[Senate Hearing 106-216]
[From the U.S. Government Publishing Office]
S. Hrg. 106-216
HEARINGS ON SANCTIONS REFORM
=======================================================================
HEARINGS
BEFORE THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
__________
MAY 11, JULY 1 AND 21, 1999
__________
Printed for the use of the Committee on Foreign Relations
Available via the World Wide Web: http://www.access.gpo.gov/congress/senate
U.S. GOVERNMENT PRINTING OFFICE
58-824 CC WASHINGTON : 1999
------------------------------------------------------------------------------
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON FOREIGN RELATIONS
JESSE HELMS, North Carolina, Chairman
RICHARD G. LUGAR, Indiana JOSEPH R. BIDEN, Jr., Delaware
PAUL COVERDELL, Georgia PAUL S. SARBANES, Maryland
CHUCK HAGEL, Nebraska CHRISTOPHER J. DODD, Connecticut
GORDON H. SMITH, Oregon JOHN F. KERRY, Massachusetts
ROD GRAMS, Minnesota RUSSELL D. FEINGOLD, Wisconsin
SAM BROWNBACK, Kansas PAUL D. WELLSTONE, Minnesota
CRAIG THOMAS, Wyoming BARBARA BOXER, California
JOHN ASHCROFT, Missouri ROBERT G. TORRICELLI, New Jersey
BILL FRIST, Tennessee
Stephen E. Biegun, Staff Director
Edwin K. Hall, Minority Staff Director
(ii)
C O N T E N T S
----------
Tuesday, May 11, 1999
U.S. Agricultural Sanctions Policy for the 21st Century
Page
Glickman, Hon. Dan, Secretary of Agriculture; accompanied by
August Schumacher, Jr., Under Secretary for Farm and Foreign
Agricultural Services, Department of Agriculture............... 6
Prepared statement of........................................ 8
Hall, Gary, president, Kansas Farm Bureau, Manhattan, KS......... 34
Prepared statement of........................................ 36
Helms, Jesse, U.S. Senator from North Carolina, prepared
statement...................................................... 25
Kohlmeyer, Robert W., president, World Perspectives, Inc.,
Washington, DC................................................. 43
Prepared statement of........................................ 46
Reinsch, Hon. William A., Under Secretary of Commerce for Export
Administration, Department of Commerce......................... 9
Prepared statement of........................................ 12
Thornsberry, Max, D.V.M., president, Missouri Cattlemen's
Association, Columbia, MO...................................... 32
Prepared statement of........................................ 33
Yost, Mike, president, American Soybean Association, Murdock, MN. 38
Prepared statement of........................................ 40
Thursday, July 1, 1999
The Role of Sanctions in U.S. National Security Policy
Ashcroft, John, U.S. Senator from Missouri, prepared statement... 81
Eizenstat, Stuart E., Under Secretary for Economic, Business, and
Agricultural Affairs, Department of State...................... 58
Prepared statement of........................................ 63
Responses of Under Secretary Stuart Eizenstat to additional
questions submitted by Senator Hagel........................... 88
Responses of Under Secretary Stuart Eizenstat to additional
questions submitted by Senator Helms........................... 89
Wednesday, July 21, 1999
The Role of Sanctions in U.S. National Security Policy--Part 2
Ashcroft, John, U.S. Senator from Missouri....................... 104
News release entitled ``Ashcroft Seeks Help for Farmers
Through Removal of Trade Sanctions''....................... 108
Letters to Senator Ashcroft regarding food and medicine
sanctions.................................................. 110
Dodd, Christopher J., U.S. Senator from Connecticut.............. 96
Hagel, Chuck, U.S. Senator from Nebraska......................... 101
Helms, Jesse, U.S. Senator from North Carolina, prepared
statement...................................................... 92
Lugar, Richard G., U.S. Senator from Indiana..................... 93
News release entitled ``Lugar Calls for More Thoughtful
Sanctions Policy''......................................... 96
(iii)
U.S. AGRICULTURE SANCTIONS POLICY FOR THE 21ST CENTURY
----------
TUESDAY, MAY 11, 1999
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met at 2:31 p.m., in room SD-562, Dirksen
Senate Office Building, Hon. John Ashcroft, presiding.
Present: Senators Helms, Lugar, Hagel, Thomas, Grams,
Ashcroft, Brownback, and Sarbanes.
Senator Ashcroft. Good afternoon, everyone. Let me thank
you for coming today to participate in this hearing, U.S.
Agricultural Sanctions Policy for the 21st Century. Welcome,
Mr. Secretary and Mr. Reinsch. Is it Mr. Schumacher?
Mr. Schumacher. Yes.
Senator Ashcroft. Thank you very much for coming.
Sanctions, as you know, are under the jurisdiction of this
committee, and we appreciate your willingness to appear here
today to discuss specifically sanctions on agriculture and
agricultural products. I look forward to hearing your remarks
and discussing with you sanctions reform, which is important to
America's farmers and ranchers, and especially important to me
as a Member of the Senate who represents a farm State.
For more than 200 years, farmers and ranchers have been
vital to the growth of our country and to its economic
prosperity, always responding to the challenges of our
competitive free market system. I believe the United States has
the best farmers in the world, first class in their production,
first class in processing, marketing both at home and abroad.
However, we are seeing the effects of depressed prices
across the Nation. No doubt, we need to face the crisis head
on, but we also must enact reforms that give farmers and
ranchers the opportunity to be productive and competitive, and
that strengthen farm families. I believe those policies are
ones rooted in the American tradition of increasing
opportunity.
One hundred years ago my grandfather, Cap Larsen, left
Norway as a teenager to sail the high seas. He changed his name
and basically carried all he had in a duffle, boarded the ship
bound for America when Lady Liberty was less than a teenager.
He could not speak the language, but he knew what America was
all about. America was already understood a century ago as a
land of ascending opportunity where every generation has the
opportunity to do better than the previous generation.
And I think the single most important question that any of
us can ask, how can we reinforce the definition of America as a
culture of ascending--ascending--opportunity, including for
agriculture? I want farm families of America to be able to say
what my grandfather said when he came to this country, that is,
the best is yet to come.
As I have traveled around Missouri, I have learned that
farmers and ranchers, young and old, expect to create a new
century of opportunity. Already the agricultural sector is one
of the State's largest employers. Missouri happens to be the
second leading State in the number of farms. Clearly the
agricultural industry is the backbone of our economy,
accounting for more than $4 billion annually. And while the
United States can produce more food than any other country, we
account for only 5 percent of the world's consuming population,
and that leaves 95 percent of the consumers for agricultural
products outside of our borders.
This is an astounding statistic when we put it in terms of
creating opportunities. Exports already account for 30 percent
of the gross cash receipts for America's farmers, and nearly 40
percent of all U.S. agricultural production is exported.
However, with the consuming capacity of the world largely
outside of our borders, our farmers and ranchers need
increasing access to the demand of the world marketplace.
Farmers and ranchers tell me repeatedly that they want more of
our help abroad and less of our interference on their farms.
They need us to open foreign markets and they need us to keep
those markets open. And our task, opening foreign markets,
looms before us as a brick barricade. With the same will and
authority of President Reagan before the Berlin Wall, when he
said, Mr. Gorbachev, tear down this wall, we must face head on
the barricades before our farmers and ranchers. It is not an
easy task, but then again, neither was dismantling the evil
empire.
In just 2 days, the Europeans will stand on their massive
wall of protectionism built across the trail of free trade and
simply reject U.S. beef, even in the face of having lost the
World Trade Organization case. They have lost the litigation.
They lost it under GATT. They lost it under WTO. And they are
still going to stand there in a barricade. We have got to blaze
a trail, and it will be tough. The Europeans cannot be allowed
to make a mockery of the competitive spirit of America's cattle
ranchers.
Our second task, keeping markets open, is what we must
address today. The picture of ascending opportunity for farmers
is incomplete without a view of foreign markets unimpaired by
our own embargoes. Using food and medicine as weapons creates a
cumbersome trail and environment of descending opportunity.
Agricultural embargoes amount to a denial of much needed food
and medicine to the innocent people of foreign lands with whom
we have no quarrel and to a unilateral disarmament of farmers
in a competitive world market. We must not use our farmers for
innocent people as pawns of diplomacy or allow embargoes merely
to add bricks to the walls of protectionism which have been
erected by foreign marketplaces.
Once farmers jump through all the hoops of foreign trade
barriers and red tape to establish trusted relationships with
foreign buyers, the U.S. Government should be extremely
cautious about interrupting their sales through imposing trade
sanctions. Many farmers' livelihood depends on sales overseas.
For instance, in the mid-1990's, more than one-fourth of
Missouri's farm sales were made to overseas consumers, but
because the U.S. Government has sanctioned agricultural trade,
there was an estimated $1.2 billion annual decline in the U.S.
economy during those years. That translates to 7,600 fewer U.S.
jobs. If even one-third of those 7,600 lost jobs translated
into the loss of a family farm, that would mean about 2,500
family farms gone, and the tradition they would have passed on
to the next generation is lost forever each year. This is a
trend that we can and I believe we must stop.
What I hope we explore today is how U.S. agricultural trade
sanctions hurt America's farmers and ranchers. Also I would
like to hear some comments about how sanctions against food and
medicine are detrimental to the world's poor that have to live
under the rule of tyrants.
I agree that in some instances the United States needs to
use trade sanctions. They can be foundational to the protection
of U.S. national security interests and to the promotion of our
foreign policy goals. However, because I believe that
agriculture and medicine should rarely be a part of such
sanctions, I support the administration's recent reform for
sanctions against some sales of agriculture and medicine. It is
a good first step, and I think Congress and the administration
need to use their combined authority to lift further most of
the remaining restrictions on our farmers and ranchers.
This is why Senators Brownback, Baucus, Bob Kerrey and I
have introduced the Food and Medicine for the World Act of
1999. The theme of the bill is that sanctions should rarely, if
ever, be imposed against agriculture or medicine. Our farms
should not be sanctioned without serious deliberation about the
effects. If the Food and Medicine for the World Act is passed,
in order to use agriculture or medicine as a part of a
sanctions regime, there must be an agreement between the
administration and Congress. We do not tie the hands of the
President; we merely ask the President to shake hands with the
Congress.
The Food and Medicine for the World Act sends a message to
overseas customers that U.S. farmers and ranchers will be
reliable suppliers. People around the world depend on our
medicine and our farm products, and the health and welfare
needs of those abroad will be best served if we ensure that our
farmers and producers are a continuous source of food and
medical supplies.
The Food and Medicine for the World Act also sends a
message to U.S. farmers, ranchers, and to related businesses
and industries that their livelihood will not be threatened by
the bad acts of tyrants without due deliberation. Farmers and
ranchers are twice as reliant on foreign trade as the U.S.
economy is as a whole. It is time for us to enact policy that
reflects our support for their efforts to reach their
competitive potential internationally that creates ascending
opportunity for our farm families for the 21st century so that
the best is yet to come for those families.
I am pleased now to recognize other members of the
committee who have come to make statements. I will call on them
in order of their appearance today. In that respect, I would
call on Senator Thomas of Wyoming.
Senator Thomas. That means when they appeared?
Senator Ashcroft. Yes. It is not how you appear.
Senator Thomas. I see.
Senator Ashcroft. It is not that you are better looking
than the rest of us.
Senator Thomas. Mr. Secretary, welcome. Good to have you
here. I appreciate your doing this and the other attention you
pay to agricultural issues. And I appreciate all of you being
here.
I think it is an important issue, Mr. Chairman, and glad
you are having it. I have traditionally opposed economic
sanctions as a tool of foreign policy. I recognize that from
time to time they must be used, but seldom are they useful. I
guess the example, I was in China. We were having a little fuss
with China, and so they canceled their purchases with Boeing
and bought Airbuses. So, it sort of points up that most
countries can buy whatever we sell somewhere else.
So, certainly we want to recognize that prohibitions hurt
U.S. farmers and other businesses, undermine our reputation as
a dependable supplier, and hand over important markets to
others.
So, I appreciate this hearing and look forward to your
comments. Again, thank you for being here.
Senator Ashcroft. Thank you very much.
It is my pleasure now to call upon Senator Lugar, who as
the chairman of the Agriculture Committee for the U.S. Senate
and expert in foreign relations as well, is most appropriately
welcomed here. Thank you for coming.
Senator Lugar. Thank you very much, Mr. Chairman, and I
thank you for this hearing because I think the legislation you
have introduced is very important. It is always good to see the
Secretary of Agriculture in the Foreign Relations Committee or
in the Agriculture Committee. We had, as you know, a hearing
this morning in the Agriculture Committee, and Gus Schumacher,
the Under Secretary, was with us as was Mr. Yost, who will
appear later today, for the soybean people.
They are going to make some general comments I suspect that
you have already made eloquently, Mr. Chairman. It is that the
problem of unilateral economic sanctions, whether it be in the
area of food and medicine or more broadly, has usually been
ineffective, especially ineffective in the case of food and
humanitarian services, including medicine.
I welcome, as you have, the activity taken by the
administration with regard to three countries. We heard this
morning and we may hear again this afternoon that this action
involves the licensing of specific sales and that poses some
difficulties. The need for legislation, I believe the
administration indicated through Mr. Eizenstat and Mr.
Schumacher this morning, is evident.
My own activities in this area have been involved in a
general sanctions reform effort which finally reached
culmination in the debate on the agricultural appropriation
bill last year and it lost 53 to 46. This year we have
introduced nearly identical legislation, trying to work with
the administration specifically on the prerogatives of the
President to make certain there is adequate flexibility in
terms of our foreign policy interest and waiver comparable to
that which we approved on the Glenn amendment and which
mercifully allowed some flexibility with India and Pakistan.
That legislation I believe has been referred to this committee.
Now, in addition, we also have a bill that deals directly
with agriculture and food and commercial sales, and that was
what we heard this morning. S. 566. I hope that we will have
rapid action in the Agriculture Committee to report out that
legislation so that there will be activity on the floor as soon
as possible.
We have another bill that I have introduced that is in the
Finance Committee. Because of the cross-jurisdictions, we took
the precaution of introducing legislation that might end up in
any of the three committees and it might finally succeed in any
of these platforms. I applaud your initiative, Mr. Chairman, in
this area, and that of Senator Harkin, the ranking member in
the Agriculture Committee who has worked with you on one of
your bills; and Senator Dodd, a member of this committee, who
has been active. I have a feeling the critical mass of activity
is going to lead to some degree of success this year, and
therefore this hearing is important to help refine the issues,
find where the areas of potential success might be, and to
combine the efforts of the various committees that have
jurisdiction so it does not fail.
I would just finally say, with regard to agricultural
America, this legislation is especially urgent. We heard
testimony this morning that passage of the Agriculture Sanction
Act by itself would bring about enormous encouragement to
farmers and, some hasten to add, increases in prices. There was
some caution that even after we come back into those markets,
having damaged ourselves substantially, it may take a while for
people to get used to buying from us again. And this is not
automatic.
But failure to act quickly in the areas of food and
medicine would certainly be tragic. So, I share your idealism
and your practicality, Mr. Chairman. I am grateful to be a part
of this hearing.
Senator Ashcroft. Thank you very much, Senator Lugar.
Now the Senator from Minnesota. Do you have remarks you
would like to make? The Senator from Wyoming has already
enlightened us.
Senator Grams. No, I do not have an opening statement, but
I have a few questions. Thank you, Mr. Chairman.
Senator Ashcroft. Thank you very much.
It is now my pleasure to call upon the first panel of
witnesses: the Honorable Dan Glickman, Secretary of
Agriculture, and the Honorable Bill Reinsch, Under Secretary
for Export Administration at the Department of Commerce, and of
course, Gus Schumacher, the Under Secretary of Agriculture for
Farm and Foreign Agricultural Services.
Let me just say, Mr. Secretary, it is good to have someone
from the bread basket of America as deeply concerned about
agriculture as you are and willing to come and appear before us
to participate in this hearing. I would be pleased to welcome
your remarks at this time.
STATEMENT OF HON. DAN GLICKMAN, SECRETARY OF AGRICULTURE;
ACCOMPANIED BY AUGUST SCHUMACHER, JR., UNDER SECRETARY FOR FARM
AND FOREIGN AGRICULTURAL SERVICES, DEPARTMENT OF AGRICULTURE,
WASHINGTON, DC
Secretary Glickman. Thank you very much, Mr. Chairman. You
have properly noted Mr. Schumacher who is here to help bail me
out with answers to your questions. He did testify also this
morning before Senator Lugar's committee, and I would call upon
him at the appropriate time on the question and answer side of
the picture.
I might say to you that my mother was born on the Missouri
side in the city of Kansas City, not far from where the Country
Club Plaza is now. So, I am kind of two worlds.
Senator Ashcroft. Well, sometimes we call that Lap Land,
and that is where Missouri laps over into Kansas and Kansas
laps back over into Missouri. We are delighted.
Secretary Glickman. Mostly you get our water and air,
though, I would have to say.
Senator Ashcroft. Well, thank you.
Secretary Glickman. It just flows west to east.
Senator Ashcroft. We are grateful.
Secretary Glickman. Thank you.
In any event, I am honored to be here. I think this is the
first time that I have appeared before this committee. I have,
of course, appeared before Senator Lugar's committee on many
occasions, and it is a pleasure to see him, as well as Senator
Thomas and Senator Grams.
I have a very short statement.
If I might just say with respect to reform of U.S.
sanctions policy, you are aware that 2 weeks ago that President
Clinton announced that the United States will exempt commercial
sales of agricultural commodities and products, medicine, and
medical equipment from future unilateral economic sanctions,
unless the President finds that it is in the national interest
to include such items due to compelling circumstances.
This is a very significant step toward revising U.S.
unilateral economic sanctions and it has important implications
for American agriculture, as you so noted in your opening
statement. While this new policy does not mean automatic
approval of agricultural sales, it does give U.S. producers and
exporters an opportunity to compete in more open markets.
In addition, the new policy will extend to existing
unilateral economic sanctions to permit case-by-case review of
specific proposals for commercial sales. Because under current
policy, conditioned sales of certain items are already
licensable for Iraq, North Korea, and Cuba--and at least in the
cases of Iraq and North Korea, there have been both donations
as well as I believe commercial sales--the change will affect
only Iran, Libya, and Southern Sudan, that particular
announcement because the other sales were opened.
We are working to implement these changes as quickly as
possible in developing licensing criteria to guide this on a
case-by-case review. I would say that the Agriculture
Department is a key player and a partner in the interagency
effort to ensure that these rules are written in a way which
are fair to U.S. farmers and ranchers, and Under Secretary
Schumacher and his team are actively involved in this licensing
process, this criteria process.
The criteria will be designed to ensure that sanctioned
governments do not gain unjustified or unwarranted benefits.
Sales must be at prevailing market prices and sales generally
will be restricted to non-government entities or government
procurement bodies not affiliated with the coercive organs of
the state. However, sales to some quasi-government
organizations could be authorized, provided that they are not
affiliated with coercive organizations.
This policy change will cover agricultural commodities and
products, medicine, and medical equipment. As I said, we are
working with other Departments of Government, including State,
Commerce, and Treasury, to develop precise definitions of the
products to be covered.
This important step toward sanctions reform should help
boost U.S. agricultural exports of bulks commodities. This is
largely a bulk commodity issue right here that we are talking
about. Wheat, corn, rice, and vegetable oil are the primary
bulk commodities that would be involved. We estimate that our
producers may sell an additional half a million to 1 million
tons in exports of both wheat and corn as a result of this
change to policy. And this is largely to Iran. Of the three
countries I mentioned, Iran is probably one where the
overwhelming majority, if not all, of the sales would go to at
least initially. In addition, some of these countries were once
major markets for U.S. rice, and we hope that our rice
producers will recapture some of these lost sales.
For example, Iran, a nation of 60 to 70 million people
represents about a $3 billion food market. Two decades ago with
only about half of its current population, Iran was the biggest
customer for American rice and one of the biggest for American
wheat. Now our producers will have the opportunity to recapture
their share of that market.
There has been a lot of discussion about what is the value
of lost sales under our sanctions policy. Well, there are a
myriad, I suppose one could call of them, sanctions in a whole
host of laws that have been adopted by Congress over the last
30 or 40 or 50 years. Primarily we are talking about the
following countries: Iran, Libya, Sudan, Cuba, North Korea, and
Iraq. Those have been the countries that the sanctions have
been pretty much across the board. We estimate--and this is
merely an estimate--that we are probably talking somewhere of
around $500 million worth of sales are affected in those
countries. That is an estimate. It could be a little higher, it
could be a little lower. It could raise higher in the future if
other economic factors occurred.
The reason why I mentioned that is because that number is
less than what some people have talked about in terms of lost
agricultural markets to sanctions. These countries that I just
mentioned would probably represent roughly about 1 percent at
current levels U.S. agricultural sales. Now, while that may
seem small, any amount right now is good. The opening might
allow us to be more competitive in other places around the
world.
I do not want to overstate the value of this, however, the
overwhelming majority of our agricultural products do not go to
these countries. They go to many other countries around the
world. This will represent an opening. I think it is very
positive news.
The Clinton administration is committed to the reform of
U.S. sanctions policies. We need to ensure that unilateral
economic sanctions, to the extent that they exist, are
effective, that the cost to U.S. interests are minimized, and
that they directly contribute to U.S. foreign policy goals.
The changes we are discussing today follow through on the
President's belief--and I have talked to him about this myself
and it is my own belief, after having been in the U.S. Congress
for 18 years--that agricultural commodities and other human
essentials should not be used as instruments of foreign policy,
absent very compelling circumstances. And as you said, Mr.
Chairman, there are certain circumstances where they may be
warranted.
When it comes to monitoring rogue nations and combatting
international terrorism, we will continue to be vigilant. But
we have found too often that sanctions on food and medicine
have no influence on the behavior of governing regimes.
Instead, they harm innocent citizens, poor citizens as you
indicated, who may be denied basic tools of survival.
And, of course, sanctions can have a negative economic
effect here at home. American agricultural export shares in
these markets are frequently captured by our global
competitors. Just as innocent people abroad should not be
punished for the policies of their governments, there is no
reason why American farmers should be punished either.
With farm prices still low and global demand still soft,
this new sanctions policy could not have come at a better time.
Our farmers are hurting and they deserve every opportunity to
reach out to as many potential consumers around the world as
possible. They produce the best food the world has to offer,
and we cannot afford to handicap them by ceding potentially
lucrative markets to our global competitors.
Mr. Chairman, that completes my statement. After all the
statements are finished, I will be glad to answer any questions
that you have.
