[Senate Document 105-26]
[From the U.S. Government Publishing Office]



105th Congress                                                 Document
                                SENATE

 2d Session                                                      105-26
_______________________________________________________________________


 
     PROCEEDINGS OF THE SENATE TASK FORCE ON ECONOMIC SANCTIONS

                               __________

                       MITCH McCONNELL, Chairman

                         JOE BIDEN, Co-Chairman

                    TASK FORCE ON ECONOMIC SANCTIONS

                          UNITED STATES SENATE





       Printed under the authority of S. Res. 289, 105th Congress


                SENATE TASK FORCE ON ECONOMIC SANCTIONS

                  MITCH McCONNELL, Kentucky, Chairman
                         JOE BIDEN, Co-Chairman
ALFONSE D'AMATO, New York            MAX BAUCUS, Montana
JESSE HELMS, North Carolina          CHRIS DODD, Connecticut
TIM HUTCHINSON, Arkansas             JOHN GLENN, Ohio
RICHARD LUGAR, Indiana               JOHN KERRY, Massachusetts
JON KYL, Arizona                     PATRICK LEAHY, Vermont
CONNIE MACK, Florida                 CARL LEVIN, Michigan
PAT ROBERTS, Kansas                  JOE LIEBERMAN, Connecticut
JOHN WARNER, Virginia                PATRICK MOYNIHAN, New York


                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 8, 1998
                           OPENING STATEMENTS

                                                                   Page
McConnell, Hon. Mitch, U.S. Senator from the Commonwealth of 
  Kentucky.......................................................     1
Baucus, Hon. Max, U.S. Senator from the State of Montana.........     4
    Prepared statement...........................................     6
Eizenstat, Stuart, Under Secretary of State for Economic, 
  Business and Agricultural Affairs, Department of State.........     8
    Prepared statement...........................................    14
Kyl, Hon. Jon, U.S. Senator from the State of Arizona............    36
Lieberman, Hon. Joseph I., U.S. Senator from the State of 
  Connecticut....................................................    43
Hutchinson, Hon. Tim, U.S. Senator from the State of Arkansas....    45
Glenn, Hon. John, U.S. Senator from the State of Ohio............    46
Roberts, Hon. Pat, U.S. Senator from the State of Kansas.........    49
    Prepared statement...........................................    52
Lugar, Hon. Richard, G., U.S. Senator from the State of Indiana..    59
Mack, Hon. Connie, U.S. Senator from the State of Florida........    60
Roth, Kenneth, executive director, Human Rights Watch............    61
    Prepared statement...........................................    64
Lee, Thea M., assistant director for International Economics, 
  Public Policy Department, AFL-CIO..............................    75
    Prepared statement...........................................    77
Abrams, Elliott, president, Ethics and Public Policy Center......    81


                           SEPTEMBER 9, 1998
                           OPENING STATEMENTS

McConnell, Hon. Mitch, U.S. Senator from the Commonwealth of 
  Kentucky.......................................................    95
Haass, Richard, N., Brookings Institution........................    98
    Prepared statement...........................................   101
Hufbauer, Gary, Reginald Jones Senior Fellow, Institute for 
  International Economics........................................   108
    Prepared statement...........................................   111
Carter, Barry E., Georgetown University Law Center...............   122
    Prepared statement...........................................   127
Lugar, Hon. Richard G., U.S. Senator from the State of Indiana...   138
D'Amato, Hon. Alfonse, U.S. Senator from the State of New York...   142
    Prepared statement...........................................   144
Sprague, William R., president, Kentucky Farm Bureau, 
  representing American Farm Bureau Federation...................   150
    Prepared statement...........................................   153
Lane, William C., CEO, USA Engage Coalition......................   160
    Prepared statement...........................................   163
Donohue, Thomas J., president and CEO, U.S. Chamber of Commerce..   170
    Prepared Statement...........................................   173
Hutchinson, Hon. Tim, U.S. Senator from the State of Arkansas....   182
Warner, Hon. John W., U.S. Senator from the Commonwealth of 
  Virginia.......................................................   182
Biden, Hon. Joseph R., U.S. Senator from the State of Delaware...   187



                    TASK FORCE ON ECONOMIC SANCTIONS

                              ----------                              


                       TUESDAY, SEPTEMBER 8, 1998

                              United States Senate,
                          Task Force on Economic Sanctions,
                                                   Washington, D.C.
    The task force met, pursuant to notice, at 2:11 p.m., in 
Room SH-216, Hart Senate Office Building, Hon. Mitch McConnell 
(chairman of the Task Force) presiding.
    Present: Senators McConnell, Hutchinson, Kyl, Lugar, Mack, 
Roberts, Warner, Baucus, Glenn, and Lieberman.

 OPENING STATEMENT OF HON. MITCH McCONNELL, U.S. SENATOR FROM 
                  THE COMMONWEALTH OF KENTUCKY

    The Chairman. Good afternoon, everyone. We will start the 
hearing. We are pleased to have Secretary Eizenstat here.
    The rules for the Task Force will be that the chairman and 
Senator Baucus, who is standing in for Senator Biden, who is 
not here today, will make a brief opening statement and then I 
would like to ask the other members to make whatever opening 
statements they may have in conjunction with the questioning. 
And we will do five-minute rounds, taking people in order of 
their arrival to the Task Force, which will give, hopefully, 
everybody an opportunity to have his or her say in the most 
efficient manner.
    This Task Force was formed by Senator Lott and Senator 
Daschle to try to answer seven questions which I think are 
important to keep in mind as the hearings and the process move 
forward.
    First, what defines a sanction? Is restricting U.S. 
assistance a sanction, or is a sanction only a ban on 
investment?
    Second, what sanctions are in place already and what 
flexibility is afforded to modify or lift these existing 
sanctions?
    Third, how is success determined or defined?
    Fourth, how should goals be defined?
    Fifth, is there an effective coordination between the 
executive and legislative branch when sanctions are imposed?
    Sixth, is there monitoring of compliance with existing 
sanctions?
    And, finally, should we adopt new Senate procedures for the 
consideration of sanctions?
    At the heart of today's hearing and the broader debate is 
the very first question: what is a sanction? To determine the 
answers to every other question the leadership has included in 
our mandate, we must begin with a common understanding of the 
baseline.
    I have always held the view that any interruption of 
commercial activity, especially a ban on investment or 
restrictions on exports, imports and financial transactions, 
certain constitute sanctions. However, much of the public 
interest which generated this Task Force and this review of 
sanctions is based on frequently quoted statistics collected by 
the National Association of Manufacturers and widely circulated 
by USA Engage.
    They report, ``between 1993 and 1996, 61 new U.S. laws were 
enacted authorizing new unilateral sanctions on 35 countries, 
or 42 percent of the world's population, and 19 percent of the 
world's export markets.'' Now, that is a quote from the USA 
Engage publication. However, many, if not the majority of the 
sanctions identified are conditions imposed on the availability 
of foreign assistance to a recipient nation.
    For example, the study cites a restriction I included in 
the fiscal year 1995 foreign operations bill which linked 
foreign aid to Russia with the government making progress on 
negotiating payment of commercial debt, enforcing contract 
sanctity, and providing equitable treatment to foreign private 
investment. Aid was also withheld if the government 
expropriated private assets.
    I took the view then, as now, that if Moscow did not 
adequately protect and promote private investment, Russia would 
not grow and our aid would be wasted. This particular 
condition, in fact, was largely generated by problems described 
by U.S. firms struggling with an increasingly irrational 
commercial environment.
    Nonetheless, the condition is cited by the National 
Association of Manufacturers and USA Engage as a sanction 
apparently because it generates an impression that the United 
States is an unreliable trading partner. I guess, to paraphrase 
an old cliche, one man's economic terrorist is another man's 
commercial freedom fighter.
    As I have considered the boundaries of sanctions, it seems 
the current debate over definitions and merits turn upon 
whether the action is unilateral or multilateral and whether it 
has punitive consequences in terms of sales or market access 
and permanent share. Personally, I am extremely uncomfortable 
with these distinctions as a basis for evaluation or definition 
of a sanction, as it could invite a reconsideration of the 
merits of retaliatory trade actions which have historically 
been punitive and unilateral, but also successful. I think we 
need to refine the debate and the terms.
    As has been suggested in the conversations leading up to 
these hearings, I expect our witnesses to begin with their 
understanding of what constitutes a sanction so that we can 
better frame the parameters of legislative or executive conduct 
which is the subject of review and potential revision. We will 
not be able to reach a consensus on recommendations if we can't 
agree on the scope of the problem we have been asked to 
consider.
    While the leadership's questions are very specific, let me 
suggest our witnesses also consider three general themes which 
bear on the Task Force recommendations and my conclusions. They 
are: the relevance of U.S. leadership, the complexities of 
current international conditions, and the balance of power 
between branches of Government.
    The United States stands today as the only real, relevant 
political, military and economic superpower, a position which 
rests on the firm foundation of the unparalleled success of a 
free market democracy. We stand in marked contrast to the 
failed protectionist cronyism which has crippled economies from 
Tokyo to Thailand.
    Inherent in this position of leadership is the 
responsibility to serve and advance fundamental standards of 
conduct. Thus, the first issue to consider is the following. In 
the interest of protecting American economic opportunities, how 
should we balance or consider our long-term interests in 
encouraging improvements in basic civil liberties, human rights 
and non-proliferation, or defeating terrorism, narcotics 
trafficking and crime?
    Second, in today's world is it possible, or even advisable, 
to produce a bill or a policy position that, in essence, is a 
``one-size-fits-all'' package? Should the procedures available 
to Congress or the President be identical when dealing with 
problems related to political repression as they would be with 
dealing with a nuclear threat? For example, are Burma and Iraq 
so similar we can legislate a standardized approach for future 
application?
    While the prolonged review period over Burma sanctions was 
frustrating for some of us, it did allow for a full discussion 
and reasonable decision to be reached. I am not so sure this or 
a similar extended process would be as effective in a case 
where a nation threatened to expand or use its arsenal of 
weapons of mass destruction. If the United Nations or the 
Europeans balk, should the President be required to wait three 
months before taking action to impose a military-enforced trade 
embargo on such a pariah?
    Obviously, there are circumstances of an immediate threat 
in which emergency powers could justifiably be used to preempt 
any uniform approach we develop. But many involved in this 
debate believe there should be a standardized threshold with 
uniform expectations about timing and terms before any action 
is taken. If I have learned anything in this job, it is that 
the frequency of unanticipated contingencies usually outpaces 
most legislative proposals attempting to fit or manage all 
future policy options.
    Finally, having agreed the world is an increasingly complex 
place, I am uncertain about the wisdom of ceding any branch of 
the Government new and, relatively speaking, more of a role in 
shaping our future. The administration's proposal, which I 
understand Secretary Eizenstat will explain, reflects a balance 
in principle, but if I understand it correctly, not in actual 
power.
    While all congressional sanctions procedures would be a 
matter of statute, the administration would be subject to 
executive order or Presidential policy directive, which is 
somewhat easier to overturn, reverse or modify on short notice. 
The final question, therefore, is can we achieve a balance in 
any proposal which preserves the prerogatives of each branch of 
Government and still satisfy the important concerns raised by 
our business and agricultural communities.
    I would hope these hearings lead to a report and 
legislation which will offer a rational, yet flexible plan for 
the consideration and imposition of sanctions. In discussions 
with my colleagues on the Task Force, I have suggested that we 
attempt to bring the same level of confidence and reasoning 
which governs the 301 trade sanctions process to the broader 
universe of sanctions.
    I believe we need to develop a matrix which makes clear 
what U.S. actions can be taken in response to types of actions 
by foreign governments. There is an obvious range of options, 
from the positive, such as opening embassies and expanding 
trade, to the negative, visa reviews and limiting joint 
commission activities, to actual bans on financing, trade or 
investment.
    The 301 process succeeds because there are clear rules, 
with a steady, moderated and monitored increase in the pressure 
applied with each step designed to modify government or 
corporate conduct. This Task Force can succeed if we bring that 
level of confidence to this discussion and to our results.
    With that, let me turn to Senator Baucus.

 STATEMENT OF HON. MAX BAUCUS, U.S. SENATOR FROM THE STATE OF 
                            MONTANA

    Senator Baucus. Thank you, Mr. Chairman. I am here, as you 
know, substituting for the co-chairman of the Task Force, 
Senator Biden. He is unable to be here today. In fact, it is a 
very urgent call. His daughter-in-law was in labor, so he is 
attending to his duties being a good grandfather.
    I have just a few brief remarks. I will ask that my full 
statement be included in the record. Just several points. One 
is that we are all perplexed as to what the use of sanctions 
should be, and this is nothing new to the 1990's. It was, after 
all, the United States that imposed sanctions with the Stamp 
Act because of taxation without representation. There was a 
blockade during the Civil War. We all approved the South 
African sanctions.
    Not too long ago, I was reading a biography of President 
John Adams, who said that sanctions just don't work, and he was 
giving all the reasons why unilateral sanctions don't work. And 
it is deja vu; we actually should have had him here today. It 
is amazing how similar his reasoning was in opposition to 
unilateral sanctions then as it is to many today.
    I read somewhere that we have sanctions affecting over two 
dozen countries, about one-third of the world's population. I 
am sure that is not the case with the European Community, with 
Japan or any other country. I also note that sanctions often 
hurt ourselves more than they hurt the intended country or 
people. They also hurt innocent people in other countries, 
particularly in this interrelated world where different 
countries and companies can find other ways of accomplishing 
their purposes.
    The main point I want to make--a couple points, actually--
is one you made, Mr. Chairman, that we have to do a lot better 
job in figuring out where sanctions fit in the whole quiver of 
arrows of foreign policy. There are lots of different actions 
this Government can take with respect to another country, and I 
think that we should have a much more methodical and organized 
and orderly examination of where sanctions fit in compared with 
some of the other actions that you mention. I know the 
administration is thinking more along those lines, but it is my 
sense that we are not nearly as far along on that as we could 
and should be.
    And my final point is that partisan politics--we have heard 
it many, many times--should stop at the water's edge. And to go 
a bit further with that point, I think it would be very useful 
if the administration could sit down with members of the House 
and the Senate who are particularly interested in foreign 
policy, Republicans and Democrats, to try to structure some 
kind of a system, some kind of an approach dealing with the 
hierarchy of actions that this country takes in the foreign 
policy arena.
    I know it sounds a bit ambitious and perhaps even a bit 
naive, but if we are going to be the world leader that we like 
to think we are, and particularly given these times with the 
economic crises worldwide and where American leadership is 
being sought and in many respects not given, it is time for 
members of the House and Senate, Republicans and Democrats, to 
step up and be a little more statesmanlike and kind of do what 
is right for the country, knowing that there will be plenty of 
other opportunities for members of the House and Senate to 
pursue their own individual interests which may or may not 
include partisan politics. But on matters such as this, 
sanctions, foreign policy, and particularly at this time with 
the world economic crisis in such a state, I think it behooves 
us all to work better together.
    Thank you.
    The Chairman. Thank you, Senator Baucus.
    [The prepared statement of Senator Baucus follows:]
    
    
    The Chairman. Secretary Eizenstat, go right ahead.

  STATEMENT OF STUART EIZENSTAT, UNDER SECRETARY OF STATE FOR 
  ECONOMIC, BUSINESS AND AGRICULTURAL AFFAIRS, DEPARTMENT OF 
                             STATE

    Mr. Eizenstat. Thank you very much, Mr. Chairman. I 
genuinely welcome this opportunity to share with you our views 
on the use of economic sanctions as a foreign policy tool. This 
Task Force can make a genuine, lasting contribution to 
developing a bipartisan consensus on an important area of our 
country's foreign policy where both the Congress and the 
executive branch have clear responsibilities.
    I would like to extend my appreciation to Majority Leader 
Lott and Minority Leader Daschle for convening the panel, and 
to you, Mr. Chairman, and Senator Biden and Senator Baucus for 
co-chairing this Task Force. We stand ready to work with you in 
the days and weeks ahead to develop both an improved dialogue 
on this issue, but also to forge an actual agreement and 
enhance our effectiveness in advancing America's national 
interests.
    Properly designed and implemented as part of a coherent 
multilateral strategy, sanctions, including economic sanctions, 
can be and are a valuable tool for advancing American interests 
and defending American values. As examples, without economic 
sanctions, Serbia would not have come to the negotiating table 
to end the war in Bosnia. Iraq would not be limited in its 
ability to sell oil and acquire weapons of mass destruction. 
Libya would not stand isolated for its failure to hand over the 
Lockerbie suspects. South Africa might not have ended 
apartheid. All of these have succeeded in whole or in part 
because they were part, however, of an integrated multilateral 
sanctions regime.
    There is also a useful, though more limited role for 
unilateral sanctions. Those sanctions include such countries as 
Cuba and Iran, the Sudan, Nigeria and Burma, and they serve 
important U.S. interests. But in recent years, there has been 
an explosion in the frequency with which we turn to unilateral 
economic sanctions. More than half of all the sanctions, 
however defined, since the end of World War II have been 
employed since only 1993; 62, more than half, since 1993, 
compared to a total of 92 since the end of World War II.
    The President's Export Council notes that more than 75 
countries are now subject to some form of U.S. economic 
sanctions. Most of the sanctions imposed have been non-
discretionary measures required by law by the Congress. In 
contrast, only 3 of the 62 unilateral economic sanctions 
regimes imposed since 1993 have been imposed by the executive 
branch as a discretionary matter under the President's 
authority under the International Emergency Economic Powers 
Act, or IEEPA, on Iran in 1995, and in 1997 on the Sudan and 
Burma.
    If our sanctions are to be effective, if we are to bring 
needed discipline to this area, we all have to work together to 
see that our use of sanctions is appropriate, coherent and 
designed to ensure international support. We think there is a 
hierarchy of U.S. responses to actions by foreign governments 
which may adversely affect U.S. interests.
    First, we should use all available diplomatic weapons, and 
we have a whole variety of them. Next, if those fail to achieve 
our objectives, multilateral sanctions should be tried, since 
they will be more effective than unilateral sanctions and will 
exact fewer costs to U.S. business and agriculture. And, 
oftentimes, we are not given the full opportunity, Mr. 
Chairman, to try to develop a multilateral sanctions regime, 
which takes time.
    But if a multilateral regime cannot be successfully 
negotiated--and there will be times, indeed, when that is the 
case; Iran is an example--unilateral sanctions are an option. 
But, there, the key consideration should be whether they will 
be effective in promoting our foreign policy goals. Last, of 
course, on this hierarchy, but one that always has to be 
available, is the possible projection of military force.
    Because reform of our sanctions policy should reflect a 
common vision by the administration and Congress, embodied in 
clear procedural and substantive guidelines for both branches 
of Government, we really welcome this opportunity to share with 
you our views. We sought to build on many of the concepts 
advanced by Senator Lugar, Congressmen Hamilton and Crane, 
Senator Dodd, Senator Glenn, Senator Roberts, Senators Robb and 
Brownback in actual legislation, and those discussed by 
Senators like Baucus and Hagel and others, to craft a proposal 
which we believe, if adopted, could make a real contribution to 
improving the way we use sanctions to further our foreign 
policy objectives.
    The fundamental principle behind our proposals is one of 
symmetry between the branches. Congress, in short, Mr. Chairman 
and members of the Task Force, should be no more prescriptive 
of the executive branch than it is willing to be of itself. 
With this basic concept, permit me to share some additional 
thoughts on how this might be accomplished.
    First, with respect to constraints that the Congress 
imposes on itself, we are obviously somewhat leery of trying to 
be prescriptive of what you should do with your body, but 
permit me to say this. The Lugar bill contains constraints on 
congressional consideration of future sanctions legislation. It 
prescribes certain congressional procedures for consideration 
of future sanctions bills. The administration would like to 
build on but modify those ideas.
    We, for example, endorse the constructive idea that a 
member could raise a point of order if the procedural steps in 
the Lugar proposal are not met before a sanctions bill is moved 
to the floor. But the trigger for raising a point of order in 
the Lugar proposal is a mandatory Presidential report, and we 
think it is both unrealistic and highly burdensome to expect a 
detailed executive branch report each time any sanctions bill 
is voted out of a committee.
    Thus, we suggest instead that sanctions reform legislation 
provide that a bill would not be in order to move to the floor 
unless there had been a report of the relevant committees 
explaining whether the bill meets the substantive criteria 
called for in the Lugar proposal. The legislation could also 
provide, we suggest, that future unilateral economic sanctions 
legislation be considered a so-called Federal private sector 
mandate which would require that a Congressional Budget Office 
report be prepared assessing the impacts of the bill on the 
U.S. economy, and that this could trigger a point of order 
against a bill reported by a committee that did not include 
such a CBO report.
    The Lugar bill would also impose certain substantive 
constraints on future sanctions legislation; for example, a 
statement of objectives, a sunset clause, contract sanctity, 
national interest waiver, that the sanction be narrowly 
targeted, that it not include restrictions on the provision of 
food and medicine, that it seek to minimize adverse 
humanitarian impact. We frankly would support the inclusion of 
such provisions in new sanctions regarding the Congress, with 
appropriate flexibility.
    You raised the issue, and a very important one, Mr. 
Chairman, of the scope of constraints. What is an economic 
sanction? To what legislation would that apply? Here, we 
generally support the proposal in Lugar, the definitions 
contained therein, that constraints would apply to future 
unilateral economic sanctions broadly defined, as he has done 
so, to apply to bills imposing both discretionary and mandatory 
sanctions and to sanctions imposed for a wide range of reasons.
    Some of the examples might include a denial of a normally 
available benefit; for example, the denial of access to the 
U.S. market on an MFN basis, the denial of other benefits which 
might be provided--for example, U.S. support in international 
financial institutions or USAID--or the imposition of other 
punitive or coercive economic measures in order to induce a 
foreign government to change its policies. We agree with the 
sponsors of the Lugar bill that this provision should not apply 
to trade legislation, but we also believe it shouldn't apply to 
labor-related or environmental legislation.
    The Congress, of course, will always retain--and here is 
where the issue of symmetry comes into effect--always retains 
as a legislative body the flexibility to depart from whatever 
sanctions legislation it passes, including these kinds of 
guidelines, because a subsequent inconsistent sanctions law 
would always take precedence by simply including 
``notwithstanding any other bill'' language, and because 
Congress can simply choose to disregard or to change any 
procedural rules applicable to it. Nonetheless, these 
provisions are an important baseline for congressional 
consideration.
    Second, I would like to address the issue of a national 
interest waiver, and here I would like to address the notion of 
comity between the branches. Certain existing sanctions laws 
contain inadequate or, in at least one case, the Glenn 
amendment, no waiver authority at all. We believe that 
flexibility, accompanied by appropriate national interest 
waiver authority in all legislation, is the single most 
essential element to make sanctions work.
    We believe that the President should be authorized to 
refrain from imposing or taking any action which results in the 
imposition of any unilateral economic sanction or to suspend or 
terminate such a sanction based on a national interest 
determination. Now, we don't expect carte blanche. Here again, 
we have genuinely tried to build in the concept of comity 
between the branches, and so we suggest, for example, that any 
such national interest waiver could include inclusion of 
expedited procedures by the Congress to allow Congress to pass 
legislation disapproving the President's exercise of that 
waiver authority within a prescribed number of days--30, 60, as 
you wish.
    We would support applying this waiver authority to all 
existing and future legislation. And I would like to again 
emphasize that everything else we suggest, the legislation and 
the executive order I am about to mention, would apply only to 
future legislation. This we would like to see, if possible, 
apply to both existing and future legislation.
    I want to stress why this national interest waiver is so 
important. Congress should, and does, lay out prescriptively 
foreign policy goals it would like to see accomplished, backed 
by economic sanctions. That is a appropriate. It is also 
appropriate, however, as a matter of comity to say to the 
President, we realize that, as the President, responsible for 
the implementation of foreign policy and negotiation and 
dealing with foreign governments, that you alone have the 
opportunity to balance all the interests engaged.
    Let me, if I may, give you three quick examples of how this 
flexibility can be used and, when it is not available, how it 
can hamstring the administration, and if I may say so, even the 
Congress. The Iran and Libya Sanctions Act, Helms-Burton, and 
the Glenn amendment--very quickly, let me just run through 
those, with your permission.
    On the Iran and Libya Sanctions Act, the whole purpose of 
the legislation was to try to deny Iran the capability of 
acquiring weapons of mass destruction, something we obviously 
agree to. When the Total Gazprom deal in Iran came up, we were 
able to use the leverage of sanctions to get both the European 
Union and Russia to tighten their export control regimes to 
make it more difficult for Iran to acquire weapons of mass 
destruction. So we creatively used the waiver authority you 
gave us to accomplish the very purposes of the Act.
    The same occurred with respect to Helms-Burton. We used the 
Title III lawsuit waiver authority, which we have now exercised 
about five times, to get the European Union to agree that they 
would not upgrade their relations with Cuba until and unless 
Castro changed his human rights conduct, and the promise of a 
potential waiver to amend Title IV just a few months ago when I 
negotiated with the European Union an agreement that would bar 
any European Union commercial assistance agency from providing 
government assistance to any investor in Cuba until they 
determine that it is not on expropriated property. So here 
again, using that waiver authority, we actually accomplished 
the goals of the statute.
    On the other hand, with the Glenn amendment covering India 
and Pakistan, we had no such authority, no flexibility 
whatsoever, and this has impeded our ability, as the Senate has 
recognized in your own action to give us more flexibility, to 
accomplish the goal of getting India and Pakistan into a non-
proliferation regime.
    So here again, in the waiver authority we fully recognize 
your constitutional responsibilities, and what we are saying is 
Congress does and should speak in these areas, but give us the 
flexibility with the national interest waiver to waive 
sanctions when necessary, with your then having the right after 
the fact on an expedited basis to overturn that, subject to, of 
course, Chaddha requirements. You also, of course, have the 
power of the purse, you have the power of oversight, and all of 
these make an adequate tool for supervision.
    Third is what restrictions should apply to the executive 
branch? The Lugar bill would also impose a number of specific 
procedural and substantive restrictions on the executive branch 
for new sanctions imposed under IEEPA and for all future 
unilateral economic sanctions. We would propose instead that 
the President would be willing to issue an executive order, and 
this would be done in a very transparent way sharing with you 
our thoughts and ideas, that would set out guidelines, and if I 
may say so, Senator Lugar, taken largely from your legislation, 
that would apply in two situations; first, all future sanctions 
regimes under IEEPA; second, the imposition of sanctions under 
future sanctions laws passed by Congress.
    The Lugar bill would impose many inflexible restrictions on 
the President's imposition of sanctions requiring him, for 
example, to announce and publish his intent in advance in the 
Federal Register specifying all future sanctions that would be 
included, things that would be included like cost/benefit 
analysis and contract sanctity.
    Now, we support the general idea behind these constraints 
and we would put many of them in our executive order. But 
flexibility is crucial. Permit me to give you some examples as 
to why it is very difficult to legislate in this area.
    If we were required to telegraph in advance our intention 
to seize the assets of suspected terrorists or narcotics 
traffickers or major international criminals, or indeed in 
other foreign policy purposes, it would effectively rule out 
asset freezes and many other things. I can tell you as a 
personal fact that when I was negotiating with the European 
Union and Russia on the tightened export controls for dual-use 
products going to Iran, if we had had to publish in advance our 
intention to sanction, we would have cut off negotiations. We 
would not have been able to pursue that. They would have 
withdrawn from negotiations we had.
    Likewise, sunset clauses, if they don't have sufficient 
flexibility, also can present a problem. Many of the purposes 
for which we impose sanctions--non-proliferation, to combat 
drug trafficking, to combat terrorism, to encourage greater 
respect for human rights--are long-term and time-bound. We 
shouldn't give the targets of such sanctions the ability to 
wait us out.
    Even contract sanctity, which again, as I will describe, we 
will try to honor, has to have some flexibility because we are 
told by our law enforcement people with whom I have obviously 
talked before presenting this testimony that one of the ways 
they break into international criminal gangs is they go behind 
front organizations and break contracts. So there again, there 
has to be flexibility and that is the key. In these, as in all 
other cases, the President needs the flexibility to tailor our 
responses most appropriately to the specific situation with 
which we deal.
    Having said that, we are not trying to escape our 
responsibility while we are asking you to restrain yourself. We 
would include many of the things that you are suggesting in 
your legislation in this executive order. Indeed, with the 
enhanced flexibility I have suggested and in the context of an 
overall package, the President would sign an executive order 
that would include the following guidelines according to which 
the President would have to follow to impose sanctions: a 
requirement to analyze costs and gains to all relevant U.S. 
interests. We use the term ``gains,'' by the way, because 
``benefits'' suggests that you can always quantify a sanction 
or a cost; you can't with respect to protection of a human 
right or preventing missile delivery or whatever.
    Contract sanctity should be generally preserved, and we 
would say so in the executive order unless the President 
determined that it would detract from the effectiveness of the 
sanction. Annual review of future executive branch sanctions 
under which the President would have to determine annually that 
sanctions--and here we would be willing to go back to existing 
sanctions as well--are meeting certain criteria in order for 
them to continue in existence. If he did not make that 
determination, the sanction would sunset. As the Lugar 
legislation suggests, narrow targeting, appropriate exemptions 
to minimize adverse humanitarian impact, and, wherever 
possible, prior consultations with Congress.
    As a general principle, as the President has said on 
several occasions, we also think that, frankly, starvation is 
not a useful tool for foreign policy. Restrictions on the 
commercial export of food, medicines and other human essentials 
should be excluded from the economic sanctions regimes, absent 
compelling circumstances. The Senate frankly has recognized the 
same thing in the fiscal 1999 Agricultural Export Relief Act 
and this is a good model that we can use; that is, generally, 
sanctions on a unilateral basis should not apply to food, 
medicines or humanitarian goods.
    But here, too, flexibility is needed. For example, with 
countries on the terrorist list like Iran, we would not want to 
feel that we have to ship food, that we have to ship medicine. 
Therefore, any legislation and our executive order would 
include authority to waive the exemption so that we could 
balance those interests out as well.
    Mr. Chairman, there is much else to say, but I don't want 
to preempt in any way your questions. Let me just conclude that 
by working together, respectful of each other's duties and 
responsibilities in the foreign policy area, we believe we can 
develop a bipartisan consensus on economic sanctions as a 
foreign policy tool. This would make us more careful in our use 
of sanctions, ever mindful of the costs as well as the gains, 
and would make those sanctions we do employ more effective in 
accomplishing our national goals.
    Again, I would like to thank you and thank so many of the 
Senators, Senator Lugar and others, for the excellent work they 
have done in helping--Senator Roberts--all of you have done 
your bit. We have tried to incorporate as much of your 
legislation as we could in our thoughts.
    [The prepared statement of Secretary Eizenstat follows:]
    
