The Negative Costs of Sanctions

Congress has developed a voracious appetite for imposing sanctions on countries whose policies or behavior it disapproves of, and feeding that hunger is costing American businesses and workers dearly.

The latest sanctions threat comes in a House-passed bill opposed to religious persecution. Countries found to persecute people for their religious beliefs would face an automatic cutoff in U.S. aid, restrictions on exports to America and opposition to loans from such agencies as the International Monetary Fund. Among the countries mentioned in the House debate were Sudan, China, Indonesia and Pakistan. By ironic coincidence, the Clinton administration is at this very moment trying to induce Pakistan not to test a nuclear weapon. The trade-off is attractive aid and export concessions that, under the House bill, would probably have to be withdrawn.

The effect of the sanctions legislation could well reach beyond the countries named. As one critic of the bill reminded his colleagues, under its definition of persecution the bill could be applied to such friendly states as Saudi Arabia, Germany, Israel and Greece. Indeed, it is the unintended consequences of congressionally mandated sanctions that exposes the faults of this approach to managing foreign relations.

Last year the President’s Export Council reported that 75 countries, home to more than 50% of the world’s people, were threatened by unilateral U.S. sanctions. Included were not just traditional pariah states like Iraq, Libya and Burma, but such NATO allies as Canada and Italy as well as Japan, a major trading partner. American exports to the countries under risk of sanctions totaled almost $94 billion in 1996. USA Engage, a coalition of more than 670 businesses, farm groups and trade associations, calculates that up to 250,000 jobs have already been lost because of sanctions.

Sanctions are meant to inflict economic pain and demonstrate moral disapproval, but too often the pain falls on domestic producers. What is needed before Congress gives in to its taste for sanctions is a cool look at their costs and consequences. How will foreign policy goals be affected if sanctions are imposed, what harm could be done to a target country’s civilian population and what would be the costs to Americans?

A sanctions reform bill that addresses these questions has been introduced by Reps. Lee Hamilton (D-Ind.) and Philip Crane (R-Ill.). It calls for closer consultation between Congress and the executive branch on possible alternatives to sanctions, such as multilateral political pressures. It requires careful analysis of the likely costs and effectiveness of any new sanctions.

Before imposing a unilateral sanction, Congress and the president would have to weigh whether it meets a clearly defined policy goal and what its impact on U.S. industry and agriculture would be. In short, the Hamiliton-Crane bill seeks to prevent a heedless rush to actions that could be of dubious effectiveness at best, and do unforeseen economic harm at home. It is always eminently sensible to anticipate the consequences of any policy. It’s time to apply that standard to sanctions.