[The prepared statement of Secretary Glickman follows:]
Prepared Statement of Hon. Dan Glickman
Mr. Chairman, members of the Committee, I am pleased to appear with
Bill Reinsch, Under Secretary of Commerce for Export Administration, to
discuss sanctions and their effects on U.S. agricultural trade.
reform of u.s. sanctions policy
Mr. Chairman, two weeks ago, President Clinton announced that the
United States will exempt commercial sales of agricultural commodities
and products, medicine, and medical equipment from future unilateral
economic sanctions, unless the President finds that it is in the
national interest to conclude such items due to compelling
circumstances. This is a significant step toward revising U.S.
unilateral economic sanctions policy and it has important implications
for American agriculture. While this new policy does not mean automatic
approval of agricultural sales, it does give U.S. producers and
exporters an opportunity to compete in more markets.
In addition, the new policy will extend to existing unilateral
economic sanctions to permit case-by-case review of specific proposals
for commercial sales. Because under current policy conditioned sales of
certain items are already licensable for Iraq, North Korea, and Cuba,
this change would affect only Iran, Libya, and Sudan.
We are working to implement these changes as quickly as possible.
We are developing licensing criteria to guide this case-by-case review.
These criteria will be designed to ensure that sanctioned governments
do not gain unjustified or unwarranted benefits. Sales must be at
prevailing market prices and sales generally will be restricted to non-
government entities or government procurement bodies not affiliated
with the coercive organs of the state. However, sales to some quasi-
governmental organizations could be authorized provided they are not
affiliated with coercive organizations.
This policy change will cover agricultural commodities and
products, medicine and medical equipment. We are working with the
Departments of State, Commerce, and Treasury to develop precise
definitions of the products to be covered.
This important step toward sanctions reform should help boost U.S.
agricultural exports of bulk commodities such as wheat, corn, rice, and
vegetable oil. We estimate that our producers may sell an additional
500,000 to 1 million tons in exports of both wheat and corn as a result
of this change in policy, mainly to Iran. In addition, some of these
countries were once major markets for U.S. rice, and we hope our rice
producers will re-capture some of these lost sales.
For example, Iran, a nation of 60 to 70 million people, represents
about a $3-billion food market. Two decades ago, with only about half
its current population, Iran was the biggest customer for American rice
and one of the biggest for American wheat. Now our producers will have
the opportunity to recapture their share of that market.
conclusion
Mr. Chairman, the Clinton Administration is committed to the reform
of U.S. sanctions policies. We need to ensure that unilateral economic
sanctions are effective; that the costs to U.S. interests are
minimized; and that they contribute to U.S. foreign policy goals.
The changes we are discussing today follow through on the
President's belief that food and other human essentials should not be
used as instruments of foreign policy, absent compelling circumstances.
When it comes to monitoring rogue nations and combating
international terrorism, we will continue to be as vigilant as ever.
But we have found too often that sanctions on food and medicine have no
influence on the behavior of governing regimes. Instead, they may harm
citizens, who may be denied basic tools of survival.
And, of course, sanctions can have a negative economic impact here
at home. American agricultural export shares in these markets are
frequently captured by our global competitors. Just as innocent people
abroad should not be punished for the policies of their governments,
there is no reason why American farmers should be punished either.
With farm prices still low and global demand still soft, this new
sanctions policy could not have come at a better time. Our farmers are
hurting, and they deserve every opportunity to reach out to as many
potential consumers as possible around the world. They produce the very
best food and fiber that the world has to offer, and we cannot afford
to handicap them by ceding potentially lucrative markets to our global
competitors.
Mr. Chairman, that completes my statement. I will be happy to
answer any questions.
Senator Ashcroft. Mr. Secretary, I want to thank you very
much and commend you for taking, I think as Senator Lugar
mentioned--and I certainly believe--a significant step in the
right direction in terms of making our products available and
making markets around the world available to our producers.
It is now my pleasure to call upon the Honorable Bill
Reinsch, the Under Secretary for Export Administration at the
Department of Commerce. Mr. Reinsch, please go forward.
STATEMENT OF HON. WILLIAM A. REINSCH, UNDER SECRETARY OF
COMMERCE FOR EXPORT ADMINISTRATION, DEPARTMENT OF COMMERCE,
WASHINGTON, DC
Mr. Reinsch. Thank you, Mr. Chairman. It is a pleasure to
be back here before the committee to testify. I recall the last
time was on chemical weapons. This is a slightly happier topic,
and I am pleased to have the opportunity to be with you.
Let me also, Mr. Chairman, on behalf of the Department of
Commerce, welcome you to membership on the President's Export
Council. It is an important opportunity, I think, to work with
us to enhance exports in this sector, but also in other
sectors. I know that Secretary Daley and I and Ambassador Aaron
look forward to working with you. We particularly appreciate
your participation in the last meeting. Not all of our
congressional representatives show up, but you did and we are
grateful for it.
Let me today discuss the Department of Commerce's views on
agricultural sanctions and, in particular, our activities in
regard to licensing the export of food and medicine to
sanctioned states.
As Secretary Glickman pointed out, this administration has
been working for the last 2 years, in conjunction with the
Congress, to rationalize the sanctions process. A major step in
this effort, as you noted, occurred last month when the
President announced that commercial sales of food and medicines
will generally be exempt from unilateral sanctions. This will
allows sales to Iran, Libya, and Sudan. That is an important
step for several reasons.
First, when we look at the broad outline of sanctions
policy, it is clear that multilateral sanctions are generally
more effective in enforcing international norms, advancing U.S.
interests, and defending U.S. values. Multilateral sanctions
maximize international pressure, while minimizing damage to the
U.S. economy. Unilateral sanctions are usually much less
effective since there are few products or services for which
the United States is the only producer. For agricultural
products, the large number of alternative suppliers means that
unilateral sanctions may do more damage to U.S. farmers than to
their intended target, as Senator Thomas pointed out in his
remarks a few minutes ago. The President's decision of last
month takes this into account.
For example, when the United States imposed a grain embargo
after the Soviet invasion of Afghanistan, the Soviets were able
to replace the majority of the embargoed grain with imports
from other sources. GAO concluded that the embargo caused
almost no change in Soviet consumption. The economic cost for
the United States, however, was high, and not only in the
agriculture sector. In addition to the loss of the direct
sales, manufacturers of agricultural equipment, savings and
loan associations in wheat farming areas, the shipping
industry, and trading companies all suffered losses.
Additionally, there was long-term damage to business
relationships and market share. As Senator Lugar pointed out,
when your credibility is damaged in these things, it takes a
long time to rebuild it and restore it. Nevertheless, there are
clearly times when important national interests or values are
at stake, and unilateral sanctions should remain available as a
tool to address these situations.
In pursuing this policy, the administration is building, in
part, on longstanding humanitarian precedent. Since the 1960's,
within certain specific guidelines, the United States has
generally encouraged and authorized donations of food and
medical equipment to sanctioned and embargoed nations. However,
the sale of food and medical items has been restricted in
certain instances. The President's April decision has changed
this and will allow sales of food and medical products to Iran,
Libya, and Sudan.
Commerce is currently assisting the Department of State in
developing a list of medical items that will need to be
exempted from the President's policy of general approval. This
list will include certain chemicals, pharmaceuticals, vaccines,
and medical equipment which will be subject to stringent review
because they are controlled for chemical and biological
weapons' concerns.
We are also working with other agencies to develop precise
definitions of the affected products and country-specific
licensing criteria. Commerce expects that changes in the
regulations for Cuba, North Korea, and Syria are not necessary
because sales of food and medicine are already permitted to
these destinations. In the case of Iraq, sales are permitted
under the United Nations oil for food program and U.N. Security
Council resolutions, and as a result, we do not expect
regulatory changes there either.
Now let me describe briefly how Commerce Department
licensing activities vis-a-vis food work. In 1998, the Bureau
of Export Administration processed 10,378 license applications
for the export of controlled U.S.-origin goods. Two percent of
those, or 221, were for food and medical items to sanctioned
states. These licenses are processed under existing Commerce
authorities in consultation with the Departments of Defense and
State and under the aegis of Executive Order 12981 which sets
up the process for considering these and which imposes
discipline and transparency on BXA's licensing process.
As spelled out by the Cuban Democracy Act of 1992, the
United States will generally approve licenses to export
medicines, medical supplies, instruments, and equipment to Cuba
that meet a set of five criteria. In 1998, BXA processed 107
applications worth $97 million for food and medical exports to
Cuba.
In March 1998, the President announced that export
applications for the sale of medicine and medical supplies and
equipment to Cuba would be simplified and expedited, that
direct cargo flights for humanitarian reasons would be
restored, and that the monetary value and allowable frequency
of family remittances to Cuba would be increased. In the
aftermath of this announcement, Commerce's approved licenses
for medical sales increased significantly, from a total value
of only $22,500 in 1997 to $19.2 million in 1998. However, at
the same time we understand that actual shipments are
substantially below the authorized level. In this respect I
should point out, Commerce licenses or authorizes exports. We
do not necessarily keep track of everything that actually
leaves the country pursuant to license, and I can go into that
a little bit later in questions if you wish.
In January of this year, the President announced a series
of new initiatives for Cuba designed to help the Cuban people
transition to democracy without strengthening the current
regime. The initiatives include a provision permitting the sale
of food and certain agricultural items to independent
organizations and non-governmental entities. Through the
implementation of this initiative, the United States hopes to
support the small but vital private sector of the Cuban
economy. The Commerce regulations liberalizing the sale of food
to Cuba and the accompanying Treasury regulations go into
effect today and will be published in the Federal Register on
Thursday.
In regard to North Korea, although sales of goods,
including food and medical items, are permitted under the
embargo, the country's lack of hard currency makes payment a
problem, and as a result most food exports to North Korea are
donations. As the scale and intensity of North Korea's food
shortage have intensified, the number of export licenses BXA
has processed has increased. In 1994, for example, BXA
processed a total of 10 licenses for North Korea. By 1998, the
number had increased to 48, with a value of $173 million.
While Syria has been designated as a supporter of terrorism
and is under strict export controls for many U.S.-origin goods
as a result of that, it is not an embargoed state. Therefore,
although some agricultural commodities, such as pesticides and
vaccines, are controlled, the majority of food and medical
items exported to Syria do not today require a license.
Finally, Mr. Chairman, let me comment briefly on S. 425,
the Food and Medicine for the World Act of 1999, although I
want to be clear that the administration is still studying the
bill, and we have not taken a formal position on it. While we
sympathize with the objective of this bill, we do have some
concerns in regard to the limited flexibility it offers the
administration. That said, the bill also shows that there is an
important opportunity here for Congress and the administration
to continue to work together along the lines Senator Lugar
suggested in his remarks. The President's April 28 initiative
is an important step forward in rationalizing sanctions. As we
assess the effect of this decision, further steps to
rationalize agricultural sanctions and sanctions in general may
well be possible.
Commerce looks forward to continuing to work with this
committee and others in the effort to ensure that sanctions
advance U.S. foreign policy goals but minimize burdens and
other U.S. interests. While multilateral sanctions are a strong
and effective foreign policy tool, we believe unilateral
sanctions should only be used when the United States is unable
to rally other states to the defense of our national security
interests.
Thank you.
[The prepared statement of Mr. Reinsch follows:]
Prepared Statement of Hon. William A. Reinsch
Mr. Chairman, members of the Committee, thank you for the
opportunity to testify on sanctions reform for agriculture and on the
bill before the Committee to exempt agriculture and medicine from
unilateral sanctions legislation. In my statement, I will address the
Department of Commerce's views of agricultural sanctions and Commerce's
activities in regard to the export of food and medicine to sanctioned
states.
This Administration has been working for the last two years, in
conjunction with the Congress, to rationalize the sanctions process. A
major step in this effort occurred last month when the President
announced that commercial sales of food and medicines will generally be
exempt from unilateral sanctions. This will allow sales to Iran, Libya
and Sudan, countries to which U.S. farmers could not previously sell
food. This change is part of the Administration's overall approach to
sanctions reform and is not directed to any specific country. It is an
important step for several reasons.
First, when we look at the broad outline of sanctions policy, it is
clear that multilateral sanctions are generally more effective in
enforcing international norms, advancing U.S. interests and defending
U.S. values. Multilateral sanctions maximize international pressure
while minimizing damage to the U.S. economy. Unilateral sanctions are
usually much less effective since there are few products or services
for which the United States is the only producer. For agricultural
products, the large number of alternative suppliers means that
unilateral sanctions may do more damage to U.S. farmers than to their
intended target. The President's decision takes this into account.
For example, when the U.S. imposed a grain embargo after the Soviet
invasion of Afghanistan, the Soviets were able to replace the majority
of the embargoed grain with imports from other sources; the GAO
concluded that the embargo caused almost no change in Soviet
consumption. The economic cost for the United States, however, was
high. In addition to the loss of the direct sales, manufacturers of
agricultural equipment, savings and loan associations in wheat-farming
areas, the shipping industry, and trading companies all suffered
losses. Additionally, there was long-term damage to business
relationships and market share. Nevertheless, there are clearly times
when important national interests or values are at stake, and
unilateral sanctions should remain available as a tool to address these
situations.
In revising its approach, the Administration is building in part on
long-standing humanitarian precedent. Since the 1960s, within certain
specific guidelines, the United States has generally encouraged and
authorized donations of food and medical equipment to sanctioned and
embargoed nations. However, the sale of food and medical items has been
restricted in certain instances. The President's April decision changed
this and will allow sales of food and medical products to Iran, Libya
and Sudan.
Commerce is assisting the Department of State in developing a list
of medical items that will need to be exempted from the President's
policy of general approval. The list will include certain chemicals,
pharmaceuticals, vaccines and medical equipment, which will be subject
to stringent review because they are controlled for chemical and
biological weapons' concerns.
We are also working with other agencies to develop precise
definitions of the affected products and country-specific licensing
criteria. Commerce expects that changes in the regulations for Cuba,
North Korea and Syria are not necessary because-sales of food and
medicine are already permitted to these destinations. In the case of
Iraq, sales are permitted under the United Nations oil-for-food program
and U.N. Security Council resolutions, and as a result, regulatory
changes are not expected.
Let me now describe briefly Commerce Department licensing
activities vis-a-vis food. In 1998 the Department of Commerce's Bureau
of Export Administration (BXA) processed 10,378 license applications
for the export of controlled U S.-origin goods. Two percent of all
BXA's licenses applications, or 221, were for food and medical items to
sanctioned states. These licenses are processed under existing Commerce
authorities, in consultation with the Departments of Defense and State,
and under the aegis of Executive Order 12981, which imposes discipline
and transparency on BXA's licensing process. Donated goods can, under
Commerce regulations, be exported without a license.
As spelled out by the Cuban Democracy Act of 1992, the United
States will generally approve licenses to export medicines, medical
supplies, instruments and equipment to Cuba that meet a set of five
criteria. In 1998, BXA processed 107 applications worth $97 million for
food and medical exports to Cuba.
In March, 1998, the President announced that export applications
for the sale of medicine and medical supplies and equipment to Cuba
would be simplified and expedited, that direct cargo flights for
humanitarian reasons would be restored, and that the monetary value and
allowable frequency of family remittances to Cuba would be increased.
In the aftermath of this announcement, Commerce's approved licenses for
medical sales increased significantly, from a total value of only
$22,500 in 1997 to $19.2 million in 1998. However, we understand that
actual shipments are substantially below the authorized level.
In January of this year, the President announced a series of new
initiatives for Cuba designed to help the Cuban people transition to
democracy without strengthening the current regime. The initiatives
included a provision permitting the sale of food and certain
agricultural items (i.e., seeds, pesticides and fertilizer) to
independent organizations and nongovernmental entities. Through the
implementation of this initiative, the U.S. hopes to support the small
but vital private sector of the Cuban economy. Treasury will also
implement a counterpart regulation on the Cuban initiatives under its
jurisdiction. The Commerce regulations liberalizing the sale of food to
Cuba and the accompanying Treasury regulations go into effect today.
The newest initiative for Cuba involves the sale of food and
agricultural items, including but not limited to pesticides,
herbicides, seeds, and fertilizer.
In regard to North Korea, although sales of goods including food
and medical items are permitted under the embargo, the country's lack
of hard currency makes payment a problem, and as a result, most food
exports are donations. As the scale and intensity of North Korea's food
shortage has intensified, the number of export licenses BXA has
processed has increased, in 1994, for example, BXA processed a total of
ten licenses for North Korea; by 1998; the number had increased to 48
with a value of $173 million. Many of the license applications for
North Korea are filed by organizations, such as USAID and CARE, that
are working under U.S. Government contracts to fulfill U.S. obligations
under the Agreed Framework and other agreements we have with North
Korea. These shipments represent direct food aid from the U.S. to the
Democratic Peoples' Republic of Korea.
While Syria has been designated as a supporter of terrorism and is
under strict export controls for many U.S.-origin goods as a result of
that designation, it is not an embargoed state. Therefore, although
some agricultural commodities, such as pesticides and vaccines, are
controlled, the majority of food and medical items exported to Syria do
not today require a license.
Finally, let me comment briefly on S. 425, the ``Food and Medicine
for the World Act of 1999,'' although I want to be clear that we are
still studying the bill and have not taken a formal position on it.
While we sympathize with the objective of this bill, we do have some
concerns in regard to the limited flexibility it offers the
Administration. That said, this bill also shows that there is an
important opportunity here for Congress and the Administration to
continue to work together. The President's April 28 initiative is an
important step forward in rationalizing sanctions. As we assess the
effect of this decision, further steps to rationalize agricultural
sanctions and sanctions in general may be possible.
Commerce looks forward to continuing work with this committee and
others in the effort to ensure that sanctions advance the United
States' foreign policy goals but minimize burdens on other U.S.
interests. While multilateral sanctions are a strong and effective
foreign policy tool, unilateral sanctions should only be used when the
United States is unable to rally other states to the defense of
national security interests.
Senator Ashcroft. Thank you, Secretary Reinsch, for your
participation and for your comments.
It is my understanding that Secretary Schumacher will just
choose to be a part of responses to inquiries. Thank you.
We would launch then our round of inquiries now and let me
begin again by expressing my appreciation.
I think all of us are sensitive to the fact that our
farmers and ranchers have been facing some really tough times.
Mr. Secretary, I would like to hear your thoughts about how the
ability of farmers to export their farm products affects the
U.S. farm economy as a whole.
Secretary Glickman. It is dramatic. You talked about your
own State of Missouri. One out of 3\1/2\ acres production in
this country is dedicated to exports. Of course, that does not
take in the extraordinary amount of exports in the livestock
sector as well.
Roughly 45, 50 percent of wheat is exported. Corn is
significantly less. I am sorry. Wheat is about 30 percent. Corn
is 40, 45 percent. Soybeans are half or thereabouts. And that
is replicated across the board. Cotton is an important export
item, not quite as high. Rice is an important export item that
has fallen to some degree, and then of course, the livestock
sector, which is becoming more and more of an important part of
it. So, it is dramatic.
Senator Ashcroft. It seems to me that an important part of
our promise in the 1996 Freedom to Farm bill was that we would
increase access to international markets. Do you think that
that part of our commitment includes reforming the sanctions
regime for agricultural markets?
Secretary Glickman. Well, I think it is across the board
looking at ways that we can open markets. Mr. Schumacher and
his team have done a lot of things over the last few years. For
example, this year we expect our humanitarian assistance
overseas to reach 10 million metric tons, compared to 3 million
metric tons last year, so over a triple increase. North Korea
and Russia are two of those places.
We are going to use our GSM credits this year and last year
at a significantly higher amount than we have done before.
Gus may want to talk about some specific markets where we
have had great success.
1996, 1997, and 1998, each year was record world grain
production. Each year. 1996 over the rest of the years, 1997
over the rest of the years, 1998 over the rest of the years. I
guess everybody was blessed with wonderful weather and higher
yields, productivity, technology, et cetera. When you couple
that with some decrease in demand, and it has had a profound
effect on price. But there is no question that we are doing
everything we can to move this product overseas. Obviously, if
there are some markets that are excluded from us, that has an
impact.
Senator Ashcroft. So, sanctions reform can have an impact
on----
Secretary Glickman. It can have an impact. It is probably,
in the short term, not a monumental impact, but it has some
impact.
Senator Ashcroft. Tell me about the importance of the
USDA's export credit and credit guarantee programs to U.S.
farmers and their competitiveness overseas.
Secretary Glickman. I might ask Mr. Schumacher to talk. He
runs that program.
Mr. Schumacher. Thank you.
I think we nearly doubled the use of the GSM program, GSM
102, particularly helpful, Senator, in Asia when things got a
little rocky in Korea and the other Asian countries in late
1997 and 1998. In Korea it was extraordinarily helpful. We went
from very little use of GSM to nearly covering half of our
exports in 1998, and that has been renewed in 1999. Very
important not just for bulk, but particularly for the meats and
the meats have been taken up very aggressively.
Senator Ashcroft. So that if we are going to be competitive
overseas, in many respects we rely on our ability to have
credit guarantees.
Mr. Schumacher. Yes. Those are not subsidized interest
rates. They are commercial rates of interest. They provide a
term of 1, 2, sometimes 3 years, but mainly 2 years to assist
our producers in selling overseas.
Senator Ashcroft. If we were to end our credit and credit
guarantees unilaterally, what effect would that have on our
farmers?
Secretary Glickman. It would make the French and other
countries very happy. That is what it would do.
Senator Ashcroft. It would hurt us dramatically.
Secretary Glickman. It would make our competitors very
happy because, as Gus was saying, these are not subsidies, but
they do provide the ability of the U.S. Government's economic
power to guarantee commercial bank loans. Being the most
economically powerful nation in the world, there is a lot of
resistance to our use of our credits overseas.
But if we didn't use them, it would, as last year, support
about $4 billion to $5 billion in sales. They provide liquidity
for a lot of people buying our commodities. They are available
only in certain markets where there is credit worthiness. Other
sorts of tests apply there of course.
But it would have a fairly significant impact, and a
growing impact on the livestock sector where they are used more
and more all the time.
Senator Ashcroft. U.S. law prohibits credits for terrorist
nations. The prohibition was drafted so broadly that a U.S.
farmer cannot use these programs to export food to a private
citizen in one of these countries. Even if Congress were to
ameliorate the harshness of this law such as by allowing credit
guarantees for entirely private citizens, does not the USDA
still have a review process in place to evaluate whether any
one particular credit request should be granted?
Mr. Schumacher. We look at many credit requests, but we, of
course, do not make GSM credits available to terrorist nations.
That is a very important issue.
Senator Ashcroft. Do you have a process that would review
and evaluate whether a particular credit would be granted in
the event the Congress were to expand the law to include the
potential of credit extensions to private citizens in those
nations which currently do not receive credit guarantees?