    
    The Chairman. Thank you, Secretary Eizenstat. Do you 
consider conditions on foreign assistance programs sanctions?
    Mr. Eizenstat. Yes, sir, in general, we do. We think that 
the kind of broad definition that is in the Lugar bill is most 
appropriate and that the denial of benefits such as U.S. 
support in international financial institutions or USAID does 
constitute a sanction.
    The Chairman. Does it necessarily follow, then, that it is 
your view that foreign aid is an entitlement that can't be 
conditioned?
    Mr. Eizenstat. No, we don't suggest that a sanction has to 
be something other than--or that it has to be an entitlement at 
all.
    The Chairman. No, no, that foreign aid is an entitlement.
    Mr. Eizenstat. No. I understand. Of course, it is not; 
neither, in a sense, is access to our market. But we think that 
sanctions are best defined as the application of economic 
pressure to achieve foreign policy objectives. And if economic 
pressure is used by saying that we can't vote in an 
international financial institution for aid or that our foreign 
aid is to be withdrawn or that market access is to be 
withdrawn, or whatever, that that is, in fact, a sanction. 
Again, we certainly would be willing to work with you on the 
definitions.
    The Chairman. You indicated you were recommending statutory 
changes for congressional procedures regarding sanctions, but 
that the administration's procedures would be carried out by 
Presidential directives or executive orders. Are you open to 
discussion that we proceed in tandem on both of those, with 
both these branches?
    Mr. Eizenstat. Yes, sir, we are. One of the concerns we had 
was the mandatory language in some of the proposals that are 
out there now, the ``shall'' language, ``the President shall do 
certain things.'' And here again, we get to the issue of 
symmetry. We know that as a legislative body, Congress can only 
do so much to limit itself. It can prescribe rules, it can 
prescribe points of order, but it can always in the next bill 
avoid those by a ``notwithstanding any other measure in law'' 
provision.
    If that is the case with respect to the Congress, the 
President also needs to have some flexibility and he can't be 
more bound in the executive branch. But the short answer to 
your question is yes, we are willing to proceed in tandem and 
to make these as symmetrical as humanly possible.
    The Chairman. You indicated in your statement you favored 
excluding current labor or environmental regulations or law 
from the sanctions review process. This would mean that the 
rules that have kept, for example, OPIC out of Korea until 
recently or the Ex-Im Bank out of major projects in China would 
remain fixed in place as we engage in a comprehensive overhaul 
of all the other sanctions?
    Mr. Eizenstat. Our general feeling is that issues like 
tuna-dolphin, shrimp-sea turtle, GS pre-treatment, are not what 
we would consider national security or directly foreign policy 
issues. They have clearly a foreign policy impact. We also 
think that in terms of passing a piece of legislation that the 
practical burdens that including this might impose on the 
Congress and executive branch might outweigh the benefit of 
doing so.
    The Chairman. Senator Baucus?
    Senator Baucus. Thank you, Mr. Chairman.
    Mr. Secretary, I assume--you didn't state it in your 
remarks--that you would be opposed to state and local 
sanctions.
    Mr. Eizenstat. Senator, this legislation doesn't include--
that is, the Lugar legislation doesn't include it. Our proposal 
did not as well. We think that, again, in some respects, 
Chairman McConnell, this is similar to the question you asked. 
If we start to get into the issue of State and local sanctions, 
we are dealing with a whole different kettle of fish.
    It is a problem. We have worked very assiduously with state 
and local governments to try to avoid conflicts with Federal 
policy. We have a situation right now with the Massachusetts 
sanctions on Burma. We had threatened sanctions on Switzerland, 
and so forth. We think that that is best worked out 
cooperatively in our Federal system rather than to try to 
legislate it. It would be very difficult, Senator Baucus, to 
try to legislate state and local sanctions.
    Senator Baucus. Next, you mentioned potential congressional 
constraints; for example, points of order and potential points 
of order; for example, whether the bill meets certain criteria, 
and also whether the Congressional Budget Office has issued a 
report on the bill's impact on the economy. And there are some 
provisions, I think, in Senator Lugar's bill.
    What kinds of points of order do you think make sense and 
which do not, that is among those that have been discussed, and 
why?
    Mr. Eizenstat. Well, again, here we are little leery of 
trying to be overly prescriptive for the legislative branch in 
the same way we hope you will not be overly prescriptive of the 
executive. But our feeling was that the current proposals 
dealing with points of order did not really provide the kind of 
assurance that legislation which failed to follow, for example, 
the Lugar criteria would be kept off the floor.
    And so our suggestion was that committees would have to 
include the requirements that the Lugar legislation has--for 
example, contract sanctity, sunset provisions, cost/gain 
analyses and the like--and that if they did not, they would be 
subject to a point of order with--you know your rules far 
better than I do--with what is necessary to overturn a point of 
order.
    Likewise, and we think even more effective, would be 
requiring the Congressional Budget Office to prepare a report 
on the impacts under the concept of the private sector mandate. 
That way, when Congress was preparing something for the floor, 
the members of the Senate and the House would have before them 
a CBO analysis of what impact the proposed sanction would have, 
whether it was likely to be effective, what costs it would 
impose, are other countries likely to join, is this simply 
going to mean the loss of business, and the like. And that CBO 
report, if it was not included, would also make the legislation 
subject to a point of order.
    Senator Baucus. One other area, if I have the time, is 
national interest, say, versus national security, and you have 
spent a lot of time talking about national interest and the 
reasons why that gives the administration appropriate 
flexibility because, obviously, you know, no one can predict 
the future with a clear crystal ball.
    Could you give us some examples of what the national 
interest--what are the standards, what are the criteria for 
national interest, and I assume by not mentioning why national 
security would not be the appropriate standard for flexibility?
    Mr. Eizenstat. Thank you. We had the opportunity, Senator 
Baucus and Senator McConnell and other Senators, of meeting 
with your staff a few weeks ago in preparation for this hearing 
and we went through this question. And one of the staff asked--
Robin Cleveland--the question of whether we would be willing to 
consider a different waiver standard, like national security, 
for certain types of sanction legislation like non-
proliferation legislation.
    What we said was that our general view is that the national 
interest--and I am going to answer your question very 
specifically in a second--that national interest is a broader 
standard. It is a more flexible standard. It is, if I may say 
so, Senator Lugar, the standard that you have used as your 
guideline. However, with respect to non-proliferation sanctions 
legislation, we are willing to consider a potentially different 
standard, like national security.
    Now, what do we mean by national interest? It will depend 
on the particular circumstance. Permit me to give you a 
concrete example of the national interest standard that we used 
in the 9(c) waiver under the Iran and Libya Sanctions Act on 
the Total investment in Iran. We took into account, and we 
enumerated to the Congress so you knew transparently what we 
considered, the following factors: that if we had sanctions, it 
would be contrary to the national interest; that it would have 
been more difficult to get the cooperation of the European 
Union and Russia in negotiating export controls on dual-use 
products to Iran; that it would have complicated Russia's 
ratification of the START II treaty; that it would have made it 
more difficult for us to continue cooperation with the European 
Union and with Europe in a number of other areas like Bosnia, 
Kosovo, and the like; that it would have invited more Russian 
vetoes in the Security Council in areas that were critical to 
us. A Malaysian company was also part of this. It would have 
complicated Malaysia's economic situation during this financial 
crisis if we are perceived as sanctioning one of their major 
companies.
    Now, what we are suggesting is that--and, again, we have 
tried to be as accommodating as we can to the notion that both 
branches have a genuine say-so. And, Senator Glenn, this is 
something that we discussed with you as well, that there should 
be some enhanced role for the Congress if the President has 
this kind of national interest waiver authority. For example, 
there would be an expedited procedure to disapprove that within 
a prescribed period of time so you know you are going to vote 
on it. It does hold our feet to the fire.
    There does have to be, we think, under Chaddha, a 
Presidential veto. But nevertheless it would give you the 
opportunity of acting promptly, and we would know that you had 
the opportunity of acting promptly before we issued any waiver.
    The Chairman. Senator Kyl?

   STATEMENT OF HON. JON KYL, U.S. SENATOR FROM THE STATE OF 
                            ARIZONA

    Senator Kyl. Thank you, Mr. Chairman. First, let me thank 
you for holding this hearing and say that I subscribe to 
virtually everything you said in your excellent opening 
statement.
    Mr. Secretary, let me ask a related question to Senator 
Baucus' last question. Do you include under a definition of 
sanctions a listing of covered exports or countries on 
munitions lists or similar limits on arms or dual-use 
technology exports?
    Mr. Eizenstat. We would, yes.
    Senator Kyl. As you know, on August 20th President Clinton 
signed an executive order freezing any U.S. assets owned by 
Usama Bin Laden, two of his senior lieutenants, and the Islamic 
organization. It also prohibits U.S. firms and individuals from 
doing business with them.
    According to proponents of the Sanctions Policy Reform Act, 
the executive order issued by the President on August 20th 
would be considered a sanction, and certainly under the 
definition to which you subscribe. As such, the President would 
have to, one, provide a 45-day notice before implementing the 
executive order; two, terminate the executive order within two 
years automatically; three, provide for contract sanctity in 
the event Bin Laden, his lieutenants or the Islamic 
organization had any contracts in the United States; four, 
submit reports to Congress prior to implementing the order; 
and, five, await reports from the Secretary of Agriculture 
before allowing the order to take effect.
    Although the President would have limited authority to 
waive some of these requirements, that authority would expire 
within 60 days. Does it make sense to you that the President 
should have to undertake any of these steps prior to imposing a 
sanction?
    Mr. Eizenstat. The answer is no, and that is precisely--
Senator Kyl, you have said it, frankly, better than I could 
have said it in three times as many words. This is exactly the 
kind of situation in which you need to have Presidential 
flexibility. You don't want to be bound to give advance notice, 
nor do you want to have to go through hoops of saying, well, 
this is one of those where there would be a national security 
exemption and you wouldn't have to do it. That is, again, 
exactly the kind of situation where you don't want the advance 
notice and where the kind of flexibility we are proposing would 
be most appropriate.
    Senator Kyl. Thank you. As you know, some organizations 
representing the business community, such as USA Engage and the 
National Association of Manufacturers, have published papers 
listing the instances in which the United States has imposed 
sanctions over the years. This is the catalog from NAM, for 
example.
    One often quoted statistic is that during President 
Clinton's first term in office, from 1993 to 1996, the United 
States imposed sanctions 61 times. Of these 61 measures defined 
as sanctions, two-thirds were imposed through executive orders 
issued by the President. In your view, has the administration 
used sanctions too frequently or abused the broad powers given 
to the President under IEEPA to issue executive orders?
    Mr. Eizenstat. No, sir. Our count, it might surprise you to 
know, is a very different one. We believe that in only 3 of the 
62 unilateral economic sanctions regimes imposed since 1993 has 
the President acted on his own using his own discretion. The 
others have been done pursuant to mandatory statutes. Those 
three under IEEPA were tightening the U.S. embargo on Iran in 
1995, comprehensive embargo sanctions on Sudan in November of 
1997, and then sanctions authority on Burma, particularly 
investments in certain oil and gas, in May of 1997.
    Senator Kyl. Mr. Chairman, I would ask unanimous consent 
that the National Association of Manufacturers Catalog of New 
U.S. Unilateral Economic Sanctions for Foreign Policy Purposes 
be included in the record, a catalog which does, in fact, if 
you count them up, demonstrate that over two-thirds of the 
sanctions imposed were imposed by the administration, not by 
the Congress.
    The Chairman. It will be included in the record.
    [The information referred to follows:]
    
    
    Mr. Eizenstat. May I also say, Senator Kyl, that some have 
been multilateral, for example, against UNITA, and then done by 
executive order. So, in other words, if you actually look at 
the number of executive orders, there will be a number of 
executive orders, including those done multilaterally.
    And may I also suggest we really don't want to get into an 
arithmetical argument. I didn't come up here to point the 
finger at the Congress; I genuinely did not.
    Senator Kyl. I appreciate that, Mr. Secretary. In your 
opening statement, however, you catalogued a much different 
definition.
    Mr. Eizenstat. I understand.
    Senator Kyl. And I felt it important to put on the record a 
definition, which incidentally does relate to unilateral 
sanctions, not multilateral sanctions.
    Mr. Eizenstat. But, again, permit me to say that what I am 
proposing is that we also bind ourselves in ways similar to 
what we would suggest you bind yourself to do.
    Senator Kyl. Mr. Chairman, since my time is just about 
expired, let me make the point--it is reflected in the first 
question that I asked you--that I agree with you that we have 
got to be flexible in both congressional and executive branch 
sanctions, which is one of the reasons that I differed somewhat 
with my colleague, Senator Lugar, in the listing of 
requirements that would not be very flexible under his 
legislation.
    And I also agree with you that it is important not to get 
into some arithmetical debate about how many were imposed by 
the administration and how many were imposed by Congress. But I 
did want to make it clear that the statement in your record, at 
least in the view of some, would leave an inaccurate impression 
that it is always the Congress and very rarely the 
administration that imposes sanctions. To me, it doesn't 
matter. There are appropriate circumstances where both need to 
impose sanctions, and we also need to invoke some reforms.
    The Chairman. Thank you, Senator Kyl.
    Senator Lieberman?

 STATEMENT OF HON. JOSEPH I. LIEBERMAN, U.S. SENATOR FROM THE 
                      STATE OF CONNECTICUT

    Senator Lieberman. Thanks, Mr. Chairman. Thanks for 
convening the hearing.
    Mr. Secretary, thanks for being here and for giving this 
complicated subject all the thought you have. I appreciate very 
much one of the first paragraphs in the statement that you 
submitted for the record today, and I will just read it 
briefly. ``We believe that, properly designed and implemented 
as part of a coherent strategy, sanctions, including economic 
sanctions, are a valuable tool for advancing American interest 
and defending U.S. values. Used in an appropriate way and under 
appropriate circumstances, sanctions can further important U.S. 
policy goals.''
    I appreciate that statement very much on behalf of the 
administration because though Senator Lugar's legislation 
certainly does not end sanctions, but creates a thoughtful 
process for their application and implementation, there are 
some who speak in entirely critical terms about sanctions. In 
fact, your own diplomatic and negotiating skills have shown us 
in at least two cases, ILSA and Helms-Burton, the way in which 
a tough statement of policy by Congress, linked with sanctions, 
have created, for want of a better term, what law enforcement 
people here at home call a good cop-bad cop strategy. We 
essentially gave you a club and you used it to negotiate to 
achieve the outcomes that I don't think would have occurred had 
you not had the club.
    Mr. Eizenstat. Also, if I may say so, Senator Lieberman, 
would not have occurred if you hadn't given us the waiver 
authority as well.
    Senator Lieberman. Absolutely. Without a waiver, there 
would have been a club, but it would have been one that you 
would have had to swing because you would not have been able to 
lower it after you held it up in the air. So I appreciate that.
    You in your opening statement correctly say that the fear 
is in recent years that we have turned with too much frequency 
to unilateral economic sanctions which were essentially non-
discretionary. And I think that is the spirit in which this 
Task Force has gone forward and I appreciate the administration 
coming to the table with that in mind as well. We may be using 
sanctions too often; probably, we are, particularly if they are 
non-discretionary. But there are a whole host of circumstances 
in which they have worked, not always, but they have worked in 
a lot of cases to advance American values and protect our 
interests, and I appreciate the extent to which you have 
indicated that in your statement.
    We hear a lot of talk about the costs of sanctions, and 
again I thank you for talking about not costs and benefits, but 
costs and gains. How do we, as we go forward as a matter of 
policy, administration and legislative, try to quantify even 
the costs, which may be easier to quantify than gains are? Does 
the Department, for instance, or the administration have 
figures that quantify the potential costs of some of the 
sanctions that have been passed by Congress?
    Mr. Eizenstat. I would say--and here I am being quite self-
critical--I think that we are not in any sense perfect in this 
area and that we need to do a better job ourselves of 
quantifying costs and gains. We do try to make some assessment 
of effectiveness, but I think we can do more. We have created a 
new sanctions team under my direction at State and our effort 
is, in fact, to try to do a better job of analyzing both costs 
and gains because at the end of the road the real question is 
are sanctions effective? Effectiveness is the litmus test.
    Senator Lieberman. Right.
    Mr. Eizenstat. If they are not going to be effective, they 
make us look weak, not strong. We end up using a pop gun 
against a country, which then ignores it and walks away. And 
instead of making the United States appear to be a leader, it 
makes us appear to be weak and ineffectual. So we need to do 
more. Our sanctions team will hopefully do that. This executive 
order which I am suggesting, which would require us to lay out 
for you when we do a sanction what the costs are, will 
hopefully enhance our ability to do this kind of measurement.
    Senator Lieberman. Well, you are absolutely right about 
that. This is another case where if you use a tool or a weapon 
too often, you dilute its impact. I look forward to the 
testimony of some of those before this Task Force who are more 
broadly opposed to sanctions to see if they have any numbers to 
help us quantify this and to acknowledge, as you have, that 
this can never be a mathematical formula that is balancing 
costs and gains, because how does one put a dollar figure on 
human rights or fairness to workers, for instance?
    My time is up. Thanks, Mr. Secretary.
    The Chairman. Thank you, Senator Lieberman.
    Senator Hutchinson?

 STATEMENT OF HON. TIM HUTCHINSON, U.S. SENATOR FROM THE STATE 
                          OF ARKANSAS

    Senator Hutchinson. Thank you, Mr. Chairman, and I would 
just add to what Senator Lieberman said that I think you can't 
put a price tag on those kinds of things. And to quantify it or 
try to put it simply in terms of dollars and cents and profits 
would really be counterproductive to our national goals because 
there has always been, as I know you are aware of, a moral 
dimension to our foreign policy. There have been certain 
principles and the American people, I believe, expect 
policymakers to include those kinds of values upon which our 
Nation has been based as part of our foreign policy.
    When words don't work and when recriminations and harsh 
rhetoric does not have the desired effect upon an abusing 
nation, whether it is in human rights or in other areas, we 
have to have some recourse short of military action. And hence 
while there has been--and I am certainly willing to join in the 
chorus--an acknowledgement of the misuse of sanctions, the 
over-use of sanctions, the abuse and ineffectiveness of the way 
Congress has applied sanctions, I am fearful that in our goal 
to reform and our goal to put constraints that we, in effect, 
eliminate that tool in foreign policy.
    I appreciate very much your testimony. In your definition 
of sanctions, it seems to me that you and the administration 
are taking a very broad scope, a very broad approach on what 
should be included as sanctions. You said denial of benefits in 
USAID would be a sanction. Denial of visas would be a 
sanction--or let me ask you, would denial of visas be 
considered a sanction?
    Mr. Eizenstat. No. We would see that as a diplomatic tool.
    Senator Hutchinson. So, that would not be included as a 
sanction. Nonetheless, it is a pretty broad scope, I think. The 
munitions list--I think Senator Kyl asked about that. You have 
proposed a broad national interest waiver. When you spoke of 
symmetry and comity, it seems to me that we have a broad 
national interest waiver for the President. You have urged 
maximum flexibility and that the legislative check on this 
would be only an expedited disapproval of waiver. Am I correct 
in my understanding?
    Mr. Eizenstat. Yes, sir. Our concern--and I know that there 
had been some, Senator Glenn and others, who had suggested that 
there be a prior requirement of actual passage of legislation. 
We think that that would be so complicated and difficult that 
it just would be unworkable, and so we have suggested an 
expedited disapproval process on a national interest waiver.
    Senator Hutchinson. Now, if I understand correctly, you 
have also proposed that the constraints on the executive branch 
be included in an executive order and that you would bind 
yourself in such a way. Why would--I guess two things. How is 
that compatible with maximum flexibility if it is truly 
binding, and why would an executive order be preferable to 
congressional legislation?
    Mr. Eizenstat. Thank you. I will answer that directly. You 
raised another couple of questions. If I may just quickly deal 
with those, I fully agree with you on the issue of U.S. values, 
human rights, et cetera, and that is precisely why we suggest 
costs and gains rather than costs and benefits because you 
can't quantify it. At the same time, one shouldn't simply say, 
because this is an important value to the United States, you 
don't have an obligation to also measure the costs and the 
question of whether it will be effective.
    Second, we have taken a generally broad definition, and we 
here agree almost completely with the definition in the Lugar 
proposal.
    Third, on the executive order, this really gets to the 
heart of the issue of comity. Congress can, as I have 
explained, with the stroke of another piece of legislation, 
decide to ignore any restrictions that would be imposed in 
reform legislation through ``notwithstanding'' legislation. 
Likewise, the executive order, although it would be binding on 
the executive, would itself be flexible; that is to say, it 
would say that contract sanctity, for example, should generally 
be promoted, except where it undercuts the effectiveness of the 
Act, so that if you were going against a narcotics gang that 
had a front company that had a contract, the President would be 
proscribed from going forward and allowing the FBI to break 
that contract.
    So the executive order itself would have the same kind of 
flexibility we would expect--and I think Senator Kyl and 
yourself are suggesting this--that you would want to have in 
your own legislative restrictions. I really see that--you know, 
Senator McConnell said, well, are we willing to proceed in a 
parallel fashion? Absolutely.
    I think as you put things in place that give you 
flexibility, we would try to do as close to the identical thing 
for ourselves as possible. But by not having you prescribe it--
it has got to be 45 days' notice, you have got to publish it in 
the Federal Register--it gives us the same kind of flexibility 
we think that you will end up wanting for yourselves.
    Senator Hutchinson. Thank you.
    The Chairman. Thank you, Senator Hutchinson.
    Senator Glenn?

 STATEMENT OF HON. JOHN GLENN, U.S. SENATOR FROM THE STATE OF 
                              OHIO

    Senator Glenn. Thank you, Mr. Chairman. Our sanctions 
program in the past, I think, has been more effective than most 
people would like to remember. We think of Argentina and Brazil 
when they had budding programs back then with South Africa; 
South Korea and Taiwan that both had active programs going, and 
Pakistan, of course, that we are very familiar with.
    So there were some good things that happened under 
sanctions, and it was against that kind of a backdrop that we 
passed my legislation that made it very, very tough, with no 
waiver, thinking that with the success we had had, if we just 
were a little bit tougher on this, maybe it really would work. 
And you and I have discussed this at some length.
    Now, because of Hindu fundamentalism or nationalism, or 
whatever it is, India broke over and Pakistan broke over, and 
so we are faced with a new day. And I do think it is a new day 
in that we are into more of a multi-polar world now where 
nations can get anything they want anywhere in the world, and 
our sanctions imposed unilaterally are far, far less likely to 
have an impact than they were back even, say, 10 years ago. So 
we are into a new day and I think this is very appropriate that 
we are here talking about this now.
    Now, your basic points starting out are that it has to be 
effective. There has to be comity between the executive and 
congressional branches of Government. There is no one solution, 
no cookie-cutter solution to the whole thing; that unilateral 
action is not likely to be effective, but we must be able to 
act unilaterally if it is necessary. Those were basically the 
points you made, I think, in your opening statement.
    What I had proposed in my bill, S. 2258, was that we work 
hand in glove, back and forth, with the executive and 
legislative branches, and had proposed that where a sanction by 
law is to be imposed, the administration have 45 legislative 
days to try and generate international support for whatever the 
sanction is, and during that period propose changes to Congress 
that might be made so it would not be a cookie-cutter approach, 
so it would be tailored to that specific situation so it would 
be more likely to be effective.
    Then Congress would have to act within 15 legislative days, 
with expedited procedures, and that keeps us in hand-in-glove 
operation here which I think is necessary because I don't think 
the administration can go off imposing these things and having 
congressional opposition. Nor do I think Congress should be 
imposing these without administration agreement. So my bill 
provided for us to work together, as I saw it, and then each 
one of these sanctions would be reviewed within two years and 
every year thereafter, and a recommendation made back to 
Congress and we would have to consider those on an expedited 
basis every time they are made.
    It just seems to me still that that keeps us working 
together more than anything I have heard suggested and gives 
maximum flexibility. If the administration thinks something 
should not go into effect, then they come to Congress and say 
we believe this would not work in this case and we can't get 
multilateral support and it isn't going to work, and we don't 
want to penalize our own people more than the sanctionee out 
there that we are after and so we recommend that we have full 
waiver, and Congress would be party to that.
    Now, it would appear to me that what you are trying to do 
here--and maybe I am reading this wrong completely--is to go a 
little bit the other way and say that we are giving the 
administration far more authority to just say, we don't like 
this, we will waive it in the national interest. And we have no 
recourse, except to start all over again and pass some new 
legislation that would deal with this.
    This is a rather long statement, I guess. It is more of a 
statement than a question, but would you comment on that 
because what I had tried to do was make this where we really 
work together on this?
    Mr. Eizenstat. Well, thank you. First, we agree with many 
of the sentiments that you have expressed and what we would 
like to do in the weeks ahead is to work with the Task Force to 
find out the best ways in which we can work cooperatively 
because, clearly, you have responsibilities and constitutional 
roles, and we do as well.
    Let me say first with respect to the waiver, Congress in 
almost every instance--the Glenn amendments on nuclear tests 
are an exception--in almost every instance, whether it is 
proliferation or other economic sanctions, has always put some 
waiver provision in. The problem is that the waiver provisions 
are all over the board--national emergency, national security, 
national interest. There are about five or six different ways 
in which Congress has imposed it.
    So what we are suggesting is let's use national interest. 
We are willing again in the proliferation area because of its 
national security importance to consider perhaps a national 
security standard, but let's try to systematize what the 
waivers are so we don't have this incredibly conflicting number 
of standards to try to meet and to try to dance on the head of 
a pin.
    Second, you said it again as well as it can be said. The 
world has changed. There are very few target countries that 
don't have the opportunity of obtaining whatever we are trying 
to prevent them from getting them from somebody else who is all 
too willing to provide it. We have not come up here to suggest 
a way of gutting sanctions, absolutely not. We are implementing 
a whole host of sanctions that, as I mentioned, whether it is 
Nigeria, whether it is Cuba, whether it is Iran, whether it is 
Iraq, are all very important to our national security. What we 
are saying is let's do it in a more considered and careful way 
so that when we do use sanctions, they are actually effective 
because, again, it debases sanctions if we don't.
    Last, on the notion of advance notice, I go back again to 
the point that Senator Kyl made. If one had to provide advance 
notice to the Cali cartel, as an example, that we are about to 
impose a sanction on you, and we did that as a way of providing 
Congress a way of getting engaged in this, it would send a 
signal that would undercut the very effectiveness of what we 
are trying to do. So that in that instance, advance notice 
would not work well.
    Again, I cited a second situation that actually is very 
much the case in the Wolf-Specter legislation, but I found it 
in the Iran and Libya Sanctions Act. We were in the midst of 
negotiating with the European Union, on the one hand, and 
Russia on the other to tighten their export controls--Russia, 
frankly, had almost none--to develop a whole export control 
regime, and for the European Union to tighten theirs. And, in 
return, we were considering a waiver.
    Well, we looked at the way the Iran and Libya Sanctions Act 
was worded, Senator, and it said that we had to make a finding 
of sanctionability, an advance finding of sanctionability. And 
one of the options in there, also, was make the finding of 
sanctionability and then wait 60 days and try to negotiate with 
them. Well, what we found was had we listed them as, quote, 
unquote, ``sanctionable,'' they absolutely would have pulled 
out of negotiations. We would have never gotten to that last 60 
days.
    So what we ended up doing is making the sanctionability 
finding coterminus at the end of the road with the actual 
waiver when we got what we wanted from them in terms of 
tightened controls. So the point I am making is that making 
advance notice of the target itself oftentimes has the negative 
consequence of informing the target of what you are doing and 
therefore undermining the capacity of changing their conduct.
    The Chairman. The Senator from Kansas.

