest in the Export Control program, which was in my area of responsibility when I was at Commerce. This program is an important part of the overall foreign and national security policy of the United States. To administer it successfully, at a time of rapid changes in technology and shifts in international trade patterns, is a difficult job. We are very fortunate that people with the skills and experience of Bill Reinsch, Scott Bunton, Roger Majak and the members of their team are in charge of this program. And they rely on all of you, not only to ensure compliance, but to give them practical input and constructive suggestions from the viewpoint of our exporting firms.

The term sanctions is sometimes applied to different kinds of measures. There are the broad embargoes on nations such as Iran, Iraq, Cuba, Libya, Sudan and Serbia that deny those countries access to our markets, to the right to purchase our goods and services, and to the economic benefits of U.S. investment. There are also the narrowly targeted prohibitions against new investment or the transfer of defined products or technologies to some nations, to encourage them to take certain actions, such as abiding by a human rights standard or nonproliferation rules, or because of the threat of a transfer of sensitive military technology to nations of concern. Some observers would even include in the definition of sanctions the withholding of U.S. support in loan or grant decisions by International Financial Institutions, or on conditions we put on our own aid programs when they are imposed to advance our foreign policy objections.

At the outset, I want to make it clear that while sanctions, by their nature, act to restrict trade and investment, they do not represent the fundamental thrust of the international economic policy of the United States. We seek to open markets, not close them, encourage investment, not restrict it. Last year, our exports of goods amounted to almost $700 billion, of which less than 3 per cent went to controlled destinations.

We are working actively to spread the benefits of globalization and technology, in terms of higher living standards and greater economic opportunity, to peoples throughout the world. Yet it is precisely because the world is growing smaller, with people, goods and ideas moving ever more freely across borders, that those governments that flout international norms, abet or practice terrorism, or traffic in weapons of mass destruction pose a growing danger to international peace and economic progress. All nations need to be alert, and act appropriately to counter these threats.

This Administration's position on the role of sanctions as a tool of foreign policy has been clearly stated. Properly designed, implemented and applied as a part of a coherent strategy, they are a valuable tool for enforcing international norms of behavior and protecting our national interests. At the same time, sanctions are often blunt instruments with unintended adverse consequences on innocent parties, as nations of concern choose guns over butter. As a policy, economic sanctions are not a panacea nor are they cost free. The decision to use sanctions must weigh these costs against their anticipated benefits and, if possible, adjust the sanctions to reduce the potential adverse impact on the civilian population. Indeed, used inappropriately, sanctions can impede the attainment of our objectives and come at a significant cost to other U.S. policy goals.

The U.S. uses economic measures to pursue a broad variety of policy goals. National security, non-proliferation, human rights, environmental protection, and combating narcotics and terrorism are perhaps the most important. None of these is simple and their costs and gains cannot be measured in dollars and cents on a spreadsheet. Nevertheless, Americans expect that when their government does use economic sanctions, the measures can be effectively implemented and enforced, will have a significant impact on those at whom they are targeted, will not have a greater adverse impact on the U.S. itself than the wrong they are trying to remedy, and that due consideration is given to the potential adverse impact on American agriculture and business, as well as other U.S. interests, including ties with our allies.

There are certain common sense principles this Administration is using in making decisions on sanctions. First, we believe unilateral sanctions should generally not be the initial, but among the last, measures taken when a foreign government or group acts in a way that negatively affects our interests. We should first aggressively pursue other diplomatic options. Depending on the situation, they can range from symbolic measures at one end of the spectrum, such as withdrawing an Ambassador or denying visas to target figures, to stronger responses at the other, such as entering into security arrangements with neighboring countries. Generally, we should turn to sanctions only after other, less conflictive options have failed, or are judged to be inadequate or inappropriate.

The Thompson bill, S2645, currently being considered in the Senate, departs from this approach. It is yet another example of an ill-conceived unilateral sanctions bill. In an effort to impose mandatory sanctions on China for weapons proliferation, with a low threshold of proof, it would diminish our ability to work with China on missile proliferation; would punish China as a whole for the actions of private U.S. and Chinese persons; and would threaten permanent normal trade relationships with that nation. It would hurt our interests more than China's, by undermining confidence in U.S. financial markets, threatening Chinese retaliation against U.S. financial services firms, and simply lead to China doing business with our international competitors in dual-use products.