Mr. Schumacher. Certainly I think, Senator, you recall in
the case of Pakistan and India last year, when the law was
amended. We responded rapidly in terms of the Pakistan issue
and worked that one very carefully.
Secretary Glickman. This is an issue that we are
encouraging further discussion in the interagency process, the
use of GSM credits, as we deal with the issues raised in the
sanctions issues. The sanctions policies the President brought
forward did not make any changes in the GSM credits, and I am
not saying that there will necessarily be changes, but it is
something that is desirous of review in that process.
Senator Ashcroft. Senator Lugar.
Senator Lugar. Thank you very much, Mr. Chairman.
Let me just review for a minute the licensing process. I
have noted in your statement, Secretary Glickman, that you are
working to implement this change or licensing criteria to guide
us on a case-by-case review. You pointed out that sanctioned
governments should not gain unjustified or unwarranted
benefits. And the sales would generally be restricted to non-
government entities or government procurement bodies not
affiliated with the coercive organs of the state.
I understand all that, but the effect of that is, it seems
to me, to discourage export sales. The thrust of all we are
talking about today is that somehow, as you point out, bulk
commodities, rice, wheat, vegetable oil, would be available to
Iran, Libya and Sudan. Already, as you pointed out, some of
this is available to North Korea through emergency gifts in our
foreign policy, and in Cuba through 107 licenses that you
pointed out have led to some humanitarian business.
But I am wondering why the regulations could not simply say
that if anybody in the United States wants to make a sale of
bulk commodities, rice or wheat or vegetable oil, to somebody
in Iran, that they go ahead and do it. In other words, we may
define Iran as a coercive state and try to define what is a
quasi-governmental entity there, but anybody in this country
that wants to make a sale is going to find it very difficult to
market to somebody in Iran who will want to know can you get
through all of the hoops to get the material to me, given the
fact there may be some resistance in that market, given all
that has transpired.
Can you enlighten me a little as to why you are not just
making a general category with bulk commodities?
Secretary Glickman. While these are basic principles to be
applied in this licensing process, the licensing process has
not been finalized yet. We do have to use good judgment and
make sure it makes sense, while facilitating trade in the
process. So, your views have and are being expressed in the
interagency process as the final licensing criteria is done.
I do not know if my colleague from the Commerce Department
has any comments on that.
Mr. Reinsch. If I could add a word, Senator Lugar.
Personally I think you make a good point, and there is
certainly the possibility that we will do it wrong and end up
having the impact that you fear. That has not happened yet.
That is, as Secretary Glickman said, still under discussion.
There are some other aspects of this that are important,
generally speaking, particularly on the finance side. The
Treasury Department, which is the agency that will actually be
issuing the license in these particular cases has wanted to
track the financing of these items very carefully to make sure
that the financing is not coming from an entity that is
problematic from a foreign policy or national security point of
view. That creates arguments in the interagency process for
attaching some additional reviews and some additional cuts on
these things to make absolutely certain that we are not
assisting people as part of this process that we do not want to
assist.
Senator Lugar. Well, I understand that, and you can make
that case for the whole country of Iran. In other words, in a
common sense way, either you open up the market or you do not.
This is sort of a little bit of a ``now you see it, now you
don't'' situation. Who in Iran are these coercive forces? Are
you trying to parse between the new President and a few local
officials who are perceived as more democratic than others? Or
is the Ayatollah buying it and you then say no? I do not think
you can do it from here.
I appreciate the bureaucratic regimens that go through
this. Within your own administration, you may not have people
that are exactly in agreement that the policy should have been
changed at all.
I am just saying this as a practical effect--and I think
you are correct, Secretary Glickman, not to hold out great
hopes for a lot of product moving because not much is going to
move. We have the one significant contract possibility with the
Nikki Company which is sort of well known in all the trade
publications for a long time, and they might move some wheat.
But after you get beyond that, this is going to be heavy going
for anybody working through even these draft regulations and
all the debate that is occurring here.
So, I just take advantage of the chairman's hearing to make
this point because it is critical.
Now, that does not mean that we should not proceed with
legislation. I think that is the solution. In other words,
solve the problem for you and to say, in essence, you do not
have to wrangle among the administration people parsing all
these fine places. We would just say simply food and medicine
can be shipped.
Now, at that point, there is still a definition of food. It
is almost like the food stamp problem. Does it cover beer and
wine and spirits, adhesive, and whatever else is in the grocery
store? I admit that there are some problems here.
But you were talking today about the basic things we do,
bulk wheat and beans and oil and so forth. That is not a tough
call. It seems to me that if we pass this legislation and send
clearer signals, that would be helpful to you, but in the
meanwhile, hopefully you will be helpful to us. We have an
immediate problem of agricultural sales.
Secretary Glickman. I agree with you in this sense. It is
fruitless for us to go down this road and then to use all sorts
of bureaucratic machinations and nothing happens because we
cannot find parties to talk to each other or reach agreement
with each other. That is clearly not the President's intention.
Senator Lugar. And that is what I am suggesting is going to
happen unless there is a little different type of dialog in
this interagency process.
Secretary Glickman. That is one of the reasons why the U.S.
Department of Agriculture is an equal partner in this effort
because I think they need our judgment and our experience as
part of this dialog.
Mr. Reinsch. If I may, Senator, I think you make a very
compelling point. Personally I am glad you made it, and I am
looking forward to conveying your views back to the Office of
Foreign Assets Control at Treasury.
Senator Lugar. Well, please do. I am prepared to argue
personally with these people.
Mr. Reinsch. That might be a good idea.
Senator Lugar. Throughout all of this business, we have
seen the Secretary here today, but also Sandy Berger, a whole
raft of administration people to get to this point. So, this
has involved hand-to-hand combat, and we would be glad to help
out further.
Senator Ashcroft. Thank you very much, Senator Lugar.
Senator Thomas.
Senator Thomas. Just a couple questions. Tell me a little
about--do you deal with North Korea?
Mr. Reinsch. Yes, sir.
Senator Thomas. What is the technique? What is the programs
or resources that allow us to get agricultural products there?
Mr. Reinsch. Most of what we do with respect to North
Korea, largely because of their hard currency problem, is
donations, parcels that are assembled by people here who do
that as a business. I made a little elaboration on this in my
testimony. It was the part that I did not deliver orally.
Most of the license applications we get for North Korea are
filed by organizations such as USAID and CARE.
Senator Thomas. NGO's and USAID?
Mr. Reinsch. USAID, but also CARE which would be an NGO.
But they are working under U.S. Government contracts to fulfill
U.S. obligations under the agreed framework and other
agreements we have with North Korea as part of the energy
negotiations that we had with them. These shipments represent
direct food aid from the United States to the DPRK.
Senator Thomas. Well, energy agreements provided for an
exchange of commerce. They do not have any money? We do not
have any just commercial sales?
Mr. Reinsch. Very few commercial sales right now. Sales are
permitted, but there are not any effectively.
Secretary Glickman. We estimate this year somewhere between
400,000 and 600,000 tons of wheat will move to North Korea
primarily through the World Food Program, U.S. wheat. You are
talking about a lot of product that is moving there.
Senator Thomas. I guess there have been some unsatisfactory
commercial deals where companies have ended up without being
paid.
Mr. Reinsch. This is also an example, Senator, of why
monitoring of these things and licensing of these things is
important. In the case of North Korea, in particular, there is
always a question of whether the food is being diverted to the
military and also whether it is being resold for profit. So,
this is one of those cases where I would say why it is
important for us to have a licensing system in place and a
monitoring system in place so that we can make sure that it
does go to the people who need it.
Senator Thomas. But you still are not able to do that. Is
that not correct?
Mr. Reinsch. Yes, sir.
Senator Thomas. You are not able to.
Mr. Reinsch. No. I am sorry.
Senator Thomas. You are not able to determine exactly where
it ends up.
Mr. Reinsch. We try the best we can.
Senator Thomas. You mentioned, Mr. Secretary--I realize we
are talking about sanctions, but there is much more loss in
terms of tariffs and non-tariff barriers. Is that not true?
Secretary Glickman. That is correct.
Senator Thomas. What is your outlook on the EU in terms of
beef? I am off the subject a little bit I guess.
Secretary Glickman. The 13th of May, which is the end of
this week, is the deadline date in terms of their compliance
with the WTO rulings, and under the presumption that they do
not intend to comply, although there are continuing discussions
between us and them on some sort of compensation system,
labeling and compensation--I do not have anything to report
today. It is our intention to move ahead, assuming there is no
agreement reached there, with sanctions. Then there is a
process to be followed there, but we intend to exercise our
rights fully under the law.
Interestingly, next week I intend to be at the World Meat
Congress in Dublin on Wednesday where a lot of the European--I
am not sure which ministers will be there. The EU ag minister
will be there and I am sure this will be an item of intense
discussion.
This is obviously a very serious problem. In the context of
our other trade problems, it is frankly far more serious than
the banana issue because of the impact that it potentially has
here in our markets.
Senator Thomas. It is in Wyoming anyway.
They have had sanctions basically on their purchases for
some time, but we have not ever exercised a reciprocal
sanction, have we? And that is what we might do now.
Mr. Schumacher. If I may, Senator, in the past we had $100
million worth of what they call withdrawal of concessions up
until 1993, 1994. The WTO came in. Then we went through the
dispute settlement mechanism, and they simply have not
complied, as the chairman said earlier. We won the panel and we
won the appellate, and they simply decided that, for a variety
of reasons, they cannot abide by the ruling. We did offer some
proposals. Those have moved a bit, but the issue still remains.
There are still 2 days left, but it does not look good.
Senator Thomas. Thank you. Thank you, Mr. Chairman.
Senator Ashcroft. Thank you.
The Senator from Minnesota, Mr. Grams.
Senator Grams. Thank you very much, Mr. Chairman.
I want to thank our panel for being here. Secretary
Glickman, Secretary Reinsch, thank you very much.
I also look forward to working with you, Mr. Chairman, on
this issue. I think it is very important.
I also want to particularly thank a fellow Minnesotan, Mike
Yost, who is here today and is going to testify--he is
President of the American Soybean Association--for his
willingness to be here as well today.
This whole hearing is about the fact that farmers are tired
of losing sales due to the increasing use of unilateral
sanctions and having to combat the reputation that the United
States earns as an unreliable supplier long after the sanctions
end.
Secretary Glickman, is it your opinion that the U.S. still
suffers from the reputation of being an unreliable supplier,
especially after the Soviet grain embargo, also the Japanese
soybean embargo? Do we still have that lingering bad reputation
out there?
Secretary Glickman. I do not think so, but I must say that
when I go out around the world, I do reinforce the fact that
they can count on us, that we are reliable. There are clearly
some markets--we have talked about them today--that we have
been sanctioned out of. We are trying to change that. But by
and large, with respect to our major markets, they need to know
that we are reliable suppliers.
To be honest with you, a lot of times there is a lot of
rhetoric. I am not saying it is here but in the political
rhetoric about when some country does something bad, the
immediate response is, let us cut them off. It is often
agriculture that will suffer as a result of that. And it is not
a partisan thing either. It happens on all sides of the
political aisle.
So, while I think there is some concern, I have not found
this to be an incredibly difficult problem. I think it is a
dog-eat-dog world out there. It is competitive as heck out
there right now. Every nation is trying to get the advantage
over the other nation in terms of supplies.
For example, I saw recently where Iran--the issue is some
countries have been selling to Iran and have been selling at a
higher price because the U.S. has not been in the market. There
is certainly a lot of potential competition for that market
that we would benefit from and some of our competitors have
gotten the benefit that we have not been in the market. So, it
is a very competitive world out there.
Senator Grams. The Senator from Indiana put me up to this,
but do you support the Lugar Sanctions Reform Act?
Secretary Glickman. Well, let me say this. I do not know
what Under Secretary Schumacher said this morning about that,
but we certainly support in general principle the exempting of
commercial sales of agricultural commodities from unilateral
economic sanctions. We would have to work, whether it is on
Senator Lugar's bill or Senator Ashcroft's bill, with the
issues like how one would define the waiver authority of the
President of the United States. How you would set up the
process so that the President would be able to react quickly,
if he needed to, in order to deal with a difficult
international situation is very important. But as a matter of
general principle, I think we agree on it.
Senator Grams. You mentioned the progress in lifting some
of the agricultural sanctions on countries like Iran and Sudan
and Libya. Why not include Cuba?
Secretary Glickman. I will let you answer first and then I
will think about how I am going to answer that.
Mr. Reinsch. The short answer is we are constrained by the
law with respect to Cuba, Senator Grams. The embargoes on Iran,
Libya, and Sudan were matters of executive action which can be
changed by the President. The various pieces of Cuban
legislation impose very strict restrictions on what we can do.
We believe we have liberalized food sales to Cuba and donations
to the extent the law permits. There may be some people in the
Congress who think we have gone beyond what the law permits.
But I think it is quite clear to go any farther would take some
statutory change with respect to Cuba.
Secretary Glickman. I would say that clearly Helms-Burton,
the other legislation means that the Congress has spoken on
this issue. These are political decisions. It relates to the
regime of Fidel Castro. I think the President in January, as
you said, announced some changes in the policy.
If, in fact, the conditions exist that allow for normal
trading relations--and they do not exist now, but if they
existed--and I want to qualify it like that--I think the
opportunities would be fairly good. Cuba currently imports
about $700 million in agricultural products, with wheat as the
leading import, then oils, rice, fruit and vegetables, other
meat products as well. So, you would expect the U.S. to be a
major factor in that market if, in fact, relations got to the
point where they could be opened up.
Senator Grams. Also, Secretary Glickman, is there any way
you can assure us that no unilateral sanctions on ag will be
imposed without justifying those sanctions through a process
similar to one that is being spelled out in the Lugar bill?
Secretary Glickman. Well, I can just tell you from the
President's announcements of late last month, coupled with his
announcements on Pakistan and India earlier, I do not expect
the President to make any announcements on sanctions of
agricultural products without some extraordinary event
happening without a thorough review with the Congress.
Senator Grams. Also, are there any options to the trade
sanctions that might work better? We are always looking for
some way. It seems like sanctions have become the first resort
rather than last resort. Is there anything that you would
suggest that would work better or something that does not cause
other countries to usurp our markets?
Secretary Glickman. The only thing is, is that I would say
to the extent that we can deal with international problems on a
multilateral basis, we minimize the impact of unilateral
sanctions. I think that is what the President is trying to do
in the Balkan situation right now, i.e., the NATO conference
here. So, the best I can tell you is multilateralism is a way
to resist unilateral sanctions.
Senator Grams. Just one last question, if I could, to Mr.
Reinsch. Would you support adding language to the EAA
reauthorization that would exclude agriculture from unilateral
sanctions.
Mr. Reinsch. There is already language in there in the old
EAA that addresses this and makes it somewhere between
difficult and virtually impossible for the President to impose
agricultural export limitations under the Export Administration
Act. I would have to look at the existing language to see if it
was sufficient, but in general I agree with Secretary Glickman.
The President has made very clear his belief that it is not
appropriate to include food as an instrument of foreign policy.
I think that if there were appropriate language that embodied
that thought, that we would be able to support that.
Also though, as you know and as my statement said, we have
opted at the end of the day in these situations for leaving
with the President some flexibility to deal with extreme
situations, such situations being, for example, a case of
declared war or situations where we had evidence that the food
that would otherwise not be embargoed would be going directly
to assist the military in a conflict situation. So, there are,
at least theoretically, circumstances in which we would not
want to have a flat ban and would want to have some
flexibility.
Senator Grams. All right. Thank you very much, Mr.
Chairman.
Senator Ashcroft. Thank you, Senator Grams.
Senator Hagel from Nebraska.
Senator Hagel. Mr. Chairman, thank you. To our guests this
afternoon, thank you very much for coming to add your
contributions.
If I could pick up on an element of Senator Grams' question
regarding Cuba, with the new realization that the general
principle that food and medicine should not be subject to
sanctions, is the administration contemplating any suggestions
in the way we now deal with Cuba or any changes in the law
regarding our sanctions with Cuba directly related to----
Secretary Glickman. I am not aware of any, Senator. Just
the January announcement that was made by the President. It was
the last word that I think has come out of the administration.
Maybe Commerce knows more.
Mr. Reinsch. Well, as far as I know, we are not presently
contemplating proposing legislative changes. I think we have
taken a number of steps, particularly the one referenced in
January to flesh out, if you will, the Cuban Democracy Act and
the authorities that are permitted under that. Whether we would
want to contemplate some further suggestion to the Congress in
the future I could not say. These are the kinds of situations
where we take a step. We wait to see what the Cubans do. We
wait to see how the Congress reacts. I would not rule out some
future initiative here, but right now I do not believe anything
is contemplated.
Mr. Schumacher. If I may, one of the things that disturbed
us is that there was a severe drought in Cuba, and there was
some offer made of some food aid through the World Food Program
of the United Nations, and Fidel Castro rejected that.
Senator Hagel. Thank you.
Secretary Glickman. He did not want food assistance, for
whatever reasons.
Senator Hagel. These were private entities--the decisions
that were made in January. Is that correct?
Mr. Reinsch. You mean the destination?
Senator Hagel. Yes.
Mr. Reinsch. Yes, that is correct.
Senator Hagel. Would you take us through the process that
is being used now and maybe associate a timeframe with that in
regard to the changes in policy with Iran, Libya, and the
Sudan, interagency regulations and how long and other dynamics
of making sure that we get this put into place and it is
implemented?
Mr. Reinsch. Well, not all of the actors are here, let me
say, Senator, because that particular decision for those three
countries, the way it is divided up, will be administered by
Treasury's Office of Foreign Assets Control.
What is going on is the President made his announcement on
April 28, which was about 2 weeks ago, roughly. As Secretary
Glickman said earlier, we are presently engaged in a discussion
of fleshing out some of the details, in fact, precisely the
details Senator Lugar commented on in his series of questions
about what is covered in terms of what constitutes food which,
as he pointed out, is not an easy question always--and the food
stamp program is a good illustration of that--and also the
circumstances of the particular kinds of end users, what kinds
of financing arrangements are appropriate, and particularly the
point that he raised about how much information, if you will,
and how much of this has to be certain in advance before a
license could be granted, recognizing that that can often be a
deterrent to these deals being made.
Our target is that we are aiming for 60 days to both work
out these problems and then publish regulations. So, the target
there would be the end of June.
Senator Hagel. And that would then mean that you feel that
the Government would be in a position to be able to then
implement the changes in the law?
Mr. Reinsch. The changes the President announced.
Senator Hagel. Yes.
Mr. Reinsch. Yes, sir.
Senator Hagel. What additional agriculture export
opportunities do you foresee out there with this change?
Secretary Glickman. I think Iran is the primary beneficiary
of this particular change. I have also said we will supply
North Korea somewhere around a half million tons of wheat this
year through the World Food Program, somewhere between 400,000
and 600,000 tons. I think the North Korean needs will increase.
I cannot tell you how much we will go through that process, but
their needs are monumental. So, those would be the two
opportunities.
Gus, do you have any other thoughts there?
Mr. Schumacher. Those are the main ones.
Senator Hagel. So, wheat is where you think the first focus
would be.
Secretary Glickman. Wheat and corn both. As I said, we
would hope that we could get some rice into Iran as well
because they used to be very large rice producers.
Senator Hagel. You mentioned Senator Lugar's line of
questioning on what is defined as exportable and appropriate
and falls within the terminology of agriculture exports. I know
agriculture inputs or fertilizers, so on have yet to be dealt
with. Is that correct?
Mr. Schumacher. That is correct. We are still working
through that issue in the interagency and we have another few
weeks to sort through that.
Senator Hagel. Could you give us any sense of where you are
going with that?
Mr. Schumacher. No.
Senator Hagel. You will not give us any sense.
Mr. Schumacher. I think it is we are going to work through
the interagency. We have a very vibrant interagency process
and----
Senator Hagel. A vibrant process. Absolutely. So, we will
know within a few weeks what that vibrant policy is going to
produce.
Mr. Schumacher. We are working that through very carefully
and vibrantly.
Senator Hagel. Secretary Reinsch, would you care to add
anything to that?
Mr. Reinsch. I think Mr. Schumacher said it very well,
Senator.
Senator Hagel. He is very eloquent.
Mr. Reinsch. He is, indeed.
Senator Hagel. Thank you very much, Mr. Chairman.
Senator Ashcroft. Thank you.
The distinguished chairman of the Senate Foreign Relations
Committee, the senior Senator from North Carolina, has come to
be with us. It is a bit humbling to introduce him in a round of
questions, but I am delighted to do so.
The Chairman. Mr. Chairman, I thank you very much
especially for holding this hearing today. I hold the Senator
from Missouri in enormously high respect. He is one of the most
distinguished members of this committee. He has been a leader
in the effort to find a workable compromise on the sanctions
issue that protects America's moral and national security
interests while at the same time helping American farmers. And
I commend you, sir, for all these efforts.
And I join you in welcoming Secretary Glickman to the
Foreign Relations Committee. This is a novel place for you to
be, but I hope my colleagues have made you welcome.
Secretary Glickman. They have but I feel more welcome now
that you are here, Senator.
The Chairman. If I may, Mr. Chairman, explain why I am so
late. All the staff members of the Foreign Relations Committee
and hundreds of others around this place will be sad to know
that Admiral Nance, the chief of staff of the Foreign Relations
Committee, is not expected to make it. Bud and I have been
close friends since we were born in Monroe, North Carolina. He
was 2 months older than I. I used the past tense, but he is 2
months older than I. He is a distinguished American. He served
38 years in the Navy, the skipper of the Forrestal, the
aircraft carrier that had more sailors aboard than we had
people in my hometown. I do not know of anybody around the
Senate who does not love Bud Nance.
I hope that all of you will say a little prayer for him. He
is hanging by a slim thread. And I am a little bit emotionally
upset. I know you will forgive me.
I have a full statement that I would like for you to
include in the record, Mr. Chairman, as if read.
Senator Ashcroft. We will be pleased to receive it and put
in the record.
[The prepared statement of Senator Helms follows:]
Prepared Statement of Senator Jesse Helms
Thank you, Mr. Chairman, for holding this hearing today. I hold the
Senator from Missouri in enormously high regard. He is one of the most
distinguished members of this committee, and has been a leader in the
effort to find a workable compromise on the sanctions issue that
protects America's moral and national security interests, while at the
same time helping American farmers. I commend him for those efforts.
And I join him in welcoming you, Secretary Glickman, to the Foreign
Relations Committee. I know this is not your normal turf, Mr.
Secretary, but we will do our best to make you feel at home.