 STATEMENT OF HON. PAT ROBERTS, U.S. SENATOR FROM THE STATE OF 
                             KANSAS

    Senator Roberts. Thank you, Mr. Chairman. I want to thank 
you and Senator Baucus for your leadership in this regard. I 
don't know what I can add at this point, but I want to hear 
Senator Lugar, so I am going to stay here a while.
    Are we going to be able to submit questions to the 
Secretary for further response? I have got an ag question, but 
I have got a national security question and I know when I get 
wound up, I am going to run out of time.
    The Chairman. We will be glad to submit questions if you 
can't stay for another round, whatever accommodates the 
Senator.
    Senator Roberts. So there will be another round with the 
Secretary?
    The Chairman. If he can stay and if we have others who want 
a second round.
    Senator Roberts. I know the timing is important. I think we 
have made a little progress. We have got the GSM and the 
Pakistan situation worked out to some degree. We have the 
unilateral sanctions in regard to food and medicine. We have 
got the executive waiver business. We have the Lugar bill. That 
was tabled not because of the content, but because we had a 
good debate for about six hours on sanctions, in general.
    You have had a very fine statement here and I thank you for 
it. I especially like your reference on page 7 when we went 
into the Carter embargo and all of the downside that that 
prompted, and so we are sort of soulmates in that regard.
    Mr. Eizenstat. I lived through that.
    Senator Roberts. We are soulmates in that regard.
    On page 1, you refer to Iraq, and I will get to the 
question. Here, we have a situation which I think is a paradox 
of enormous irony. We have sanctions in place with Iraq. The 
Secretary of State indicates that Saddam Hussein is in a box 
and that in terms of continuing their production of the weapons 
of mass destruction that the sanctions are effective.
    And yet we have an exemption on the oil-for-food business 
and the revenues from that led, in part, to the construction 
and the production of some things we didn't like in regard to 
the chemical plant in Sudan and so we launched a missile 
strike. And so here we have sanctions, but we exempt the oil-
for-food, and the revenues from that go to another country and 
we, in response to the terrorism attacks, have destroyed that 
plant.
    I might add that we have been doing the backstroke in 
regard to the justification for that, and I still have real 
concerns in that regard and I don't see how that adds up in 
regard to sanctions. And it gets back, I think, to your 
statement that if you are going to have a sanction under the 
banner of national security, it better be all-inclusive or you 
have a leakage. And in this particular instance, it led to the 
construction and the production of VX in a chemical plant that 
we then had to take out. How do we explain that?
    Mr. Eizenstat. Well, first, the sanctions against Iraq, 
although we have our own, are multilateral and imposed under 
the UN, so we have that advantage. Second, with respect to the 
oil for food, it gets to the basic prospect of trying to avoid 
wherever possible using food as a direct weapon of foreign 
policy.
    And, third, there is a provision in the oil-for-food 
program that revenue goes to a UN-controlled account and can be 
only expended for approved contracts, so that it would not be 
able to be used to finance a chemical----
    Senator Roberts. But the approved contracts, and pardon me 
for interrupting, were for pesticides and were for the element 
of food production. That was the idea, to give to Iraq the 
self-sufficiency situation so you are not in the business of 
sanctioning people in regard to malnutrition and hunger. 
Obviously, they used it for something else and then we had to 
launch the missile attack.
    If we can't determine the cost and gain--and that is pretty 
much how I am interpreting what has gone on here in regard to 
your comments--if costs and gains can't be clearly identified, 
are the costs of sanctions basically irrelevant? And the reason 
I am asking that is I can document from the USDA the lost sales 
in regard to exports, and I am for an embargo protection act 
that will pay the farmer and rancher the difference because I 
think if that is in our viable national, what, foreign policy 
interest, they shouldn't have to pay for it. That cost should 
be spread over all taxpayers. Is there any way that we can 
solve that problem?
    Mr. Eizenstat. Well, we certainly are willing to look at 
that. One of the points we are certainly making in the 
agricultural area is that, in general, food and agricultural 
products should not--and the Senate has spoken on this 
recently--should not be a matter of sanction. However, even in 
that instance--oil for food is a good example--you wouldn't 
want a blanket requirement that in every instance of a sanction 
you were permitted, without restriction, to provide food to any 
country, even if it is on the terrorist list.
    Oil for food is limited; there is a limited amount of 
revenue that can be obtained. There are limited uses. Perhaps 
those need to be tightened, but there is a UN-controlled 
account. So I think that the way to do it, again, is to state a 
general principle, and at the same time to give the President 
and the Congress some flexibility so that you are not required 
to provide food to Iran or to Iraq in a circumstance where they 
were acting in ways that were highly contrary to us.
    Now, the question of whether the farmer should then be 
compensated is another issue with budget implications and we 
would like to think about that, but I certainly appreciate the 
sentiment that goes to it because, again, I lived through this 
Afghanistan issue. I dealt with the farm groups there. We spent 
$2 billion--this was in 1977 when that actually meant 
something--we spent $2 billion buying up contracts and 
offsetting the impact--Senator Lugar was there and we worked 
with him at that time--to offset the impact on the farmer in 
that situation, $2 billion in one fiscal year.
    The Chairman. I need to interrupt you, Secretary Eizenstat. 
We have a vote and I understand you have to leave shortly, so 
we probably won't have time for a second round. What I would 
like to do is go on to Senator Lugar and Senator Mack. I am 
going to leave, go vote and come back so we don't have to 
interrupt the hearing, if that is okay with you, Senator 
Roberts.
    Senator Roberts. Mr. Chairman, I have a statement for the 
record.
    The Chairman. It will be included in the record.
    [The prepared statement of Senator Roberts follows:]
    
    
    Senator McConnell. Senator Lugar?

STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR FROM THE STATE 
                           OF INDIANA

    Senator Lugar. Thank you very much, Mr. Chairman.
    Secretary Eizenstat, I appreciate all the negotiations you 
and your group have done with many who have been supporting our 
legislation. You pointed out in your testimony that whereas 
your views in some respect are close to those of the Lugar-
Crane-Hamilton bill, you have important differences. Your views 
boil down, as I have outlined them, to these: the Lugar-Crane-
Hamilton bill would impose many binding and onerous constraints 
on executive branch discretion to conduct foreign policy and 
only limited flexibility, whereas the Congress has the ability, 
as you have pointed out, to change the rules. Our intent in 
drafting the bill was to provide parallel and comparable 
jurisdiction, yet you felt throughout the negotiations that 
this is unfair.
    The second thing on which we have been unable to come to 
closure is on a national interest waiver applicable to existing 
and future sanctions. Our bill takes care of future sanctions; 
it does not pertain to existing sanctions. Let me just say that 
on both of these issues, I am not certain how to propose to 
make headway.
    It could be that the Majority Leader has appointed this 
Task Force because sanctions legislation has not come forward 
through any committee. There has not been a single markup, a 
single bill reported. The bill that I brought to the floor came 
as an amendment to the agriculture appropriations bill. It was 
non-germane in the sense that it really was not an 
appropriations measure, but it was the only way that we had to 
debate the issue this year. It lost 53 to 46, in part, because 
some Senators disagreed with the bill. Others felt that it was 
going to tie up an appropriations bill, and Senator Stevens 
argued strongly that that was the problem.
    It also failed because the administration was not behind 
it, but I am not certain how we work this out. In other words, 
this Task Force might come forward with a burst of enthusiasm 
and then the administration reconciles itself in one way or 
another. But we are not at that point. I would say respectfully 
we need to know what the administration is prepared to support 
because it seems to me otherwise that we are not going to have 
legislation and we are looking at another Congress.
    Now, this is very disappointing to people in farm country, 
as Senator Roberts has reflected, and to American manufacturers 
and others who believe that there are substantial changes that 
need to be made in our policies. I am among them, and I feel 
sad that we have come to this point, checkmating each other. 
Even now, I really do not know, given the testimony you have, 
how we would come to this degree of equity.
    From the standpoint of the administration, you are arguing 
on behalf of the President for enormous flexibility. I 
understand that, but part of the problem of all of this has 
been the lack of constraint on the executive on the Congress. 
We have simply imposed far too many sanctions unilaterally and 
at great cost to our country.
    Secondly, if we revisit past sanctions, we run smack into 
the Cuban business and into Iran. Politically, these are mine 
fields. You can argue that we ought to tackle both. I have 
deliberately tried to tackle neither in our bill, in the hope 
that somehow we would have a constructive piece of legislation. 
So I must say even though I appreciate the things you have said 
about the legislation today, essentially the administration has 
pretty well frustrated our purposes and I am not certain I see 
a way out of the box at this point.
    Can you give us some guidance?
    Mr. Eizenstat. Yes, sir, I think there is a way out of the 
box. Believe me, I share your frustration because I know that 
in negotiating with you, we were dealing with somebody who was 
trying to come to the same end point.
    First of all, your point about future versus existing 
legislation. Let me point out that we are suggesting that both 
the reform legislation and our executive order would only apply 
to future legislation.
    Second, with respect to the waiver, where we have expressed 
a desire, this is an expression of preference. I think we would 
be able to work something out, notwithstanding that preference, 
that we would find mutually acceptable in terms of applying the 
waiver to existing legislation. We are trying to tell you what 
we would hope in the best possible world to get. We know we 
don't live in the best possible world, so we would be 
realistic.
    And, third, with respect to an executive order, we are 
basically taking your whole legislative piece for what you 
would want the executive branch to do and suggesting putting it 
into an executive order, but doing so just with a little more 
flexibility because you have given yourselves in the Congress 
that same flexibility. You can't bind yourselves, and we are 
suggesting that we would be bound to the same extent.
    Once the President signs an executive order--and I assure 
you we would do this very transparently. We would sit down with 
you and tell you exactly word for word what would be in it and 
let you comment on it. You will find that it is prescriptive. 
You will find that it is a real filter, but it gives us the 
same kind of flexibility that you are trying to give 
yourselves.
    Senator Lugar. Thank you very much.

 STATEMENT OF HON. CONNIE MACK, U.S. SENATOR FROM THE STATE OF 
                            FLORIDA

    Senator Mack. I have neither a statement nor questions.
    Senator Baucus [presiding]. Thank you.
    Mr. Eizenstat. Can I just say again, I think you suggested 
a new burst of energy. I think that this Task Force will give 
us a new burst of energy and that we are really prepared to try 
to develop something that is mutually acceptable.
    Senator Baucus. Thank you very much, Mr. Secretary. I see 
our panel has departed and the vote has about six, seven 
minutes left. We will stand in recess until the chairman 
returns.
    Mr. Eizenstat. I do have a plane that I need to catch at 
some point.
    Senator Baucus. Right. There will be no more further 
questions of you.
    Mr. Eizenstat. Thank you.
    Senator Baucus. Thank you, Mr. Secretary.
    The Task Force stands in recess until the call of the 
Chair, which will be about 10 minutes.
    [Recess.]
    The Chairman. We need to move along here. We are late, for 
which I apologize. I would like to ask the next three guests to 
come as a panel--Ken Roth, Executive Director of Human Rights 
Watch; Thea Lee, AFL-CIO Assistant Director of International 
Economics; and Elliott Abrams, President of the Ethics and 
Public Policy Center. I would like to ask each of you to limit 
your remarks to five minutes, and we will be happy to put full 
statements in the record.
    I will just take them in order listed here. Mr. Roth, you 
first; Ms. Lee, you second; and, Mr. Abrams, you third.

  STATEMENTS OF A PANEL CONSISTING OF KENNETH ROTH, EXECUTIVE 
 DIRECTOR, HUMAN RIGHTS WATCH; THEA M. LEE, ASSISTANT DIRECTOR 
FOR INTERNATIONAL ECONOMICS, PUBLIC POLICY DEPARTMENT, AFL-CIO; 
 AND ELLIOTT ABRAMS, PRESIDENT, ETHICS AND PUBLIC POLICY CENTER

                   STATEMENT OF KENNETH ROTH

    Mr. Roth. Thank you very much, Mr. Chairman, for holding 
these hearings and for inviting me today. In light of the time 
limitations, I was going to highlight a number of the aspects 
of Senator Lugar's bill with which I agree, but I think it may 
be wiser simply to highlight a few points where I differ, with 
the hope that I might be able to assist the committee in its 
deliberations.
    First, in response, Mr. Chairman, to your original 
question, I think it is wrong to include economic assistance in 
a sanctions bill of this sort. I don't believe that a 
conditional grant of economic assistance should be considered a 
sanction. Senator Lugar's bill already does exclude military 
aid, military equipment and the like, but it includes economic 
assistance. The result is that it would deprive the United 
States Government of one of the most important tools available 
to it to secure change and to avoid complicity in serious human 
rights abuse or other forms of governmental misconduct.
    The effect, if it were applied retroactively--and frankly 
it is not clear to me from the legislation whether the future 
orientation of the legislation would mean that an aid cut-off 
under Section 502(b) of the Foreign Assistance Act would be 
included or not. But it has the potential of rewriting one of 
the benchmarks, really the cornerstones of U.S. economic 
assistance policy and would have the odd result of making the 
U.S. much more likely to be complicit in serious human rights 
abuse by, in a sense, forcing it either to jump through a 
series of difficult procedural hoops or to continue providing 
the means with which a government might be repressing its 
citizenry.
    The only argue for this is that an aid cut-off would in 
some sense affect the atmosphere of trade relations or that it 
might lead to retaliation. But these seem, in my view, to be 
peripheral concerns in comparison to the importance of avoiding 
direct U.S. complicity in the most severe forms of human rights 
abuse, as outlined in Section 502(b).
    Similarly, the Lugar bill, I believe, inappropriately makes 
it tougher to convey conditional trade benefits. Again, I don't 
believe that statutory schemes which grant trade benefits on 
the condition, for example, that the recipient respect labor 
rights should be considered a sanction.
    It is most likely that American support for the global 
economy will come if trade is seen to be occurring on a level 
playing field, not necessarily wage equality, but rather equal 
respect for basic labor rights, including the right to form 
labor unions and to bargain for wage increases. That is the 
statutory accord that was reflected, for example, in the 
Generalized System of Preferences legislation, in OPIC, and 
there is similar human rights language with respect to Ex-Im 
Bank loans.
    The Lugar legislation would, in effect, rewrite that 
legislation if it were applied retroactively, or it at least 
would preclude the enactment of similar legislation in the 
future by forcing the U.S. Government to convey trade benefits 
in an all-or-nothing manner. The kind of conditional grant, 
condition on respect for labor rights, would not be permitted 
because that would be defined as a unilateral economic sanction 
if those trade benefits were withheld because the recipient 
didn't live up to the bargain by violating basic labor rights.
    Similarly, I believe that the bill inappropriately elevates 
so-called contract sanctity to paramount value, as if there is 
a God-given duty to complete commercial deals regardless of the 
human consequences. There is only, of course, a very narrow 
Presidential waiver provision allowed to override this concern 
with contract sanctity.
    Now, obviously, it is important that American businessmen 
live up to their contractual obligations and that they not be 
prevented by the Government from doing that. But this logic can 
lead to the kind of embarrassing results that we saw several 
years ago when, following the Nigerian government's execution 
of Ken Saro-Wiwa and eight of his colleagues, several European 
governments continued nonetheless to sell the Nigerian 
government arms on the rationale that the contract had already 
been signed.
    We believe that if there is any sanctity, the sanctity 
should be one of human life and that that should be given 
higher priority over the sanctity of contract and that the 
legislation should make that more appropriate balance between 
so-called contract sanctity and this other higher human 
sanctity.
    Similarly, I believe that the bill perversely includes 
votes in international financial institutions as a unilateral 
sanction. And, again, I would argue that that should not be 
considered a sanction at all. First of all, it is perverse 
because the international financial institutions are precisely 
the fora in which multilateral action can best be secured.
    The only apparent rationale, again, for treating these as 
unilateral economic sanctions in forcing the various hoops to 
be jumped through before they can be imposed is that it might 
somehow tarnish the atmosphere in which commerce is conducted. 
I believe it is far better for the U.S. to be able to firmly 
commit itself to a negative vote, say, at the World Bank rather 
than have to enter negotiations to secure multilateral support 
for a position with a vague commitment that perhaps they will 
vote against a loan in the future, if only others will join us. 
Far better to commit to a negative vote from the outset, which 
this bill would make much more difficult.
    Sometimes, leadership does require unilateral action. One 
can look no further than the U.S. stand on corruption where 20 
years ago we were acting by ourselves through the Foreign 
Corrupt Practices Act, and we now have an OECD accord outlawing 
corruption because we were willing to act on our own. We were 
willing to act unilaterally and we saw that other governments 
ultimately joined us.
    I see that my time is up, so let me just quickly note that 
the 45-day delay would, I believe, severely handicap the 
effective use of sanctions because even the opponents of 
sanctions recognize that prompt action is likely to be much 
more effective than delayed action. We saw that with respect to 
Milosevic in Kosovo. We saw that in U.S. efforts to reverse the 
Guatemalan coup of 1993. Similarly, the two-year sunset clause 
would severely weaken sanctions by simply letting dictators 
know how long they have to wait before U.S. pressure is likely 
to be eased.
    Finally, I believe that the bill inappropriately elevates 
U.S. trade interests above all others, first of all, by 
excluding trade sanctions from its ambit, and, second, in terms 
of listing the cost of sanctions by looking for the most part 
only at commercial costs and not considering, for example, the 
costs to the U.S. commitment to support human rights and the 
U.S. desire not to become complicit in severe abuse by 
continuing to trade or give aid to the world's most heinous 
dictators.
    Thank you very much.
    The Chairman. Thank you, Mr. Roth.
    [The prepared statement of Mr. Roth follows:]
    
    
    The Chairman. Ms. Lee?

                    STATEMENT OF THEA M. LEE

    Ms. Lee. Thank you. I appreciate this opportunity to 
present the views of the AFL-CIO on the effectiveness and 
appropriate use of economic sanctions.
    I think we all agree that unilateral economic sanctions are 
an essential policy tool that should be applied judiciously, 
consistently and effectively. I think we would also all agree 
that multilateral sanctions are better than unilateral economic 
sanctions. But we can't always get the consensus in a timely 
fashion, of course, for multilateral action.
    Therefore, our challenge is two-fold. How can we be more 
effective in gaining support for concerted multilateral action 
and how can we design sanctions to achieve maximum impact at 
minimum cost? We should not allow our discussion to be 
sidetracked into an ultimately unproductive debate or whether 
or not to use unilateral sanctions. We should rather keep the 
focus on improving the use of sanctions.
    There has been much discussion recently about the need to 
discipline economic sanctions because, it is argued, they have 
simultaneously proliferated and become less effective and more 
costly. And, of course, the Hamilton-Lugar bill is one of the 
legislative solutions that has been proposed for this sanctions 
problem. The AFL-CIO supports the portions of the Hamilton-
Lugar bill that require sanctions to be narrowly targeted and 
to minimize the adverse impact of sanctions on humanitarian 
activities.
    However, I would agree with Ken Roth that the built-in 
delay, 45-day delay, and the necessary advance announcement for 
sanctions would be counterproductive, would dilute the 
effectiveness of the sanctions when actually applied. And we 
would, in general, oppose the imposition of new obstacles or 
delaying tactics that would simply weaken the effectiveness of 
the sanctions that we use.
    We are also concerned that the definition of sanctions 
contained in the bill is overly broad, and this addresses a 
question that you raised, Senator McConnell, at the beginning 
of what is a sanction. And I think the question that we are all 
grappling with is not so much what is a sanction, but what is a 
sanction that needs to be disciplined, that needs legislation 
to limit its effectiveness, because I guess I would agree with 
Secretary Eizenstat's general, very broad definition that a 
sanction is something which applies economic pressure to 
another country, and yet certainly would not agree that all of 
the sanctions that are referenced in the Hamilton-Lugar bill 
are things that need to be restricted and delayed and have new 
reporting requirements imposed upon them.
    We believe it is appropriate and desirable to attach 
conditions to certain kinds of aid and trade preferences. 
International labor rights very often fall into that middle 
ground of areas where we are unlikely to take military action 
against a country for repeatedly violating internationally 
recognized labor rights. And yet diplomatic actions are often 
not effective in ending abuses of labor rights.
    This is an economic problem; it is a trade-related problem 
and it is one which in many cases has been effectively 
addressed by trade-related measures, and we would not want to 
see these trade-linked labor rights that we have currently in 
U.S. law weakened in any way.
    The Hamilton-Lugar bill includes the imposition of 
increased tariffs on, or other restrictions on imports of 
products of a foreign country or entity as economic sanctions 
when they are used for foreign policy reasons. This does 
include, or has been construed to include the withdrawal of 
trade benefits under the Generalized System of Preferences, the 
special trade advantages we grant to developing countries, 
because withdrawing a trade benefit, in effect, raises the 
tariffs on that country. We would vehemently object to any 
weakening of the GSP labor rights provisions. In fact, we would 
like to see these provisions strengthened and implemented more 
aggressively in the future.
    The debate that has arisen in the last year or so purports 
to be about the effectiveness of unilateral economic sanctions 
as a policy tool, not about the justness of the causes to which 
they are applied. And yet the criticism of sanctions and the 
legislative vehicles that have been under discussion have 
focused exclusively on the problems involved with sanctions 
imposed for foreign policy reasons, while excluding sanctions 
imposed to attain trade or commercial objectives, such as 
remedying unfair trade practices.
    This distinction does not make sense. If unilateral 
economic sanctions are ineffective when used to achieve foreign 
policy goals, then they must also be ineffective when used to 
achieve trade objectives. And yet the business community and 
the U.S. Government routinely threaten and occasionally impose 
unilateral economic sanctions to achieve commercial objectives 
or to protest unfair trade practices, such as violations of 
intellectual property rights or market access restrictions.
    Let me just conclude by saying that successful grass-roots 
action on trade policy can be a valuable and empowering force, 
as well as a legitimate expression of citizen concern. Our task 
should be to make these initiatives more successful and 
effective, not to choke them.
    I look forward to your questions and comments. Thank you 
for your time and attention.
    The Chairman. Thank you, Ms. Lee.
    [The prepared statement of Ms. Lee follows:]
    
    
    The Chairman. Mr. Abrams?