Second, we believe sanctions are most effective when they deprive the target country or group of one or more of its critical needs, from armaments to key commodities, or of its prestige and place in the international community. That, in turn, requires that they have broad multilateral support, especially, though not exclusively, through the United Nations. Last week's decision by the Security Council to ban international sales of diamonds originating with the rebel forces in Sierra Leone is the most recent example of this type of effort. The history of our own use of unilateral sanctions shows that by themselves, in the majority of cases, they fail to change the conduct of the country targeted, or, at best, are a contributory, but probably not decisive, factor in securing the changes we seek. Multilateral sanctions, if applied broadly and consistently, maximize international pressure on the offending state. It was multilateral sanctions that helped end apartheid in South Africa, isolated Saddam Hussein in Iraq and limited his ability to acquire weapons of mass destruction, brought Serbia to the bargaining table in Dayton, and encouraged Libya to surrender the Lockerbie suspects for trial. In the global economy of today, there are few products or services in which the United States is the sole supplier. Our ability to unilaterally deny key economic benefits to a particular country is therefore limited.

Third, sanctions should be narrowly targeted and we must carefully consider their impact on companies from third countries. Sanctions that are both unilateral and extraterritorial may often complicate our efforts to build the multilateral support that is so important if we are to be truly effective in influencing the policies and behavior of target states.

Nonetheless, where we do not succeed in building a coalition of like-minded countries, and important national interests or core values are at issue, the U.S. feels it must be prepared to act unilaterally, as we have done with respect to Cuba and Iran. We understand that some countries that share our values and our views, for example, about the dangers posed by states of concern may be reluctant to join in our initiative. But to maintain our leadership role, the U.S. must sometimes act even though other nations do not feel compelled to do so. Indeed, unilateral U.S. action may spur others to act as well, or may parallel independent action by others. An example is the EU's sanctions program against Burma, a nation on which the U.S. imposes its own sanctions because of its anti-democratic measures and human rights violations.

Fourth, Presidents should be given broad flexibility in any sanctions legislation passed by the Congress. This is so the President can use sanctions flexibly to respond to constantly changing and evolving situations and to balance competing national interests, which only the President can do in his role as the Constitutional implementer of U.S. foreign policy. The President should have the necessary authority from Congress, including waivers, to tailor specific U.S. actions to meet our nation's foreign policy objectives He must be able to trade off sanctions measures to get international consensus for actions that may have a greater impact upon the sanctioned country, or even directly negotiate with the sanctioned country to modify its behavior.

I was in charge of the negotiations with the European Union and Russia over investments in Iran under the Iran and Libya Sanctions Act. Sanctions, if imposed, could have badly impaired diplomatic and economic relations. But by using the project-by-project waiver authority, which Congress wisely built into the Iran and Libya Sanctions Act, we were able to gain agreement from the EU to strengthen export controls on hi-tech exports to Iran and aggressively fight terrorism. The Russians agreed to adopt, for the first time, a catchall export control system. These actions directly furthered the basic goal of ILSA. Without Presidential waiver authority, this would have been impossible.

Waiver authority was also key in my two extended negotiations with the EU over Cuba sanctions. The Helms-Burton Act requires certain measures with respect to firms that invest in property confiscated by the Cuban government. The first negotiation, in 1997, resulted in the EU taking a Common Position on Cuba which explicitly tied closer relations to an improvement in human rights and democracy in that regime and cleared the way for a series of Presidential waivers of sanctions under Title III of the Helms-Burton Act, which have thus far been exercised every six months by President Clinton, as the EU has renewed and implemented its Common Position. In the second negotiation, in 1998, the EU acknowledged for the first time that Cuba had confiscated U.S. property in contravention of international law. The EU committed to restrict official government support for investments by companies in illegally expropriated property and to refrain from giving export and investment subsidies to any of their companies which are investing in such property. This could have a much greater impact on restraining investment in illegally expropriated property in Cuba than the Title IV visa sanctions. However, implementation of this agreement is contingent on our obtaining waiver authority from the Congress under Title IV of Helms-Burton.

Last month, the Supreme Court unanimously decided to strike down a Massachusetts state law restricting state entities from buying goods or services from companies doing business with Burma. The Court determined that the state law was preempted by the Federal law which imposed sanctions on Burma thus violated the Supremacy Clause of the Constitution. In that decision, the Court emphasized the importance of waiver authority in a sanctions regime. It spoke of the "significance" of "the express investiture of the President with statutory authority to act for the United States in imposing sanctions...augmented by the flexibility to respond to change by suspending sanctions in the interest of national security."