Like the Senator from Missouri, I represent a farm State. And I
know that farmers are hurting today--not only in North Carolina but
across the Nation. The lenders I speak with back home have estimated
that one-third of the farmers they currently service will no longer be
in business by the end of the year if commodity prices remain in their
current dismal condition. Clearly, there is a farm crisis in this
country. And we need to do everything we can to help American farmers
to boost exports.
Now I understand that in desperate times, some people reach for
desperate solutions. And unfortunately, some in the agriculture
community have been pressing the U.S. Government for a wholesale
lifting of sanctions on pariah states. I know that these folks have
only the best of intentions, and the interests of American farmers at
heart, but we and they all need to recognize some facts: The farm
crisis in America has not been caused by U.S. sanctions on pariah
states, and it will not be solved by gutting U.S. sanctions on pariah
states.
Let's consider some facts:
The Foreign Agricultural Service (a division of the U.S.
Department of Agriculture) recently estimated that the net cost
of sanctions to the American agricultural economy is
approximately $500 million per year. That amounts to just one
percent of the $49 billion worth of farm exports the USDA
projects for 1999.
Of the more than 200 countries in the world, only six--I
repeat, six--are targets of comprehensive sanctions. Those are:
North Korea, Cuba, Libya, Sudan, Iran, and Iraq.
The share of world agricultural trade represented by these
six closed markets totals just 1.9 percent.
With these facts in mind, Secretary Glickman, your own chief
economist at USDA, Keith Collins, said the following in a speech this
February about the drop in U.S. farm exports. He asked: ``Wouldn't
elimination of trade sanctions help solve the problem? . . . The answer
to [this] question is `no' . . . trade sanctions are having only a
minor effect on our exports . . .''
According to Mr. Collins, the farm export crisis is due to a
combination of 1998's bad weather (which devastated many regions across
the country), and the fact that the Asian financial crisis and rising
world commodity supplies reduced farm prices and the value of farm
exports. Exports are dropping, he says, ``As a result of anemic world
economic growth and lower prices.''
So, according to USDA, sanctions are not the cause of the dramatic
fall of U.S. farm exports, and lifting sanctions on terrorist states
will not bring significant relief to American farmers.
Now, that said, our farmers are hurting. And we need to do
everything we can to help them increase their exports. So it is right
that this committee and the administration work together to examine our
sanctions policies, and see if there are some ways we can help them by
adjusting our sanctions to allow some new export opportunities, while
at the same time protecting U.S. national security.
It is for this reason that I gave my strong support to the measures
announced last week by Ambassador Stuart Eizenstat adjusting our
sanctions on Sudan, Iran and Libya. The administration announced that
food and medicine sales to those sanctioned countries will be allowed
under carefully-crafted conditions: The sale must be pursuant to a
fully negotiated contract, made at prevailing market prices and made to
non-governmental organizations or to governmental entities not
associated with coercive bodies (i.e., not to police, military, etc.).
Also no sales of dual-use items (such as pesticides, fertilizers,
sprayers, etc.) which can be used to build weapons of mass destruction
will be permitted.
Most importantly, such sales will not be eligible for any credits
or U.S.-backed subsidies of any kind. Credits are the key issue. If
Iran wants to pay cash-on-the-barrel for American grain, that is fine
with me. Every dollar Iran spends on U.S. farm products is a dollar
Iran cannot spend on terrorism or weapons of mass destruction. Giving
Iran or other terrorist states credits, by contrast, would have allowed
cash to be diverted from food purchases for other and nefarious
purposes. That would have amounted to a U.S. taxpayer subsidy for
terrorism.
I think the measures taken by the administration are responsible,
and they should be a model for Congress to follow--and I will be proud
to co-sponsor legislation doing just that. They represent a good faith
effort on Ambassador Eizenstat's part to find middle ground between
those who want to eliminate sanctions, and those of us who insist that
the moral and national security dimensions of our foreign policy be
protected. Unfortunately, some business lobbyists are pushing for much
broader elimination of sanctions, and are exploiting the suffering of
farmers to accomplish this goal. Their objective is the establishment
of a mercantilist foreign policy driven exclusively by trade. We cannot
allow that to happen.
Indeed, I was impressed by an excellent statement Senator Ashcroft
made in the Foreign Relations Committee a few weeks ago during our
markup of the State Department authorization bill. He said, and I
quote: ``There is a trend to commercialize all aspects of the United
States Government and its relationships with other nations, and the
commercialization results [in] going to the bottom line and letting the
almighty dollar rule all of the considerations. My view is that we have
got to be very careful that we do not go so deeply into the
commercialization of these relationships that we do not [undermine] our
national security interest[s] . . . that exist between the United
States and other countries.''
I agree wholeheartedly, and I thank the Senator for chairing this
hearing and for his leadership on this issue. Let's do everything we
can to help farmers--but let's do so without allowing the
commercialization of our foreign policy, without undermining America's
moral and national security interests.
Thank you.
The Chairman. Now then, Mr. Secretary, if I can regain my
composure, let me say that I appreciate and applaud the
administration's recent decision to permit the sale of
agricultural commodities on a cash basis to Iran, Libya, and
Sudan.
Now, to your knowledge, will all traditional agricultural
commodities, such as cotton, be included in the
administration's new policy?
Secretary Glickman. That, Senator, is still being discussed
right now in the interagency process. I cannot give you an
absolute answer just yet. But I would tell you that USDA is an
active player in that interagency process, and I would just
tell you that cotton is one of the items that we are very
worried and concerned about as well as a commodity. But I
cannot give you a specific answer yet.
The Chairman. I have got a lot of cotton farmers in my
State, as have many other southern States, and I will be a
little bit provincial and hope that you can work it out.
Now then, a lot of our friends in the business community
have lobbyists who are enthusiastic about doing business with
terrorist states and like to trot out statistics saying that
the sanctions imposed by the United States cost the American
Government enormous amounts of money. But the CBO, the
Congressional Budget Office; the Congressional Research
Service; and the Department of Agriculture, your own
department, disagree with that. They say that the cost of
sanctions is a tiny percentage of national income.
I will ask any or all three of you to comment on whether
the lobbyists are correct about that.
Secretary Glickman. I understand the CBO study assessed
trade sanctions' impacts on overall merchandise trade in the
general economy, and they really did not address agricultural
exports per se.
Our belief is that the sanctions amount, on these six
countries, three of which were subject to the latest
announcement by the President, the ones you mentioned, plus
three others which would be North Korea, Libya, and Iraq--are
not a monumental impact on exports. Actually all the countries
that are sanctioned we expect, if we allowed the sanctions to
be lifted, would amount to roughly about $500 million worth of
sales, which is about 1 percent of our total exports. Not huge
in the big picture, but important, particularly when prices are
down and markets are so rough around the world.
I do know there is a lot of talk about how much
agricultural exports are affected by sanctions. I think,
generally speaking, the talk tends to overstate the impact, but
it is still quite important, particularly when times are so
rough as they are.
And it has a big impact on certain commodities, wheat
particularly, which is in oversupply produced almost everywhere
in the world, and some of these markets could be buying U.S.
wheat.
The Chairman. Do either of you gentlemen wish to comment?
Mr. Reinsch. Senator, this is a little farther afield from
what I do. I am more in the international security business.
I think that Secretary Glickman made an important point. I
would just like to reiterate it in a slightly different way.
There are really two issues at hand here. I think the studies
to which you are referring focused on the overall cost of
sanctions beyond agriculture sanctions, and beyond sanctions to
the particular list of terrorist countries, because we do have
sanctions that are in place in other cases, particularly with
respect to India where the commercial consequences in the non-
agricultural area, in particular, are much larger if only
because the economy is much larger.
So, you can look at the big picture or the smaller picture.
I certainly agree with Secretary Glickman with respect to the
smaller picture that for these particular countries in the
gross sense or particularly as a percentage of GDP or exports,
however you want to look at the universe, this is going to be a
small number. I think the issue for the Department of
Agriculture, as well as the issue for the committee, is
notwithstanding that, what is going to be the impact on the
American farmer, is the amount that is involved significant,
will it benefit the farmer and do we want to go down that road
or do we not?
The Chairman. Well, I would hope that we take a look at who
is in charge in a nation, as in Cuba where the people are being
held in bondage down there under circumstances that most people
find it difficult to believe in terms of what is imposed upon
them.
But setting aside the question of sanctions as our focus
and returning to the issue of terrorism, if I may, last month
the administration's change in sanctions policy regarding Libya
was announced just a few days after two Libyan agents charged
with the bombing of Pan Am flight 103 showed up for their
trial. Now, what would the opponents of sanctions and export
proponents say about the signal this sends to the families of
the victims, or does this country even care what they feel? I
will just throw that out.
Secretary Glickman. Senator, I cannot respond to your
particular question.
Mr. Reinsch. I may have to ask for some additional detail
from you, Senator. What happened in the wake of the Libyan
Government handing over the two individuals to the court was
that the United Nations, almost immediately, dropped its
sanctions. The U.S. Government, as far as I know, has made no
change in its policy. We have had unilateral sanctions in place
with respect to Libya, and those sanctions remain in place. We
have not changed anything.
Secretary Glickman. The only thing that has changed is that
Libya is covered in the President's recent approval in current
licensing policies to permit case-by-case approval of proposals
for commercial sales of agricultural commodities and products
and medicines. That is the extent of which Libya was covered
under this announcement.
Mr. Reinsch. And I do not think any have been approved yet.
The Chairman. Well, I think I can ask this question feeling
certain it does not violate any information that we have got on
the fourth floor of the Capitol, the secure room. A number of
experts have reported, however, that a handful of hostile
countries may be studying biological warfare that could be used
to attack American crops. Now, what countries are giving us
concern, Mr. Secretary?
Secretary Glickman. USDA is involved in a Government-wide
effort to review this issue. Some of this information is
classified. But we have a fairly extensive program within our
Agricultural Research Service as well to try to mitigate the
effects of international terrorism as it might affect food
supply. This is an important issue, bioterrorism as it would
affect food and water both. But I probably could not comment
much further in open forum.
The Chairman. Well, you almost answered my next question,
as I was going to ask what is the nature of the precautions you
are taking to protect American crops from such economic
warfare. Maybe you have something you want to add.
Secretary Glickman. We have a fairly extensive research
effort that is ongoing, plus all the other disaster
preparedness efforts that we are involved with as a country. In
fact, there was a hearing over here. Senator Bennett called a
hearing on the Y2K problem where the safety of the food supply
during the year 2000 problem came up, and it kind of spilled
over into the subject that you raised as well. So, there is
increased attention to this issue of the stability and safety
of the food supply in an era of greater international
terrorism.
The Chairman. One quick question and a quick answer, Mr.
Chairman. Are we talking to our friends around the world and
suggesting that they pay attention to this potential problem?
Secretary Glickman. Yes. In fact, a lot of these efforts
are multilateral efforts.
The Chairman. I see.
My time is expired. Thank you, Mr. Chairman, and thank you,
sir.
Senator Ashcroft. Thank you, Mr. Chairman.
Senator Coverdell of Georgia, a distinguished member of
this committee, has asked that I pose a question to you, and it
relates to the current status of the approximately $2.5 billion
in disaster assistance that was appropriated last fall for crop
loss. He indicates that he understands that the USDA will
distribute these funds this coming June, and he asks why is it
that the funds would only be distributed in June of this year
when the crop loss was presented and was, indeed, a serious
problem last year.
Secretary Glickman. Just briefly, Congress passed a
disaster bill of about $6 billion in October. About 65 percent
of that money was out within 3 weeks. What is called the
supplemental AMPTA payments went out immediately to Eurocrop
producers. The livestock assistance program has gone out, and
the dairy program is in the process of going out.
This is one of the few--it has happened before, but this
disaster program was capped, which meant we could spend only a
designated amount of money on it. In prior years, disaster
programs have often been entitlement. If you suffered the
disaster, you could come into your county office and get a
check. In this case, Congress limited us to some amount
slightly in excess of $2 billion to spend on these programs.
So, we cannot pay the money out until all of the requests for
disaster assistance come in.
In addition to that, there were two funds in that bill. One
was a multi-year loss fund and one was a single-year loss fund.
The farmer could choose which of the two that he would be
covered under. I must tell you it is an extraordinarily
complicated thing to run.
There is no program that has generated more interest by our
inspector general and the General Accounting Office than our
disaster programs. Quite frankly, over the last 30 years, we
always have not had a stellar record in this area, making sure
that the right people get the money.
So, we have done as best as we can with it and the money
will be out by the middle of June.
Senator Ashcroft. Senator Lugar of Indiana has another
question.
Senator Lugar. Mr. Chairman, I just want to supplement the
response to the chairman's question on the amount that might be
covered. As we were discussing earlier, the $500 million of
possible sales to Iran may not occur if the licensing situation
does not work out. It could be zero dollars ultimately. The
problems, as we heard this morning, with our negotiators at
both the Uruguay Round and the Tokyo Rounds were essentially
that because our country has been perceived as unreliable,
after the soybean problems, the sanctions against soybean sales
in Japan back in the 1970's, and the Russian wheat sale in the
1980's, our negotiators said they had very great difficulty
making any headway with the Japanese at all. In other words,
the parameters of those negotiations were very, very limited.
Now, Japan is a big market. We are talking about small
countries now that have, at best, as you say, 1 or 2 percent of
the sales. When you come to Japan or other countries that are
potentially large buyers--and they maintain all of their tariff
and non-tariff barriers because we do not have the clout, given
our sanctions posture--that is a serious problem.
The second basic problem they raised was the India/Pakistan
situation. It is illustrative of the Glenn amendment. Now,
because we have temporary waiver authority and because the
Congress acted almost instantly to try to begin lifting
sanctions in agriculture almost the day that it happened much
of those large markets were preserved, or given the chance to
bid for the Pakistan wheat, which was the first situation we
faced. In other words, the problem that the Government study
overlooked was the secondary or collateral effects of sanctions
upon our ability to negotiate trade treaties.
Now, agriculture remains the most protected area in the
world, and Ronald Reagan started to change it when he got rid
of 100 percent of all the non-tariff and tariff barriers. Bush
scaled that back to 50 percent. We finally settled at about a
third at Uruguay.
So, we have a huge amount still to do, and the WTO
negotiations are hobbled from the start by the lack of fast
track authority and the sanctions business. Now, if we get
those two things cleared away, then our ability to export will
begin to take off. And those are the parameters of the market
that we are losing or in jeopardy of losing.
Secretary Glickman. I think you raise a good point, that
is, this issue is beyond just the 1 or the 2 percent. It sends
signals around the world as well.
Senator, could I just make one other comment?
Senator Ashcroft. I would be happy to have you do that, and
then I have one more followup question.
Secretary Glickman. I just thought I would mention, since
Senator Helms is here, that I am pleased to announced that the
President recently announced his intent to nominate as an
ambassador, the first USDA Foreign Agriculture Service person
in history to become an ambassador. He is nominating Mr.
Christopher Goldthwait to be our new Ambassador to Chad. Of all
the people, he is a career Foreign Service person within the
Foreign Agriculture Service. He is the first one to be
nominated in the history of the country. So, we are very proud
of that, that we finally have a USDA person that has been
nominated to be an ambassador.
The Chairman. I feel like I am being lobbied a little bit.
Secretary Glickman. Pardon?
The Chairman. I said, I feel like I am being lobbied a
little bit.
Secretary Glickman. No, no, no. I just wanted to let you
know. He has been the general sales manager for the Commodity
Credit Corporation for all these years under Republican and
Democratic administrations. He has done an outstanding job. I
just thought I would mention that.
The Chairman. Well, I thank you. Now, we will welcome his
papers.
Senator Ashcroft. The Senator from Kansas has reappeared. I
need to ask you if you could sort of look back to your
tradition of brevity and see if you can tap that, but since the
Secretary is also known to favor sunflowers, I do not want to
go without calling on you for this panel.
Senator Brownback. I will, recognizing brevity is next to
godliness many times.
I do not have other questions I want to add. I apologize
for missing much of the panel. I have talked with Secretary
Glickman about the sanctions issue before. I used to serve with
Secretary Schumacher when we were both ag secretaries together.
I just want to state I deeply appreciate the action the
administration has taken, and I hope that the Congress can
followup some of these sanctions with some sanctions-lifting
legislation here as well. But I think these are great steps.
I also thought you put it in the right context. This is not
something that is going to solve all of our market problems. We
have much broader based problems as well we need to deal with
to get more marketing taking place, but I applaud the action
that you have done.
Senator Ashcroft. Thank you very much, Senator Brownback.
Mr. Secretary, this last question. From what you have said,
it seems that the USDA credits should rarely be cutoff
unilaterally for farmers. As Congress considers reforms that
will allow more commercial sales, should we also consider
reforms that will allow more credit guarantees to be used to a
greater extent?
Secretary Glickman. Well, we would certainly work with you
on that. Right now the primary limits are, of course, a credit
worthiness test. Credits cannot be issued unless the country
can basically pay the money back. Of course, the credits are
not issued in the cases of those countries where sanctions
exist. In the announcement that was made, there was no mention
of allowing credits to go forward with those particular
countries, but we will work with you on that. I do not have any
further announcements to make on that right now.
Senator Ashcroft. Let me thank you and Secretary Reinsch
and Secretary Schumacher for coming. We are delighted to have
your appearance and we applaud the steps that the
administration has taken. I believe that if Congress and the
administration can act together with their respective
authorities we can go even further toward developing a fair and
appropriate policy that will be reflected in a better
livelihood for farmers and ranchers. So, thank you very much
for coming.
I would like now to welcome our second panel. It is a panel
that recommends I think the values of America to Washington,
and that is the genius of this country. The genius of America
is not that values expressed in Washington would be imposed on
America, but that the values of America would be imposed on
Washington. So, I am glad that you all could make it here.
Would Dr. Max Thornsberry please come forward? Mr. Gary
Hall, who is the president of the Kansas Farm Bureau; Mr. Mike
Yost, who has already been mentioned; Mr. Robert Kohlmeyer. If
you would all please take your places. Dr. Max Thornsberry is
president of the Missouri Cattlemen's Beef Association from
Columbia, Missouri. As a fellow Missourian, welcome to the
Foreign Relations Committee. Please proceed with your remarks.
STATEMENT OF MAX THORNSBERRY, D.V.M., PRESIDENT, MISSOURI
CATTLEMEN'S ASSOCIATION, COLUMBIA, MO
Dr. Thornsberry. Thank you. Mr. Chairman and Senators, I
want to thank you on behalf of the National Cattlemen's Beef
Association and the Missouri Cattlemen's Association for the
privilege of being before you here today. We appreciate your
efforts to shed light on the impact of unilateral sanctions on
American agriculture. I might add that Missouri is No. 2 in the
Nation in cow/calf numbers. So, any sanctions against beef
would have a very significant effect for our State.
Although I have not met all of the Senators personally, I
do know that Senator Ashcroft is concerned about the effect of
sanctions on U.S. exports and the ricochet effect of those
sanctions on beef producers. At this very moment, cattle
producers nationwide are attempting to influence their
legislators concerning the area of free trade and the ability
to break down trade barriers.
Senator Ashcroft has been instrumental in attempting to
force the European Economic Union to yield to the World Trade
Organization in ruling that the importation into Europe of
American beef be allowed. This would be a very poor time to
discuss foreign trade sanctions that would, in effect, rebuild
trade barriers.
Although multilateral trade sanctions have been a useful
tool in diplomatic processes in the past, unilateral trade
sanctions simply reduce American farmers' ability to compete in
the world economy. Our agricultural competitors simply step in
and take our place in the market, and we do not believe that
food and fiber should be used as a weapon unilaterally.
The National Cattlemen's Beef Association and the Missouri
Cattlemen's Association policy on sanctions and any type of
export control is very simple. We oppose governmental
intervention that has the effect of restricting U.S. exports of
any agriculture commodity except to countries that pose a
threat to our national interest and our security.
It has been a long time since beef has been directly
affected by trade sanctions, but our brothers and sisters in
other areas of agriculture have been significantly affected
even in the very near future.
We are currently in desperate straits economically. The
last 5 to 6 years the beef cattle industry has literally lost
billions of dollars of equity. We have a very fragile beef
commodity, a very fragile beef economy, with only three meat
packers to offer a bid for our cattle. The current prices of
beef will not support or cover the cost of production. Even in
the best of times, our margins are very slim.
Please do not alter our ability to do business.
Thank you.
[The prepared statement of Dr. Thornsberry follows:]
Prepared Statement of Dr. Max Thornsberry
Mr. Chairman, Senators: Thank you for the opportunity to
participate in today's hearing. On behalf of the National Cattlemen's
Beef Association (NCBA) and the Missouri Cattlemen's Association (MCA),
I appreciate and commend your leadership regarding your efforts to shed
light on the impact unilateral trade sanctions has on America's
agricultural producers.
Although I have not had the privilege of meeting each of you, I
know from my visits with Senator Ashcroft that this Committee is truly
concerned about our nation's use of sanctions to affect foreign policy
and all-to-frequent ricochet affect on U.S. export commerce,
particularly in the agricultural sector. As we begin the new
millennium, we clearly need your continued leadership to forge a
sanctions policy that hits the intended target.
While the beef sector has not been directly impacted in recent
history, NCBA and MCA echo the concerns and frustrations described by
my fellow panel members. Each of our respective organizations is
constantly and consistently working to improve our export
opportunities. I am sure you have heard this many times--with 96
percent of our potential customer base living outside of the United
States, we must export to fuel growth and profitability in agriculture.
The beef business is no exception.
At the same time we are working to improve our export trade
outlook, cattlemen and women, as well as our neighbors in other
livestock and farm enterprises, are working with the government and our
industry partners to break down the barriers to U.S. food and fiber
exports. Which raises the essential question: Why do we as a nation
have a foreign sanctions policy that effectively rebuilds trade
barriers?
It makes no sense. As Members of this Committee, you know better
than I how much it takes in terms of time, resources and manpower to
achieve even modest reductions in the trade barriers that limit access
to, or keep U.S. products out of, foreign markets. Even more
frustrating to those of us involved in agriculture is the fact that in
many cases where the United States has imposed unilateral sanctions,
our foreign competitors simply step in and take the business. That is
the ricochet I mentioned earlier.
The result? The country targeted for sanctions still gets their
food or fiber, albeit from our competitors. Our competition gets a
boost in their economic viability courtesy of Uncle Sam. And America's
farmers and ranchers must cope with even lower prices because of
reduced export demand. The commodities impacted in each sanctions case
may change, but almost like clockwork, the impact is the same.
Agriculture's road to economic recovery just gets longer.
NCBA and MCA policy on sanctions and related export controls is
simple. We believe the ability to export U.S. agricultural products is
of great economic importance--not only to producers, but the nation. We
believe that establishing our reputation as a dependable supplier is
critical to developing new markets and expanding existing ones. We
oppose governmental intervention that has the effect of restricting
U.S. exports of any agricultural commodity, except to countries that
pose a threat to our national security.