                  STATEMENT OF ELLIOTT ABRAMS

    Mr. Abrams. Thank you, Mr. Chairman, and thank you for the 
invitation here today. First, let me say in listening to the 
two previous witnesses to see if they would say anything I 
disagreed with, I am afraid neither has. So I would first say I 
think they made very persuasive arguments.
    I think the challenge that we all face is that there is a 
wide range of tools available to policymakers and we need to 
figure out which tools are best, are most appropriate, in a 
particular situation where our freedom or our security or our 
prosperity may be at stake. At one end of the spectrum come 
words, words of thanks, words of denunciation, diplomatic 
protests, and, of course, at the other end of the spectrum, 
lies and war, a military strike of some kind. And in the middle 
there are the economic and trade and financial measures, which 
I believe Senator Lugar would really make it almost impossible 
to use effectively.
    It has become fashionable in the last year to say that we 
over-use sanctions; particularly, we over-use economic 
sanctions. There is a very large business lobbying effort now 
to persuade the Congress of that, arguing that sanctions are 
usually ineffective, that they hurt our interests, and that the 
real thing we need to do is we need to engage economically in 
these countries. That is likely to produce democracy, human 
rights. I think those are serious arguments, but I really think 
they are wrong.
    If sanctions were really so ineffective, if unilateral 
sanctions were really having no impact on the target countries, 
why would so many people, so many dictators, in particular, 
devote so much time and treasure to try to get those sanctions 
lifted? Obviously, they do have an impact. They have an 
economic impact and I think they have a political impact in the 
target countries.
    And how are they ineffective? One thing they are certainly 
effective at doing in the human rights cases is showing the 
outrage, the horror of the American people, at those vicious 
human rights abuses. And they are very often effective in 
restricting the access of the target regime to this economic 
superpower and this, the world's largest market.
    I think we are obviously the leader of the democracies, and 
our refusal to treat, for example, despicable dictatorship as 
if it were a fine trading partner, to treat a proliferator of 
nuclear weapons or missiles as if it were a fine trading 
partner, is not foolish or ineffective. It is admirable, even 
if we do it unilaterally.
    There was one line of Secretary Eizenstat's that is in his 
written testimony that I thought was very well-said, and that 
is we cannot permit other countries to veto our use of 
sanctions by their failure to act. I think we need to take a 
real careful look at this notion that we are hearing in a lot 
of the business propaganda that trade is a form of engagement 
that produces democracy in some sort of magical fashion. 
Clearly, I would think--economic development in Korea is a good 
case that, over time, does create a middle class, can lead to a 
more democratic society and government.
    But when we import goods from companies that are owned by 
the People's Liberation Army, we are adding to the PLA's 
resources; we are not promoting democracy in China. If we were 
to allow business deals with the Cuban government, then we are 
enriching the government of Cuba; we are not helping the people 
it oppresses.
    What I think Mr. Lugar's bill does is to put an endless 
array of roadblocks in the way of economic sanctions, making it 
more likely that they will not be used. And, of course, that 
leaves you with those two options. Either you use words, which 
are far more likely to be ineffective, or you end up in a 
corner where what else do you have left but some kind of 
military response. I would think it is far better to undertake 
a case-by-case analysis whenever sanctions are proposed, using 
what standards you think are sensible, without the great 
burdens imposed by the legislation.
    I think, for reasons that have been stated, the required 
delays are not sensible. I think the definitions of sanctions 
are far too broad. I think the bill--and this has been said 
before--has a very odd hierarchy of values. Unilateral 
sanctions can be imposed, and quickly, when one company has 
been hurt by some country's unfair trade practice to enforce a 
countervailing duty or dumping case, for example. But if a 
country is massacring Christians or selling nuclear-tipped 
missiles, then you have to jump through all those hurdles to 
impose sanctions. I don't see the logic of it.
    So I would argue that it is just not sensible to impose all 
of these hurdles. It is far more sensible to try, for sure, to 
target sanctions where they will have the greatest impact. We 
should try to do that, but we should not allow the interests of 
a small number of companies to outweigh the interests of our 
country in using our economic might to promote peace and 
freedom and to protect our national security.
    Thank you, Mr. Chairman.
    The Chairman. Let me ask each of you, if you were in my 
seat and you had been asked by the Republican Leader to 
evaluate our policies and come up with a recommendation, 
beginning with you, Mr. Abrams, would your recommendation be 
that this is not something we ought to address at all, that 
this business is, of necessity, an ad hoc determination and 
that this is an impossible task?
    Mr. Abrams. I think it is, of necessity, ad hoc. I think 
that it is reasonable for the Congress to say, look, we want to 
be targeting sanctions as carefully as we can in each case, and 
we want to think carefully, using some of the standards that 
have been discussed in the Lugar bill and have been discussed 
here today, to judge whether this particular application of 
sanctions really is effective.
    The Chairman. If I may interject, Congress demonstrated 
recently that when the wrong result was occurring, we could act 
pretty fast, and we passed legislation which lessened the Glenn 
amendment s impact on the U.S. Agriculture Sector. Clearly, 
that was a situation where existing law was, in the view of 
everyone, counterproductive and we changed it.
    Go ahead.
    Mr. Abrams. Well, I think that is a very good example, and 
that is why I think it is a mistake to adopt this kind of bunch 
of hoops and hurdles and obstacles in the abstract. I would 
rather see something like a Task Force report that sets forth a 
common-sensical approach to evaluating any proposal to adopt 
sanctions in a particular case, and then when the proposal is 
made by the administration or by a Senator, you compare it in 
your debate in the committee, or in evaluating what the 
administration has done you compare it to the standards that 
you have. But I think that to adopt the Lugar approach here 
would be to eliminate the tremendous advantage that you have to 
quickly react to a real-world situation.
    The Chairman. In your view, are restrictions on foreign aid 
a sanction?
    Mr. Abrams. Absolutely not. I heard Secretary Eizenstat, 
but the more he explained it, the less I understood it. It is 
an act of generosity on the part of the American people, acting 
through their Government, to give a gift to another people. I 
don't see how the decision not to give that gift constitutes an 
economic sanction. I don't punish you if I don't give you a 
birthday present.
    The Chairman. Ms. Lee, would you address both these 
questions I asked Mr. Abrams?
    Ms. Lee. Yes. I guess I think that the issue can be 
addressed by guidelines or by a Task Force report that can lay 
out both what the criteria should be for when sanctions need to 
be applied and for a ranking of the possible tools available, 
the different kinds of sanctions, of which some are, I think, 
much more costly than others. For example, restrictions on 
American exports of goods that are easily available, like 
agricultural products or commercial products, does seem to me 
somewhat counterproductive.
    You restrict the American export of something which is 
easily available at similar prices from other countries. That 
could be one of the more costly and least effective kinds of 
sanctions that we do apply, as opposed to some other things, 
for example, withholding foreign aid or freezing assets or 
other kinds of sanctions which have both a smaller economic 
cost to the United States and a larger impact on the targeted 
audience.
    The Chairman. Then you agree with Mr. Abrams that 
restrictions on foreign aid are not a sanction?
    Ms. Lee. I guess I would agree that it is not a sanction 
that needs to be disciplined. I think it is a very good use of 
how we give foreign aid that we should be rewarding countries 
that have good human rights and labor rights records and 
democracy, and so on. And we should take that into account as 
we figure out what our foreign aid guidelines are, and so on.
    But, yes, I guess I think that we need more flexibility and 
less rigidity in terms of the sanctions applications. What the 
Congress doesn't need is more limitations on itself or 
necessarily on the President in terms of delaying, slowing, 
blocking the use of sanctions, but possibly more intelligence 
about which sanctions work best.
    The Chairman. Mr. Roth, would you address both those 
questions, too?
    Mr. Roth. Yes. I actually thought, Mr. Chairman, that your 
opening statement was excellent in this regard. If I understand 
what you were driving at, you seemed to be aiming toward 
treating different kinds of economic pressure differently. I 
don't agree with Secretary Eizenstat that every form of 
economic pressure is the kind of sanction that needs this sort 
of strict regulation that Senator Lugar's bill would impose, 
and so I think that we really need to look at them case-by-
case.
    In the case of economic assistance, I don't believe that 
aid is an entitlement. I believe the U.S. Government has every 
right to grant aid conditionally and to unilaterally revoke 
that, and there is no need for anything extra.
    The Chairman. In the foreign aid bill, you are talking 
about?
    Mr. Roth. In the foreign aid bill, exactly.
    The Chairman. Yes.
    Mr. Roth. And, frankly, it is not even clear to me--in the 
current version of the Lugar bill, it says that a new 
unilateral economic sanction would be defined as something 
imposed pursuant to any law enacted after the enactment of this 
bill. Does that mean that the invocation of 502(b) of the 
Foreign Assistance Act cutting off economic support funds----
    The Chairman. I assume so. We pass a foreign aid bill every 
year, so we would be doing that in the future.
    Mr. Roth. Okay, because I mean I could see the opposite 
interpretation as well, which is to say that 502(b) is there 
already and that the cut-off of the aid would be preexisting 
legislation. But I mean I think that is an important thing to 
clarify either way. I think it would be a mistake is you needed 
to jump through all those hoops to cut off aid to some 
government that starts systematically massacring people.
    In terms of conditional trade benefits, similarly I don't 
think there is any need for this kind of strict regulation. If 
you take something like the Generalized System of Preferences, 
there already is lots of procedure governing that. The U.S. 
Trade Representative takes petitions, holds hearings. Everybody 
gets heard as to whether there are serious enough labor rights 
violations to warrant a cut-off of the trade benefits, and 
there is a conditional grant. You get the trade benefits so 
long as you are operating on a fair, level playing field by 
allowing workers in your country to organize and bargain 
collectively. It makes no sense to add additional procedures 
onto the quite extensive ones that exist in current 
legislation. You could say the same thing about OPIC, you could 
say the same thing about Ex-Im Bank loans.
    When it comes to the international financial institutions, 
as I indicated in my testimony, I just don't understand that. 
Yes, there may be some atmospheric effect, but it would seem to 
be precisely in places like the World Bank or the IMF that you 
want to allow the U.S. to take a lead to say we are going to 
vote no and then to try to rally support for that rather than 
to sort of go in and say, well, if you all will join us, maybe 
we will go back and convince our government to vote no. That is 
not the way you lead. And, again, I think that the Lugar 
procedures are too much for those circumstances.
    What I think we really should be focusing on here is 
commercial activity and what kinds of restrictions on 
commercial activity or investment should be permitted. I, for 
one, would completely exempt food from the realm of sanction. I 
don't see the justification, even in the five cases that the 
U.S. currently restricts food sales, for that to take place. 
And a lot of the impetus for this bill comes from the 
agricultural community that says, you know, why are you 
stopping us from selling food to people?
    The Chairman. Right.
    Mr. Roth. I think that since one of the basic principles of 
sanctions is that they should be respectful of human rights, 
and since I think it very quickly borders on a violation of 
human rights to deprive people of food--you know, we are not 
selling food to North Korea while people are starving. That is 
crazy, and so I would exempt agricultural goods altogether.
    With the remaining commercial goods, I think you really 
have to look--military equipment, arms and the like, are 
exempted from the Lugar bill, but Eizenstat would include it. I 
think that should not be treated the same as, you know, trading 
with just a private business in a regular country. So I do 
think that the kind of nuanced approach that you suggested in 
your opening remarks is what is required. To try to develop one 
rule to fit every situation is bound to fail and I think will 
straightjacket us and make U.S. policy much less effective in 
this area.
    The Chairman. Thank you, Mr. Roth.
    Senator Lieberman, I think you are the last act here.
    Senator Lieberman. I can't say that I am prepared to finish 
with a flurry here, but I thank you.
    The Chairman. Next to the last.
    Senator Lieberman. Oh, okay, good. I will just be the warm-
up act for Senator Hutchinson.
    Let me thank the witnesses. I regret that I was on the 
floor a little longer than I thought I would be coming back, 
but I have seen your statements and I am in sympathy with them.
    Let me ask you a question I asked Secretary Eizenstat, 
which is, you know, we assume that economic sanctions that 
affect American businesses cost American businesses. Obviously, 
we have talked here and there were questions about how does one 
quantify the gains that we achieve, particularly in something 
like human rights. And as you have said in one way or another, 
it says a lot that is good about our country that we are 
willing to sacrifice economically for principles, let alone 
interests of ours.
    But I am wondering in your work on this subject whether the 
three of you have ever seen any true quantifications of the 
costs of various sanctions for American business or whether 
this is largely anecdotal.
    Mr. Roth?
    Mr. Roth. Well, let me begin with the initial part of your 
comments because I think this is part of what you are driving 
at. I mean, my answer to the last part of your question is no, 
I don't know the actual costs to business. But I think what you 
noted at the outset, which I fully agree with, is that there 
are gains for business to have from strong U.S. support for 
human rights.
    It is in the business community's interest to have the rule 
of law worldwide. It is in the business community's interest to 
have the stability that comes from democratically elected 
governments rather than dictatorships. And so I think it is a 
mistake to view the support of human rights and the support of 
business as antithetical.
    It is in the interest of business that there be broad 
American support for engagement in the global economy, support 
that will only come if we have strong support for labor rights 
as an essential aspect of our embrace of the global economy. So 
I think there is a false dichotomy that tends to emerge here 
where, in fact, there is much more in common.
    Senator Lieberman. That is a nice twist, actually. I hadn't 
been thinking of that. But, you know, in the Chinese case, as 
you know, in the PRC, a lot of the work that is going on on the 
rule of law, work that the U.S. is doing, is being encouraged 
and really in some senses appealed for by our business 
community because of a desire for predictability in 
relationships, contract law if you will. But there is also a 
broad feeling that that will help because of human rights 
because it will create a procedure, a society of due process. 
But you are absolutely right; it works the other way, too.
    Ms. Lee, do you have any evidence of cost, quantification 
of----
    Ms. Lee. Well, I would first of all agree with Mr. Roth's 
statement that human rights and labor rights can be something 
which create stability and create the kind of sustainable 
political democracy that is good for business. It is a good 
business environment for investment, and so on.
    I would say just briefly in terms of the quantification of 
costs that the IIE study, the Institute for International 
Economics, which attempts to measure the cost of economic 
sanctions for U.S. businesses and in terms of jobs, in my view, 
very grossly overstates those costs partly because it takes 
what might be costs to individual businesses and assumes those 
are net national costs; that if we lose one export market, some 
of those exports will be replaced by exports to other places.
    And the same thing with foreign aid, that foreign aid could 
be withdrawn from one country and then given to another 
country, or the money could be used differently within the 
budget, and so on. And so the actual cost of economic sanctions 
on the net national level to businesses or to jobs, I would 
say, is much smaller. The marginal difference between two 
different activities, between investing in one country and 
investing in another country, for example, in Burma or in 
Thailand, is much smaller than the gross that is often put 
forth. So on both levels, one that human rights are good for 
business, and on the other that many of those costs are 
fungible.
    Senator Lieberman. Thanks.
    Mr. Abrams, good to see you. Thanks for being here.
    Mr. Abrams. Nice to see you, Senator. I don't think there 
has ever been a really reliable study of the costs. In fact, 
maybe that is something the Task Force could call for from, I 
don't know, GAO or the Statistical Assessment Service or 
somebody.
    Senator Lieberman. Let me ask a final question, maybe a 
hard one to answer, but, Mr. Roth, you indicated you are 
opposed to sanctions that deprive people of food, for instance. 
Are there any sanctions here that are preferred? Let me just 
deal with the cause of human rights for a moment. Any of you 
really, are there any that you think are more appropriate or, 
from experience, more effective sanctions to apply in the 
interest of protecting human rights of citizens around the 
world?
    Mr. Roth?
    Mr. Roth. I mean, I think that there actually is pretty 
broad agreement as to what works better than other things. The 
real controversy comes down to, you know, what happens if the 
preferred sanctions are unavailable. Can you go on to the less 
preferred sanctions?
    Senator Lieberman. Right.
    Mr. Roth. But I think it is broadly agreed that 
multilateral sanctions are better than unilateral sanctions. I 
would simply argue that it is important to retain the right to 
impose unilateral sanctions if that is all that there is, say, 
in the case of Milosevic in Kosovo.
    I think it is clear that sanctions work better if they are 
tied to clear benchmarks so it is clear to the target what 
needs to be done to get the sanctions lifted. It is best if 
sanctions are imposed quickly, which is one of the problems 
with the Lugar bill because it would impose a delay that would 
undermine the effectiveness of the sanctions.
    Senator Lieberman. Quickly after enactment, you mean?
    Mr. Roth. No, no, after the offending event.
    Senator Lieberman. Yes.
    Mr. Roth. In other words, you know, Milosevic cracks down 
on Kosovo. It is best to act within a day or two rather than 45 
days later.
    Senator Lieberman. Right.
    Mr. Roth. Sanctions work better if they are targeted at the 
leadership of the government. Prosecution is the best one, if 
you want to consider that as a form of sanction. Certainly, 
seizing assets, denying visas, trade sanctions imposed on 
industries with government controls, cutting off economic 
assistance to the government--those are all very targeted 
sanctions which are better than broad-based trade sanctions.
    It is obviously better if a sanction is supported by key 
constituencies within the country, particularly if they are 
able to speak out. And it is also important that the sanctions 
themselves respect human rights. That is one of the reasons why 
I am opposed to using food as a sanction. So those are, I 
think, broad principles. But, you know, sometimes you have to 
breach those if the only thing left is something that falls 
outside of those principles, if you think it will be effective.
    Senator Lieberman. My time is up. Thank you.
    Senator Hutchinson [presiding]. Senator Lieberman, I 
believe you can take all the time you want.
    Senator Lieberman. That is okay.
    Senator Hutchinson. Thank you, Senator.
    Mr. Roth, you said that targeted sanctions were better 
rather than comprehensive trade-based sanctions, which I think 
I would certainly agree with that. When we had a package 
dealing with human rights abuses in China that we attached to 
the State Department authorization on, I think, one of the 
appropriations bills, one of the criticisms was that it would 
be impossible to monitor or enforce. Could you respond to that 
concern on those kinds of targets? For instance, government-
operated industries where there were human rights abuses, labor 
abuses, child labor, those kinds of things going on--how would 
we be able to monitor and enforce such sanctions?
    Mr. Roth. Well, I recall that debate and what was proposed, 
as I recall, was that rather than cut off MFN across the board, 
say, that there be some kind of tariff increase for businesses 
that were owned or operated by the PLA. And even if you were to 
accept the argument that was made at the time that it is 
impossible to know which companies are run by the PLA because 
there are all sorts of shell companies and intermediaries, it 
is possible, I believe, to identify industries which tend to be 
dominated by the PLA.
    And that may be a rough cut. It is not quite as tailored as 
actually picking out the PLA-controlled businesses, but it 
would be one way which would be monitorable to say, okay, you 
know, the PLA tends to dominate ``x'' industry, therefore we 
are going to increase tariffs on that industry. And it is not 
ideal, but it would be a way of taking a step forward without 
simply throwing one's hands up and saying you can't monitor 
anything.
    Senator Hutchinson. This next question probably has already 
been asked and answered, so I apologize, and I really apologize 
for missing the testimony. I was here earlier and left and came 
back, and I regret that I was not able to be here.
    I think Senator Lieberman was touching upon this. On those 
kinds of sanctions where they are targeted, like what we were 
just talking about on PLA on industries in China, what kind of 
economic impact--how does that affect business? Is that as big 
as what opponents of even narrowly targeted sanctions would 
argue that it is? How big a factor is that?
    Mr. Abrams. It is very hard to measure and there is no 
reliable study of that question. If you think of the PLA, which 
I guess is a favorite thing to think about because it is for 
many Americans evident that that is a good place to make a 
cut--don't do business with the People's Liberation Army when 
it is engaged in repressive activities. It is probably the case 
that some American companies are going to lose out on an 
opportunity to sell arms or materials that go into arms, or 
uniforms or boots to the PLA.
    But this is an old question. You know, once upon a time in 
the 1970's, the question was tear gas, selling tear gas and 
cattle prods to security forces in different countries around 
the world. And, you know, the first answer, I guess, is to say 
there are some things you don't want to sell at all. In other 
cases, there are things you don't want to sell to that person 
at all, regardless of the potential profitability to some 
American manufacturer.
    I would say in the case of the PLA we really don't know 
because no one has ever totaled up the impact of all of the 
potential lost sales to companies that are PLA-dominated, and 
we don't know--in the case of importers, I suppose there are 
importers who are losing money because they cannot import 
products made with slave labor. There, again, I mean the real 
answer is, well, we don't want to do that even if it does make 
some profits for somebody. But one of the things we were 
talking about just before your arrival was the need for 
somebody, in the Government or out, to do a reliable assessment 
of what those numbers really are. How much is it hurting?
    Ms. Lee. I would just add to that what is maybe obvious, 
but that the import and the export impact is very different for 
American jobs. For example, if you lose an export, then you are 
going to lose jobs, if you are losing the export of cattle 
prods, for example, and that is something that we would--you 
know, I think the labor movement recognizes there are times 
when there will be jobs lost if we take a principled stand on 
the basis of human rights and labor rights.
    But on the other hand, not accepting imports as slave 
labor, imports from the People's Liberation Army, means that 
American workers are not forced to compete with egregiously bad 
conditions in other countries. And that is something which is 
good for not just the number of jobs, but the quality of jobs 
here in the United States, and that is why, you know, our 
belief that it is good for the U.S. economy as well as good for 
the developing world to have a principled stand on worker 
rights in trade legislation is something that is good for 
American workers and is also good for the quality of the labor 
market and the middle class and development, and so on, in 
developing countries and our trading partners.
    Senator Hutchinson. Did you want to add anything, Mr. Roth?
    Mr. Roth. No.
    Senator Hutchinson. Okay. Is the idea of requiring an 
economic impact statement or some kind of a quantification of 
impact--is that really a practical solution or a practical 
requirement in imposition of sanctions?
    Mr. Abrams. I think it is sensible to think about it; that 
is, I suppose one can envision some case where you would look 
at the impact in the foreign country and say it is probably 
going to be marginal, it is not going to have much impact. But 
you can see a real impact on American jobs and say, wait a 
minute, surely there has got to be a more targeted sanction 
that we could use in this one.
    So I think it is sensible to ask precisely that question, 
but I don't think it is possible to quantify it. And so I don't 
see why it is sensible to put it in legislation and make 
everybody jump through hoops and do 12 reports of it, rather 
than simply maybe put it in the Task Force report and have it 
in your minds so that you know that when anybody proposes 
sanctions, you and other Senators are going to say, well, tell 
me why this is the most sensible sanction and why you 
disregarded others.
    I think that it is always wise to think about the 
effectiveness of the particular move that is being proposed 
here in the Senate or by the administration. I just don't think 
that putting it in a incredibly elaborate system of hoops and 
obstacles is a good way to make policy.
    Mr. Roth. If I could add to that, too, I think that the 
list that is in the current Lugar bill is a very one-sided 
list. It is sort of a maximalist business position. And if you 
are going to go through a list of considerations, put in what 
will be the effect on American credibility if we are seen as 
trading with somebody who is committing mass murder at home. 
You know, what will be the effect on our credibility if we are 
actually complicit in that because we are funding him by giving 
him aid?
    Senator Hutchinson. I would imagine it would really get 
hard to quantify some of those things.
    Mr. Roth. But I mean I don't think any of this is so easy 
to quantify. It really is a balance of considerations and these 
are important considerations.
    Senator Hutchinson. It would seem to me one of my concerns 
would be that such a requirement--in fact, in much of the 
legislation the goal would be to eliminate sanctions or to so 
restrict them that it makes it an ineffective option in foreign 
policy.
    Ms. Lee. Or to slow it down so much. I mean, that is the 
other thing about reporting is that it is always great to have 
more information, but if it means that everything takes an 
inordinate amount of time because you need to have 19 different 
reports from 17 different agencies before you can proceed, then 
it becomes simply an excuse for slowing the process, and that 
has all the problems that we have been talking about here.
    Mr. Abrams. If I could add, Senator, I think one has to 
ask, well, if that is logical, and I think it is, and that 
happens--that is, it slows sanctions down or makes it less 
likely that we ever adopt them--well, then, what are we going 
to do? It seems to me what it does is if you get pushed out of 
the broad middle of a lot of possible trade and economic 
sanctions, defining them broadly, you are either at one end 
where you are just making speeches, which is not going to have 
much of an impact, or you are pushed to the other end of the 
spectrum where you end up saying, well, maybe we should send in 
the Marines. So I don't see why it is effective as a policy 
tool for you to take that whole broad middle area and make it 
less likely and less possible to use it.
    Senator Hutchinson. I am assuming that probably you already 
answered the question on defining what a sanction is. Should 
the denial of aid and benefits be considered a sanction?
    Mr. Abrams. Could I just add one thing we didn't discuss? 
And I really would like to just make one statement about this. 
We didn't ask the question of what is unilateral. I was very 
struck in the Lugar bill that a unilateral sanction is 
something that you do alone and multilateral stuff happens 
under an international legal regime like the UN.
    In other words, if you can get the British and the French 
and the Germans and the Italians and the Japanese with you, 
that is not multilateral under the Lugar bill. It has got to be 
very formal, under some kind of international organization. I 
don't see why that is a sensible definition at all.
    Senator Hutchinson. You are argued in ``Words or War'' that 
that would put us in a position of going to the lowest common 
denominator and, in effect, giving any nation a veto power over 
our foreign policy in the area of sanctions, or multilateral 
sanctions anyway. Is that fair?
    Mr. Abrams. It is, and in his written testimony Mr. 
Eizenstat said we cannot permit other countries to veto our use 
of sanctions by their failure to act. I think that is really 
the same idea.
    Mr. Roth. In terms of the question, is the conditional 
grant of economic assistance a sanction, I think we all 
answered no, it shouldn't be. I wanted to add one thing, if I 
could, which is that there is a tendency to view the U.S. as 
somehow sanctions-crazy and that we are imposing sanctions and 
nobody else does.
    But if you take the Lugar definition, which would be that a 
conditional grant of economic assistance or a conditional grant 
of trade benefits is a sanction, then the European Union 
sanctions every single country that it has a trade and 
cooperation agreement with because all they do is give aid and 
trade benefits conditionally. That is the way they do it. In 
fact, I think in many ways that is a superior system because 
they actually have the recipient's signature on a contract and, 
in a sense, you have their consent to the withholding of aid or 
trade benefits if they violate human rights, say. We, instead, 
have broad legislation and then follow that legislation by 
revoking----
    Senator Hutchinson. But you said you can't have it both 
ways. You can't have a broad definition of sanctions and then 
say we are the only one that has gone sanctions-crazy in the 
world when you look at the European----
    Mr. Roth. Precisely, because the EU does it everyplace.
    Senator Hutchinson. What about the issue of giving 
Presidential waivers? How much does that--under the guise of 
flexibility, how much does that undermine the use and 
implementation of sanctions as a foreign policy tool?
    Mr. Roth. I think that the current system of having 
different kinds of waivers given in different situations is 
probably the right way to go because there will be times when 
you, in fact, want to give broad latitude to the executive 
branch, usually when you trust the executive branch.
    Senator Hutchinson. Their argument was that almost every 
sanction has some kind of waiver, but that the waivers vary so 
much that there is no consistency in our policy.
    Mr. Roth. And I don't think consistency is the highest 
value here. In other words, there will be times when the 
administration is in your wave length and you can give it a 
national interest waiver because you trust it to be pushing as 
hard as it can. And the two examples that Secretary Eizenstat 
cited may be good examples of that.
    But there will be other cases when the administration is 
not eager to do what Congress has asked it to do, in which case 
you will want to have a much narrower waiver authority. And I 
think it is important for the Congress to be able to vary in 
terms of how much leeway it is going to give the 
administration, depending on how willing it feels the 
administration is to really push the objectives of the 
congressional legislation.
    Mr. Abrams. Again, it seems to me the search for 
consistency is ever-present, but it is probably the enemy of 
good policy here. I agree with Mr. Roth.
    Senator Hutchinson. I think I had better quit. I have gone 
way over. That is the luxury of being the last one, but I don't 
want to torment you all too much.
    Mr. Abrams, I want to compliment you. I enjoyed your 
article. I haven't read ``American Purpose,'' the whole thing, 
but it was a very thoughtful piece. In it, you do make some 
reference to China and the missiles, nuclear technology 
transfer, and the possible connection to what India did in 
response to Pakistan's receiving of that technology.
    I would like all of your opinions, and I will close with 
this. In the case, I guess it was last week or the last ten 
days, of the CBS reporter who was arrested in China, our 
response thus far--I don't know if we have had a response other 
than a verbal protest. I have written the Secretary of State.
    Where we have ongoing human rights abuses, and sometimes 
even in the midst of--what are the appropriate steps? What 
should we be doing? What kind of tools should we have at our 
disposal to respond to situations like this most recent one, 
which in itself might not be the cause for action? But in this 
case there is a long pattern of abuses similar to that. Even in 
the face of the President's visit to China, we found that 
within a few days of his visit they were, before and after, 
rounding up those who would start an opposition political 
party.
    While I don't know all of the circumstances or all of the 
facts concerning this reporter who was arrested, it seems to me 
it is part of the continuing pattern to prevent truth, access 
to the information by the Chinese people, and what is going on 
in China getting out. So I just wonder what kind of hierarchy 
of responses should we have at our disposal. What would be the 
proper kind of thing for our Government to be doing, if I could 
just get each of your opinions?
    Mr. Abrams, since I complimented you so effusively, I will 
let you begin.
    Mr. Abrams. Thank you, Senator. Well, this is a special 
kind of human rights matter because it involves an American, 
which we are bound to take very seriously. I don't fault the 
administration for starting to approach this with what we used 
to call quiet diplomacy; that is, with just saying to the 
Chinese fairly quietly this can't happen, this person needs to 
get out right now.
    But I think if that doesn't happen immediately in this case 
or other cases, what you need to do is find a sanction that 
teaches--it may sound condescending, but that teaches the 
Chinese you can't do this and you will wish that you hadn't if 
you try it again. Maybe, for example, since we are dealing with 
one individual, what we do is we come up with a list of 10 
Chinese officials who are barred from the United States for the 
next 3, 6, 9, 12 months, so that we say, look, we are not 
destroying the bilateral relationship, but next time you think 
about picking up an American, think twice because there will be 
a price to pay.
    I think maybe going after individuals in a case like this 
is better than a broad-scale economic sanction. But I think we 
need to be willing to ratchet it up in a case where the person 
is not released. That is probably not this case, but it is a 
very good example of the kind of difficulties you run into in 
matching the particular sanction with the particular offense. 
And it is a very good example--I would just close with this--as 
to why it may not be so wise to legislate all of this and wiser 
to allow for a great deal of flexibility.
    Senator Hutchinson. Go ahead.
    Ms. Lee. Well, I guess I would agree that in the case of an 
individual like that you would start with diplomacy and hope 
that that would work. I would point out in terms of 
effectiveness and what sort of gets the attention of the 
Chinese government that back in 1995 we did threaten the 
imposition of tariffs on, I guess, about $100 million worth of 
Chinese goods over the violation of intellectual property 
rights, and that was one of the times we got the most response 
from the Chinese government. We didn't end up imposing those 
tariffs, but we did get some satisfaction. Maybe it was short-
lived satisfaction.
    Senator Hutchinson. In that case, it was not a human rights 
situation.
    Ms. Lee. Right, exactly.
    Senator Hutchinson. It was an economic situation which we 
responded very forcefully about.
    Ms. Lee. We responded forcefully with the threat of 
economic sanctions, of unilateral economic sanctions, and it 
was effective in that short run. So I guess the point is simply 
that we shouldn't rule out the use of unilateral economic 
sanctions in the case that there are repeated human rights 
violations of that kind with a government that is not 
responsive. But I think that is a long-term, difficult question 
with the Chinese government.
    Mr. Roth. Well, I could go on at length about the Clinton 
administration's China policy, but suffice it to say that the 
Chinese government, in my view, has only responded to pressure 
over the last six years. When there has been sustained 
pressure, it has moved. When the administration has embraced 
solely a constructive engagement approach, it has gotten 
nowhere.
    And what particularly concerned me over the last year is 
that there were two obvious sources of leverage that the 
administration had, neither of which would have entailed 
significant economic costs at all to the United States. One was 
proceeding with the critical resolution before the UN Human 
Rights Commission in Geneva which we gave up in return for a 
promise that is yet to be fulfilled that a human rights treaty 
would be signed. In other words, we got nothing out of 
withdrawing the treaty.
    And the second was Clinton's visit to Beijing, where the 
President could have said quietly, if he wanted, I am not going 
to go to Beijing until you give me something systematic, stop 
reform through labor imprisonment, release the counter-
revolutionary prisoners who are in prison for an offense that 
no longer exists on the statute books, release the people who 
are still in prison for the Tiananmen democracy demonstrations, 
give me something meaningful and then I will come to Beijing.
    He didn't do that. He went, engaged constructively, got 
nothing in return. He got to talk on TV, you know, which was 
nice, but it is not something that has been of any immediate 
significance to the Chinese people. And I think it is the 
administration's refusal to use any form of leverage, any form 
of pressure, that has left us in such a hole when it comes to 
trying to improve human rights in China today.
    Senator Hutchinson. Well, thank all of you. Thank you for 
indulging me for far more than five minutes.
    Senator McConnell has given me authority to say the hearing 
is adjourned. Thank you.
    [Whereupon, at 4:38 p.m., the Task Force was adjourned.]