In light of the general principles I have described, this Administration has worked with Congress, both this year and last, on general sanctions reform legislation. We believe that, as part of such legislation, the President should be authorized to refrain from imposing any unilateral sanction, and be able to suspend or terminate the application of such a sanction on national interest grounds. So that Congress can play its Constitutional role with respect to this decision, it would be notified of the President's decision to exercise such a waiver and be able to disapprove of it, using expedited procedures. It is important that the President have flexibility to avoid complicating our government's efforts to deal with the situation which led to the sanctions. As Secretary Albright succinctly put it, there can be no "cookie-cutter" or "one size fits all" approach to sanctions policy.

Unfortunately, it now appears that comprehensive sanctions reform legislation will not be enacted in this Congress. However, the Administration is closely watching deliberations on the Senate and House bills to eliminate sanctions on agricultural and medical products, even to terrorist-list states, and to subject new agricultural and medical sanctions to requirements of prior notice and approval by both Houses of Congress. The legislative outcome is uncertain because of efforts to exclude certain states such as Cuba and Iran from the scope of the legislation or alternatively to tie the hands of the President in administering sanctions policy.

The President believes that food and medicine should not be a tool of foreign policy except under extraordinary circumstances. The measures now being debated in Congress share in some respects the basic intent of actions already taken by the Administration to open up farm exports when the President determines that this is in the national interest. Unfortunately, we have several concerns with the bill pending in the House of Representatives. The prior notice and Congressional approval requirements would severely restrict the President's flexibility to impose or retain agricultural and medical sanctions, which might be justified in certain situations. There is no provision for a Presidential waiver. The proposed definition of agricultural commodity is far broader than the standard used by the Administration and could include products that states of concern could sell to earn foreign exchange for weapons programs. The licensing provisions for sales to terrorist state governments do not appear to give the President flexibility with regard to exports to non-governmental entities in these countries.

A fifth factor that guides our sanctions policy is that, in balancing the considerations of which I have spoken, we try to be guided by the principle that our purpose in applying sanctions is to influence the behavior of regimes, not to deny people their basic human needs. Some regimes, such as that of Saddam Hussein, may choose to buy guns instead of butter regardless of sanctions. In such cases, we seek to evaluate approaches that may ameliorate the effect on the civilian population without jeopardizing the purposes for which the sanctions were applied in the first place. The United Nations's Oil for Food Program in Iraq, which we helped shape, exemplifies this concern.

While discussing general sanctions reform legislation with the Congress, the Administration has recently taken steps under existing authority to maximize the effectiveness of sanctions, while minimizing their harmful impact on innocent individuals. Last year, for example, President Clinton announced we would generally exclude agricultural products and commodities, medicines and medical equipment from future unilateral sanctions, and from existing sanctions, where we have discretion to do so. As a result, we have liberalized regulations on food and medicine exports to Iran, Sudan and Libya.

As part of our policy to promote people-to-people ties with Cubans, we increased the amount of remittances individuals can send to independent Cuban households and allowed licensing of food sales to certain non-government stores and other entities.

Last September, after receiving assurances that North Korea will refrain from flight tests of long-range missiles while efforts to improve relations continue, the Administration began a process that resulted last month in the easing of some sanctions against that country. The new rules concern consumer and non-sensitive exports. They will also allow importation of most goods of North Korean origin, as well as personal remittances and transport restrictions. The new regulations were published on June 19, but North Korea will remain designated a terrorist state under our law and non-proliferation controls, so relaxation of sanctions will not affect controls prohibiting exports of military and sensitive dual-use items, some financial activities, and most U.S. government aid.

Last March, as a result of the growth of the reform movement in Iran, Secretary Albright announced we would no longer bar imports into the United States of certain foodstuffs and carpets from Iran. However, further changes in relations between Iran and the U.S. are likely to evolve slowly and additional U.S. steps must be taken as part of a reciprocal, balanced exchange between the two sides. The Secretary made it clear that Iran's continued support of terrorism remains high on the list of our grievances and reaffirmed that our Iranian sanctions are due, in part, to the fact that the authorities currently exercising control in Tehran have financed and supported terrorist groups, including those violently opposed to the Middle East Peace Process. "Until these policies change," she said, "fully normal ties between our governments will not be possible and our principal sanctions will remain."

These are some of the factors and national policy considerations that underlie sanctions, including export controls. As you can see, they have been effective and flexible policy tools. If they are to continue to be so, all parts of our government, as well as private interests and non-governmental organizations must work together to see that our use of sanctions is appropriate, coherent and designed to attract international support. In that effort, as well as the implementation of our policies, we need and appreciate the active participation of yourselves and your companies. Thank you.



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