I would add a caveat. When the United States is considering
sanctions of any kind, we should work with our allies to ensure that we
are not the only participants. I am not a foreign policy or relations
expert, but it appears that when the United States has worked with
other countries to impose multilateral sanctions, they generally work.
Or more to the point, they do not unfairly impact American producers.
In recognition of the situations affecting the other members of the
panel, I want you to understand that the beef industry has not
experienced the effects of U.S. sanctions policy for some time. Our
research indicates we would probably have to go back to the time of the
Shah of Iran to find circumstances directly related to beef. However,
given the Asian economic crisis and the decade-old and growing EU ban
on U.S. beef--just to name a couple of trade issues/concerns--NCBA, MCA
and our members will be continuing our coalition efforts to work with
Congress on enacting trade sanctions reforms that protect American
agriculture.
Again, on behalf of all beef producers, thank you for your interest
and leadership on this issue. I would be happy to answer any questions
you might have.
Senator Ashcroft. Thank you very much, Dr. Thornsberry.
Mr. Gary Hall is the president of the Kansas Farm Bureau.
Delighted to see you here from Manhattan, Kansas. It is our
second Kansan joining us today. It looks like my colleague from
Kansas stacked the deck.
Senator Brownback. We just know an important issue, Mr.
Chairman, and we want to be involved in it.
Senator Ashcroft. We should at least get a good, strong
representation of Kansas values here today.
Mr. Hall, please go forward.
STATEMENT OF GARY HALL, PRESIDENT, KANSAS FARM BUREAU,
MANHATTAN, KS
Mr. Hall. Thank you, Mr. Chairman. It is my pleasure to be
here and I extend greetings to you from my counterpart in
Missouri, Charlie Cruse, also Harry Pearson, also Bryce
Nightig, and of course, my favorite Senator, Mr. Brownback, we
appreciate the opportunity and the invitation to be here.
My name is Gary Hall and I am president of the Kansas Farm
Bureau. I represent a multi-generation farm in north central
Kansas, and I do appreciate having a chance to talk about
something that is very important to those of us in Kansas. We
are all very proud of our respective States. Kansas is the
sixth leading exporter in the United States, a major livestock
State, a major wheat producing State, and previous conferees
have mentioned the importance of wheat exports across the
world.
But I think most important, the reason that I am here, is
to take philosophies, take dollars and cents, metric tons, and
the other discussion we have heard so far today and put it down
to human terms. By that I mean, Mr. Chairman, that in our
State--and Senator Brownback is very well aware of this because
of his great effort in bringing out Ambassador Scher recently
to Garden City--that we are now facing a terrible economic
crisis across the board, across all commodities. The Kansas Ag
Management Association, which is really our best producers in
that management association, experienced a 70 percent reduction
in their net income from 1997 to 1998. And these would be our
better producers. This is not a potential that we are facing.
This is a crisis we are facing. So, I compliment you, as others
have, for holding this hearing today.
Obviously, having access to foreign markets is important
for our producers. A third of our products have to be exported.
However, when we are denied access to those export markets, it
merely exacerbates the situation that has been so eloquently
described earlier today.
I am very concerned about the unilateral component of the
sanctions. I want to make it clear in respect to Mr. Helms, who
I wish would have been able to remain here because I wanted to
relate to him how much respect we have in Kansas for his
leadership, but the unilateral sanction does not work. We have
not seen clear examples where the target country has truly been
impacted. We are in favor, of course, of multilateral sanctions
when others, the rest of the world, participate, and we are in
favor of sanctions when there is an armed conflict involved.
But the unilateral sanction concerns us very much, and we would
like to see that changed considerably.
I would like to relate a little bit of policy that does not
come from me as an individual, but comes across from farmers
and ranchers across the Nation. We oppose artificial trade
constraints such as sanctions. We believe that opening trading
systems around the world and open engagement with our trading
partners are the most effective means of achieving
international harmony and economic stability. And is that not
really what this is all about? International harmony and
economic stability.
We believe that all agricultural products should be exempt
from embargoes and unilateral sanctions except, as I mentioned
earlier, in the case of armed conflict. Should trade embargoes
or restrictions be declared in case of armed conflict, the
embargo or sanction should apply to all trade, all technology,
all exchange. An embargo should not be declared without the
consent of Congress.
Moreover, the threat of embargoes or other restrictions
adversely affects markets and is an inappropriate tool in the
implementation of foreign policy. If an embargo is enacted,
farmers should be compensated by direct payments for any
resulting loss.
And finally, Mr. Chairman, all export contracts calling for
delivery of agricultural commodities or products within 9
months of date of sale should never be interfered with by the
U.S. Government, except following an embargo consented to by
Congress. This sanctity of contracts is essential to maintain
the reputation of the United States as a reliable supplier, a
key component.
We share what others have mentioned today that the recent
changes by the administration in its policy regarding
agriculture and food sales to Iran, Libya, and Sudan. We think
this is a good step forward.
We also concur with Senator Helms that the new policy on
Iran and Libya and Sudan is a good faith effort to find the
middle ground between those who want to eliminate sanctions and
those who would like to keep them in place. We would only hope
that this new policy will establish a precedent for Congress to
pass legislation that exempts agriculture and food from
unilateral economic sanctions with the exception to be made in
the case of armed conflict.
We also agree with statements made earlier today
referencing Under Secretary of State Stuart Eizenstat that said
lifting sanctions on ag exports will help to alleviate that
negative image generated by the target countries of the United
States not being caring, but rather being vindictive and cruel,
thereby encouraging other countries not to follow suit from
imposing a sanction.
We also agree with the Under Secretary when he indicated
that sales of food and medicine do not increase a country's
capacity to support terrorism. Rather, in fact, we find that if
the money is spent on agricultural goods, that generally makes
it not available for other uses much less desirable.
I might add, though, quickly, relative to the
administration's new policy, we do have one concern. The
concern is that the administration must approve on a case-by-
case basis each export sale and issue a license for already
negotiated sales only if the sale is approved. We note that
this new policy will not erase the unreliable supplier image
that unilateral sanctions has created for our producers
because, in theory, an agricultural sale could still be denied.
The bottom line again, Mr. Chairman, is we have to rebuild our
credibility as reliable suppliers.
Let me also offer what many others have said and that is
support behind Senate bill 425 introduced by Senators
Brownback, Ashcroft, Kerrey, and Baucus. This would carve out
agriculture of future sanctions unless the President requests
agriculture to be included and Congress approves the
President's request by joint resolution.
We have learned two things in the past on why this bill is
very important. We have learned that the cost of unilateral
sanctions to our producers is very high. The second thing we
have learned is that not only is the monetary cost of exports
sales high, but it takes years and years to regain markets that
were once closed due to sanctions.
Then let me conclude with something that we think we need
to go forward with, and that is relative to unilateral
sanctions on Cuba. We have changed our national policy to
embrace the opening of negotiations on normal trade relations
with Cuba. The Gulf of Mexico is a major export for hard red
winter wheat, with 75 percent of such exports flowing through
that port. As a result, we see strong potential for trade with
Cuba, particularly for wheat given our proximity to the Gulf
and the Gulf's proximity to Cuba.
Mr. Chairman, we are very proud of our infrastructure in
Kansas and also across this great Nation. We want to see the
agricultural infrastructure maintained and enhanced. And on
behalf of those that have the responsibility to feed the world,
I appreciate this opportunity to testify. Thank you.
[The prepared statement of Mr. Hall follows:]
Prepared Statement of Gary Hall
Mr. Chairman, members of the Committee, I am Gary Hall, President
of the Kansas Farm Bureau and owner of a multi-generation grain and
livestock operation in Central Kansas. I appreciate the opportunity to
testify before you today on the important issue of sanctions reform.
The Kansas Farm Bureau represents 120,000 member families. Our
members produce a number of different commodities, including wheat,
corn, soybeans, beef, pork and dairy products and depend on access to
customers around the world for the sale of over one-third of our
production.
Kansas is the sixth leading state in terms of agricultural exports,
with 1997 shipments to foreign countries exceeding $2.6 billion. Our
principal export commodities are live animals, meats and wheat. In
fact, Kansas is first in the nation in total wheat production. Our
wheat producers account for more than one-third of the total U.S. Hard
Red Winter wheat produced in the United States. Kansas wheat farmers
realized $860 million in wheat exports in 1997.
Access to foreign markets is important for our producers. However,
our farmers and ranchers, as well as all of U.S. agriculture, have been
denied access to five important export markets due to unilateral
economic sanctions: Iran, Libya, Sudan, Cuba and North Korea. Shutting
off access to these markets is not in the best interest of Kansas
producers.
Sanctions represent more than just export figures or bushels of
wheat being shipped to foreign nations. This is a real-life issue
facing the farm and ranch families in our state. Kansas farmers
experienced a 70 percent reduction in farm income in 1997-98. We cannot
afford to see our farm income further eroded due to sanctions.
Unilateral sanctions have cost Kansas farmers, and U.S. farmers,
valuable access to export markets with little gain in foreign policy
achievements. In fact, unilateral sanctions have removed over 14
percent of our rice market, 10 percent of our wheat market, 5 percent
of our vegetable oil market, 5 percent of our barley market and 4
percent of our corn market from the table for all of U.S. agriculture.
Farm Bureau has longstanding policy opposing artificial trade
constraints such as sanctions. We believe that opening trading systems
around the world and open engagement with our trading partners are the
most effective means of achieving international harmony and economic
stability.
Farm Bureau believes that all agricultural products should be
exempt from embargoes and unilateral sanctions, except in the case of
armed conflict. Should trade embargoes or restrictions be declared in
case of armed conflict, the embargo or sanction should apply to all
trade, technology and exchanges. An embargo should not be declared
without the consent of Congress.
Moreover, the threat of embargoes or other restrictions adversely
affects markets and is an inappropriate tool in the implementation of
foreign policy. If an embargo is enacted, farmers should be compensated
by direct payments for any resulting loss.
Finally, all export contracts calling for delivery of agricultural
commodities or products within nine months of date of sale should never
be interfered with by the U.S. government, except following an embargo
consented to by Congress. This sanctity of contracts is essential to
maintain the reputation of the United States as a reliable supplier.
That reputation has been irrefutably diminished because of the use of
unilateral sanctions.
We are very pleased with recent changes by the administration in
its policy regarding agriculture and food sales to Iran, Libya and
Sudan. The administration announced in late April that commercial sales
of food, medicine and medical equipment will be eligible for exemption
from sanctions to these three nations.
This new policy will give our wheat producers a chance to compete
in the Iranian, Libyan and Sudanese markets. Iran used to be a primary
purchaser of our wheat exports until sanctions were placed on U.S.
trade with this country. Purchases of U.S. wheat by Iran reached as
high as 1.7 million metric tons. Sudan was also once a good customer of
our Hard Red Winter wheat exports, buying up to 437,000 metric tons in
1989-90. As a result of unilateral sanctions, these three countries now
buy at least 7.5 million metric tons of wheat per year from our
competitors. Our producers would appreciate the opportunity to re-enter
those markets.
We concur with Senator Helms that the new policy on Iran, Libya and
Sudan ``is a good faith effort to find the middle ground'' between
those who want to eliminate sanctions and those who would like to keep
them in place. We hope that this new policy will establish a precedent
for Congress to pass legislation that exempts agriculture and food from
unilateral economic sanctions, with an exception to be made in the case
of armed conflict.
We agree with the recent statements made by Undersecretary of State
Stuart Eizenstat that lifting sanctions on agricultural exports will
help to alleviate the often counterproductive effect of unilateral
sanctions by target nations that use images of suffering, innocent
civilians to depict the United States as cruel and vindictive, thereby
discouraging other nations from following suit. Undersecretary
Eizenstat further noted that sales of food and medicine do not increase
a country's capacity to support terrorism. In fact, funds spent on
agricultural goods are generally not available for other, less
desirable uses.
However, the new policy on Iran, Libya and Sudan has one caveat:
the administration must approve, on a case-by-case basis, each export
sale and will issue a license for already negotiated sales only if the
sale is approved. We note that this new policy will not erase the
unreliable supplier image that unilateral sanctions has created for our
producers, because, in theory, an agricultural sale could be denied. We
need Congress to exempt agricultural exports from unilateral sanctions
in order to rebuild our credibility as reliable suppliers.
To this end, we stand behind ``The Food and Medicine for the World
Act of 1999.'' This bill, S. 425, introduced by Senators Brownback,
Ashcroft, Kerry and Baucus, would leave agriculture out of future
sanctions unless the President requests agriculture to be included and
Congress approves the President's request by joint resolution. We
believe this legislation takes the very necessary step of exempting
agriculture from costly sanctions.
We have learned very poignantly that the cost of unilateral
sanctions to our producers is high. According to USDA, the Soviet grain
embargo of the early 1980s cost the United States about $2.3 billion in
lost farm exports and government compensation to American farmers.
Not only is the monetary cost of lost export sales high due to
unilateral sanctions, but it also takes years to regain markets that
were once closed due to sanctions. For example, when the United States
cut off sales of wheat to protest the Soviet invasion of Afghanistan,
other suppliers--France, Canada, Australia and Argentina--stepped in.
These countries expanded their sales to the Soviet Union, ensuring that
U.S. sanctions had virtually no economic impact on the target country.
Congress must lift unilateral economic sanctions on agricultural
exports.
Regarding unilateral sanctions on Cuba, Farm Bureau recently
changed its national policy to embrace the opening of negotiations on
normal trade relations with Cuba. The Gulf of Mexico is a major export
for Hard Red Winter wheat, with 75 percent of such exports flowing
through that port. As a result, we see a strong potential for trade
with Cuba, particularly for wheat, given our proximity to the Gulf and
the Gulf's proximity to Cuba.
We in Kansas are proud of the generations-old farming
infrastructure we have created. We produce high quality export products
and enjoy a high demand in most parts of the world. However, we cannot
allow the impressive infrastructure that we have built, and our
positive export reputation, to be continually impaired by unilateral
sanctions. We are not opposed to multilateral sanctions such as those
in place now for Iraq. We are opposed, however, to unilateral
sanctions. Unilateral sanctions only hurt those of us who have a
responsibility to feed the rest of the world.
Thank you for the opportunity to testify today on behalf of the
farmers and ranchers in Kansas.
Senator Ashcroft. Well, thank you very much. It is a
pleasure to have a neighbor come and to see you. I appreciate
your bringing greetings to us from so many of our friends in
the Farm Bureau.
Mr. Mike Yost is president of the American Soybean
Association from Murdock, Minnesota. I understand you were
already at the Agriculture Committee hearing today, and so you
are on a hearing marathon? Marathons take about 2 hours and 40
minutes for good runners. I hope that you can run faster than
that. But we are pleased to hear you. Please try to limit your
remarks to about 5 minutes so we have an opportunity for
questions. Mr. Yost, it is a pleasure to see you.
STATEMENT OF MIKE YOST, PRESIDENT, AMERICAN SOYBEAN
ASSOCIATION, MURDOCK, MN
Mr. Yost. Well, good afternoon, and thank you, Mr. Chairman
and members of the committee. As you stated, I am a farmer from
Murdock, Minnesota and I currently serve as president of the
American Soybean Association. And we very much appreciate the
opportunity to appear before the committee today.
ASA commends you, Mr. Chairman, for holding this important
hearing on U.S. unilateral economic sanctions. Exports are very
important to American soybean farmers because we export every
other bushel of soybeans we produce either in the form of whole
beans or soybean products. I would like to add that Missouri is
one of our largest soybean producing States and is home to many
of the companies that are key leaders in our industry. On
behalf of both our State and national membership, ASA would
like to thank you for your leadership on this important issue.
Mr. Chairman, the use of unilateral economic sanctions by
our Government has been a recurring nightmare for soybean
producers and all of U.S. agriculture for nearly three decades.
Every year these sanctions deny U.S. farmers, processors, and
exporters access to multi-billion dollar markets. In a report
completed last August, ASA determined that restrictions on
exports to Iran, Iraq, Libya, Sudan, Cuba, and North Korea
result in lost U.S. sales totaling about $150 million annually
for soybeans and soy products alone. With world demand and farm
prices at historic lows, these lost market opportunities only
worsen the current crisis in our farm economy.
Even more damaging than the loss of annual sales to
specific countries, unilateral sanctions establish the
reputation of the United States as an unreliable supplier. Food
and fiber are the most basic of necessities and the most
strategic of commercially traded commodities. The willingness
of the U.S. Government to restrict agriculture exports has had
the expected effect of encouraging other countries to make
long-term plans to secure their food import requirements from
other suppliers.
The impact of past sanctions on agriculture has been
reviewed by other witnesses, so I will skip over that part of
my written statement.
I would like to point out rather than restricting U.S.
agricultural exports, our Government should focus on how to
maintain and expand access. Rather than restrict U.S.
agriculture exports, our Government should focus on how to
maintain and expand access to foreign markets. The reasons why
countries resist opening their markets to increased imports now
go beyond simply protecting their less efficient farmers and
maintaining some degree of self-sufficiency. In recent years,
governments have begun to restrict imports of food products
based on how they are processed or on the processes through
which they are derived.
A danger is now confronting the U.S. soybean and corn and
cotton industries following the introduction of genetically
modified varieties of these crops in this country in 1996.
After initially approving varieties of biotech soybeans and
corn that year, the EU has failed to develop a transparent,
timely, and science-based process for reviewing and approving
applications for additional varieties. During the same period,
an active disinformation campaign by extremist groups has
inflamed food safety concerns among some consumers and the
European press, encouraging food manufacturers to sell products
that are guaranteed not to contain genetically modified
ingredients. Three weeks ago, several major food chains in the
UK announced they will market only non-GMO products.
While these are private sector decisions, they reflect
continuing failure on the part of the EU Commission and the
governments of the EU member States to exercise their
responsibilities and to conform their food safety regulations
to the science-based principles of the Sanitary and
Phytosanitary Agreement contained in the Uruguay Round
agreement. The EU's inaction has clearly contributed to and
encouraged these decisions, and the EU should be held
accountable for any resulting reduction in U.S. exports of
agricultural products to the EU market.
This issue must be addressed at the highest level. Last
week, ASA and 23 other major agricultural organizations sent a
letter to President Clinton urging the United States to raise
this concern over trade in biotech products as a key priority
at the upcoming G-8 meeting. We would like to commend you,
Senator Ashcroft, for making a similar appeal to the
administration. U.S. agriculture must forcefully oppose this
and every other misguided effort to introduce factors other
than sound science as the basis for decisions on food safety.
Turning to the subject of this hearing, Mr. Chairman, ASA
commends you for introducing Senate bill 425. This legislation
would exempt U.S. exports of agricultural and medical products
from unilateral economic sanctions unless requested by the
President and approved by both Houses of Congress. The only
exceptions to this exemption are in the event Congress has
declared war, the President has declared a state of national
emergency, or in the case of products which could have some
military application. Also, the bill would not exempt products
included in any multilateral sanction.
In our view, this legislation represents a good step toward
reforming U.S. policies governing unilateral economic
sanctions. It would set a precedent for exempting sales of
agricultural and medical supplies from export restrictions
unless conditions meeting the standards of a national emergency
exist. This bill would also protect humanitarian exports under
the Food for Peace Program, Section 416, and the GSM export
credit guarantee program. These authorities are extremely
important to U.S. soybean industry which depends on food
assistance and credit sales programming for a significant part
of our annual exports.
Another positive feature of this legislation is the fact
that it would not impose export licensing requirements on
commercial sales of agricultural products. ASA strongly
supported the administration's decision on April 28 to lift
unilateral sanctions on the sales of food and medicine to Iran,
Libya, and Sudan. This action opens a market worth over $4.2
billion annually and would allow a requested sale to Iran of
$500 million of U.S. agricultural commodities, including
soybean oil and soybean meal, to be completed.
However, we do not support establishing an export licensing
requirement as a kind of halfway house between sanctions and
unrestricted commercial sales. Over time such a requirement
would move our Government into direct control of international
commodity transactions. Given the competitive nature of this
business, any additional red tape confronting potential
customers would provide just one more reason for them to buy
from our competitors.
In conclusion, Mr. Chairman, the enactment of Senate bill
425 would send a signal to both our customers and our
competitors that the United States is beginning to understand
that unilateral sanctions are a reflection of weakness rather
than a demonstration of strength in American foreign policy. It
would also suggest to advocates of such policies that while
active commercial relations create considerable leverage for
affecting the behavior of other countries, this influence is
entirely lost when those relations are disrupted.
Thank you again, Mr. Chairman, for this opportunity to
appear before you, and I would be happy to respond to any
questions.
[The prepared statement of Mr. Yost follows:]
Prepared Statement of Mike Yost
Good afternoon, Mr. Chairman and Members of the Committee. I am
Mike Yost, a soybean and corn farmer from Murdock, Minnesota, I
currently serve as President of the American Soybean Association, a
producer-led organization with 32,000 members which represents all U.S.
soybean farmers on national policy issues. We very much appreciate your
invitation to appear before the Committee today.
ASA commends you, Mr. Chairman, for holding this important hearing
on U.S. unilateral economic sanctions. Exports are extremely important
to American soybean farmers. One out of every two bushels we produce
each year must be exported, either as soybeans, soybean oil, soybean
meal, or in the form of livestock products, including pork and poultry.
I would add that Missouri is one of our largest soybean producing
states, and is home to companies that are key leaders in our industry.
On behalf of both our state and national membership, ASA would like to
thank you for your leadership on this important issue.
To put it bluntly, Mr. Chairman, the use of unilateral economic
sanctions by our government has been a recurring nightmare for soybean
producers and all of U.S. agriculture for nearly three decades. Every
year, these actions deny U.S. farmers, processors, and exporters access
to multi-billion dollar markets. In a report completed last August, ASA
determined that restrictions on exports to Iran, Iraq, Libya, Sudan,
Cuba, and North Korea result in lost U.S. sales totaling about $150
million annually for soybeans and soy products alone. With world demand
and farm prices at historic lows, these lost market opportunities only
worsen the current crisis in our farm economy.
Even more damaging than the loss of annual sales to specific
countries, unilateral sanctions establish the reputation of the U.S. as
an unreliable supplier. Food and fiber are the most basic of
necessities, and the most strategic of commercially-traded commodities.