                    TASK FORCE ON ECONOMIC SANCTIONS

                              ----------                              


                      WEDNESDAY, SEPTEMBER 9, 1998

                              United States Senate,
                          Task Force on Economic Sanctions,
                                                   Washington, D.C.
    The Task Force met, pursuant to notice, at 2:33 p.m., in 
Room SH-216, Hart Senate Office Building, Hon. Mitch McConnell, 
(chairman of the Task Force) presiding.
    Present: Senators McConnell, D'Amato, Hutchinson, Lugar, 
Warner, and Biden.

 OPENING STATEMENT OF HON. MITCH McCONNELL, U.S. SENATOR FROM 
                  THE COMMONWEALTH OF KENTUCKY

    Chairman McConnell. This hearing will come to order.
    Our first panel today for the task force on economic 
sanctions will include: Dr. Richard Haass of the Brookings 
Institution; Dr. Gary Hufbauer, a Reginald Jones Senior Fellow 
at the Institute for International Economics; and Mr. Barry 
Carter of the Georgetown University Law Center.
    Later, we will be hearing from a second panel which will 
include: Tom Donohue, president and CEO of the U.S. Chamber of 
Commerce; a good friend of mine, Bill Sprague, who is president 
of the Kentucky Farm Bureau, testifying on behalf of U.S. 
agricultural interests; and William C. Lane, CEO of USA Engage.
    Today's witnesses offer the most expertise in assessing the 
cost of sanctions. The members of the first panel have each 
been involved in thought-provoking and thorough studies of the 
policy, history, circumstances, purposes, accomplishments, and 
impact of sanctions on jobs, income, and our economy.
    Yesterday, a number of members asked our witnesses how do 
we quantify the cost of sanctions. Well, today, we have 
assembled the experts to tell us.
    The second panel can offer practical judgments about the 
impact sanctions have had on U.S. commercial and agricultural 
sales and related jobs.
    Representing companies and constituents who are the 
heartbeat of the American economy, they know firsthand what it 
means to lose market access and share to the seemingly 
arbitrary impact of sanctions.
    At some point over the past few years, each witness today 
has offered the view that most unilateral sanctions are 
ineffective and too costly. This view must be considered in the 
context of the thinking offered yesterday that we cannot allow 
other countries to veto our interests in or use of unilateral 
sanctions by their failure to act.
    Our challenge on this task force is to find the right 
balance between American economic opportunity and our use of 
sanctions to advance democratic free markets. These need not be 
mutually exclusive goals. However, since 1993, today's 
witnesses would suggest that the acceleration of sanctions 
seems to place more emphasis on the latter at the expense of 
the former.
    I hope the two panels will help us arrive at a better 
understanding on how to achieve a better balance of our 
interest.
    I see my colleague from Delaware has arrived.
    What we did yesterday, Joe, was to have brief opening 
statements from the Chair and the Co-Chair and then go straight 
to the witnesses. So, if you would like to----
    Senator Biden. Well, Mr. Chairman, I appreciate that. I 
will not take much time.
    You have worked and our staffs have worked very hard on 
this issue, and I was not here yesterday. I want to explain, as 
they say in our business, a point of personal privilege. I was 
in a hospital just about to be handed my second granddaughter, 
and as important as sanctions are, I wanted to be there. So I 
do apologize for not being there, but I would have had great 
trouble explaining to my mother why I chose to go to a 
sanctions hearing rather than be at the hospital as my second 
granddaughter was delivered.
    With your indulgence, Mr. Chairman, I would like to briefly 
deliver the statement I would have given yesterday.
    As you know better than anyone, the majority and minority 
leader presented this task force two assignments; first, to 
make recommendations on sanctions imposed against India and 
Pakistan last spring, and that has already been fulfilled. A 
second assignment was to make recommendations on broader 
sanctions policy, which as we all know is far more difficult, 
both because of the complexity of the subject matter and the 
diversity of views within this body.
    The question before the task force is not whether sanctions 
are legitimate, at least my view that is the question. It 
should go without saying that sanctions are a necessary part of 
the diplomatic toolbox, and the Constitution counts us in on 
that deal. It is a very important point to make, and we should 
not in any way, in my view, imply and/or suggest we are not 
legitimately involved.
    Now, this is not micromanaging. This is a constitutionally 
authorized tool available to us as well. Nor is there any doubt 
about our ability to impose or enact economic sanctions. As I 
said, the power under the Foreign Commerce Clause gives us that 
authority.
    But what Congress cannot do is conduct the daily business 
of diplomacy. Only the President can negotiate with foreign 
governments, and as a partner in the formulation of foreign 
policy, it seems to me that Congress has to take care to 
exercise its power in ways that do not unduly restrain the 
executive.
    Foreign policy always involves a complex mosaic of 
interests, and it is rare that two cases will involve the same 
considerations. Therefore, it is difficult in the abstract, in 
my view, to devise a precise road map for use of sanctions, but 
in considering our recommendations to the Senate, it seems to 
me we can establish some guideposts to chart our course.
    First, both Congress and the President should resist the 
rush to sanction when foreign policy challenges arise. 
Diplomacy should not be seen as a dirty word. It can work, but 
it requires patience and tenacity.
    Second, we should be especially cautious in imposing 
unilateral sanctions. As the Senator from Indiana has pointed 
out time and again, they very seldom ever have a positive 
result.
    As the global economy expands, our ability to use economic 
power to influence the country's decision-making will shrink.
    I remember when Dr. Haass was helping us on this Committee. 
We used to talk about the ability to sanction economically a 
particular product or a particular endeavor, and we were the 
only game in town. If they did not get it from us, they did not 
get it. There is hardly anything we can say that about now.
    So suppliers in Europe and Asia, unconstrained by 
governments which usually favor profits over principal, are 
happy to supply the goods that we restrict, thereby undermining 
our policy and depriving our companies of markets.
    As the world's only super power, we must often lead by 
example--and act alone when necessary, but unilateral sanctions 
should be utilized only after other options have been 
exhausted, and in rare circumstances in my view.
    Third, in enacting sanctions laws, the Congress should 
build in flexibility for the President, the flexibility to 
negotiate changes in the conduct that we oppose and flexibility 
to meet changing circumstances.
    It has been my experience here, Mr. Chairman, and I am sure 
it is the same for all of us, that it is very hard to turn this 
super tanker around. Once sanctions are in place, they build a 
constituency, even though it may be a minority constituency, 
and to take out of the law a sanction that may have made sense 
at one time is not impossible, but one of the more difficult 
tasks in this town.
    We are still talking about, I do not know how many years 
later, sanctions against the former Soviet Union and Russia 
relating to Jewish immigration that now I do not know anybody 
who argues that they have any utility any longer or any need, 
but it is very difficult to take it out of the law.
    Fourth, in enacting sanctions, we should in most cases 
provide a sunset, thereby ensuring a regular review that they 
remain justified, again, shifting the burden to us to reimpose 
rather than have to generate the positive support to get enough 
votes to end them.
    Fifth, in considering sanctions, it seems to me we should 
clearly define our objectives and attempt to quantify the costs 
and benefits, as Senator Lugar has proposed in his legislation. 
Cost estimates will always be imprecise, but we should consider 
whether sanctions are worth the price.
    So, Mr. Chairman, today we have a distinguished group of 
witnesses, and I look forward to hearing their ideas.
    I again apologize for not being able to be here yesterday 
with an equally distinguished panel.
    I thank the chair.
    Chairman McConnell. Thank you, Senator Biden.
    Why don't we lead off with Dr. Haass, and then we will go 
to Dr. Hufbauer and then Mr. Carter.

      TESTIMONY OF RICHARD N. HAASS, BROOKINGS INSTITUTION

    Mr. Haass. Thank you, Mr. Chairman.
    What I would like to do is just make a few remarks. You 
have got my formal statement.
    If I might, though, there are just two things I would like 
to say to Senator Biden before we begin. One is ``mazel tov.''
    Senator Biden. Thank you.
    Mr. Haass. And the other is you have got one hell of a 
memory as it has been more than a quarter century since I had 
worked at this Committee.
    Senator Biden. Well, I have been here more than a quarter 
century. That is the frightening part.
    Mr. Haass. For both of us.
    I really also want to applaud all of you and your 
colleagues in setting up this Commission, on serving on it. I 
just think that this examination of what has become one of our 
most important foreign policy tools is long overdue, and I wish 
you well with it.
    The most common question I hear is the question of do 
sanctions work. So let me answering with a resounding, 
unambiguous and clear answer, it depends. It depends most on 
the task that is set out for the sanction, and it depends a lot 
on how much time is allowed.
    As a result, sanctions will tend to disappoint you if 
ambitious goals are set forth and if you are in a hurry, or to 
put it more positively, you may get something more from 
sanctions if you set out more modest goals and if you are a 
patient individual.
    The second critical factor that will contribute to the 
effectiveness of sanctions is the degree of multilateralism. 
Again, as a result of thumb, unilateral sanctions ought to be 
avoided. That is not simply a bias, but it is really in many 
ways a reflection of the world we live in, and the trends will 
reinforce that. The more globalized we become economically, the 
more that entities will have the opportunity to find 
alternative sources of technology, equipment, financing, what 
have you, on either the black market or a gray market or even 
the white market.
    I also think we ought to avoid secondary sanctions. What 
they tend to do is transform an existing dispute from one 
between the United States and the target to one between the 
United States and normally one of our allies, and in the 
process, it harms our relationships and broader interests.
    When we have those situations where we cannot get our 
friends and allies to support the primary sanction that we 
would like, we really have two choices. One is to accept lesser 
sanctions, to see if we can come to some kind of a bargain, 
better to have multilateral support normally for a lesser 
sanction than go unilaterally with a maximal sanction, or to 
think about an alternative foreign policy tool. And I would 
like to come back to that issue at the end.
    As a result of thumb, again, any sanction should include a 
humanitarian exception. For food and medicine, in here, I would 
say that is for both moral reasons. I think it tends to be the 
right thing for Americans to do, but also for practical 
reasons.
    It has been my experience that humanitarian exceptions make 
it somewhat less difficult to garner international support for 
the basic sanction itself.
    We want to keep our sanctions narrow. We do not want to 
hold an entire bilateral relationship normally hostage to 
disagreements in one area, and here I would cite the recent 
legislation that passed the Congress dealing with the Iran 
missile problem in which sanctions were introduced against 
Russia, and I think that was a step in the right direction. 
That seemed to me to be a good-faith effort on the part of the 
Congress to say here we have a disagreement with this aspect of 
Russian foreign policy. We do not want to bring down or burden 
the entire U.S.-Russian relationship because of this 
difference, so we are going to target the specific entities in 
Russia that were involved. And I think that is, in general, the 
right sort of approach.
    By contrast, I would point to the other legislation that 
was triggered by the Indian and Pakistani test where the entire 
relationships with both India and Pakistan were essentially 
jeopardized because of our disagreements in one area, which was 
the nuclear area.
    Impact statements ought to become part and parcel of the 
sanctions process at two times. First, when sanctions are being 
considered, we ought to have a very careful, rigorous 
assessment of what the likely costs and benefits of the 
sanction are going to be.
    Secondly, at regular intervals thereafter, sanctions ought 
to be revisited because, as time passes, we no longer have to 
simply think about the likely impact. We will have the 
advantage of being able to look at the actual impact, and we 
can look at the costs and benefits to the full range of 
American foreign policy and economic interests, and in all of 
these cases, both at the time of adoption, as well as at 
regular intervals thereafter, we can look at the pros and cons 
of sanctions as compared to the potential pros and cons of 
other foreign policy instruments.
    Here in Congress, I would think that you could perhaps look 
to the CBO or one of the other congressional support agencies 
to undertake this function for you, and this could be something 
that they would be tasked to do, and every year, they would 
come out with a set of impact statements on sanctions to help 
you and your colleagues decide whether this tool continues to 
make sense, if, indeed, it made sense in the first place.
    I think if Congress adopts the sort of measures I am 
talking about, it will make sanctions better. With that said, 
we also need to think about other foreign policy tools, and let 
me end with that.
    In some cases, no matter how wisely the sanction is 
crafted, it simply will not be the best approach, or to borrow 
from Senator Biden's metaphor, it will not simply be the best 
tool in the kit bag. There will be other tools in the kit bag 
that look better.
    In some cases, for example, military force will be 
preferable. This was the judgment of the Bush administration at 
the time of Desert Shield that we essentially said instead of 
continuing with the sanctions, we thought that the use of 
military force come January 1991 was a better foreign policy 
approach for the United States.
    More recently, several years ago when the Cuban government 
shot down several airplanes of the Brothers to the Rescue 
Organization, I would have preferred rather than introducing 
added sanctions as well as secondary sanctions that we perhaps 
had used several cruise missiles to take out the MIG aircraft 
in question or one Cuban airfield to let them know that that 
was simply unacceptable.
    In the case of Bosnia, I think two administrations spent 
way too much time sticking to sanctions when, again, they 
should have turned to the military instrument. So I think one 
of the most important things is not simply making sanctions 
better or smarter, but making foreign policy better and smarter 
and not asking too much of the sanctions instrument.
    In the area of nonproliferation policy, for example, which 
has been front and center since the Indian and Pakistani test, 
yes, we can turn to sanctions to carry the full burden of the 
policy, but there are other things we can and should do as 
well, strengthening the IAEA, improving export controls, 
perhaps putting more resources into theater and national 
ballistic missile defense, the sort of preventive attack that 
we launched against the Sudan. Those are other foreign policy 
instruments, and again, the answer is not to do away with 
sanctions, but in some ways to change the balance or the mix 
between sanctions and all the other instruments that are 
available.
    I think this issue particularly comes into play when you 
face the problem of so-called rogue or difficult countries, 
North Korea, Cuba, Iran, Iraq even, and there in the case of 
North Korea, we have an interesting model. The agreed framework 
is an attempt to structure a relationship with North Korea in 
which sanctions have a part, but so, too, do very conditionally 
made available incentives.
    I would think with the new government of Iran, that is a 
possible approach. Secretary Albright has already discussed the 
idea of a road map. So, rather than having a sanctions-only 
policy, which is essentially current American foreign policy, I 
can imagine structuring a policy towards Iran in which 
sanctions would play a part, but so, too, would their lifting 
is another way of talking about incentives if Iran were to meet 
certain behavioral norms.
    I could say the same thing about Cuba. I could even say the 
same thing about Iraq. I just think that, again, the answer is 
not to do away with sanctions, but it is to better blend them 
or mesh them with the other tools of American foreign policy.
    So let me then simply conclude, Senator, where I began. 
There is no universal answer to the question of when to use 
sanctions. Sometimes they will be the best tools; sometimes 
not.
    Clearly, though, we will benefit from greater scrutiny of 
the likely and actual cost of sanctions and from greater 
scrutiny by both Congress and the executive branch of the 
available alternatives. My hunch is that if we go that 
approach, we will tend to use sanctions less as a light switch 
and somewhat more as a rheostat to be adjusted rather than just 
simply turned on and off, and we will probably use them 
somewhat less in comparison to other foreign policy 
instruments. And I think all things being equal, those sorts of 
evolutions would be desirable.
    Thank you very much.
    [The prepared statement of Mr. Haass follows:]
    
    
    Chairman McConnell. Thank you, Dr. Haass.
    Dr. Hufbauer?

   TESTIMONY OF GARY HUFBAUER, REGINALD JONES SENIOR FELLOW, 
             INSTITUTE FOR INTERNATIONAL ECONOMICS

    Mr. Hufbauer. Thank you very much, Senator.
    Let me start off by saying that I associate myself with 
everything that Richard Haass has said, and I will try to be 
very brief.
    I welcome the Lugar-Hamilton-Crane bill as an important 
reform in this area, and I endorse the remarks of Senator 
Biden.
    That said, I do not associate myself, and I do not think my 
colleagues do or any of you Senators do, with those who say 
that we should never use sanctions or hardly ever use 
sanctions. I do not accept that position.
    Let me just quickly go over about seven points, many of 
which are repetitive. My colleague, Kim Elliott, at the 
Institute for International Economics, has put together some 
numbers and charges which you have.
    Just to briefly summarize, because I do think there has 
been some misrepresentation in the media, the number of 
unilateral sanctions cases is not particularly higher now than 
it had been in recent years in the 1990's. We have more 
multilateral cases because, of course, times have changed. The 
focus has shifted in just counting cases to Africa more than 
Latin America, and of course, that means that the United States 
is less likely to have unilateral sanctions because Africa has 
always, in diplomatic terms, been more closely associated with 
Europe and Latin America, with the United States.
    The number of new cases is down somewhat, but when you look 
at the cumulative numbers, the U.S., of course, has been the 
preponderant user of sanctions over the century, and 
particularly since the second world war.
    We put together some numbers. My colleagues at the 
institute, Kim Elliott and Jeff Schott and myself, put together 
some statistics on success, and that an hour's discussion how 
you measure it, but we have tried to be consistent over time. 
The last table shows a point which Richard made, and I think 
most commentators agree that the success ratio, however you 
measure it, is declining over time. We have been less 
successful in recent years than in earlier years, and 
unilateral sanctions are not very successful in terms of 
foreign policy goals.
    One of the ironies of sanctions is that they are more 
effective against societies which are partly open and, again, 
societies which are substantially closed, and, of course, many 
of our adversaries, such as Burma and North Korea, are 
substantially closed societies.
    The point that Richard made about sanctions not being seen 
in isolation is absolutely essential. I thought the 
administration's handling of the bin Laden incident and all 
that surrounding it was a model of diplomacy and a very 
difficult context, that is, mixing military force and 
sanctions. We could all tweak it somewhat, but I thought it was 
a big improvement over some of the earlier episodes.
    Turning quickly to the cost, I see that the International 
Trade Commission has come out with a study. I have not had a 
chance to read the study. They cite a range of $5 billion to 
$20 billion in lost U.S. exports because of all sanctions now 
in place. The $20 billion, I take it, is the figure that my 
colleagues and I came up with, and the $5 billion, I do not 
know where that comes from, but I am sure that that is also a 
respectable estimate.
    Any of these magnitudes is fairly small given the size of 
the U.S. economy. Of course, you know, 15 minutes and the stock 
market gains or loses $20 billion, as everybody knows, but the 
point which I would emphasize is that these costs are very 
particularized on individual communities and companies in our 
country. They are highly targeted, and one normally thinks of 
foreign policy as a cost, like defense, that we should all 
share in the country, and the way sanctions work is that 
particular companies were doing business with the targeted 
country, communities, workers, they lose, and they lose 
heavily. And I think that unfairness clearly attracted 
Congress' attention in the India/Pakistan case where the 
farmers were at risk, and in other cases rightly should attract 
congressional concern.
    To me, there are two costs which are somewhat more 
important than just trying to add up the total lost exports. 
One is the morality issue in the following sense, as parsed by 
an economist. When sanctions are broad-based, as many of ours 
are, they do hit the least powerful, the most impoverished and 
deprived elements of these societies, Iraq, Iran, North Korea, 
Burma, Cuba, and so forth, and actually, they tend to 
strengthen the leaders that we dislike and are adversaries and 
in some cases are enemies. So that is very troubling to me, and 
I think that is a very high cost of broad-based sanctions. And 
there, I distinguish from the targeted kind of sanctions, the 
companies that Richard mentioned, bin Laden and other targeted 
cases.
    And then the final cost, which I think is really quite high 
for our overall posture in the world is that we are setting up 
a very considerable backlash against ourselves because of the 
wide use of sanctions now covering more than half the world's 
population, not in any very heavy-handed way, but enough so 
that every Canadian you talk to, every Frenchman, they all know 
about these cases. They resent them. They regard them as 
excessive U.S. dictation of foreign policy, especially the 
secondary aspects, and I think that reads against our ability 
to marshal a consensus in many cases. It is a very heavy cost, 
I think we are paying, hard to quantify. It is not typically 
economist stuff, but it does trouble me.
    Finally, let me just tick off four points where I would 
hope when the Lugar-Hamilton-Crane bill is enacted, if it is 
enacted, and signed that it will be strengthened. The 
multilateral aspect to the points that Richard made, any 
strengthening in that direction, I would welcome those to say 
that unilateral should be reserved for exceptional cases, even 
though as I say the numbers are not high. I think they are too 
high. They are not rising, but I think they are too high.
    I think Presidential waivers are a good policy not only for 
new cases, but for existing cases, for reasons that I have 
written about, and because we have this substantial inventory 
of sanctions which has potential carrots for rewarding modular 
improvements towards good behavior, along the lines that 
Senator Biden spoke of.
    I welcome more instances where sanctions are directed at 
rulers, at leaders. I will be very specific to take the India/
Pakistan case. If I were running policy, which I was not, of 
course, I think our intelligence forces know that 50 or so 
people in India who are responsible for that decision, those 
individuals could have been named, and they could have been 
sanctioned in some way, shape, or form. Many of them have 
children or assets outside of India. To me, that would have 
been an improved policy over what we came to with the Glenn 
Amendment.
    Finally, just to endorse what Richard said, I do think 
sanctions should be seen as just one element of diplomacy, and 
in particular, when we feel strongly enough about a country 
that we put on broad-based sanctions, which deprived the entire 
population of oil, imports, exports, truly broad-based 
sanctions, I think they have to be seen in the context of going 
on to military force. Otherwise, to me, it is immoral to have 
broad-base sanctions against a country for 10, 20 years because 
of the impact they have on the weaker elements on society.
    Thank you very much.
    [The prepared statement of Mr. Hufbauer follows:]
    
    
    Chairman McConnell. Thank you, Dr. Hufbauer.
    Mr. Carter?

 TESTIMONY OF BARRY E. CARTER, GEORGETOWN UNIVERSITY LAW CENTER

    Mr. Carter. Thank you, Chairman McConnell.
    Senator McConnell, other distinguished Senators, ladies and 
gentlemen, it is an honor to appear before this task force, and 
it is also a challenge to try to suggest some useful ideas.
    I prepared a longer statement, and with your permission, I 
would ask that it be entered in the record.
    Chairman McConnell. Each of your statements will be made a 
part of the record.
    Mr. Carter. Thank you.
    I do want to congratulate this task force and the U.S. 
Senate for deciding to take a step back and undertake a careful 
overall look at U.S. economic sanctions. For many years, these 
sanctions often seemed to be authorized by Congress and 
implemented by the executive branch without any particular 
order or rationality.
    Ten years ago in 1988, I published a book about economic 
sanctions with a title that noted the haphazard U.S. legal 
regime. The situation has become even more haphazard over the 
succeeding 10 years.
    I realize how busy you Senators are and how focused you are 
in improving matters. So let me start at the end by 
highlighting my conclusions.
    First, I support S. 2244, subject to possible modifications 
of the definitions and exclusions. This bipartisan bill 
introduced by Senator Dodd for himself, Senator Hagel, Senator 
Biden, and Senator Roberts, provides the possibility of a 
Presidential waiver for important national interest in most 
existing sanction laws. It allows for more consistency in 
applying sanctions, and it provides more U.S. flexibility in 
foreign policy.
    Second, I also support S. 1413 and its companion, H.R. 
2708, again, subject to some minor modifications. This 
bipartisan bill introduced by Senator Lugar and Representatives 
Hamilton and Crane provides a much-needed process for careful 
implementation and evaluation of unilateral U.S. sanctions.
    Third, along with Dr. Haass, I would encourage the task 
force to consider secondary sanctions. I call them secondary 
boycotts. I would hope this task force considers somehow 
creating the presumption against so-called secondary boycotts.
    Just as the United States strongly opposed the secondary 
demands on U.S. businesses by the Arab boycott of Israel, I 
believe the United States should be very hesitant to impose 
unilateral U.S. sanctions that do not work directly on the 
target country or entities in that country, but act as a 
secondary boycott against foreign companies or individuals who 
do business with the target country.
    I will come back to these conclusions later. However, let's 
first ensure that we have a workable definition of sanctions 
because I think that one can try to do too much, and I think 
there is often confusion or conflict over definitions that are 
unnecessary. And I think it is also helpful to get the 
historical trend.
    As for a workable definition, I think the task force would 
have more than enough to chew on by focussing on U.S. 
unilateral economic sanctions for foreign policy purposes. 
Let's parse that a bit more.
    Economic sanctions can be defines to include measures that 
limit exports, limit imports to the United States, investment 
in the target country, and private financial transactions 
between U.S. persons and the target country.
    This also includes directions for the United States to vote 
against loans in the international financial institutions.
    Further, it should include restrictions on U.S. Government 
programs, Ex-Im Bank, OPIC, foreign assistance, aircraft 
landing rights, because changing those programs can have a 
definite impact on the target countries and on U.S. companies.
    I think it is also important to define the purposes of the 
sanctions you are going after. The focus should be on sanctions 
for foreign policy practices where foreign policy is defined 
broadly to include national security, nonproliferation, anti-
terrorism, human rights, democratization, environmental 
concerns, and anti-narcotics efforts.
    Well, what is left or what should be left, I do not think 
the definition of ``foreign policy'' should include the use of 
economic sanctions as a tool in trade disputes or trade 
negotiations. Although these are interesting and very 
important, the use of economic sanctions for such economic 
purposes, trade purposes, bring a host of other situations, 
such as market access, intellectual property rights. They raise 
new and difficult legal and policy issues, and they often 
involve different laws. As a result, I suggest that you focus 
on sanctions that are undertaken for non-economic foreign 
policy purposes.
    I also suggest that you focus on unilateral economic 
sanctions. These are the ones that the U.S. is authorized under 
U.S. law to impose or already has imposed without comparable 
actions by other countries against the target country. These 
sanctions are the most controversial, in part, because the 
impact of the sanctions might be diluted by offsetting foreign 
countries filling the gaps or because U.S. companies use 
business to foreign rivals.
    With these parameters as our working definition, let's 
briefly recall some relevant history. Between the end of World 
War II and until the mid-1970's, U.S. economic sanctions were 
primarily a part of the cold war and employed against Communist 
countries. There were some rare exceptions. However, it was 
starting in the mid-1970's, in part, because of congressional 
initiatives that sanctions were authorized and used in more 
foreign policy cases against human rights abuses, terrorism, 
and proliferation.
    This growth in the 1970's slowed down considerably when the 
use of unilateral U.S. economic sanctions encountered strong 
domestic criticism during President Carter's agricultural 
embargo against the Soviet Union in 1980 and then very strong 
foreign opposition to President Reagan's abortive oil pipeline 
sanctions against the Soviets in 1982.
    In some ways in the early 1980's, a generation of 
congressional and executive policy-makers received an education 
about some of the limits to unilateral sanctions.
    As a result, the late 1980's were a period of relative 
restraint in the use of new U.S. sanctions. Well, as noted by 
several speakers, things have heated up against during 1993 
through 1998. In part, it might well be because of the major 
turnover in Congress and the new generation of policy-makers in 
many places.
    In any event, although there are variations in the numbers 
of various studies, there is a consensus that U.S. unilateral 
economic sanctions now cover at least 26 target countries that 
include over half the world's population.
    I want to emphasize that the reasons behind sanctions is 
usually commendable. The difficult question is whether U.S. 
unilateral economic sanctions are the appropriate measure to 
take, rather than making diplomatic protest, pushing for 
multilateral sanctions, using cruise missiles or the like.
    Even if U.S. unilateral economic sanctions might seem 
appropriate in a situation, there are real questions what might 
be the most cost-effective sanctions. I believe that cutting 
off U.S. exports directly affects revenues and jobs in the 
United States, and would seem to be the economic sanction of 
last resort. Maybe cutting off foreign aid or foreign aircraft 
landing rights or even limiting imports from the target country 
might have an effect without the same cost to the United 
States. One needs to tailor the sanctions to the specific 
situation.
    Well, whatever one thinks of the particular uses of U.S. 
sanctions, I think there are some grounds for consensus on 
certain points that this task force can easily reach.
    I think there is a need to instill more order and 
rationality into the process. To begin with, right now there is 
no system for recording in any comprehensive fashion the 
various U.S. unilateral sanctions, much less evaluating their 
impact.
    Given the controversy generated by some of these sanctions, 
the public discourse would be greatly aided if Congress decided 
that there should be a regular report on unilateral U.S. 
economic sanctions.
    The report should include at a minimum a listing of them, a 
listing which does not exist today.
    There should also be a requirement for some empirical 
analysis of the impact of these sanctions on the target country 
and on U.S. businesses and U.S. jobs.
    The International Trade Commission has been doing a major 
study at the request of a congressional committee. The ITC is 
an independent agency, and I encourage the use of the ITC for 
further studies, but let me be more specific.
    As I mentioned before, first, I urge the Senate to support 
S. 2244. I would, however, suggest that one needs to examine 
the definitions and exclusions in S. 2244 carefully.
    For example, my earlier definition of U.S. economic 
sanctions is generally consistent with the one in 2244, except 
there is a last subsection there about intellectual property 
that I think is unclear and inconsistent with the other 
definitions.
    For another example, although the exclusions in 2244 are 
understandable, why exclude arms sales from a possible 
Presidential waiver, as the bill does, since the President 
might well have national security reasons to waive such a 
sanction?
    Also, the last clause of the bill says that the bill's 
waiver does not preempt any more restrictive waivers. Well, 
that is vague, and I am sure it is going to lead to dispute. I 
think it could be clarified.
    I support 2244. I just think that there are some ways that 
it can be improved, as I am sure this task force is looking at 
it.
    Secondly, I also support Senator Lugar's S. 1413. In 
commendable ways, it goes beyond the basic reporting and 
evaluation process that I recommended earlier. However, again, 
I think one should look carefully at the definition of 
sanctions, such as the one regarding intellectual property.
    The bill might also benefit from a section about statutes 
that are excluded from its coverage, much as Senator Biden's 
bill does have that exclusion section. Otherwise, if you do not 
have such an exclusion section, an amendment to an economic-
based trade law, such as anti-dumping or countervailing duties, 
might fall incorrectly, I believe, under the definition of 
sanction. We do not need to get into those issues. I suspect 
Senator Lugar and others did not intend to. The bill might make 
it more clear.
    Third, and for a new idea, I encourage the Senate task 
force to somehow create a presumption against new laws imposing 
secondary boycotts. The phrase ``secondary boycott'' is much 
more precise than the word ``extraterritoriality.'' I think the 
word ``extraterritoriality'' deserves an award, an award for 
one of the most vague and amorphous terms in international 
politics and law.
    There is extraterritoriality everywhere, in the laws of the 
United States, the European Union countries, and others, be it 
an anti-trust, securities or smuggling.
    For example, the European Union rails against our 
extraterritoriality in the Helms-Burton law and the Iran-Libyan 
Sanctions Act. However, the EU also carefully examined and even 
required changes in the merger between Boeing, a Seattle-based 
corporation, and McDonnell-Douglas, a company headquartered in 
St. Louis.
    The EU interest in that merger was understandable, though, 
because of the world trade in the area, but it surely 
demonstrated that one cannot and does not want to simply 
prohibit extraterritoriality.
    I think the better dividing line is a secondary boycott. 
Let me be clear. A primary boycott limits trade and other 
transactions between the host country and the target country. 
Most U.S. sanctions and laws involve a primary boycott; for 
example, limits on trade by U.S. companies with Libya or Syria.
    A secondary boycott limits trade between companies in 
Country A and a third country, C, or its entities because the 
third country is going business witness the target country, B. 
So you pick on C to get at B.
    Until recently, the best known example of a secondary 
boycott in international relations was the Arab boycott of 
Israel. Certain Arab countries not only prohibited their 
companies from trading with Israel, a primary boycott, but they 
imposed sanctions on third-country businesses, such as our 
companies, U.S. companies, for trading with Israel; hence, a 
secondary boycott.
    In 1977, the U.S. amended the Export Administration Act to 
make it illegal, indeed, a potential felony for a U.S. company 
to act in furtherance of the Arab secondary boycott. And I 
think we ought to think very hard before we impose secondary 
boycotts.
    Thank you again for the opportunity to testify here today. 
I hope you have questions or comments, but I also hope that if 
there is an opportunity for your staff or others who would like 
to work with me, I would be happy to work with your staff and 
others.
    [The prepared statement of Mr. Carter follows:]
    
    
    Chairman McConnell. Thank you, Mr. Carter.
    We are going to do 5-minute rounds.
    If I may ask each of you to respond briefly to the 
following question. Do you consider conditioning foreign aid a 
sanction?
    Dr. Haass?
    Mr. Haass. I would say it is, yes. I would say that 
conditioning foreign aid to make it available only if certain 
conditions are met or to take it away if certain things are 
done is a form of a sanction.
    Chairman McConnell. Dr. Hufbauer?
    Mr. Hufbauer. Yes.
    Chairman McConnell. Mr. Carter?
    Mr. Carter. I do. I think it should be just like OPIC and 
Ex-Im Bank aid.
    Chairman McConnell. You have each made the point that the 
U.S. is the largest user of unilateral sanctions. A witness 
yesterday pointed out that if a sanction is the conditioning or 
linkage of economic aid with a specific action, every trading 
partner for Japan or European countries should be viewed as 
subject to a sanction since there is always a quid pro quo or 
conditioning of aid. Do you all agree with that observation?
    Mr. Haass. I think what is different, Mr. Chairman, about 
the American use of sanctions is the use of sanctions for what 
you might describe as foreign policy purposes rather than 
trade-related purposes, and I think we are then distinguishing 
or taking out of the conversation things like special and Super 
301 or their equivalents in other countries.
    What we are essentially saying is here is--that we can 
basically either make available or take away various types of 
economic interaction, the access to investment, the access to 
markets, the access to aid, what have you, but it could also be 
military tools. It also could be political. And we are going to 
take those away normally if certain behaviors not to our liking 
continue, and I think that is what is qualitatively different 
about American foreign policy is the use, again, of largely 
economic sanctions for this much wider range of purposes rather 
than for the promotion of trade-related interests.
    Mr. Hufbauer. I agree. When I think about Japan, which has 
the largest aid program, which obviously promotes their 
corporate interests on a wide scale, occasionally those are 
interrupted, as with India and as with China in Tiananmen 
Square, but most of the conditions which were referred to, I 
think by the earlier panel, have to do with furthering 
interests of Japanese companies.
    Chairman McConnell. Mr. Carter?
    Mr. Carter. I would agree with both of my co-panelists. 
Separate the trade issues on economic trade from these foreign 
policy purposes.
    Chairman McConnell. Senator Biden?
    Senator Biden. Dr. Haass, go back 25 years. You are the 
director of this Committee. I am being serious now about this. 
You have to recommend to the Chairman and me how we fulfill our 
responsibility given by the leadership.
    Should we attempt to write a piece of legislation governing 
under what circumstances sanctions can or should be imposed? We 
are legally able to do that, but is that a judicious 
undertaking? Should we be laying out a panoply of options or 
should we put out in a report guidelines as to what sound 
sanctions policy should entail?
    You are a student of the Congress. I am not being 
solicitous. You are a student of the Congress as well as 
foreign policy. What should we be doing in your view?
    Mr. Haass. That is a good question.
    I would think there is three things that would probably be 
useful. For what you might call omnibus legislation, I think it 
makes sense to include procedural reforms about how these 
issues will be dealt with, the need for impact statements and 
so forth. I think that is what lends itself to an across-the-
board type approach.
    Secondly, I do not think you can--and I think you would 
probably agree with me, Senator--you cannot come up with the 
equivalent of a foreign policy recipe here. There is no 
cookbook for sanctions, thou shalt use them in the following 
situations or not. I think that is the sort of approach that 
gets you in trouble because it is too inflexible.
    All you can do then, I think, is on individual things to 
come along is approach them intelligently, and I would say the 
single most important reform in that regard would be waivers. 
Waivers give you and give the executive branch latitude, and I 
am not a constitutional lawyer, but one thing you may want to 
think about in order to maintain the right balance between this 
body and the executive branch is some sort of mechanism where 
if you build a waiver into every sanction, on those situations 
where the executive chooses to exercise it, then there is not 
simply a reporting requirement with the justification, but 
there could even be some recourse for Congress to overturn the 
waivers, perhaps by a two-thirds vote of each chamber, if that 
does not get you into constitutional hot water.
    But I think that more than any other single reform you 
could make would be as you pass individual sanctions--would be 
to introduce waivers, and the third thing about the general 
approach about when sanctions ought to be used as opposed to 
other foreign policy tools, I think these hearings do some 
good, and I think that is what report language is for, to give 
some general indication or guidance as to the future.
    Senator Biden. Gentlemen, would you comment on the waiver 
notion as sort of a staple of whatever sanction would be in the 
future imposed by the Congress on a foreign policy issue? Is 
that wise? Is it relevant to talk about always having--there is 
no such thing as always, but always having a waiver built in?
    Mr. Hufbauer. Senator, I spoke to that one. You were, I 
believe, out of the room, and I strongly endorse the idea of 
waivers not only in future cases, but all past cases, as a 
matter of flexibility.
    For me, the exceptions would be extremely rare.
    Senator Biden. I know you have not responded, Mr. Carter, 
but the yellow light is on. Let me do what we do here and ask 
another question and get it under the wire, and you can answer 
both.
    Does the sunset provision build in--does that obviate the 
constitutional dilemma that is created sometimes by how the 
waiver is drafted, whether or not we are dealing with the 
presentment clause of the Constitution? What about the notion 
as a matter of policy of forcing upon the Congress the 
requirement of reinstituting the sanction?
    Mr. Haass. Do you want me to take that?
    Senator Biden. I would ask all of you. I would ask Mr. 
Carter first.
    Mr. Carter. First, I think sunset provisions are generally 
a good idea. However, for instance, on the laws regarding 
Jewish emigration from Russia----
    Senator Biden. Yes.
    Mr. Carter [continuing]. As you pointed out earlier--
however, I think they are only part of the answer. One, you can 
draft a waiver clause. It should be acceptable, such as in your 
proposed bill, 2244. I think it is immanently constitutional.
    I think you would want to have a waiver, but you would also 
want to have reporting and evaluation as well, as Senator Lugar 
has proposed.
    Mr. Hufbauer. I am against--my one big difference with the 
bill written by--proposed by Senator Lugar, I am against sunset 
provisions, and the reason I am against them is that it just 
invites the waiting out by the foreign power, which happens all 
too often in any event. So that is one provision which I do not 
welcome.
    Mr. Haass. I would reluctantly take issue with Senator 
Lugar, and this would be one of my rare cases of disagreement 
with him.
    I have two problems with waivers. One is, say, in the case 
of India and Pakistan.
    Senator Biden. Waivers or sunset?
    Mr. Haass. I am sorry. With sunset. I apologize. With 
sunset. Thank you.
    One is, say, in the case of India and Pakistan now. I would 
not want to have to wait until a sunset clause was triggered. I 
think it was a mistake, and I do not want to have to go 
through, say, the next year or 2 years until we reach the end 
of that road. I think we will pay a price in the meantime.
    Secondly, in a version of what Gary Hufbauer said, I am 
never comfortable with the idea of foreign policy being set by 
inaction, and the idea that Congress would make foreign policy 
by inaction makes me uncomfortable, even though the bias would 
clearly be something I want, which is to make sanctions less 
prevalent.
    So, while I agree with the end, if you will, I would much 
prefer waivers being used in lieu of sunset because I think 
waivers give you that option at any step along the way.
    So if it were constitutionally doable, I would recommend 
that approach.
    Senator Biden. Thank you, Mr. Chairman.
    Chairman McConnell. Senator Lugar?

STATEMENT OF HON. RICHARD G. LUGAR, U.S. SENATOR FROM THE STATE 
                           OF INDIANA

    Senator Lugar. Well, thank you very much, Mr. Chairman.
    Let me thank the panel. I think that these hearings are 
useful becuase they give each of you and others an opportunity 
to offer expert testimony to help refine our views.
    Yesterday, in his testimony, Secretary Eizenstat agreed 
with a number of the principles of the legislation that 
Congressmen Crane, Hamilton and I have introduced. Yet, at the 
same time he had two problems, one of which was that he wanted 
much more discretion on the part of the President.
    He felt that our parallel construction which says that the 
Congress and the President must rationalize what they are doing 
and must be accountable is uneven. We are too restrictive on 
the executive, and that Congress might, behind the barn, change 
the rules suddenly and, lighten up the load.
    In order to obviate that prospect, Secretary Eizenstat 
wanted to widen the latitude for the administration. He may 
have some valid points. One of the problems in looking at this 
issue is that we must proceed in some rational way 
prospectively when proposing sanctions because someone ought to 
explain what our foreign policy objective is, and ought to do 
that up front, including the President.
    If it is an emergency, our bill allows him to waive most of 
the procedural requirements in the bill, but there has to be on 
the bookc some reasons why we did all this, and some bench 
marks as to whether we had any success, and finally some idea 
of what the costs are to ordinary Americans. I think that is 
still very significant, despite important foreign policies and 
human rights considerations. There are costs involved in terms 
of jobs and income to real people.
    So I would hope that both the administration and the 
Congress meet their standards. I am troubled that Secretary 
Eizenstat in all of our negotiations has not accepted that 
point.
    Secondly, Secretary Eizenstat wanted to dip back with 
waivers of existing sanctions, as well as future sanctions. Not 
a bad idea, I suspect, in remedying old foreign policy dilemmas 
or mistakes, but I said as a practical matter, my sanctions 
bill is having a very tough time prospectively, quite apart 
from taking on the Cuban fight, the Iran fight, or various 
other fights with people who are in the trenches.
    Insistence upon tackling existing sanctions is strictly a 
headed-to-the-graveyard proposition. I think this is 
frustrating. The Washington Post story today starts out by 
saying protracted negotiations began again yesterday in this 
setting.
    Leaving aside the merits, the fact is the administration is 
not on board. The administration has not endorsed my amendment 
and ultimately, the President has to sign a bill and we have to 
try to work that out.
    Among our Task Force, there are some members more 
enthusiastic about limiting sanctions than others, and I think 
that was reflected in the vote we had on the floor on my 
amendment. A good number of Senators would like to have the 
ability to drop a sanction or two whenever it seems to fit 
their purpose.
    So this careful rational process is not their cup of tea, 
and we will have to work out. I am somewhat more frustrated by 
the fact we cannot seem to come to closure with the 
administration. This is why your testimony is helpful. Your 
public testimony--you all have all written about sanctions 
extensively--and the help you have given to USA Engage, the 
Farm Bureau, and other groups in our society, have in fact 
helped to limit sanctions this year.
    We have no legislation enacted, but the tide is clearly 
against sanctions. I think everybody understands that. The Wall 
Street Journal account yesterday is more helpful. It is going 
to come, probably not in this session, not with those we are 
dealing with now, but with whatever players are coming on 
board. I think that is probably right.
    I have no questions. I appreciate the comments you have 
made on the sunset provision, and you may be right. We do not 
even know, as Mr. Carter said, the list of sanctions we have. 
It is useful to be accountable, to sweep them off as dead wood, 
and this is one way of getting on with that.
    Thank you, Mr. Chairman.
    Chairman McConnell. Thank you, Senator Lugar.
    Senator Hutchinson?
    Senator Hutchinson. Thank you, Mr. Chairman, and thank you 
for holding the hearings. I think they have been very valuable, 
certainly for me.
    Dr. Haass, I found some of your writings very provocative, 
and I would just like for you to comment on a couple of things.
    In your book, ``Economic Sanctions and American 
Diplomacy,'' you make the assertion that imposing economic 
sanctions should be as serious a step as military action. In 
fact, if I can quote exactly, ``Economic sanctions are a 
serious instrument of foreign policy and should be employed 
only after consideration, no less rigorous than what would 
precede any other form of intervention, including the use of 
military force,'' and again, you said, ``Sanctions are a 
serious business. There is a tendency to see them below use of 
military force on some imagined ladder of foreign policy 
escalation. This tendency needs to be revised.''
    Well, in fact, that is exactly the way I have always viewed 
sanctions, as being an intermediary step, as being on a ladder 
of foreign policy escalation below t he use of military force, 
and to say that the standards ought to be the same, that would 
seem to me to be putting soldiers in harm's way. We send 
military troops in and risk their lives. That is, in fact, an 
escalation of foreign policy options.
    I would like you to comment on your writing, on your 
thought.
    Mr. Haass. Thank you.
    I am sure it will come as no shock to you that I will stand 
by it.
    The reason I said that, Senator--and it raises some big 
issues--is, first, sanctions are an important tool of foreign 
policy. So, when the United States uses sanctions, it is 
speaking in the name of the United States, and any time we 
commit foreign policy acts, I think it has weight.
    Secondly, in many cases, sanctions, if they are 
comprehensive and they are in place for a while, can cause 
tremendous----
    Senator Hutchinson. You did not make that stipulation.
    Mr. Haass. Okay.
    Senator Hutchinson. Denying foreign aid. Denying foreign 
aid or conditioning foreign aid and putting that in the same 
category as the use of military force.
    Mr. Haass. Well, let me sort of finish the answer.
    Secondly, sanctions can cause widespread hurt. If you have 
sanctions that are in place and are at all comprehensive and 
long lasting, you can cause tremendous civilian discomfort.
    Look at the Catholic bishops, for example, when they have 
spoken out on this subject. They have spoken out at great 
length about the moral justification and considerations that 
have to go in because of the potential hurting of innocents.
    Take the case of Cuba I mentioned before. I actually think 
that it is possible again that a narrow use of military force, 
I believe, would have been preferable to what I think has been 
the impact on sanctions.
    Lastly, if sanctions do not work and we begin to go down 
that path, look at what happened in Haiti and other places. It 
in many ways creates tremendous pressures then for military 
force to be used.
    If you basically say a situation is unacceptable--and 
unacceptable, as you know, means just that--if you put 
sanctions in place, sanctions do not work, then increasingly 
you find yourself down the road on the hook to use military 
force.
    What I think, then, is before we head down that road using 
sanctions and saying a situation is unacceptable is then we 
ought to think about the consequences of that because we may 
create tremendous pressure, as we did in Haiti, for the United 
States to intervene.
    Senator Hutchinson. We will just simply disagree. I think 
narrowly targeted sanctions against the elite of a country, 
that is not going to have the effect upon the populace and 
those who are economically disadvantaged, and to equate that or 
to put that in the same category as a determination to use 
military force and put American soldiers' lives at risk, to me, 
I am sorry. I think we need to see this in a sense of a ladder 
of escalation; that there is benefit in having many tools, many 
options before we get to the point of having to use military 
force.
    Another of what I thought was provocative at least, on page 
206 of your book, you state that one instrument that can 
increase compliance is the provision of assistance to third 
parties in order to offset the economic cost of implementing 
sanctions. Arrangements to compensate countries whose support 
for the sanctions is central, thus, can be critical. A fund for 
this purpose should be established within the U.S. foreign 
assistance budget.
    If I am hearing that correct, if I am reading that 
correctly, what you are saying is that we ought to reward 
countries or we ought to pay countries in order to cooperate 
with sanctions that we might impose, whether it is France or 
Russia to cooperate in maintaining sanctions on Iraq. I mean, I 
think that would open an absolute--a Pandora's box in trying to 
ever use the option of sanctions.
    Every country would, in effect, be coercing, blackmailing, 
demanding payments and asserting that there was some kind of 
economic cost to them in cooperating what might be something 
that there was broad worldwide multilateral consensus on.
    Mr. Haass. What that came out of was my experience in the 
Bush administration during the Gulf War, when it very quickly 
became a fact of life that we could not get Turkey on board the 
sanctions without significant economic support, and we 
ultimately had to forgive some $6 billion or $7 billion worth 
of Egyptian debt to get the Mubarik government where we wanted 
them.
    That to me, then, was simply a recognition of the fact that 
if you have some poor countries that are relatively trade 
dependent on relations with the target state, it is simply a 
fact of life that we are either going to find a way of 
subsidizing them or they are going to carry out contraband.
    Again, it is not something I like, but it is simply 
reality, and that, to me, is potentially a price worth paying 
in the name, say, of strengthening sanctions against Iraq.
    I would be willing to do something along those lines for 
some of the neighboring countries if that is what it took.
    Senator Hutchinson. Thank you, Mr. Chairman.
    Chairman McConnell. Thank you, Senator Hutchinson.
    I just wanted to mention that I may have to miss the second 
panel because of a matter I am handling on the floor, and my 
friend and colleague, Joe Biden, has agreed to finish up the 
hearing if I have to do that.
    Senator D'Amato?

STATEMENT OF HON. ALFONSE D'AMATO, U.S. SENATOR FROM THE STATE 
                          OF NEW YORK

    Senator D'Amato. Well, thank you, Mr. Chairman, and I think 
it is important that we get a prospective on the whole issue of 
sanctions.
    And to be quite candid, I have been somewhat distressed at 
the editorials and at the utterances of the administration as 
it relates to the imposition of sanctions against Libya and 
Iran. They would have us think now that suddenly a rogue state, 
that still suppresses its own people, that finances acts of 
terrorism, and has been involved in acts of terrorism carried 
out against the American people, that somehow their attitudes 
have changed when their actions have not. I find that rather 
distressing, very distressing.
    And the editorial writers who sanctimoniously call for the 
engagement of Iran, we need more than rhetoric, but we need 
some specific signs and actions and not just sending over a 
wrestling team or other wonderful things. I am not against 
sending wrestlers to Iran, but I am absolutely opposed to the 
thought that somehow they have changed their attitude.
    Now, you can say that they have elected one official over 
there who talks like a moderate, but take a look at what they 
are doing and what their actions are. And I have to say to you 
that I am rather distressed at the question, and I applaud you, 
Dr. Carter, for making a distinction about this 
extraterritorial impact of our sanctions legislation.
    Indeed, extraterritorial impacts have taken place over the 
years with respect to positions and legislative actions that 
other countries have taken, and you pointed out very well the 
question of the European Community coming together and 
literally holding up the approval of the Boeing-McDonnell 
Douglas merger until certain conditions were met.
    So with regard to this business of extraterritoriality, let 
me ask you. Were we successful to any extent in your opinion, 
Dr. Carter, in the specific sanctions that we took against the 
former Soviet Union with respect to denial of a whole host of 
economic benefits? Did that help us or did it hurt us? Did it 
have any impact in terms of the manner in which the Soviets 
treated their citizens when we fought for human rights? Do you 
believe it was beneficial?
    [The prepared statement of Senator D'Amato follows:]
    
    
    Mr. Carter. The Soviet Union was huge, and it had many 
market opportunities, but I think there was clearly evidence 
that it hurt the Soviet Union's technological development; that 
they had trouble and higher cost to get technology, but part of 
the reason we were successful is because we cooperated with 
other countries.
    They were not as good as we were, as we discovered, and 
there are some horrible stories about our allies not 
cooperating, but to the extent we got cooperation with the 
allies, that was when the sanctions and high technology were 
most effective.
    Senator D'Amato. Let us take a look at an area we are 
getting little, if any, cooperation as it relates to Iran 
specifically, notwithstanding the failure of some of our 
allies, and I say the French in particular, but that should not 
be new to us. We have seen that before, and if that is 
provocative, it is meant to be.
    Notwithstanding, they are almost going out of their way to 
say we will do what we deem in our national interest, and the 
promotion of the Total deal with the Iranians, as it related to 
development of their oil fuels, haven't those sanctions brought 
great economic pressure? And haven't there been many oil deals 
that otherwise would have developed and led to greater 
resources that the Iranians would have had at their disposal 
were we not to have imposed those sanctions?
    Mr. Carter. Senator, my information is that there might 
have been some impact, but I have to question whether it is 
worth the cost of all the problems we created with our own 
allies, and, by the way, with our companies.
    Senator D'Amato. Let's develop that. Talk about the 
problems. You mean because they are upset with us?
    Mr. Carter. Well, they are threatening to take actions 
against us, and more importantly, what happens is they force 
waivers out of us, and then our own companies cannot go into 
Iran.
    We are in this horrible situation where Totale is going 
forward, but U.S. companies cannot. And I think what we should 
do is try to develop a common policy rather than letting the 
foreign companies going forward, as they are, Totale and 
Gazprom, while, say, Conoco and others are kept out.
    Senator D'Amato. I have to tell you, I find that kind of 
logic--and not yours, but those who expound that on the alter 
of economics unacceptable. Either we are going to stand up for 
human rights, and do what is right, or we are going to waffle 
for reasons of political expediency, and I have seen that and 
it is wrong. And there are a number of issues in which I 
believe that the national security of this country has been 
compromised just by that kind of logic, and where we have lost 
our moral compass. I just cannot believe that this 
administration and previous administrations cannot do a better 
job behind the scenes, working with our allies.
    I think we did a very poor job in terms of attempting to 
coordinate our activities to assure our allies that we were not 
trying to one-up them in terms of economic advantage; that if 
we could get a change from the Iranians or the Libyans in terms 
of their conduct, that we would look to see that they were not 
disadvantaged when future economic opportunities opened up. I 
think we have done a horrible job in this area.
    We have not worked at it. We have just gone from crisis to 
crisis without there being a consistent policy of attempting to 
bring about uniformity of action together, particularly when 
dealing with rogue nations and their actions that no one can 
countenance.
    That little red light has gone on, but with the indulgence 
of my two colleagues, I would make one other observation, if I 
might be permitted.
    It seems to me that some of our allies think that by kind 
of being passive or less than supportive of the sanctions that 
somehow the terrorist acts which are then directed at the 
United States and our interests will be deflected away from 
them, and that they will not have to face the same kind of 
violence. That is part of what some people in the diplomatic 
circles bring back to me as it relates to their failure to 
embrace publicly some courses of action, but I think it is 
important that we have some kind of dialogue with respect to 
this.
    I do not think there should be a bill that covers all 
situations, and I do think that the waiver provisions are 
absolutely essential, as Senator Lugar has provided in his 
legislation and that my colleagues, Senator McConnell and 
Senator Biden, have provided.
    I certainly thank them for holding this hearing and all of 
you for your appearances.
    Senator Biden [presiding]. Thank you very much, Senator.
    This is a rare opportunity, I might add, Senator Lugar, for 
me to chair a hearing these days. This was going to be a short 
hearing.
    We may have this go on a couple of hours, just so I 
remember what the feeling was like. I may not get a chance for 
another couple decades, the way things are going.
    Does anyone want a second round here?
    Senator Lugar. You are doing fine.
    Senator Biden. Well, I thank the panel very much for being 
here today, and if they have no further comments, we will go to 
the next panel. Thank you all very much.
    Senator Biden. Our next panel, our first witness is Mr. Tom 
Donohue, CEO of the U.S. Chamber of Commerce, his flight--he is 
flying in from out of town, and I understand he may not be here 
in time to make this hearing, I am told by staff, but we hope 
he is. When he comes in, I would ask staff to just bring him to 
the table.
    Bill Sprague is president of the Kentucky Farm Bureau. He 
is representing the American Farm Bureau Federation. If Mr. 
Sprague is here, I would invite him to come forward.
    Mr. William Lane is the Washington director of Government 
Affairs for Caterpillar, Incorporated. He represents USA 
Engage, a coalition of businesses which opposes sanctions.
    I welcome you both and hope Mr. Donohue will be able to 
join us. Gentlemen, I would invite you in the order you have 
been called, Mr. Sprague and Mr. Lane in that order, to make 
any opening statements you might have, and then we can move to 
questions.