The willingness of the U.S. government to restrict agricultural exports
has therefore had the not unexpected effect of encouraging other
countries to make long-term plans to secure their food import
requirements from other suppliers.
the impact of past sanctions on agriculture
The restrictions on agricultural exports due to supply shortages
imposed by Presidents Nixon and Ford in 1972 and 1973 sent shock waves
through countries that had become dependent on the U.S. as a supplier
of basic food products, including soybeans. Within a few years, major
importers led by Japan initiated a long-term investment program to
develop the agricultural potential of South American countries,
particularly soybean production in Brazil. Twenty-five years later,
Brazil is our chief competitor for global soybean, soybean oil, and
soybean meal markets.
The Soviet grain embargo of 1980-81 imposed by President Carter
demonstrated U.S. willingness to restrict exports of farm products for
foreign policy reasons. Again, the sales we lost to competitors in
Europe and South America during the 16 month duration of the embargo
were minor compared to the long-term impact of encouraging investment
in agricultural production in those countries.
In the decade since the fall of the Soviet Union, the U.S. has
repeatedly resorted to unilateral economic sanctions as tangible
expressions of displeasure with, and efforts to punish the behavior of,
various foreign governments. When diplomacy fails, and when our
national security interests are not directly threatened, sanctions have
become almost a reflexive reaction of U.S. foreign policy.
This knee-jerk use of sanctions is only accelerating efforts by
many food importing countries--not just the intended targets--to make
themselves independent of the U.S. as a supplier. Sanctions advocates
must come to appreciate the strategic consequences of these actions. In
the absence of multilateral participation that includes all major
suppliers, sanctions are ineffective and will eventually become
meaningless, as the rest of the world is able to supply its needs,
regardless of U.S. policies.
the need to maintain market access
Rather than restricting U.S. agricultural exports, our government
should focus on how to maintain and expand access to foreign markets.
The reasons why countries resist opening their markets to increased
imports now go beyond simply protecting their less efficient farmers
and maintaining some degree of self-sufficiency. In recent years,
governments have begun to restrict imports of food products based on
how they are processed, or on the processes through which they are
derived.
Dr. Thornsberry has described how the EU is refusing imports of
U.S. beef based on claims regarding our use of growth hormones that
have no legitimate scientific basis. This impasse will likely result in
the U.S. imposing restrictions on imports of EU products, further
restricting bilateral trade. In the longer term, it will impact beef
production and trade, as the EU sources supplies from other countries.
the threat to trade in biotech products
A similar danger is now confronting the U.S. soybean, corn, and
cotton industries following introduction of genetically modified
varieties of these crops in this country in 1996. After initially
approving varieties of biotech soybeans and corn that year, the EU has
failed to develop a transparent, timely, and science-based process for
reviewing and approving applications for additional varieties. During
the same period, an active disinformation campaign by extremist groups,
including Greenpeace, has inflamed food safety concerns among some
consumers and the European press, encouraging food manufacturers to
sell products that are guaranteed not to contain genetically modified
ingredients, Three weeks ago, several major food chains in the United
Kingdom announced they now will market only non-GMO products.
While these are private sector decisions, they reflect continuing
failure on the part of the EU Commission and the governments of EU
Member States to exercise their responsibilities and to conform their
food safety regulations to the science-based principles of the Sanitary
and Phytosanitary Agreement contained in the Uruguay Round Agreement.
The EU's inaction has clearly contributed to and encouraged these
decisions, and the EU should be held accountable for any resulting
reduction in U.S. exports of agricultural products to EU markets.
This issue must be addressed at the highest level. Last week, ASA
and 23 other major agricultural organizations sent a letter to
President Clinton urging the U.S. to raise concern over trade in
biotech products as a key priority at the upcoming G-8 meeting. We
would like to commend you, Senator Ashcroft, for making a similar
appeal to the Administration. U.S. agriculture must forcefully oppose
this and every misguided effort to introduce factors other than sound
science as the basis for decisions on food safety.
the benefits of s. 425
Turning to the subject of this hearing, Mr. Chairman, ASA commends
you for introducing S. 425, ``The Food and Medicine for the World Act
of 1999.'' This legislation would exempt U.S. exports of agricultural
and medical products from unilateral economic sanctions unless
requested by the President and approved by both Houses of Congress. The
only exceptions to this exemption are in the event Congress has
declared war, the President has declared a state of national emergency,
or in the case of products which could have some military application.
Also, the bill would not exempt products included in any multilateral
sanction.
In our view, this legislation represents a good step toward
reforming U.S. policies governing unilateral economic sanctions. It
would set a precedent for exempting sales of agricultural and medical
supplies from export restrictions, unless conditions meeting the
standard of a national emergency exist. This bill would also protect
humanitarian exports under the Food for Peace Program, Section 416, and
the GSM export credit guarantee program. These authorities are
extremely important to the U.S. soybean industry, which depends on food
assistance and credit sales programming for a significant part of our
annual exports.
Another positive feature of this legislation is the fact that it
would not impose export licensing requirements on commercial sales of
agricultural products. ASA strongly supported the Administration's
decision on April 28 to lift unilateral sanctions on sales of food and
medicine to Iran, Libya and Sudan. This action opens a market worth
over $4.2 billion annually, and would allow a requested sale to Iran of
$500 million of U.S. agricultural commodities, including soybean oil
and soybean meal, to be completed.
However, we do not support establishing an export licensing
requirement as a kind of ``halfway house'' between sanctions and
unrestricted commercial sales. Over time, such a requirement would move
our government into direct control of international commodity
transactions. Given the competitive nature of this business, any
additional hoops or red tape confronting potential customers would
provide just one more reason for them to buy from our competitors.
conclusion
I mentioned at the beginning of my remarks that the damage caused
by unilateral economic sanctions far exceeds the lost opportunity for
sales to the affected country. In the long term, sanctions impact the
buying preferences of other importing countries, and stimulate
investment in the agricultural production and export capabilities of
our competitors.
Enactment of S. 425 would send a signal to both our customers and
our competitors that the U.S. is beginning to understand that
unilateral sanctions are a reflection of weakness rather than a
demonstration of strength in American foreign policy. It would also
suggest to advocates of such policies that, while active commercial
relations create considerable leverage for affecting the behavior of
other countries, this influence is entirely lost when those relations
are disrupted.
I would like to thank you again, Mr. Chairman, for the opportunity
to appear before you today. I will be glad to respond to any questions.
Senator Ashcroft. Thank you and let me just thank you for
deleting that one part of your text that was redundant to other
testimony. I would indicate that if you all wish to submit your
written testimony, we will make sure that the entirety of your
testimony appears for the benefit of the record and for our
benefit as well.
Robert Kohlmeyer is the president of World Perspectives, a
Washington, DC based organization that promotes the interests
of U.S. agriculture from an international standpoint, which is
exactly what we in the U.S. Government should be doing as well.
It is my pleasure to call upon you to make your remarks. Try
and limit them to 5 minutes to give us an opportunity for some
quick questions.
STATEMENT OF ROBERT W. KOHLMEYER, PRESIDENT, WORLD
PERSPECTIVES, INC., WASHINGTON, DC
Mr. Kohlmeyer. Thank you, Mr. Chairman. I am president of
World Perspectives, a company specializing in analysis and
strategic planning in agriculture, markets, and trade policy. I
joined WPI 8 years ago after retiring from a 36-year career in
the international grain trade. And I thank you, Mr. Chairman,
and the committee for the opportunity to share some of my
experiences and thoughts with regard to agricultural trade
sanctions. I will shorten my testimony, and I thank you for
including it in its entirety in the record.
I would like to share with you a brief history of U.S.
agricultural trade embargoes and some of the things that I
believe I have learned about them in the 44 years I have spent
in this industry.
There are essentially just two kinds of agricultural trade
embargoes. One is a restriction placed on trade as a result of
fears of short supplies, a so-called short supply embargo, and
the other is a restriction on agricultural trade as an
expression of foreign policy.
Short supply embargoes occurred twice during the 1970's. In
1973, when it appeared that a large volume of export sales
might drain U.S. supplies of soybeans and soybean products, the
Nixon administration became concerned that such shortages would
cause production problems for producers of meat animals. This
would raise retail meat prices, it was reasoned, a time when
double digit inflation was already a major national problem.
The embargo, declared in the summer of 1973, not only
forestalled new sales, but it also cut across existing sales
contracts by allowing only 50 percent of open sales of soybeans
to be shipped.
Then again in 1975, in response to a large volume of sales
of corn and soybeans to Russia and Poland, high level USDA
officials called U.S. grain exporters and informally asked them
to refrain from making additional sales. The informal request
covered several weeks because of concerns over rising domestic
food prices at the time. No formal embargo was ever declared,
but the impact on markets and trade was the same as if one had
been.
Official attitudes toward tight grain supplies have
changed, however. When short supply concerns began to develop
once again in 1995 and 1996, USDA Secretary Dan Glickman, to
his credit, made it clear that the United States would not
interfere with trade on those commodities deemed to be in tight
supply. Domestic and overseas users of U.S. commodities would
continue to have equal access to them.
By contrast, at that time, as you may recall, the European
Union's Commission imposed export taxes on sales of wheat and
barley for export. In effect, it was interfering with trade in
an effort to subsidize its domestic users at the expense of
foreign customers.
It seems to me that this experience with short supply grain
embargoes has taught two lessons.
The first is that markets do a far better job of allocating
scarce resources than do government planners. For example, in
1973 the market, by virtue of the impact of high prices on both
buyers and sellers, had already sorted out supplies relative to
demand before the embargo was declared.
The second lesson is simply that short supply embargoes
call into question the reliability as a supplier of the nation
invoking the embargo. There can be no doubt that the 1973
soybean embargo provided substantial encouragement for the
newly emerging soybean industry in South America and for
investment in it by overseas interests wanting to insure
another source of supply. I am not saying that without the 1973
embargo soybean production in Argentina and Brazil would not
have developed. Such development would have occurred
eventually, but the U.S. soybean embargo certainly gave it an
important jump start.
The question of reliability continues to be relevant in the
face of tight supply situations in the 1990's. After all, who
appears to be the more reliable supplier? The United States,
which declared equal access to its limited supplies in 1995 and
1996 or the EU with its export taxes?
Foreign policy embargoes are the other type of embargo with
which we have had some experience. In the latter stages of the
20th century, the United States began to engage in the use of
foreign policy embargoes with some frequency. It imposed a
trade embargo against Cuba following the rise to power of the
government under Fidel Castro, and in January 1980, the United
States imposed the grandfather of all agricultural embargoes,
the embargo of grain sales to the Soviet Union. President
Carter decided to cancel all sales of agricultural commodities
to the Soviets in response to the invasion of Afghanistan that
exceeded the quantities called for by the then current Long
Term Agreement. Thus, more than 17 million tons of commercial
sales of wheat, corn, soybeans, and soybean meal were wiped out
with the stroke of a pen.
At the time I recall estimating that U.S. grain exporters
stood to lose about $1 billion as the difference between the
value of the very high priced sales made to the Soviets and the
prices at which the commodities might be resold elsewhere after
the market collapsed. Fortunately, the administration at the
time decided to assume the canceled contracts as they were
originally priced and to be responsible for selling them into
the market as the only way to protect farmers from the effect
of a terrible market fallout. This also saved exporters from
most, though by no means all, of the losses they faced.
Although the Carter administration tried to persuade other
grain exporting countries to join with the United States in the
embargo against the Soviets, they were almost entirely
unsuccessful. Soviet buyers turned to suppliers such as the
European Union, Argentina, Canada, and Australia and others to
replace the canceled U.S. grain. One of the very little known
aspects of the Soviet grain embargo concerns how much money the
Soviets saved as a direct result of it. They were able to
cancel 17 million tons of very high priced purchases and
replace them with purchases from others at much lower prices,
the fact of the embargo having driven market prices lower. I
estimated at that time that the embargo probably saved the
Soviets about $250 million which was not exactly a hoped-for
result.
President Reagan lifted the Soviet grain embargo in March
1981. The following year, he outlined a U.S. doctrine on
agricultural trade and he included these points. There will be
no restrictions on exports of farm products imposed because of
rising farm prices. Farm exports will not be singled out as an
instrument of foreign policy and can be used only as part of a
broad trade embargo. Finally, he said, we believe world markets
must be freed of trade barriers and unfair trade practices.
In the 1990's, U.S. agricultural trade sanctions have
become a part of a general trade action. Destinations involved
have included Iran, Libya, Sudan, Cuba, Cambodia, North Korea,
and Vietnam. Some of the trade restrictions were subsequently
lifted, and on April 28, as we have heard, President Clinton
announced his change in the regime for administrative action
embargoes, including Iran, Sudan, and Libya.
Looking at all of this background and history, I have drawn
several conclusions.
The first one is that unilateral trade sanctions do not
work. With perhaps the exception of a small handful of highly
technical products, the potential sources of supply are simply
too many for the United States alone to force a desired change
on a target for trade sanctions. Despite the U.S. trade
sanctions that have covered virtually the entire period, the
Castro regime will celebrate its 40th anniversary this year.
The U.S. trade embargo has certainly caused Cuba some economic
hardship over the decades, but not enough to topple the regime
because other countries have stepped in to replace the United
States in trade and investment. On the other hand, the U.N.
sponsored multilateral trade sanctions against Libya in the
wake of the Pan Am sabotage did eventually have a desired
impact as the impending trial of the suspects in the
Netherlands attests.
A second conclusion. Because agricultural products can be
obtained from so many sources, those most harmed by unilateral
sanctions tend to be the agricultural producers in the country
doing the sanctioning. They suffer lower prices and reduced
outlets.
A third conclusion. Unilateral sanctions by a major
agricultural producing country such as the United States tend
to encourage production in other competitor countries.
Another conclusion I have drawn is that confidence in the
United States as a reliable supplier is reduced by unilateral
sanctions.
Finally, importing countries are encouraged to pursue a
self-sufficiency no matter what the cost sort of policy.
Withdrawing food and medicines from our unilateral
sanctions is an important first step. It provides both the
background and the opportunity for us to rethink our policies
in this area. It is especially timely for us to do so in the
light of the forthcoming new round of trade negotiations due to
begin this autumn. Food security will be a key issue for the
agricultural trade sector in these negotiations, and the U.S.
role in food security through trade is compromised by
unilateral embargoes in food trade.
Harking back to President Reagan's 1982 statement, we seem
to have accepted his doctrine that no restrictions be placed on
food exports because of rising prices. We have partially
accepted the idea that farm exports will not be singled out,
but we have yet to accept the need for other nations to support
a broad trade embargo before we invoke sanctions. And we still
have a long way to go, of course, to achieve world markets that
are free of trade barriers and unfair trade practices.
We are making progress, however, and when I think of where
we were in 1973 and 1980, we have come quite a long way.
Thank you very much.
[The prepared statement of Mr. Kohlmeyer follows:]
Prepared Statement of Robert K. Kohlmeyer
My name is Robert Kohlmeyer. I am president of World Perspectives,
a company specializing in analysis and strategic planning in
agriculture, markets and trade policy. I joined WPI 8 years ago after
retiring from a 36 year career in the international grain trade. I
thank the Committee for the opportunity to share some thoughts on
agricultural trade sanctions.
I suppose that trade embargoes, as an expression of disapproval by
one nation or a group of nations of the policies or politics of another
nation or group of nations, are rooted in basic human behavior that we
learn at an early age. ``You can't play with my toys if you won't give
me some of your candy.'' But for nations like the United States, which
depend on international trade for an important contribution to the GNP,
the use of agricultural trade as a foreign policy tool can have some
far-reaching and frequently unintended consequences.
I would like to share with you a brief history of U.S. agricultural
trade embargoes and some of the things I have learned about them during
the 44 years I have spent in the grain trade as a participant and
observer.
There are essentially just two kinds of agricultural trade
embargoes: one is a restriction placed on trade as a result of fears of
short supplies--a ``short supply'' embargo. The other is a restriction
on agricultural trade as an expression of foreign policy.
short supply embargoes
Short supply embargoes occurred twice during the 1970's. In 1973
when it appeared that a large volume of export sales might drain U.S.
supplies of soybeans and soybean products, the Nixon administration
became concerned that such shortages would cause production problems
for producers of meat animals. This would raise retail meat prices, it
was reasoned, at a time when a double-digit rate of inflation was
already a major national problem. The embargo declared in the summer of
1973 not only forestalled new sales, but it also cut across existing
sales contracts by allowing only 50 percent of open sales of soybeans
to be shipped.
Then again in 1975, in response to a large volume of sales of corn
and soybeans to Russia and Poland, high level USDA officials called
U.S. grain exporters and informally asked them to refrain from making
additional sales. The informal request covered some weeks because of
concerns over rising domestic food prices at the time. No formal
embargo was ever declared, but the impact on markets and trade was the
same as if one had been.
The farm community was upset in both cases. It saw short supply
embargoes as a denial to them of the high prices they believed they
deserved from tight supply situations, and their farm groups sought
protective legislation. Largely as a result of those efforts, the Food
and Agriculture Act of 1977 contained the first protection against
embargoes. It required that commodity price support loan rates be set
at 90 percent of parity if an agricultural embargo were ever again
imposed for short supply reasons. The idea was to make it so expensive
that no administration would ever consider such an embargo.
Official attitudes toward tight grain supplies have changed,
however. When short supply concerns began to develop once again in 1995
and 1996, USDA Secretary Dan Glickman, to his credit, made it clear
that the U.S. would not interfere with trade on those commodities
deemed to be in tight supply. Domestic and overseas users of U.S.
commodities would continue to have equal access to them.
By contrast, at that time the European Union's Commission imposed
export taxes on sales of wheat and barley for export. In effect, it was
interfering with trade in an effort to subsidize its domestic users at
the expense of foreign customers.
It seems to me that this experience with short supply grain
embargoes has taught two lessons. The first is that markets do a far
better job of allocating scarce resources than do government planners.
For example, in 1973 the market, by virtue of the impact of high
prices, had already sorted out supplies relative to demand before the
embargo was declared.
The second lesson is simply that short supply embargoes call into
question the reliability as a supplier of the nation invoking the
embargo. There can be no doubt that the 1973 soybean embargo provided
substantial encouragement for the newly emerging soybean industry in
South America and for investment in it by overseas interests wanting to
insure another source of supply. I am not saying that without the 1973
embargo, soybean production in Brazil and Argentina would not have
developed. Such development would have occurred eventually, but the
U.S. soybean embargo gave it an important jump start.
The question of reliability continues to be relevant in the face of
the tight supply situation in the mid-1990's. After all who appears to
be the more reliable supplier: the U.S., which declared equal access to
its limited supplies for domestic and overseas users, or the EU with
its export taxes?
foreign policy embargoes
Nations have long used trade as an instrument of their foreign
policy. In ancient history the Egyptians, Greeks and Romans all allowed
or denied access to trade to further their influence. So too did the
great trading nations of the 16th, 17th and 18th centuries.
In the later stages of the 20th century the U.S. began to engage in
the use of foreign policy embargoes with some frequency. It imposed a
trade embargo against Cuba following the rise to power of the Communist
government under Fidel Castro. And in January 1980 the U.S. imposed the
grandfather of all agricultural embargoes--the embargo of grain sales
to the Soviet Union. President Carter decided to cancel all sales of
agricultural commodities to the Soviets in response to the invasion of
Afghanistan exceeding the quantities called for by the then-current
Long Term Agreement. Thus, more than 17 million metric tons of
commercial sales of wheat, corn, soybeans and soybean meal were wiped
out with the stroke of a pen.
The chaos created by this single act was extreme. At the time I
recall estimating that U.S. grain exporters stood to lose about $1
billion as the difference in value between the very high priced sales
made to the Soviets and the prices at which the commodities might be
resold elsewhere after the markets collapsed. Certain grain exporters
told the Carter Administration that the embargo would force them into
bankruptcy. Fortunately, the administration decided to assume the
canceled contracts as they were originally priced and to be responsible
for selling them into the market as the only way to protect farmers
from a terrible market fallout. This also saved exporters from most,
though by no means all of the losses they faced.
Although the Carter Administration tried to persuade other grain
exporting countries to join with the U.S. in the grain embargo against
the Soviets, they were almost entirely unsuccessful. Soviet buyers
turned to suppliers such as the EU, Argentina, Canada, Australia and
others to replace the canceled U.S. grain. One of the little known
aspects of the Soviet grain embargo concerns how much money the Soviets
saved as a direct result of it. They were able to cancel 17 million
tons of very high-priced purchases and replace them with purchases from
others at much lower prices (the fact of the embargo having driven
market prices lower). I estimated at the time that the embargo saved
the Soviets about $250 million, which was not exactly the hoped-for
result.
President Reagan lifted the Soviet grain embargo in March 1981. The
following year he outlined what he believed the U.S. doctrine on
agricultural trade should be. He included these points:
There will be no restrictions on exports of farm products
imposed because of rising farm prices.
Farm exports will not be singled out as an instrument of
foreign policy, and can be used only as a part of a broad trade
embargo.
We believe world markets must be freed of trade barriers and
unfair trade practices.
In the wake of the unfortunate Soviet grain embargo, a provision
was inserted in the 1981 farm bill that required, among other things,
the government to raise price support loan rates to parity in the event
that an embargo was imposed that did not include all U.S. goods. The
point was to leave the conduct of foreign policy with the executive
branch, but make it extremely expensive to have just an agricultural
trade embargo.
Later language in 1985 and 1990 provided for the sanctity of
contracts made before an embargo. Finally, the 1996 farm bill states
that unless other agricultural exporting countries join in an embargo,
and unless the sanction is due to war, the loss of farm income must be
made up by the government in the form of direct producer payments or
enhanced support for export market development. If the embargo is due
to short supplies, payments must be made to producers.
In the 1990's U.S. agricultural trade sanctions have been a part of
a general trade action. Destinations involved have included Iran,
Libya, Sudan, Cuba, Cambodia, North Korea, and Vietnam. Some of the
trade restrictions were subsequently lifted. On April 28 the Clinton
Administration announced that it did not wish to include food and
medicines under its unilateral trade sanctions anymore, and it would
therefore consider requests for export licenses to those destinations
that it could consider via executive order. These included Iran, Sudan
and Libya.
conclusions
Looking at all of this background and history, I draw several
conclusions.
Unilateral trade sanctions do not work. With perhaps the exception
of a small handful of highly technical products, the potential sources
of supply are simply too many for the U.S. alone to force a desired
change on a target for trade sanctions. Despite U.S. trade sanctions
that have covered virtually the entire period, the Castro regime will
celebrate its 40th anniversary this year. The U.S. trade embargo has
certainly caused Cuba some economic hardship over the decades, but not
enough to topple the regime because other countries have stepped in to
replace the U.S. in trade and investment. On the other hand, UN-
sponsored multilateral trade sanctions against Libya in the wake of the
Pan Am sabotage did eventually have a desired impact, as the impending
trial of the suspects in the Netherlands attests.