   TESTIMONY OF WILLIAM R. SPRAGUE, PRESIDENT, KENTUCKY FARM 
      BUREAU, REPRESENTING AMERICAN FARM BUREAU FEDERATION

    Mr. Sprague. Thank you very much, Senators. It is a 
pleasure to be here, and I thank you for holding this hearing 
on this very important subject.
    I am Bill Sprague. I am a corn and soybean farmer from down 
in Western Kentucky, but serving as president of the Kentucky 
Farm Bureau and also here representing the American Farm Bureau 
Federation as one of their board members.
    The American Farm Bureau Federation represents about 4.8 
million member families in the United States and Puerto Rico, 
and our members produce very type of farm commodities grown in 
America.
    And I think just to bring some facts to you that you know, 
I am sure, we feel very strongly how important this issue is of 
losing markets through unilateral sanctions is to our industry. 
American farmers and ranchers depend very heavily on the export 
sales for over one-third of everything we produce, and this 
makes American agriculture more than twice as relying on 
foreign trades than the U.S. economy as a whole.
    With only 4 percent of our population, the world 
population, living in the United States, you can see why it is 
so important that we maintain our trade relationships.
    If we are going to grow and be economically stable American 
farmers and ranchers, then we must have free and open access to 
these other 96 percent of the world's consumers if we want to 
have a viable industry in this country.
    Agriculture, which includes a wide variety of industries, 
more than we normally think of in production agriculture, but 
those that have all the inputs and outputs, constitute one of 
the largest sections of our U.S. economy. Combined with the 
food processing, marketing, and shipping industry, we are the 
Nation's largest employer.
    In 1997, food and fiber industries, which included 
producers of farm equipment and suppliers, processors, 
transporters, manufacturers, retailers, and the financial and 
insurance and other services, comprised about 16 to 17 percent 
of the gross national product.
    As well as being the Nation's largest direct and indirect 
employer for the past several years, the sales of agricultural 
commodities have provided the only positive return to the U.S. 
balance of trade.
    These accomplishments can only be sustained if our 
international markets remain open. It has been well documented 
that unilateral trade sanctions are sanctions against U.S. 
exports and destroy our reputation as reliable suppliers.
    Farm Bureau strongly opposes all artificial trade 
constraints such as unilateral sanctions. We believe that 
opening trade systems around the world and engagement through 
trade are the most effective means of reaching international 
harmony and social and economic stability.
    Export markets are not easy to develop and are even more 
difficult to win back when our customers see the United States 
as an unreliable supplier when sanctions are imposed.
    Unilateral sanctions have become the weapon of the moment, 
to address actions or our trading partners when we are a Nation 
disagree with actions they take. However, by recent actions, 
India told the U.S. that she was not concerned whether or not 
we applied sanctions. When we impose sanctions on our 
customers, our competitors are standing by to take over our 
markets. Today, our customers can go elsewhere for their food 
and fiber needs.
    In my written testimony, there was a table there that 
showed all the agricultural commodities that are imported by 
these sanctioned countries, and I think you can see that even 
though these numbers are not huge, U.S. producers are not even 
able to compete in these sales, and therefore, they are a loss 
to our competitors.
    The opportunity for peaceful engagement and the ability to 
influence our neighbors through trade are greater than ever 
before and must be safeguarded from unilateral sanctions that 
destroy these opportunities.
    For 50 years, the United States has followed a reasonable 
consistent policy of engagement with the world to promote peace 
and freedom.
    Recently, the United States has began to depart from this 
longstanding preference for engagement. In just 4 years, the 
United States has imposed 61 unilateral economic sanctions on 
35 countries. These countries in which the United States is 
isolating itself contain about 40 percent of the world's 
population who are the customers we need.
    The Institute for International Economic estimates that 
unilateral economic sanctions costs the United States $15 
billion to $19 billion in lost exports in 1995. This translates 
into the loss of more than 200,000 American export-related 
jobs.
    To continue to impose sanctions during a time when we are 
working to secure free trade through the World Trade 
Organization and international agreements gives our trading 
partners conflicting signals.
    As we move into the next round of the WTO negotiations, 
several of our most important markets, such as Japan, are 
expected to use sanctions as a reason to resist opening 
markets. They will try to protect their markets by declaring 
that they must be self-sufficient in food production as the 
world market is unreliable. American farmers and ranchers are 
the world market they are keeping out.
    The Soviet embargo in the 1980's cost the United States 
about $2.8 billion in lost farm exports, and the U.S. 
Government's compensation to American farmers. When the United 
States cut of sales of wheat to protest the Soviet invasion of 
Afghanistan, our suppliers, France, Canada, Australia, and 
Argentina stepped in. They expanded their sales to the Soviet 
Union, ensuring that U.S. sanctions had virtually no impact.
    Russia still appears to restrict purchases of American 
wheat fearing the United States may again use food exports as a 
foreign policy weapon. We are seen as an unreliable supplier. 
Unilateral sanction gives up our market to our competitors.
    The State Department has identified 78 countries that could 
be responsible for actions that some find that could find some 
reasons for imposing unilateral sanctions. Sanctions against 
just six of these countries, China, Egypt, Pakistan, Indonesia, 
Russia, and Saudi Arabia, could cost the American farmers and 
ranchers over $5 billion in lost sales.
    We cannot continue to provide American consumers with the 
most economic food supply in the world or maintain a positive 
return to the national trade balance if we do not have access 
to world markets to maintain our economic base.
    I must stress that when any type of sanction or embargo is 
imposed or threatened, either politically or economic, 
agriculture is the first industry to be targeted in 
retaliation.
    During the Japan-U.S. automobile parts debate, Japan 
released its proposed retaliation list in response to the U.S. 
threat of imposed sanctions. Agricultural products led the 
list. Just the threat of sanctions put American agricultural 
exports at risk.
    American agriculture, as well as other export-dependent 
industries, are in a critical economic situation, largely 
because of our inability to open new markets due to the lack of 
fast-tack trade-negotiating authority and the ongoing fiscal 
crisis in Asia, for which the International Monetary Fund is a 
major player in resolving this situation.
    You recognize how critical export markets are to 
agriculture when Congress passed the exemption to the Pakistan 
and India sanctions that allowed for the sale of U.S. wheat 
under the USDA guaranteed credit loan program. I want to 
applaud you for this and urge you to move quickly with the work 
of this task force, which I hope will result in recommending 
the reasonable monitoring and reform approach laid out in 
Senator Lugar's bill, S. 1413.
    The American Farm Bureau Federation strongly supports 
passage of S. 1413. This legislation will help prevent future 
useless embargoes by requiring a reasonable evaluation of the 
consequences of imposing unilateral sanctions before they are 
imposed.
    Senator Lott posed some very important issues to the task 
force to examine, and I have provided some of those answers in 
my written testimony, but as the leader in world trade, the 
United States has an unprecedented opportunity to promote its 
values throughout the world by peaceful engagement.
    Reaching out through engagement and trade, not withdrawing 
behind sanctions or embargoes, is the best way to achieve 
positive change, not by imposing unilateral sanctions.
    Thank you very much for the opportunity to speak on behalf 
of American agriculture.
    [The prepared statement of Mr. Sprague follows:]
    
    
    Senator Biden. Thank you very much.
    Would you like to go first?
    Senator Lugar. Should we hear Mr. Lane?
    Senator Biden. Oh, I am sorry. Mr. Lane, I beg your pardon. 
I was just handed a note on something else, and I was just 
distracted. I apologize, Mr. Lane.

    TESTIMONY OF WILLIAM C. LANE, CEO, USA ENGAGE COALITION

    Mr. Lane. You are very welcome.
    Chairman Biden, Senator Lugar, on behalf of Caterpillar and 
the 676 members of the USA Engage Coalition, thank you for this 
opportunity to discuss our concerns about the proliferation of 
U.S. unilateral sanctions and the importance of engagement.
    Caterpillar is proud to be a leader of the USA Engage 
effort. We think we have special standing to discuss this 
issue. As you may know, Caterpillar's business strategy is 
somewhat unique in that we compete globally from what is 
primarily a U.S. manufacturing base.
    As a result, we rank as one of America's largest exporters, 
but relying on a U.S. manufacturing base also means that when 
the U.S. imposes unilateral sanctions, the impact is greater on 
us than on many other companies.
    Today, about half of our sales are outside the U.S., and in 
the year 2010, 75 percent of our sales opportunities will be 
outside the U.S.
    We also have a keen appreciation on how unilateral 
sanctions have undermined our competitiveness, particularly 
what occurred in the early 1980's as a result of the Soviet 
pipeline sanctions.
    You may recall at that time, Caterpillar was forced to cede 
the Soviet market to our Japanese competitors. The results of 
the policy were pretty clear. 12,000 man-years of work were 
transferred from Illinois to Japan. Caterpillar and other U.S. 
exporters were tainted as unreliable suppliers. Kamatsu of 
Japan grew in strength, which made them a more effective 
competitor against Caterpillar on a global basis, and that is a 
legacy that is still with us today. And the Soviets completed 
their pipeline ahead of schedule.
    I might add that even though Russia is a democracy, our 
customers still ask if we can be counted on as a reliable 
supplier.
    Farmers in Illinois can recount similar experiences about 
the Soviet grain embargo and how it hurt their business. Today, 
they are not talking about the Soviet embargo. They are talking 
about how Indian and Pakistan sanctions affect international 
grain prices.
    Let me be specific. From our viewpoint, economic sanctions 
or unilateral economic sanctions generally fall into three 
categories. The first are sanctions that cut off U.S. trade and 
investment. The most notable example of this is the U.S. policy 
towards Cuba. The most recent example is the U.S. policy 
towards Sudan.
    The second category or sanctions that make it hard to 
export American products overseas, examples are recent 
sanctions against India and Pakistan that cut off Ex-Im 
financing, OPIC, P.L. 480, and the Commodity Credit Corporation 
programs.
    Then, thirdly, as a broader category, sanctions intended to 
discourage economic development. While there is no right to 
U.S. economic assistance, cutting off assistance, nevertheless, 
is a form of punishment that falls within a common-sense 
definition of sanctions.
    Much has been said today about the proliferation of 
sanctions in all the countries that have been covered recently. 
I am not going to get into that, but the main question is are 
these sanctions working.
    At USA Engage, we are not aware of any systematic 
accountability checks that are currently taking place within 
the U.S. Government to assess the effectiveness of existing 
sanctions.
    But we do know that America's sanctions-based foreign 
policy is proving costly to other U.S. objectives. Based on 
Caterpillar's experience, the cost of sanctions can be 
evaluated in several forms, but before I go into the four 
points, let me say something that is happening.
    Companies like Caterpillar have decided to take our export 
markets very seriously. We are putting our best people in some 
of the hardest places in the world to live, in China, in India, 
in Russia, in the former Republics of the Soviet Union. They 
are our best people, and they complain loudly.
    It is one thing to see other governments helping our 
competitors. We would like it if our Government was helping us 
sell in these markets. We can handle it if the U.S. Government 
is neutral when we are trying to open up these markets, but it 
really does hurt when we see the U.S. Government undermining 
our efforts to sell in these countries. These are the markets 
of the future.
    Some of the recent experiences that we have had is we have 
lost sales in Colombia because of sanctions imposed in 1996 and 
1997. The reason, our European competitors had access to 
competitive financing, which was denied by the American 
Government.
    In China, even though there is massive flooding currently 
going on throughout China, the White House efforts to 
discourage the export of American-made products to China's 
Three Gorges Dam have reduced Caterpillar sales in Central 
China.
    In Iran, we completely ceded the Iranian market to our 
European competitors, particularly the Italians.
    Even in Canada, we have lost sales because fear of the 
extraterritorial application of U.S. law convinced one of our 
customers that, to quote him, ``It is just easier to buy German 
engines.''
    In Sudan, the most recent sanction, right after the 
November 4th declaration of a trade and investment embargo, 
Kamatsu of Japan took out full-paged ads announcing their new 
marketing--this is in Arabic. So I will not expect you to----
    Senator Biden. I can read it.
    Mr. Lane. But, anyway, announcing their new marketing and 
service operations. We have lost several important contracts 
there, the most recent of which occurred last week. This is a 
country that is in the middle of a famine, and we cannot sell 
farm tractors to Sudan.
    Secondly is the issue of being tainted as an unreliable 
supplier. When you buy a Caterpillar bulldozer or a Boeing jet, 
you are making a decision that will last decades. Any 
uncertainty about our ability to provide product support means 
that we are at a competitive disadvantage. That is occurring 
today in Russia, Malaysia, and several Republics of the former 
Soviet Union.
    Thirdly is the issue of enhancing the competitiveness of 
our foreign rivals. When you cede a major market to your 
competitors, you are, in effect, giving them a protected home 
market which allows them to cross-subsidized sales in other 
markets. This is what occurred in the Soviet Union in the early 
1980's which made Kamatsu a much stronger competitor, not just 
in Asia, but in Europe and Latin America, in North America, and 
in Africa.
    Finally, and perhaps this is the most important issue, that 
U.S. sanctions sometimes undermine other U.S. objectives. Let 
me give you some examples.
    We note with concern today that at a time when the U.S. is 
trying to maintain multilateral support for a unified policy 
toward Iraq, we find that the United States has imposed or 
threatened sanctions against all Arab members of the Gulf War 
Alliance, except Kuwait, and three of four of the other 
permanent members of the UN Security Council. You do not have 
to be a foreign policy expert to realize that these sanctions 
may be one of the reasons why it has been so hard to win 
agreement on a common policy toward Iraq.
    Even more disturbing is at a time when the U.S. is mounting 
an intensified fight against international terrorism, the 
United States is seriously considering sanctions against 
moderate Arab countries over the issue of religious rights.
    Senator let me conclude by saying that we believe Senator 
Lugar's sanctions reform bill is a modest and only a modest 
step in the right direction. We believe with greater 
prevention, better process, and accountability, we can have a 
much better foreign policy.
    At this time, I would be pleased to answer your questions.
    [The prepared statement of Mr. Lane follows:]
    
    
    Senator Biden. Thank you very much.
    I just have two brief questions, and by the way, let the 
record show, I was being facetious when I said I can read 
Arabic. In the atmosphere today in American politics, I am sure 
somebody may later pull that up and say, ``Biden claimed to be 
able to read Arabic.'' That was a poor attempt at humor.
    Let me ask you two questions, each of you the same 
question. What constitutes multilateral in your view? For 
example, you both imply--you do not say, but you imply that if 
it is a multilateral sanction, you could live with it or at 
least you are not making the case that you are opposed to 
multilateral sanctions. Is that because you are certain we will 
have multilateral sanctions, or is that--I am not being 
facetious now--or is that because you see circumstances under 
which, notwithstanding the fact--withstanding the fact it would 
hurt your business, that it may be necessary? So my question is 
what constitutes multilateral.
    If Canada and the United States imposed sanctions against 
Tanzania because we were each victims of terrorist attacks--and 
there is no evidence of this--that was sanctioned by the 
Tanzanian government, would that constitute a multilateral 
sanction, even though the French and the Germans would still be 
able to sell heavy equipment or sell soybeans or whatever? I 
would ask each of you that question, if I may.
    Mr. Sprague. Well, I think that is a good question, and our 
idea is some way that--first, let me say that as farm people, 
there are probably no more patriotic strong believers in strong 
government anywhere in the country. So we understand in 
national crises, things have to be done, and we understand 
that.
    And our idea is that if things were so bad, that surely 
there would be agreement of multiple nations to interact. Now, 
where you say that is 2, 10, 35, or what, we would assume there 
would be some--hopefully a UN-type action that would get the 
whole world behind such action, but at the same time, we also 
believe there needs to be strong enough waivers or whatever you 
want to call them in any kind of legislation like this to allow 
the U.S. to protect is national interest under conditions if 
they could not attract this multi-national-type unit.
    Senator Biden. Thank you.
    Mr. Lane?
    Mr. Lane. Senator, first of all, no one in the business 
community that I am aware of complains against the sanctions 
against Iraq, nor the UN sanctions against Libya, nor the 
sanctions against some of the former parts of Yugoslavia. They 
are multilateral. We know there is leakage. We know there is 
significant leakage, but they are still a good-faith effort, 
and I am not aware of any real complaints.
    Against Cuba and the UN, I believe three countries voted 
with us or two other countries voted with us. Israel, which is 
an important investor in Cuba, and Uzbekistan, I have no idea 
how we convince Uzbekistan to vote with us, but we did--that 
clearly is not a multilateral sanction.
    In the Lugar legislation, other legislation, I know some of 
the thoughts were--if three of the G7 participated, we would 
consider it multilateral.
    As long as there is a real movement in that direction, we 
are going to support multilateral sanctions, but one thing that 
really does bother us--and let me go back to the Sudan for a 
second. It is a small country, from an economic standpoint, but 
it is the most recent sanction, in that comprehensive embargo 
was put in place in November. The next month, the United States 
participated in the APEC conference in Vancouver. All of our 
major trading partners were there.
    We talked to USTR and State Department, and they confirmed 
there was no effort to multilaterlize the sanctions, and this 
was after the President declared that this country represented 
an extraordinary threat to the national security. That is not 
even trying.
    Senator Biden. My time is up.
    Welcome, Mr. Donohue. It is nice to have you here. I had 
explained that you were en route, and we will hear your 
testimony.
    Mr. Donohue. Thank you, Senator. I appreciate your 
courtesy.
    Senator Biden. There are going to be times that we, the 
United States, are a particular target, like the Sudan, where 
there may be no target. France may not be a target. Germany may 
not be. We could be as well. We may be a target of terrorist 
activities, either engaged in by the host country in the sense 
that they are either malfeasers or nonfeasers. So I suspect we 
are going to be faced with that.
    The Farm Bureau is the biggest farm organization in my 
State, and I might add, you will know this, but no one else in 
this room will, except maybe the Chairman of the Committee. 
Agriculture is the biggest product in my State, not chemical 
industry, but agriculture.
    One of the places I find it very difficult--and the Senator 
from Arkansas is here. He is a strong proponent of human 
rights. It is on religious freedom.
    As a matter of fact, your Farm Bureau target list, what 
constitutes pro and con votes, you remind me of labor. You 
always put in things that have nothing to do with farming as to 
whether we are good or bad, whether we vote for a 
constitutional amendment on the flag or something.
    Mr. Sprague. We can get farmers to agree on those issues.
    Senator Biden. I know that.
    And one thing the farmers agree in my State, and the Farm 
Bureau agrees on, is the notion of religious freedom. Do you 
have any conflict within the Farm Bureau as to whether or not 
the sanction imposed is one on a subject that they care about 
as opposed to one they do not? I am not being facetious when I 
say that. Could you speak to that just a second?
    And my time is up, and I will yield to the Senator from 
Indiana.
    Mr. Sprague. Again, Senator, you ask tough questions, don't 
you? I think there is no question that we would agree with 
sanctions that would have some benefit. The problem that we see 
is that most of the time, we are shooting ourselves in the 
foot.
    Even though we are trying to get certain policies adopted 
that we agree with, the people that we are punishing usually 
are the ones that do not make those decisions, anyway, and 
especially with food and medicine and those kind of things.
    So our concern is that we believe there are better ways to 
hit religious issues than their are economic trade sanctions. 
They do not work, and not to belittle the issue that we are 
trying to do, but the fact that economic sanctions are not the 
most efficient way to address those issues.
    Senator Biden. I happen to agree with you. I appreciate 
your answer.
    Should we ask this panel and then have Mr. Donohue testify, 
or how would you recommend we do this?
    Senator Lugar. It makes no difference to me.
    Senator Biden. Mr. Donohue, do you want to make your 
opening statement, and then you can join in and be questioned 
as well?

TESTIMONY OF THOMAS J. DONOHUE, PRESIDENT AND CEO, U.S. CHAMBER 
                          OF COMMERCE

    Mr. Donohue. That will be fine. I will be very brief, 
Senator.
    First, I appreciate the panel and the Committee making 
arrangements so I could get back to testify. I did fly halfway 
across the country to do this. I had a choice of staying--
beginning or cancelling a speech to 800 people in Cedar Rapids, 
and I decided to go see the countryside.
    Senator Biden. Are you running for President?
    Mr. Donohue. No, sir.
    Senator Biden. That is the only reason any of us go to 
Iowa.
    Mr. Donohue. No. I am going to Iowa to try and keep track 
of the people that are.
    Let me make it very clear to the members of the Committee 
that the Chamber takes second place to absolutely no one on our 
common quest for basic human rights. No reasonable or moral 
person can countenance the persecution, torture, and other 
atrocities that are committed around the world against our 
fellow human beings, whether the political, economic, social, 
or religious pretext is the reason that this is going on.
    And we all know that basic human rights are a core American 
value, but we do not believe, as much as we have studied and 
considered this issue, that unilateral--and I understand 
``unilateral''--economic sanctions are an approachable, a 
workable or practical way to address this. In fact, the 
fundamental question is, can anyone rise and tell us where 
sanctions, unilateral sanctions, have worked.
    When you stop and think about it, we have in a very, very 
short period of time, imposed sanctions more than 120 times in 
80 years, and we maintain unilateral economic sanctions of one 
kind or another against 70 countries right now. Who is left? 
Bermuda and the Caribbean Islands? At the rate we are going, we 
apply unilateral sanctions like giving out candy bars. It is 
irresponsible, particularly when I say again, does anybody have 
an example of where it really works.
    In virtually all the instances, the actions that we take 
fail to alter materially the target country's objectionable 
behavior. Instead, the regimes we target gain support from 
others around the world. U.S. businesses are hurt. Our workers 
bear the burden, and what really happens is that the people we 
are trying to help, religious groups, economic groups, 
political groups, are punished for what we do and we become the 
enemy.
    You could go all around the world, and Senator Lugar who 
has had extensive experience in the foreign affairs area, as 
others here have, will tell you that we become the critical 
enemy within regimes who are trying to look to somebody that is 
causing--they can blame for causing the problems within their 
country.
    Now, studies have indicated that unilateral sanctions have 
cost our economy between $15 billion and $20 billion a year in 
lost export sales, and up to maybe a quarter-of-a-million jobs. 
Well, that is nothing compared to what is going to happen in 
the future.
    Stop and think about it, that we are a fraction, a small 
fraction, infinitesimal of the world's population. We want to 
trade with all of those people, and when we put a sanction in, 
here is what happens. We lose France, Germany, Spain, Italy, 
all of Latin and South America, most of Asia. All of those 
people walk, and even the Russians, and they present themselves 
ready to trade in natural resources, in finished products, in 
services. They are ready, willing, and able, while we are 
impeded because of a program that has demonstrated its 
inability to work.
    I get a feeling sometimes, Senators, about sanctions the 
way we feel about our teenage children. You all remember the 
times we wanted to kill them, but it is not allowed, and it is 
certainly not something that we want to do.
    So what do we do? We impose sanctions. We send them to 
their room or we ground them or we take away the car keys. I am 
not sure those are the things we have found work in our 
families, but they sure as hell do not work around the world.
    There are two other points I would like to just raise with 
my remaining time. Number one, it is bad enough to deal with 
sanctions on a national level, but when you have States and 
cities with the enlightened leadership that you can 
occasionally find there in terms of international affairs, 
opposing sanctions against countries, prohibiting investment, 
prohibiting exchange of technical information, prohibiting 
trade, we have a serious problem. We cannot let that happen, 
and we have joined in some lawsuits on that matter.
    Let me end with just a couple of recommendations. First of 
all, we have to mandate the application of some sort of benefit 
analysis, as Senator Lugar has suggested, before we even think 
about a sanction.
    We have to make China normal trade relations a status, a 
permanent issue, and face up to the realities of China. The 
religious persecution issue there is going to be fixed a lot 
easier by open trade than by behind-the-door sanctions.
    We have to life the embargo on Cuba. Cuba is treated worse 
in terms of food and in terms of medical care than are the 
Iraqis, and everybody else that deals with Cuba has all their 
claims resolved, land claims, the takings and so on. We are the 
only ones that have not, and that Castro fellow, he has got a 
lot more staying power than our sanctions. We need another 
approach.
    And we need to repeal unilateral sanctions against others, 
including Iran and Libya, unless national security dictates 
that we should not. In that instance--and you raised a good 
question, Senator. When the terrorism is overt and direct right 
on us, there are probably things other than sanctions we ought 
to do, and we might want to talk to former Senator Cohen about 
that. We have to prevent the enactment of the Freedom from 
Religious Persecution Act, the way it is written because, after 
you get past the rhetoric, you get down to the application, and 
it is not going to help. Any church, any missionary folks, they 
are going to tell you please do not do this.
    Senator Biden. The way it was written by whom? The one that 
I cosponsored or the other one?
    Mr. Donohue. The Wolf-Specter bill, the way it is written, 
if you talk to the missionaries, you talk to religious groups, 
you talk to others, the way it is applied, the way sanctions 
are put in are going to do nothing but hurt those people, and I 
think we have to be very careful about that.
    Senator Biden. I am confused. Are you supporting the Wolf-
Specter?
    Mr. Donohue. No, sir.
    Senator Biden. You are opposing it.
    Mr. Donohue. I am supporting the objectives of stopping 
religious persecution anywhere that it happens. I am concerned 
that this piece of legislation will exacerbate the problem and 
get us now--by the way, it could be fixed. There are issues in 
there, and I have spoken to Congressman Wolf on numerous 
occasions, but, anyway, gentlemen, I have used more time than 
you have allowed, and I appreciate that.
    I appreciate, again, you allowing me to join you a moment 
late.
    [The prepared statement of Mr. Donohue follows:]
    
    
    Senator Biden. Senator Lugar?
    Senator Lugar. Thank you very much, Mr. Chairman.
    Mr. Donohue has presented a number of foreign policy issues 
and an important agenda that I suspect the next Congress will 
have to deal with, and I say that seriously. His statement goes 
well beyond the legislation that I presented, which was 
prospective.
    If we are to debate Cuba, Iran, and Libya--and perhaps we 
should, these are very, very important issues. I acknowledge 
that, and I appreciate your discussion.
    I liked the specifics which Mr. Lane gave from the 
standpoint of an American manufacturer, and a very good one 
with a competitive product. It is a real problem when other 
governments have policies that help their exporters. It is at 
least preferable to have neutrality. When our Government works 
against our manufacturers, and does so systematically, country 
by country, that is a real problem.
    And it becomes a great problem for each of us in the Senate 
to promote jobs, to speak to businesses and labor unions about 
prosperity. We are all for that, and, yet, our policies are 
clearly not necessarily for that; as a matter of fact, it may 
be working against it.
    I want to speak specially to Mr. Sprague who is frequently 
before the Agriculture Committee, as you might imagine, and a 
very good witness there.
    The problem that he has presented is a profound one, and 
that is that we have, right now, worldwide deflation of 
commodity prices. That is clear to farmers. It is also clear to 
people in oil and in the metals and minerals industries. It may 
be a phenomenon of short duration, but it might not be. Many 
people are writing about a new deflationary cycle that we have 
not faced in this world for half-a-century.
    It hits the farmers first, and we saw that with the wheat 
market and the corn and the soybeans. As a result, almost every 
Senator is coming to the Agriculture Committee wanting money 
for farmers. It does not matter in what form, however you need 
to rewrite the farm bill, just send it, and in the next 60 days 
preferably. So I understand that, and there are very real 
problems when prices go down.
    One reason why prices are going down is because Asian 
demand has evaporated, and not in Asia alone. As a matter of 
fact, world trade as a whole in the agricultural sector is 
sharply diminished.
    When demand evaporates, prices usually go down. When supply 
is fairly constant, we are having a reasonably good year.
    That means that farmers are very interested in sanctions 
and in foreign policy and have become much more aggressive. It 
is not surprising that farmers have joined USA Engage in an 
unusual coalition of the agricultural, manufacturing and 
business sectors of our country.
    I think it is constructive that they have done so and just 
in time, and I think you are winning, as I suggested in my 
questions. We have not passed the sanctions reform bills, and I 
am not sure we will. I think the numbers of ways the 
administration can continue to frustrate us are legion, quite 
apart from disagreements we have, but the American people 
understand the game and they do not like it.
    Furthermore, when it comes to human rights issues that many 
are raising, is it every justifiable to embargo food and 
medicine? What kind of human rights are involved under this 
situation?
    I come down on the side of those who say it is not 
justifiable, we ought to get out of that business. I think the 
distinguished chairman says the same thing.
    Now, if you are an advocate for socking Cuba forever, ditto 
Iran, Libya, whoever, you do not listen to that point of view. 
You are for human rights, but in the abstract. But there are 
actual people getting hurt, and there are humanitarian concerns 
that we ought to have as Americans, as people who have the 
strong religious precepts.
    So I appreciate your testimony. It has been very specific 
and provocative and very helpful to us. As I said, I think we 
are winning the war, not the legislation. I hope we will do 
better on that front in due course.
    Senator Biden. Now I will introduce the other team. Senator 
Hutchinson.
    [Laughter.]

 STATEMENT OF HON. TIM HUTCHINSON, U.S. SENATOR FROM THE STATE 
                          OF ARKANSAS

    Senator Hutchinson. Well, it is not a war. Thank you, Mr. 
Chairman. And I hope we do not view it that way. I do not know 
of anybody who thinks that our sanctions policy has been wise 
or effective or does not need reform.
    I certainly believe it does, but I also believe this. Many 
of those who are such adamant opponents of any kind of 
sanctions or unilateral sanctions, they are doing so purely out 
of an economic--I mean, that that is the motivation. There has 
historically been a moral component to our foreign policy, and 
the American people want that.
    Regardless of what France does or regardless of what Great 
Britain does, we have stood on certain values. We have stood 
for freedom of religion. We have stood for freedom of 
expression. We have stood against human rights abuses and labor 
abuses, but that has been part of what we stand for as a 
Nation. To say that is going to be irrelevant to what we do in 
our foreign policy and that we are going to look at the profit 
margin and the bottom line as being--and I know Farm Bureau is 
one of the greatest organizations in this country, but I know 
that the membership of Farm Bureau, they care about those 
things. They care about markets. They care about selling those 
products, but they also care about what is happening to people 
in China.
    Constructive engagement, I do not care what you say, it has 
not worked in China. Things are not better.
    A CBS reporter was arrested within the last 2 weeks, 
detained. After the President's visit to China, they were 
rounding up those who dared to say we would like to form 
another political party.
    Now, you may call that success in bringing about reform in 
China. I do not see it.
    I think we have had a very valuable discussion about 
unilateral sanctions, where they work, where they do not, or 
maybe they never work, but a strict requirement that we only 
use multilateral sanctions, what my concern is, my fear would 
be that in a situation where we drew the parameters so severely 
that we effectively eliminated unilateral sanctions as an 
option, it would force us and force our foreign policy to the 
lowest common denominator of what our allies want.
    Until we can build a consensus with our allies, we would 
not be able to use this option. I do not think we want to get 
that restrictive in how we utilize sanctions. If we take the 
sanctions option off the table, how then do we reflect American 
values?
    Mr. Donohue, you used the analogy of wanting to kill our 
kids at times because of their behavior, and instead of killing 
them, we decide we are going to take the key away from them or 
put them in their room or ground them. Well, I think that is 
exactly what we ought to do. I do not think killing them ought 
to be our option.
    And to say we are going to talk to them or we are going to 
kill them is not a very good alternative. Yet, when it comes to 
foreign policy, are we not saying we are going to use rhetoric, 
and if that does not work, our only option is military force?
    So those who are saying let's get rid of the sanctions, 
let's eliminate that or greatly restrict the use of sanctions, 
my question--and maybe we will just present this to the panel--
what is there between words and war? What do we do?
    We will accept the proposition that our current use of 
sanctions is not very effective, that we are not getting the 
desired result. Give me an option. If we take that off the 
table, where do we go, short of going to Secretary Cohen, 
military action every time we have a problem with a country's 
egregious actions? That is what I want to hear is what are our 
options short of military force if we eliminate the sanctions 
option where we can reflect the values of the American people 
in our foreign policy.
    Mr. Donohue. Senator, if I might just try a couple of 
comments that might add to our conversation.
    Your point about eliminating all sanctions must be seen 
with the other bookend where we impose them without a great 
deal of thought.
    When you have 70 nations under sanction and when we would 
all agree in a quiet conversation that very many of those do 
not have any effect, the addition of the seventy-first nation 
is not very significant because people have found they can get 
any products they need. They can do their business in any way 
they like, and the United States really becomes irrelevant in 
that issue.
    I believe that we need to find ways to enhance and export 
our values, and we are doing a lot of things. The Chamber runs 
CIPE, the Center for International Private Enterprise, and I 
would like to sit down with you for a half an hour one day and 
look at the programs that have been--the unions run the other 
side of it, you know, and we do it together--that have been 
enhancing freedom and liberty and non-government organizations 
in Eastern Europe and all over the world that have led to 
freedoms and liberties, economic, social, and religious.
    We do have a problem also that in our enthusiasm for our 
values that it is our view that everyone in the world ought to 
adopt them.
    I recognize that everyone in the world ought to avoid 
torture and all those things, and we ought to try and do a lot 
of stuff about that, but I would suggest to you, sir, that we 
have had massive improvement in China over the recent 10 years. 
Just a short time ago, it was a closed nation, and now people 
travel more freely. Churches are more able to function.
    Is it perfect? Of course not. We have problems with the 
monks and the Tibetans and others, but I believe that, first, 
real engagement, economic, cultural, political, presence in 
that country, a demonstration of an improved standard of living 
and of a way of life has greater influence than extracting 
ourself from the process and leaving it to everybody else when 
we know that that sanction is not going to work, and how 
frustrating it is for the Congress and for the American people 
to recognize that there is a great gap between going to war and 
seeking some other way.
    In this modern world where money, technology, and people 
and everything is fungible and moving, you are right. We need 
to seek some other ways to do this. Do we have the absolute----
    Senator Hutchinson. I asked for it.
    Could we have Mr. Sprague and Mr. Lane? Because my time is 
up, and I really would like to hear their opinions on whether 
there are--I mean, you criticized my position on China, and----
    Mr. Donohue. No, sir. I did not criticize your position. I 
simply offered another opinion.
    Senator Hutchinson. What I did not hear was options in 
between.
    Mr. Donohue. Well, no, I gave you the option. My option is 
to make a strong, viable, economic, social, and cultural 
presence in those countries and get the benefits we have seen 
for that over 30 years.
    Senator Hutchinson. No one objects to that.
    Yes, sir.
    Mr. Sprague. Well, I think we would all agree that there 
are going to be individual situations where the hammer is the 
only method, and economic sanction would be the only thing that 
would turn a dictator or something around, but I think the 
question is we are just randomly using this so blatantly 
without any real reasoning.
    So what we are saying, let's study the situation and see 
who is getting hurt. I would argue let's get them hooked on 
Caterpillar, and then they cannot get away from it because they 
have got to have the mechanics in every other day.
    Mr. Lane. Not every other day. Once a year.
    Mr. Sprague. You know, just build up this relationship in 
the long run, it is going to do more than cutting people off 
from supplies and making them more relying on other countries 
that have less ideas of freedom than what we would have.
    Mr. Lane. Senator, I have a list here of 77 different 
action steps ranging from friendly persuasion to hostile 
activities. Sanctions are part of it.
    I should add, first of all--let me be very specific. I know 
when I was introduced, USA Engage was described as a coalition 
against sanctions. We are against the proliferation of 
sanctions, but we understand that sanctions are a tool of 
foreign policy. It should not be the tool.
    In getting to that, let me be specific. One, the main 
question is how do you make sanctions work better. Getting back 
to Mr. Donohue's point, the first thing you do is you do not 
cheapen the currency. I mean, we have just overused sanctions 
to death. They are not taken as seriously as they should.
    Secondly, and this goes to Senator Lugar's legislation. We 
need to do a much better job of targeting sanctions.
    Senator you mentioned earlier today about the need to go 
after leaders, go after people that really deserve to be 
sanctions and not go after the poor and the folks that can 
lease afford sanctions. That is really what Senator Lugar's 
legislation is all about.
    Thirdly, we have got to hold somebody accountable. When we 
put a policy in place, someone needs to be accountable. 
Usually, that is the President, but if the President is going 
to be accountable, the President also needs waiver authority so 
he has the room to maneuver around some pretty tricky 
situation.
    The next point is that we have got to recognize that you 
cannot conduct foreign policy on the cheap. We need a first-
class foreign service. We need top-notch intelligence 
capabilities. We need to know that we have carrots as well as 
sticks, and all those areas have been cut in recent years. And 
there needs to be a recognition that engagement is a powerful 
force for change.
    Let me just say--and I realize we may have different views 
on China. I have been there a couple of times, and I do not 
profess to be an expert, but the latest human rights report 
when it talked about China, it said average citizens go about 
their daily lives with more personal freedom than ever before. 
Now, that is a long time.
    They also continue to enjoy a higher disposable income, 
looser economic controls, greater freedom of movement, 
increased access to outside sources of information, greater 
room for individual choice, and more diversity in cultural 
life. Now, that is what they say about China.
    Senator Hutchinson. Mr. Lane? Mr. Lane?
    Mr. Lane. I had the opportunity to be in Cuba in March. 
None of that can be said about Cuba.
    Senator Hutchinson. My time is up, and I do just want to 
say this. I read the whole report.
    Mr. Lane. There is other parts, I know.
    Senator Hutchinson. That is a very, very selective comment 
from that report, which was in the whole, very, very critical 
of the human rights conditions in China today.
    No one is saying we should not engage China. You cannot 
isolate China. I certainly would not, but I would also say that 
what China wants today, what the Chinese regime wants today is 
the benefits of capitalism while keeping the iron fist of 
repression on their people, and that we cannot just say if we 
can sell more Caterpillars, we can increase trade, it is 
automatically going to lead to freedom and human rights 
improvements in China. It is not an automatic, and the fact 
that China today insists upon continuing to prevent their 
people from the free access of information is evidenced by the 
arrest of the CBS reporter last week, and the repression of any 
who would even seek to form an opposition political party.
    The repression on the Internet, preventing the free-flow of 
ideas through the Internet in China, that demonstrates to me 
that the government is still very, very intent on maintaining 
that iron fist of control, while reaping the economic benefits 
of trade with the United States.
    And with that, thank you. Thank you very much. I think it 
has been helpful to me. It was a very lively conversation.
    Thank you, Mr. Chairman.
    Senator Biden. Senator Warner?

    STATEMENT OF HON. JOHN W. WARNER, U.S. SENATOR FROM THE 
                    COMMONWEALTH OF VIRGINIA

    Senator Warner. Thank you, Mr. Chairman.
    Again, I express appreciation for your participation in 
this very important subject, and I will go to one extremely 
narrow part of this whole general issue and just give you a 
question and the same question to each, and you can share with 
me and the Committee your thoughts.
    Food and medicine. One of the advantages of this series of 
hearings is that I detect there is a consensus that it is 
really an area which should be left out of the sanction 
philosophy, food and medicine. Do you share that? Are there any 
circumstances that you think food and medicine should be 
included? Do you have any views on whether in history when they 
have been included that they have really added any teeth to a 
sanction?
    Why don't we just start with you, Mr. Donohue.
    Mr. Donohue. Thank you, Senator.
    Generally speaking, I believe to include food and medicine 
is to act, and a contrary view to our philosophy that we have 
been talking about, which is a philosophy of care for others.
    Second, I have not seen--I have seen a number of examples 
where you have contrary views. We are arranging for the Iraqis 
to have food and medicine and some amount of fuel. These are 
people we have been in a major war with, who have killed 
Americans.
    On the other hand, Cuba, because of great passion, we have 
included food and medicine in our sanctions, and by the way, we 
have been at this Cuban thing since John Kennedy. And as I said 
to your colleagues before you came in, everybody else has 
already adjudicated and resolved all their claims against Cuba. 
People come and go, trade all over the place with Cuba, and we 
continue to take a very old view about that matter.
    There is some enlightened activity in recent weeks and 
months, and I hope that we can move forward on that.
    There are times when the anger of our Nation is such that 
we will do things that seem appropriate, even military force, 
and I am sure there are times when the anger of all of our 
fellow citizens are such that multilateral sanctions might in 
the occasion of somebody that was conducting ongoing 
hostilities where food and medicine might be excluded from an 
enemy, but I do not think we can very well go out and preach 
our values and then say, by the way, we are mad at you, the 
head of this country or the head of their military or the head 
of their whatever, but we are going to deny your citizens food 
and medicine. It is a bit of a conflict.
    Senator Warner. I share that view.
    And on Cuba, as you know, I have made an effort with 
Senator Dodd to see whether or not we can get that relieved.
    I think we would have joined the community of nations on 
Cuba had they not done that murderous act of shooting down that 
aircraft, and that is just history. You need not go into that.
    Mr. Donohue. Senator, I understand that things like that 
impede progress.
    Senator Warner. Mr. Sprague?
    Mr. Sprague. Yes. I would agree with Tom that naturally 
there are going to be times when the Nation will be so outraged 
over certain acts that we will do anything, and food and fiber 
and medicine would be one of those things that would help bring 
the people of that nation back to their senses or something 
like that.
    I think as a humanitarian, even in those situations, we are 
probably causing more damage to the goodwill of this country 
than we are helping by doing that.
    Naturally, we are very prejudiced in the agricultural 
industry. We definitely think that food should be always on the 
table, and if we can present that to the nations, it should be 
there.
    Senator Warner. Thank you.
    Mr. Lane?
    Mr. Lane. Senator, unless we are about ready to go to war, 
I cannot think of any reason why you would want to target 
civilian populations by denying food and medicine. If the 
Senate does only one thing between now and the end of this 
Congress, we should lift the food and medicine embargo on Cuba. 
It makes us look mean-spirited, and all it does is it helps 
reinforce an authoritative regime.
    Senator Warner. I share that view.
    I thank the panel.
    Mr. Chairman?

STATEMENT OF HON. JOSEPH R. BIDEN, U.S. SENATOR FROM THE STATE 
                          OF DELAWARE

    Senator Biden. Thank you very much.
    Gentlemen, I have one question, if the panel does not mind. 
Is efficacy the ultimate test? In other words, are there any 
circumstances where we would impose a sanction unilaterally 
knowing full well it will not be effective, that they will be 
able to get the product somewhere else?
    Let me give you an example. During the days of apartheid, 
in addition to general sanctions we debated, sometimes imposed, 
sometimes did not, there were certain restrictions, for 
example, not just on technology, like we worry about with Iran 
and Korea, North Korea, but, for example, when there are the 
transfer of materials that allowed the police to better and 
more efficiently do their job, knowing they could very well get 
tear gas from wherever. I am making that up. I do not recall 
whether or not specifically tear gas was a part of it.
    Are there times when we should, just as a matter of 
principle, not participate in enabling a government to engage 
in activities that are clearly contrary to our value system? 
That is my question. Even though we know they are not going to 
be effective.
    Mr. Donohue. May I go, sir?
    Senator Biden. Please, Mr. Donohue.
    Mr. Donohue. I believe there are occasions that the 
national indignation and the national will needs to be stated, 
and in matters such as the example you gave of allowing people 
to export instruments of pain or imprisonment, I believe the 
Congress has a position to take an aggressive posture on that.
    I believe it ought not to be on 70 nations. I believe it 
ought to be done and allowed and very vigorous indignation when 
we do it, and we ought to make it stick. We ought to make it 
stick with our own companies, and we ought to make it stick 
with our trading partners. I think we could have a much better 
chance of doing that if it was an occasional action.
    Senator Biden. That is a very important that I did not 
raise, and I know you both want to answer the same question, 
but if I may, there was discussion in the first panel about 
secondary boycotts. There was discussion about imposing 
sanctions on those who do not go along with our sanctions. That 
was not my question, but now that you have raised it, in the 
case where we, in fact, were to curtail the shipment of 
products that could be used by a totalitarian government for a 
specific purpose--I am making it up--tear gas, for example, say 
we could not export tear gas, and France and Germany decided 
they can buy it from us or some other country, all of the 
importuning in the world does not work in many cases, no matter 
what Mr. Lane hopes for in terms of aggressive diplomacy on our 
part.
    We have found that many of our closest friends are 
incredibly resistant. I often say to my friend from the 
chairman of the Agriculture Committee, France does not have a 
foreign policy. They have a farm policy, as do most of our--I 
mean that sincerely. And that is not fair to France. They 
clearly have a foreign policy. I will get a thousand letters 
from my distant French relatives.
    Senator Warner. The farmers can shut that policy down 
quickly.
    Senator Biden. Yes.
    But the farm policy is significant. I am being very serious 
when I say are there circumstances where we should connect the 
dots where we engage in a secondary boycott? For example, the 
French or the Italians or whomever decides that the very 
product we want to curtail selling because it is directly and 
identifiably contrary to our value system, the way in which it 
is being used by the particular government, and they do not do 
it. Should we engage them as well and say okay, we are going to 
cut off markets to you?
    Mr. Donohue. Well, Senator, first, we do agree that there 
are times the country has to make a statement.
    Senator Biden. Well, no, we do not because you said if. You 
had a little addendum. You said if. We should use our full 
force to then bring pressure on our allies not to sell the 
product.
    Mr. Donohue. No, I did not quite go that far.
    Senator Biden. Okay, I am sorry.
    Mr. Donohue. We need to try to make it stick, and that 
means within our own country, we recognize when we do that, 
that what we are doing is making a statement.
    If we went through a daisy chain and the French violated 
what we would hope would be their support for us and then the 
Germans did it and then the Italians did it and then the 
Spanish did it and then the Chinese did it, pretty soon, who 
are we going to trade with?
    I think, Senator, what I am saying is that there are times 
that this country ought to make a statement and act on its own 
behavior.
    I think we have to be very careful of secondary boycotts. 
First of all----
    Senator Biden. I agree.
    Mr. Donohue [continuing]. As a country----
    Senator Biden. I agree.
    Mr. Donohue [continuing]. We get very, very angry with our 
friends slapping secondary boycotts on us, and you know what we 
would tell them to do with it? And I think that we need to be 
practical.
    Generally speaking, unilateral sanctions do not work. We 
cannot find a list of ones that do out of the 70 countries that 
we have under sanction.
    I believe there are times when this country needs to speak 
its mind on important and emotional issues. I am not sure we 
then need to go out--and by the way, there are military 
exceptions and so on----
    Senator Biden. Right.
    Mr. Donohue [continuing]. We need then to go out and start 
putting secondary boycotts on our friends all around the world 
as the daisy chain moves.
    Senator Biden. I just wanted to make sure that is not what 
you are saying.
    Let me conclude, and then I will ask for some comment. I 
will conclude what I was pursuing here.
    Senator Hutchinson and I probably are on close to opposite 
ends of the spectrum on matters relating to sanctions policy, 
at least on the issues that we engage on the floor. He and I 
have been on opposite sides of the argument, and I respect his 
view.
    But one of the points that the Senator makes, I think, 
should not be lost here, and that is why I asked the question 
about efficacy.
    In my view, there are occasions when notwithstanding the 
fact that the sanction will have no material impact on the 
country we are sanctioning because other countries will 
immediately fill the vacuum, that notwithstanding that, I can 
picture occasions when it is appropriate and necessary for the 
United States as a matter of principle to impose a sanction 
that we know will not work if we define work as meaning ending 
the practice for which we are sanctioning.
    And the example that comes to mind is the debates during 
the Apartheid debate, where there were arguments about 
sanctions on the South African government at the time by 
refusing to allow the sale of certain products that were used 
as instrumentalities of repression, knowing that we were not 
able to stop other countries from doing that.
    So that was the specific question. I do not want to leave 
this debate with all of you being--I happen to be 
philosophically where the three of you are in terms of my votes 
and my initiatives and my actions, but I do not think we 
should--quite frankly, Mr. Donohue, I am trying to be your 
press guy here.
    I do not think you should be put in the position of 
speaking for the Chamber, at least not the Business Roundtable 
from my State where it kind of lives. I do not think we should 
be put in the position where the business community is viewed 
as saying that unless we can prove it is efficacious, there is 
no circumstance under which we should engage in the sanction.
    Mr. Donohue. Senator, I could use a lot of help in the 
press, and I appreciate that point.
    Senator Biden. I was not being facetious. I mean that 
sincerely.
    Mr. Donohue. No, I know, but I am serious, and I do 
appreciate your--we agree on this. I believe there are times we 
need to speak our mind, and I think it is very, very difficult 
to take them down the daisy chain. I appreciate your engaging 
us in this conversation.
    Senator Biden. Does anyone else have a question?
    Senator Warner. I have another quick point. Thank you, Mr. 
Chairman.
    Gentlemen, I am in a conference now where one of the issues 
revolves around which department the executive branch should 
have sort of the final say as it relates to particularly items 
which have potential military value. I do not think you need 
any more facts to know exactly from whence I am coming on this 
question, but I will ask Mr. Donohue, and if others feel they 
want to add in, fine.
    Do you find there is a great deal of importance, whether it 
is Commerce, State, or Defense that has sort of the upper hand 
in the final say?
    Mr. Donohue. Senator, if we had a clear definition--and I 
am not going to ask you about the subject, although I happen to 
have a working knowledge of some of that. If we had a clear 
definition of what gave military advantage in a significant way 
to people we do not want to have it, first, I think the 
President has that responsibility, and second, then I think 
that could be found in the Defense Department or it could be 
found any place you wanted to put it.
    The big problem is what is the clear definition and what is 
the agenda of the departments. They all have three separate 
philosophies. Defense wants to make and sell and protect, and 
those conflict. Commerce wants to sell and export, and State 
wants to talk about--and I say that with great respect.
    I think this is a problem that when we come down to a 
question of national defense, that whether it is the national 
security guys or the President that has to adjudicate between 
those three departments--because they have all got an ax to 
grind--if you give it to Commerce, Defense is still going to be 
very active in defining what it is and what the threat is. If 
you give it to defense or to commerce, State is still going to 
be in charge of discussing this and negotiating it with foreign 
governments. If you give it just to State, Commerce and Defense 
are going to be yelling.
    You have a very difficult choice. The definition is the 
issue, and national leadership at the Presidential level is 
going to have to resolve those issues between those 
departments.
    Senator Warner. Good answer. So it does make a particular 
difference, so long as the President of the United States can 
exercise the final question.
    Mr. Donohue. That is right, and as long as each of the 
three parties are heard on their view on the matter. That is 
how these inter-working groups and national security agents, 
the National Security Council and others, work on behalf of the 
President, to bring him matters to decide.
    Senator Warner. Understood.
    I thank the Chair and the members.
    Senator Hutchinson. Mr. Chairman, I just wanted to thank 
you for the fair way in which you have conducted the hearing. I 
do not think we are that far apart in our view of trade, nor do 
I think I and the panel are that far apart in our view of the 
value of trade or the ineffectiveness of a lot of our sanctions 
policy.
    But I want to add--because I think your point on the 
efficacy not always being the standard was very, very 
important--that the case of Apartheid in South Africa maybe is 
a good example. For us taking a principal stand, though it may 
not have economically brought about the change we desired, the 
fact we took--there is a power in moral principle, and that 
that in itself had a beneficial effect, and perhaps made a big 
difference in bringing about the desired change; that that can 
happen in foreign policy, and that the symbolic value of the 
sanctions, there is that value, apart from being able to 
quantitatively prove that it will economically bring about the 
desired change.
    Senator Hutchinson. And the less often you do it, the more 
effect it will have.
    Mr. Lane. Senator?
    Senator Biden. A closing statement, Mr. Lane?
    Mr. Lane. Oh, I will make this real closing. Just two 
comments, one regarding South Africa. Senator Lugar and, if I 
recall, Senator Kassebaum played probably a total role in the 
South Africa debate as any two Senators during the mid-1980's.
    If you ever wanted an example where you had targeted 
sanctions, where you had a deliberative process, where you 
built multilateral support for a common position, it was the 
way the U.S. conducted our policy during the South African 
debate. That, in many ways, should be the model. It did not 
happen overnight. It took a long time to build international 
consensus.
    Secondly, the worst thing you can do with international 
sanctions is to pass a sanction to make a statement and then 
walk away. Multilateral cooperation, I do not want to sound 
Pollyannish here, but it is hard. It is very hard, and you do 
not get credit for an effective foreign policy that prevents 
bad things from happening, but in the same token, if you pass a 
sanction and then move onto more noble pursuits, it is 
sometimes far worse than having no action at all.
    Mr. Sprague. And I think there is no question that we want 
to be the leader in world policy. This country has that 
responsibility, and that is going to take a lot of hard 
decision sometime, and we have to do some things that maybe we 
would not agree with totally, but to be the leader and to show 
the world that we are the leader, we have to take those tough 
steps.
    I think that is the part that has made this country great. 
We have deliberated on those issues. It has not been made by 
one person or one department. It is deliberated and the 
knowledge is passed around the country so that our people can 
help make that decision, and that is what we need to continue 
to make sure happens.
    Senator Biden. Gentlemen, thank you very much.
    One of the reasons why this is becoming a more urgent 
discussion is the economic future of all our folks is out 
there. The idea that we can guarantee their economic security 
by having open and free access of American markets ain't where 
it is. So it is the good news and the bad news.
    I appreciate your testimony and thank you all for coming, 
and I appreciate Senator Lugar allowing me to actually chair a 
hearing.
    Senator Lugar. You did very well.
    Senator Biden. It felt good. Thank you very much.
    [Whereupon, at 4:56 p.m., the Task Force adjourned.]


                                
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