Because agricultural products can be obtained from so many sources,
those most harmed by unilateral sanctions tend to be agricultural
producers in the country doing the sanctioning. They suffer lower
prices and reduced outlets. Aggregated over the years, U.S. sanctions
have certainly cost U.S. farmers a significant volume of exports and
probably lower prices as well especially during years of plentiful
world supplies such as is the case now.
Unilateral sanctions by a major agricultural producing country such
as the U.S. tends to encourage production in other competitor
countries.
Confidence in the U.S. as a reliable supplier is reduced.
Importing countries are encouraged to pursue a ``self-sufficiency
no matter what the cost'' policy.
Withdrawing food and medicines from our unilateral sanctions is an
important first step in rationalizing the use of agricultural trade as
a foreign policy tool. It provides both the background and an
opportunity for us to rethink our policies in this area. It is
especially timely for us to do this in light of the forthcoming new
round of trade negotiations due to begin this autumn. Food security
will be a key issue for the agricultural trade sector of the
negotiations, and the U.S. role in food security through trade is
compromised by unilateral embargoes on food trade.
Harking back to President Reagan's 1982 statement, we seem to have
accepted his doctrine that no restrictions be placed on food exports
because of rising prices. We have partially accepted the idea that farm
exports will not be singled out, but we have yet to accept the need for
other nations to support a ``broad trade embargo.'' And we still have a
long way to go to achieve world markets that are free of trade barriers
and unfair trade practices.
We are making progress, however. When I think of where we were in
1973 and 1980, we have come quite a long way.
Senator Ashcroft. I thank you very much for your
informative discussion of a wide variety of trade embargoes. I
do not think we often enough hear about some of the real
effects. It is a little stunning to think that the Russians
picked up an extra $250 million as a result of the pain we were
inflicting. I think that is the kind of pain that caused them
to laugh all the way to the bank.
I appreciate the comments of all of those of you who have
appeared to testify, and I would call upon the Senator from
Indiana to begin questioning.
Senator Lugar. The comment has been made by several of you
that the basic problem is unilateral sanctions, and that we
differentiate them from multilateral sanctions. There may be
some problems with the latter, but most of you have testified
that your studies of unilateral sanctions have led you to
believe that they are, by and large, ineffective.
I think that is important because the argument usually
comes--and I think Senator Helms brought an important facet to
this. He discussed the possibility of terrorism. He discussed
the possibility of bio-terrorism that may be out there with
various countries. It is clearly a problem for our Nation in
terms of our overall foreign policy to always have a menu of
ways in which we may try to meet that.
Now, I think most of the sanctions legislation offered by
Senators--that certainly is true of the ``U.S.A. Engage'' and
the American Farm Bureau efforts that I have introduced--again
recognizes the fact that sanctions have to be a part of our
foreign policy. But we also have stipulated that before we go
down that road, either the administration or the Congress ought
to explain why this particular sanction in this country and
what its likely effects are going to be so there could be a
benchmark to assess its efficacy, whether it really works.
Although that has not been adopted by law, the net effect has
been, I think in the Congress and the administration ever since
we started this debate, that that kind of rationality has had
to occur.
So, one of the pieces of good news is that we have not had
any more unilateral economic sanctions without a whole lot of
thought being given to it. And that is of benefit all by
itself.
But the second point is that if we are interested in
terrorism, will the specific legislation the Senator from
Missouri is offering today with regard to humanitarian and food
make any difference at all with regard to bio-terrorism,
terrorism in general, or the Libyan shoot-down, or with our
families? I think the answer I come to is no. In these two
particular areas, leaving aside the whole gamut of American
trade, specifically with regard to food and medicine, it seems
to me we have a very specific debate.
I would be prepared to argue I think the larger range of
issues in terms of overall American trade policy, and many
people who are outside this discussion today would say, well,
we would consider more than agriculture. You are going to
settle that problem and move along, and I hope that we will.
But obviously our overall interest as a reliable supplier as a
competitor out there relies upon everything else, too.
So, it seems to me this is a very important debate. As
Secretary Glickman pointed out, this is a very tough jungle out
there in terms of competition for our country in the economic
realm. To the extent that we deliberately tie our hands behind
our back with policies that we find ineffective historically,
that is a very poor set of decisions to make.
So, I appreciate the comments all of you have made. I find
myself in agreement literally with all that you have said. We
appreciate your taking time to come and say it because it is
very important that Americans wake up to the problems that we
are in.
With regard to agriculture, they are terribly acute, and
this is why in the committee that I chair we talk about this
issue almost every day. Sanctions reform is not a panacea, and
all of us have tried that to restore the credibility of our
country and our marketing situation is going to take some
doing. Senator Lincoln, from Arkansas, this morning in the
Agriculture Committee hearing said, I want immediate results on
prices. And she got some of the witnesses, maybe because she
was so persuasive, to say they are going to go up if this bill
is passed.
I pray that will be so, but I am not confident that people
in Iran necessarily will fall over themselves buying from us
suddenly because we make that possible. I am certain, so long
as we are licensing this deal-by-deal, that the effect is
likely to be zero unless the very specific Nikki trading deal
that has been out there finally gets done. So, the
administration is presenting its position guardedly. It is not
$500 million in sales. It could be zero.
This is the reason why legislation is probably required and
why your coming today brings some rationalization, but also
some dialog so that you understand our concerns and perhaps are
prepared to act more favorably.
I thank you again, Mr. Chairman, for this hearing and this
opportunity to visit with the witnesses.
Senator Ashcroft. Well, your comments and insights are as
valuable as any we have heard. I appreciate the fact that these
individuals have come to share and exchange with us.
I would call upon Senator Brownback from Kansas for any
additional questions he might have before I conclude with
questions of my own.
Senator Brownback. Thank you very much, Senator Ashcroft,
and thanks to Senator Lugar for your leadership in bringing
this issue in front of us. You have been there for a couple of
years pushing this and doing a great job.
I want to thank too the panel. I know from traveling across
Kansas, Gary, and pushing with the Farm Bureau, there is a real
groundswell out there of people saying we have got to lift
these sanctions off. If you are going to have freedom to farm,
we have to have freedom to market. And really it is your
grassroots push that has made a big difference.
The Secretary noted that we were only talking about 1
percent of the market of total U.S. ag sales, but if you look
at wheat, which is something that I am interested in--I am
interested in a lot of the agricultural commodities, but wheat
of key importance--about 10 percent of the world's wheat market
is cutoff to U.S. farmers. Now, 1 percent has an impact,
particularly when you are looking at that adjustment between
supply and demand and where price is met, but you go to 10
percent, you have an enormous impact.
I would note that wheat stocks in the United States have
increased by about 16 million metric tons in the past 3 years,
which is about 25 percent of annual U.S. production, but during
the same time period, the price has decreased 260 percent from
what we had. And Gary alluded to this, the 70 percent drop-off
of net farm income of our best farmers.
Listen to these numbers. In May 1996, the monthly average
price of wheat in Kansas City--now, this was a great wheat
market at that time, but it was $7.02 a bushel in May 1996.
Today it is $2.70 a bushel. We are in a very difficult position
with that commodity, and it only showcases where we are with a
lot of commodities.
To me, Mr. Chairman, the lifting of sanctions is a
paramount issue. We are asking people in Freedom to Farm to
produce and they are producing freely and producing quite well,
but we have got to help them in the market end of it. And this
is something we have to do to get this done. I do not think it
is enough here. Once we move past here, then we need to get
much more aggressive on our marketing. I know all of your
organizations that you are part of will do everything they can
to market these products and will push that very aggressively.
I would just ask Gary, if I could. As you are talking with
Kansas farmers, what is kind of their attitude about whether
they are going to be able to make it through the current
financial problems that Kansas agriculture finds itself in?
Mr. Hall. Well, Senator Brownback, that is a painful
question, and I know when you were in Garden City recently, you
not only saw some of that pain on the faces, but you also heard
some frustration. And I am hearing the same. We are hearing
from some of our financial institutions that the line of credit
was established this year, but if we have another year like
last year, there will be certainly a shortage of credit, and
that is a major concern.
The second thing that we are hearing from producers is--and
this is the part that hurts the most, Senator--I do not think I
want to bide it on out. I went through the 1980's and I
recovered, but I do not want to fight this one out, which then
goes to something even worse in my eyes, and that is that next
generation. When the parents are saying we are not going to
fight it out, what happens to the next generation? I have a 20-
year-old son that is a sophomore at Kansas State, and we are
fortunate that those statements have not been made at our
coffee table yet or our kitchen table but it is being made
elsewhere around Kansas.
Senator Brownback. That is what I have been picking up as I
travel around Kansas, just a very serious attitude that last
year was a tough year, but if you do not start doing some of
these things to get prices and more income coming into
agriculture, people question how much they can stand, how much
they can take.
So, these become very important pieces, even though they
are not panaceas, but they are items. And if you are talking
about keeping us away from 10 percent of the world wheat
market, that is a significant price issue then as well.
So, I applaud your efforts and what you have been doing to
push this on forward. Hopefully we can move this legislation on
through and then not stop there but lift further sanctions, get
more aggressive in our marketing efforts so that we can help
farmers in this very difficult time.
Thank you, Mr. Chairman.
Senator Ashcroft. Thank you very much. I appreciate those
important insights.
Mr. Hall, how important is it to include in our
agricultural sanctions reform bill provisions on credit and
credit guarantees so that we continue to have sort of a
capacity to compete with other nations who provide these kinds
of items in their portfolio.
Mr. Hall. Mr. Chairman, I think it is critical. I think it
must be included because, as we compete in the international
marketplace, other countries are offering similar type
situations. And if we unilaterally exclude ourselves from those
same opportunities, we no longer are the competition. So, I
think to piggyback off of what Senator Brownback has just
mentioned eloquently, if we are going to, indeed, open up the
marketplace to farmers and ranchers, we have to use everything
in our arsenal.
Senator Ashcroft. So, it is your view that just opening up
the marketplace if, when we get there, we are at a serious
disadvantage as it relates to our competitors, it is not really
that helpful to us.
Mr. Hall. Yes, that is my feeling.
Senator Ashcroft. Dr. Thornsberry, sometimes I wonder about
the message we send to our farmers and ranchers when one hand
of Government is trying to open markets and another hand of
Government is imposing sanctions. Do you have a comment on the
way we are perceived in that respect?
Dr. Thornsberry. Well, it is very confusing to those of us
who are out in the field trying to make a living. Most of my
constituents that I work with do not understand why Europe will
not allow beef into that nation, and at the same time they do
not understand why there would be sanctions against our
products. We have not experienced sanctions directly but
recently South Korea restricted imports of beef into that
nation. It had a very significant effect on our prices. So, it
is a confusing issue.
Senator Ashcroft. For any of you, there are times when we
have seen the proposed discussion of and implementation of what
I would call third party sanctions where someone that we are
not seeking to sanction makes conveyances of products to
someone we are, so we add the person who was dealing with the
country we were upset with to our list of people, sort of third
party sanctions. Do you have any comments any of you would like
to make on that practice?
Mr. Hall. Mr. Chairman, again, I think it represents what
testimony you have heard today not only from this panel but
other panels and other Senators that a unilateral activity does
not work as it perhaps was sincerely intended, and then to just
merely exacerbate that situation by adding on does not seem to
make sense. If the first act was incorrect, why exacerbate the
problem by adding acts?
Senator Ashcroft. Let me express my appreciation to all of
you. I have already made notes in your written comments of
things that I want to be able to tap and use later on as I
discuss this issue. I appreciate the wisdom you bring to the
committee. It is clear that agricultural sanctions are damaging
our farmers and ranchers, and lifting them will create an
ascending opportunity. I believe that S. 425, the Food and
Medicine for the World Act, strikes a balance between the
seemingly competing interests of promotion of exports and the
preservation of national security. It does not tie the hands of
the President. It does require that the President and Congress
shake hands before sanctioning in any way which would affect
our farmers. And I hope we can work together to ensure its
passage.
Without objection, the hearing record will remain open for
additional questions or any additional comments that you would
like to make until May 18 at 5 p.m.
With the consent of members of the committee, I would now
adjourn this committee. Without objection, the committee
meeting is adjourned.
[Whereupon, at 4:47 p.m., the committee adjourned, to
reconvene at 11 a.m., July 1, 1999.]
THE ROLE OF SANCTIONS IN U.S. NATIONAL SECURITY POLICY
----------
THURSDAY, JULY 1, 1999
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 11:10 a.m. in
room SD-419, Dirksen Senate Office Building, Hon. Jesse Helms
(chairman of the committee) presiding.
Present: Senators Helms, Lugar, Hagel, Grams, Ashcroft,
Biden, and Sarbanes.
The Chairman. The committee will come to order, and we will
not transact business pending the arrival of other Senators,
who have been in the process of a rollcall vote on the Senate
floor, and as soon as I have the authorization of the
distinguished Ranking Member, Senator Biden, and he will arrive
quickly.
Well, Mr. Secretary, welcome. I know you were saddened, as
many of us were this past Tuesday, when the news came about the
death of a good friend of all of us, Chancellor Michael Hooker.
You are an alumnus of the University of North Carolina, as
is my best friend, Dot Helms. It is good to see you, and I
particularly appreciate your willingness to appear here this
morning, during your last 2 weeks at the Department of State.
Congratulations on your promotion.
Now, most Senators on this committee are aware that there
is a significant reason for this, the first of a number of
hearings on the question of sanctions as a tool in promoting
U.S. national security and foreign policy objectives, and you
have been greatly helpful to me and to many others in that
regard.
For the public record let me briefly review the genesis of
this debate. I think simply put it is about the question,
should the United States punish another country for pursuing
policies or programs inimical to our national security and the
safety and security of American citizens and American allies
throughout the world?
Are we doing the right thing, for example, in punishing the
Government of Muammar Quadhafi for the bombing of Pan Am 103,
despite the fact that no other nation is willing to impose
similar sanctions? Are we going too far in making clear to the
government of such a country that not only will the United
States refuse to sell high tech commodities or oil equipment,
we will also refuse to sell food and medicine?
Now, some argue that such unilateral sanctions do little
more than handicap U.S. business against foreign competitors.
Others go even further and argue that all sanctions, including
those that restrict weapons sales and dual use technology to
pariah States are inappropriate if the sanctions are
unilaterally imposed by the United States, so our task today
and in subsequent hearings, I think, will be to begin to
examine this issue for ourselves.
We have opinion pieces on both sides, and some in the
middle. Studies have been prepared by the CBO and the CRS and a
virtual alphabet soup of other think tanks and agencies. The
time has come, I think, for us to lay out the facts and debate
the issue of sanctions in a comprehensive manner, and that's
what this meeting and subequent meetings are all about.
Now, it will be no surprise to my fellow and sister
Senators, or to Secretary Eizenstat, to hear my position on the
question of sanctions. I have quoted James Madison--so many
times that I feel like he walked into the room with me--on the
question of why I believe economic sanctions are a vital tool
in our foreign policy. President Madison said, and I am quoting
him, ``The efficacy of an embargo cannot be denied. Indeed, if
a commercial weapon can be properly crafted for the Executive
hand, it is more and more apparent to me,'' he said, ``that it
can force nations to respect our rights.''
Now, I simply do not believe that there can be any
substitute for American moral leadership in this world. We
cannot always lead through consensus. Sometimes we must lead by
example, and I have said more than once that I have never met
an American farmer who would want to profit at the expense of
American moral leadership in this world.
I have also disputed the cost of sanctions as advertised by
certain industry groups. I do not know where they get their
figures, but I just do not believe them. In fact, in the area I
believe to be the most in need of sanctions reform, agriculture
sanctions, the Foreign Agricultural Service recently estimated
that the net cost of all U.S. economic sanctions to the
American agriculture economy is approximately $500 million a
year. Now, that amounts to just 1 percent of the $49 billion
worth of farm exports the USDA projects for the year 1999.
At a time when American farmers need all the help they can
get, even a small amount of lost business can take on serious
proportions, and that was why I was willing to surprise my
friend, Stu Eizenstat, by endorsing the Clinton
administration's proposed changes to certain export regulations
to allow the commercial sale of food and medicine to pariah
States, because my thinking is that if terrorist States would
rather give their money to American farmers than to, say, Abu
Nidal, well, that is fine with me.
So the question is how much further should we go? Proposals
before this committee--and I should add parenthetically that
all reform bills are properly within the jurisdiction of the
Senate Foreign Relations Committee--run the gamut from
restricting the Congress and the President's ability to
legislate sanctions in the future to lifting all sanctions
existing now, imposed for foreign policy and national security
reasons.
So with that rather lengthy explanation of the purpose of
this hearing, we will now have an opportunity to discuss all
such proposals with the distinguished Secretary.
Members with legislation will be invited to present their
views before the committee at our next hearing on July 15, as
we have scheduled it, and after that we will see if an
agreeable legislative proposal can be reached on this matter. I
look forward to an interesting informal debate, of course.
Senator Sarbanes, Senator Biden has not yet arrived. Would
you have any comments that you wish to make?
Senator Sarbanes. Mr. Chairman, I will be very brief.
First, I want to join you in your comments about Michael
Hooker. He at one time served as the president of the
University of Maryland, Baltimore Campus, and did an
outstanding job. He took the whole academic institution to a
much higher level, and we remember him with great respect and
fondness. I know he has been an extremely effective chancellor
at the University of North Carolina. He passed away at the age
of 53, so higher education in this country has really lost one
of its leaders.
I join you in welcoming this series of hearings. This is a
difficult and complicated subject. A lot of overstatement takes
place during discussion of this issue. Therefore, I am looking
forward to hearing Under Secretary Eizenstat, who is not given
to overstatements, and expect we will get a significant
contribution.
I noticed your article in Foreign Affairs, and read it with
considerable interest. I cannot believe in the end we are going
to conclude that the United States in certain circumstances
ought not to limit or restrain its intercourse with other
countries in order to try to achieve important foreign policy
or national security objectives. It seems to me the question is
how much of that do you do, and how do you do it, not whether
it is done at all.
Some are asserting it ought not be done at all. That would
end up, leaving us with a choice between doing nothing and
going to war. That does not seem to be a very comfortable
choice. I think this set of hearings that the chairman and
Senator Biden have projected is going to be extremely helpful
and informative. Thank you.
The Chairman. I thank the Senator.
Stu, you knew Michael Hooker, did you not?
Mr. Eizenstat. Yes, sir, I did, and I appreciate very much
your comments.
The Chairman. For the sake of our friends visiting with us
today, he had been at the University of North Carolina at
Chapel Hill as chancellor for the past 8 years, and he has a
delightful, wonderful, capable former legislator, Senator, I
think, in the Massachusetts legislature, as his bride.
He liked to joke about his name, particularly when--and
bear in mind, his name is Hooker, and he is chancellor, and the
new president of the University of North Carolina is Motley
Broad--he said, this is the only university that has a Broad
for the presidency and a Hooker for the chancellor.
The Chairman. Senator Biden.
Senator Biden. Mr. Chairman, thank you. I want to thank you
for starting this series of hearings on U.S. policy on economic
sanctions, and as you have already stated, I am sure the
committee is going to conduct several hearings in the coming
weeks with a view toward considering legislation later this
year to address the issue.
Several members--as a matter of fact, I think a majority of
us have said something has to be done to rationalize our
sanctions policy.
At the outset I want to state what I think this series of
hearings should not be about. I do not think they are about
whether or not sanctions are ever appropriate to be a tool used
in American foreign policy. I believe that even the strongest
supporters of sanction reform recognize that sanctions are
appropriate in certain circumstances.
Nor is this review a debate about which branch of
Government has the power to impose sanctions. Professor
Corwin's famous dictum that the Constitution tenders an
invitation to struggle to deal with foreign policy holds true
to this day, and both the President and the Congress have ample
power under the Constitution to deal with sanctions and the two
branches often engage in confrontation, though, rather than
cooperation in the exercise of these powers.
I think the questions we are going to have to answer are,
in the first instance, and I am going to ask you a little bit
about this today, Stu, is, what constitutes a sanction? We do
not have agreement on even what constitutes a sanction.
Is, for example, the withholding of aid, is that a sanction
as opposed to imposing a sanction based upon a legitimately
negotiated trade agreement, as opposed to imposing sanctions
that do not relate to any existing agreement but are viewed as
punitive efforts to change actions and behavior of other
countries, I do not think there is any uniform agreement on
what constitutes a sanction.
Second, is there any circumstance when it makes sense for
us to go it alone? Is there ever a circumstance where a
sanction unilaterally imposed by the United States is
appropriate?
Third, which kind, which types of sanctions have been the
most effective and the most ineffective, and why?
So I think if we are able to explore some of this terrain
over the next couple of weeks with informed and knowledgeable
witnesses like yourself, it will help inform our debate and
dialog as to which approach we should attempt to take.
What I do not believe is likely to happen, Mr. Chairman--I
may be wrong--it is not likely we are going to reach a
unanimous consensus around here about sanctions, but I think we
may find, when this is over, there is one view that is more
predominant than another, and at least hopefully we will be
able to provide the function this committee under your
leadership has begun to exercise in earnest, and that is,
serious consideration of serious issues and recommendations to
the Senate for its consideration.
I thank you for beginning the process. You have committed
to do this and, as always, you are keeping your commitment, and
I look forward to hearing from Secretary Eizenstat as well as
my colleagues, who have a keen interest in this subject, so
thank you.
The Chairman. Thank you, sir.
Stu, you may proceed if you want to insert the whole
address, or statement in the record, we will do that, and
whatever you would like to do.
STATEMENT OF HON. STUART E. EIZENSTAT, UNDER SECRETARY OF STATE
FOR ECONOMIC, BUSINESS, AND AGRICULTURAL AFFAIRS, DEPARTMENT OF
STATE
Mr. Eizenstat. Thank you very much, Mr. Chairman. I welcome
this opportunity to share with you and members of the committee
the administration's views on the use of economic sanctions as
a foreign policy tool. This hearing is a welcome initiative and
can make a lasting contribution in developing a consensus in
this important area of policy, where frankly both the executive
branch and Congress have clear responsibilities.
I want to assure you the administration stands ready to
work with you and the committee to seek an agreed approach on
sanctions that will advance the full range of American national
interest. The very cooperative and productive process we are
currently engaged in, Chairman Helms, with your staff on the
Serbia Democratization Act in particular is a good example of
the kind of dialog that should exist generally between the
administration and Congress on sanctions issues. It contains
some of the elements of Presidential flexibility that are
important to the administration, such as national interest
waiver authority that I will discuss in more detail.
Our view on sanctions is clear. Properly designed to be
implemented and applied as a part of our coherent strategy,
sanctions, including economic sanctions, are a valuable tool
for enforcing international norms and protecting our national
interest. At the same time, sanctions are a blunt instrument.
They are not a panacea, nor are they cost-free. Indeed, used
inappropriately, they can actually impede the attainment of our
objectives and come at a significant cost to other U.S. policy
objectives.
There are, as Senator Biden was suggesting, varying
definitions of economic sanctions and as yet no agreed
definition. This, indeed, produces widely varying estimates of
the number of outstanding sanctions regimes that we have.
For purposes of today's testimony, I will be speaking to
the full range of measures that are sometimes placed within the
rubric of the term, economic sanctions. Some include, for
example, the denial of a normally available benefit, or the
right to purchase U.S. goods or services, or to attract U.S.
investment.
Obviously, the broad trade embargoes that we have are
undisputed examples, and some might also include decisions on
whether to offer U.S. support in international financial
institutes, or conditions on U.S. aid that are imposed to
advance U.S. foreign policy objectives, but the issue on which
we should focus, frankly, is not numbers, but rather on how to
use this tool of foreign policy most appropriately and most
effectively.
We believe that our use of sanctions should be governed by
a number of common sense principles, and that any prospective
legislation which you, Mr. Chairman, and the committee may
consider should be measured against these standards.
First, effectiveness should be our watchword. Used, again,
inappropriately, they can actually undercut the effectiveness
of our foreign policy objectives, but our emphasis on
effectiveness should not lead us to expect instant results, or
deter us from acting alone when important U.S. interests are at
stake. Indeed, that is why Presidential flexibility is
essential.
Second, unilateral economic sanctions should not be a first
resort to conduct by a foreign Government which negatively
affects our interests. We should first aggressively pursue
other available diplomatic options. These can range from
symbolic measures like withdrawing an ambassador, reducing
embassy staff, to denying visas to target figures, or entering
into security arrangements with neighboring countries.
And, Mr. Chairman, I have put a chart \1\ up and handed
copies to members of the committee which give a sense of the
variety of diplomatic, political, cultural, and economic
sanctions which can exist, and the variety which can exist
short of economic sanctions, and our notion is to try to use as
many of these as possible to change the conduct that we do not
like before we turn to economic sanctions, and we should turn
to those only after other options have failed or have been
judged inadequate or inappropriate.
---------------------------------------------------------------------------
\1\ Chart referred to is in prepared statement of Under Secretary
Eizenstat.
---------------------------------------------------------------------------
Third, sanctions are most appropriate when they have broad
multilateral support. The history of our use of unilateral
sanctions shows that by themselves in the majority of cases
they fail to change the conduct of the targeted country or at
best are a contributory but probably not decisive factor in
securing the changes of behavior we seek.
Multilateral sanctions maximize international pressure on
the offending State. It was, for example, Mr. Chairman and
members of the committee, multilateral sanctions that helped
end apartheid in South Africa, that isolates Saddam Hussein in
Iraq, and that brought Serbia to the bargaining table at
Dayton.
When considering sanctions legislation, we believe that the
Congress could include provisions urging the President to make
maximum efforts to develop multilateral cooperation in
addressing the concern which the sanctions are intended to
address.
Multilateral sanctions also have another advantage, Mr.
Chairman. That is, they can minimize the economic disadvantage
to U.S. agricultural and business interests of unilateral
sanctions. Thus, when Congress considers sanctions legislation,
it could again include provisions urging the President to make
maximum efforts to develop multilateral cooperation.
Nonetheless, if we are unsuccessful in our diplomatic
efforts, as we sometimes will be, if we are also unsuccessful
in building a multilateral regime, as, for example, with
respect to Iran, and there are important national interests
that are at issue, we must be prepared to act unilaterally to
maintain its leadership role, the United States must sometimes
act, even though other nations fail to do so.
Fourth, when we do act unilaterally, flexibility is
absolutely essential if we are to use sanctions effectively.
The Congress shares with the executive branch the
responsibility for helping shape our foreign policy. In the
realm of economic measures Congress has a clear constitutional
role to play, and we respect that.
At the same time, the President is responsible for
conducting the Nation's foreign policy and for dealing with
foreign governments. Thus, sanctions legislation needs to take
into account and be respectful of these respective
responsibilities.
Sanctions legislation should set forth broad objectives
which should allow the flexibility to respond to a constantly
changing and evolving situation, and give the President the
necessary authority to tailor specific U.S. actions to meet our
foreign policy objectives. As Secretary Albright has said,
there can be no cookie cutter, no one-size-fits-all approach to
sanctions.
With these general principles in mind, we suggest that an
approach to sanctions reform which we believe will make our
sanctions policy more effective and will be productive in
achieving improved discipline are the use of sanctions both by
the executive branch and by Congress.
We have proposed appropriate and flexible guidelines that
the executive branch would be willing to apply to future
imposition of sanctions under IEPA as well as discretionary
sanctions under future sanctions laws passed by Congress. With
your permission, I would like to outline those guidelines.
First, in any sanctions reform legislation, we believe that
flexibility, accompanied by a national interest waiver
applicable to all future unilateral sanctions legislation is
the single most important element. We have found from direct
experience that having such national interest waiver authority
gives us the leverage to further the objectives of sanctions
statutes.
This is shown--and I was personally involved in this--by
the enhanced interest we have now gotten from the European
Union in human rights and democracy in Cuba as a result of
title III of the Libertad Act and its waiver, and by tightened
export controls that the EU has employed against Iran as a
result of the 9(c) waiver we employed in the Iran-Libya
Sanctions Act.
On the other hand, the diplomatic straightjacket which the
absence of national interest waiver authority can place the
President in was underscored by the Glenn amendment regarding
the Indian and Pakistan nuclear tests, where we had absolutely
no discretion. We had to immediately apply sanctions with no
ability to take other factors into account, and Congress
rectified that, realizing the problem, in the Brownback
amendment, which we very much appreciated last year.
We agree that Congress should also have a role to play in
this waiver decision. Thus, we would suggest that in any
sanctions reform legislation that the President would notify
Congress of his decision to exercise such a national interest
waiver, and that Congress would then have an opportunity to
disapprove of the exercise of the waiver using expedited
legislative procedures.
A second guideline we would suggest for any legislation is
that it is important to prevent excessive procedural complaints
from hamstringing the executive branch. We have expressed our
willingness to work with Congress on appropriate requirements.
In general, Congress is the legislative body, obviously, and it
can always override previous legislation in the sanctions area
by a simple phrase, ``notwithstanding any other provision of
law.''
Therefore, Congress should be no more prescriptive of the
executive branch than it is willing to be of itself. We cannot
accept excessively prescriptive procedural constraints such as
advance notice requirements in the Federal Register on the
President's flexibility to impose sanctions.
At the same time, we do acknowledge certain key issues of
concern to sanctions reform supporters in the Congress,
particularly a rigorous cost-gain analysis before sanctions are
imposed, something that Senator Lugar has suggested, and some
sort of sunset provisions for sanctions measures.
The administration agrees that such a cost-gain analysis,
Mr. Chairman, should be conducted, though there would be a need
for flexibility in deciding how to proceed in a particular
case. Sunset clauses, that is, the ending of sanctions
automatically, tied to a set time period, we think is not the
best way to proceed. Rather, it should be geared to whether the
sanctions performance is still appropriate, and how should it
be measured.
Many objectives of a particular sanction cannot be
achievable within a preordained time period. I know no Member
of Congress, for example, would want to give the targets of
sanctions the ability to wait the United States out by imposing
time-bound sanctions in every instance. We have suggested
instead that the President could annual review specific
sanctions measures and then he would have to make a finding
that the sanctions still had relevance, that they were still
effective, in determining whether they should be terminated or
not.
If Congress did not approve of the President's decision,
again we would support the Congress enacting legislation of
disapproval subject to constitutional processes.
Let me turn, Mr. Chairman--you mentioned in your opening
statement the issue of sanctions on food, medicine, medical
equipment and other human essentials. Many of the bills
proposed would impact on the President's ability to impose
sanctions on such items. On April 28, the President announced
that the administration will generally exclude agricultural
commodities and products and medicines and medical equipment
from future discretionary sanctions regimes, and will extend
the same principle to existing regimes where we have the
discretion to do so.
We were particularly gratified, Mr. Chairman, for your own
expression of support for these changes. At the time of that
announcement, the administration noted that there may be
compelling circumstances where this still would not be
appropriate. Therefore, the President must be given the
flexibility to tailor new sanctions, even those of food and
medicine, as appropriate in any particular situation.
We believe that many of the bills pending now in the Senate
and House dealing with food and medicine issues should conform
to the principles I have just outlined. We do not believe that
those narrow bills dealing only with agricultural or medical
goods should substitute for or divert attention away from the
broader issues of overall sanctions reform before this
committee.
In sum, if our policies are to be effective, we must work
together, the administration and Congress, State and local
governments, the business community, and NGO's to see that our
use of sanctions is appropriate, coherent, and to attract
international support. We hope to work with those of you in the
Senate and the House who have an interest in this matter to
craft an effective Sanctions Reform Act this year, 1999, to
make our sanctions policy more credible and more effective.
Thank you again, Mr. Chairman, and I look forward to your
questions.
[The prepared statement of Mr. Eizenstat follows:]
Prepared Statement of Hon. Stuart E. Eizenstat
Mr. Chairman, I welcome this opportunity to share with you the
Administration's views on the use of economic sanctions as a foreign
policy tool. This hearing is a welcome initiative and can make a
lasting contribution in developing a consensus in this important area
of policy where both the Executive Branch and the Congress have clear
responsibilities. As a representative of the Executive Branch, I want
to assure you that the Administration stands ready to work with you in
the days and weeks ahead to seek an agreed approach on sanctions that
will advance the full range of American national interests.
The very cooperative and productive process we are currently
engaged in with your staff on the Serbia Democratization Act in
particular, Mr. Chairman, is a good example of the kind of dialogue
that should exist generally between the Administration and the Congress
on sanctions issues. It contains some of the elements of Presidential
flexibility that are important to the Administration, such as national
interest waiver authority.
In this spirit, let me also mention another important area where
working in bipartisan way we have been able to advance important U.S.
goals. I am pleased to refer to the report which the Department of
State is delivering today that was requested by you and this Committee,
Mr. Chairman, on implementation of the OECD Anti-Bribery Convention.
This Convention was a critical step sought by the U.S. for over two
decades. Your leadership and the Senate's swift action to give advice
and consent to ratification and to assure passage of U.S. legislation
were essential in this achievement. We believe this report will make a
contribution to ensuring that implementation of the Convention is
vigorous and meets our objectives in advancing international anti-
corruption goals we share.
I have testified numerous times on sanctions reform including
before the House Ways and Means Committee on October 23, 1997, the
House International Relations Committee on June 3, 1998, the Lott
Bipartisan Working Group on Economic Sanctions on September 8, 1998,
the Senate Agricultural Committee on May 11, a second time before the
Ways and Means Committee on May 27, and, most recently, on June 9
before the House Agriculture Committee.
A number of bills involving economic sanctions have also been
introduced into both Houses of Congress. These include broad
legislation such as the Sanctions Policy Reform Act, S. 757, and its
House counterpart, the Enhancement of Trade, Security, and Human Rights
through Sanctions Reform Act, H.R. 1244, and the Sanctions
Rationalization Act of 1999, S. 927. Others are narrower in scope,
addressing food and medicines, targeting specific countries or issues,
such as the Export Administration Act.
The Administration has a clear position, Mr. Chairman, on the role
of economic sanctions. Properly designed, implemented and applied as a
part of a coherent strategy, sanctions--including economic sanctions--
are a valuable tool for enforcing international norms and protecting
our national interests. At the same time, sanctions are a blunt
instrument. They are not a panacea nor are they cost free. Indeed, used
inappropriately, they can actually impede the attainment of our
objectives and come at a significant cost to other U.S. policy
objectives.
We face two fundamental issues in any discussion of this issue.
First is to achieve an agreed definition economic sanctions. Second,
there is no common measure by which we can assess success.
Some, drawing on broad definitions of sanctions, charge that there
has been an explosion in both our individual application of this tool
as well as in the number of laws mandating their imposition. The
National Association of Manufacturers in 1997, for example, estimated
that the U.S. has applied sanctions for foreign policy purposes a total
of 115 times since World War I, 104 times since World War II, and
according to the count of the President's Export Council, 61 times
since 1993. Others, for example in your recent article in Foreign
Affairs, Mr. Chairman, use a narrower definition, reject this charge
and cite only the comprehensive U.S. embargoes on North Korea, Iran,
Iraq, Sudan, Libya, Cuba and, more recently, Yugoslavia as real
sanctions. Permit me to say, Mr. Chairman, that the issue on which we
should focus is how to use this tool of foreign policy most
appropriately and effectively.
With respect to what constitutes a sanction, Mr. Chairman, there is
no uniformly applicable legislative definition, but when I speak of a
sanction, I have in mind the use of economic tools to address conduct
by foreign governments or entities that is harmful to U.S. foreign
policy interests. I do not include, for example, trade related
retaliation under our trade laws.
During today's testimony, I will speak to the full range of
measures that are sometimes placed within the rubric of ``economic
sanctions.'' Some include, for example, the denial of a normally
available benefit, such as access to the U.S. market on an NTR basis,
or the right to purchase U.S. goods or services or to attract U.S.
investment. The broad trade embargoes on Iran, Cuba, North Korea,
Libya, Sudan and Yugoslavia are undisputed examples. Some might also
include decisions about whether to offer U.S. support in International
Financial Institutions or conditions on U.S. aid that are imposed to
advance U.S. foreign policy objectives.
Just as there are differences over the definition of what we mean
by economic sanctions, neither do we have an agreed standard by which
to measure success. Some sanctions measures, such as denial of U.S.
Government aid or other positive benefits to countries which violate
international norms of behavior, can be relatively non-controversial.
As we move toward unilateral restrictions on exports of private sector
products, whether agricultural or industrial, widely available from a
variety of supplier nations, they become more controversial.
We employ economic measures to pursue a broad variety of goals--
national security, non-proliferation, human rights, environment, to
combat the scourge of narcotics, to enforce international trade rules
are but a few examples. None of these is a simple issue. The costs and
gains cannot be measured in dollars and cents on a spreadsheet.
Nevertheless, the American people do have a right to expect generally
that when we use economic sanctions, the specific sanctions measures
will have a significant impact on those targeted, that they can be
effectively implemented and enforced, that they will not cause more
collateral damage than the wrong they are trying to remedy, and that
due consideration is given to the potential adverse impact on other
U.S. interests.
One example should suffice. Sections 101 and 102 of the Arms Export
Control Act (Glenn Amendment) provide for the mandatory denial of
credits, credit guarantees or other financial assistance by USG
agencies to any non-nuclear-weapons state testing a nuclear device.
Non-proliferation is undeniably a critical and central goal of U.S.
foreign policy. In this particular case, however, the application of
that sanction to Pakistan would have cut off U.S.-Government guarantees
related to grain sales, hurting innocent Pakistani consumers, and
harming an already hurting U.S. farm sector. In this particular case,
the Congress reacted by exempting USDA guarantees from the application
of the Glenn Amendment. The use of economic sanctions almost invariably
involves a trade off between interests.
We believe that our use of sanctions should be governed by a number
of common sense principles and that any prospective legislation should
be measured against these same standards.
First, effectiveness should be our watchword. In fact, used
ineffectively, they can even make it more difficult to attain our goals
and come at a significant cost to other U.S. policy objectives. At the
same time, our emphasis in effectiveness should not lead us to expect
instant results or deter us from acting alone when important U.S.
interests are at stake. Indeed, this is why Presidential flexibility is
essential.
Second, unilateral economic sanctions should not be a first resort
to conduct by a foreign government which negatively affects our
interests. We should first aggressively pursue other available
diplomatic options. These can range from symbolic measures like
withdrawing an Ambassador, reducing Embassy staff, to denying visas to
target figures, entering into security arrangements with neighboring
countries, to military intervention and everything in between. In
general, we should turn to sanctions only after other options have
failed or have been judged inadequate or inappropriate.
Third, sanctions are most effective when they have broad
multilateral support. The history of our use of unilateral sanctions
shows that by themselves in the majority of cases they fail to change
the conduct of the targeted country or, at best, are a contributory but
probably not a decisive factor in securing the changes of behavior or
policy that we seek Multilateral sanctions in contrast maximize
international pressure on the offending state. They show unity of
international purpose. Because they are multilateral, these sanctions
regimes are more difficult to evade or undermine. They minimize the
damage to U.S. competitiveness and distribute more equitably the cost
of sanctions across countries. It was multilateral sanctions that
helped end apartheid in South Africa, that have isolated Saddam Hussein
in Iraq, that brought Serbia to the bargaining table in Dayton. When
considering sanctions legislation, we believe that the Congress could
include provisions urging the President to make maximum efforts to
develop multilateral cooperation with other countries having similar
interests in addressing the concern which the sanctions are intended to
address.
Nonetheless, if we are unsuccessful in building a multilateral
regime, and important national interests are at issue, we must be
prepared to act unilaterally. To maintain its leadership role, the U.S.
must sometimes act even though other nations are not compelled to do
so.
Fourth, flexibility of application is absolutely essential if we
are to use sanctions effectively. The fundamental principle underlying
our approach is one of symmetry between the two branches--Congress, in
short, should be no more prescriptive of the Executive Branch than it
is of itself.
Our foreign policy is most effective when it reflects cooperation
and consultation between the Administration and the Congress. The
decision to apply economic sanctions--or to lift or waive potential
measures or those already in place--should reflect a relationship of
comity between the Executive and Legislative branches. We must respect
the particular role that each branch plays in making foreign policy.
The Congress shares with the Executive Branch the responsibility
for helping shape our foreign policy. In the realm of economic
measures, Congress has a clear role which we respect. At the same time,
the President is responsible for conducting the nation's foreign policy
and for dealing with foreign governments. Thus, sanctions legislation
needs to take into account these respective responsibilities. Sanctions
legislation should set forth broad objectives but should allow the
flexibility to respond to a constantly changing and evolving situation
and give the President the necessary authority to tailor specific U.S.
actions to meet our foreign policy objectives. Legislation which seeks
to codify and mandate existing sanctions regimes which have been
imposed under existing authorities, however well intended and however
carefully drafted, cannot anticipate changing situations and thus
inevitably limits the President's flexibility and unnecessarily
complicates our efforts to deal with the situation which led to the
imposition of those sanctions. As Secretary Albright has said, there
can be no ``cookie-cutter,'' no ``one size fits all'' approach to
sanctions policy.
In any sanctions reform legislation we support a single national
interest waiver standard applicable to all future sanctions
legislation.
Our experiences with the Libertad Act (Helms-Burton) and the Iran-
Libya Sanctions Act (ILSA) underscore the importance of flexibility to
achieving the purposes of those acts.
In the case of Helms-Burton, the exercise of Title III waiver
authority led the EU in December, 1996 to enact and restate each six
months its Common Position on Cuba, tying concrete improvement of its
relations with Cuba to fundamental changes in respect for human rights
and fundamental freedoms in Cuba. The EU has spoken out more forcefully
in support of democracy and human rights. It has established a special
Human Rights Working Group among its Embassies to reach out to
dissidents and has condemned the arrest of the dissident working group.
Similarly, the prospect of an amendment to Title IV that would
authorize a waiver led the EU to agree to an Understanding to limit
investment in illegally expropriated properties worldwide, including in
Cuba. Mr. Chairman, when I set out to negotiate this Understanding, I
was mindful of your long-held personal goal of strengthening the
protection of U.S. property rights abroad, a goal that is shared by the
Administration and, I know, by others on this Committee. The
pathbreaking Understanding that we reached with the EU on May 18, 1998,
will, for the first time, establish multilateral disciplines among
major capital exporting countries to inhibit and deter investment in
properties that have been expropriated in violation of international
law.
These new restrictions will discourage illegal expropriations and
chill investment in Cuba, warning investors to keep ``hands off.''
Castro has railed against the Understanding, precisely because he
understands its potential impact on Cuba and because he sees that it
embodies the principles underlying Helms-Burton.
We recognize that some in the Congress have concerns about European
implementation of the Understanding. We believe that the Understanding
itself, coupled with a detailed letter from Secretary Albright to you
and the recent letter from Sir Leon Brittan to Chairman Gilman, should
go a long way towards addressing these concerns. But we are not asking
Congress to leave to chance the question whether the Understanding will
work. We have in mind an amendment that would authorize waiver of Title
IV for countries that are implementing the Understanding but that would
require revocation of the waiver if implementation is inadequate.
Secretary Albright has committed to you that she would not hesitate to
exercise this revocation authority. We want to work with the Congress
to craft an amendment to Title IV of the Libertad Act that will
implement the United States commitment under the Understanding in a
manner that instills confidence in the Congress.
Mr. Chairman, there is no other international instrument that does
for U.S. property rights what this Understanding would do. The
Administration and the Congress must work together towards an
appropriate amendment of Title IV so that our 1998 US--EU Understanding
can go into effect. If we do not, we will lose this historic
opportunity to hand a defeat to Mr. Castro.
Similarly, the flexibility included in ILSA--the ability to decide
whether to impose or waive sanctions--was central to our ability to
advance the objectives of that law. In developing ILSA, Congress was
motivated by its deep concern about the proliferation of weapons of
mass destruction (WMD) and terrorism and expressed its deep concern
about Iran. We used the Act's waiver authority to help consolidate the
gains that we had made with the EU and Russia on strengthening
international cooperation to oppose Iran's dangerous and objectionable
behavior. For example, the EU strengthened its already good export
controls on dealing with Iran. It helped us avoid a major dispute with
allies that would not have served the Act's objectives and would have
heavily strained our cooperation with our allies across the board.
With these general principles in mind, we have suggested an
approach to sanctions reform that we believe would be productive in
achieving improved discipline on the use of sanctions by both the
Congress and the Executive Branch.
We have proposed appropriate and flexible guidelines that the
Executive Branch would be willing to apply to future imposition of
sanctions under IEEPA as well as discretionary sanctions under future
sanctions laws passed by Congress.
First, we believe that flexibility accompanied by national interest
waiver authority applicable to all future unilateral sanctions
legislation is the single most essential element. The President should
be authorized to refrain from imposing, or taking any action that would
result in the imposition of, any unilateral economic sanction, and be
authorized to suspend or terminate the application of such a sanction
based on a national interest determination.
We agree that Congress should also have a role to play in this
decision. Thus, we have suggested that the President would notify the
Congress of his decision to exercise a national interest waiver and
that the Congress would have an opportunity to disapprove of the
exercise of the waiver using expedited procedures.
Second, it is important to prevent excessive procedural constraints
from hamstringing the Executive Branch, for example, advance public
notice of sanctions which could allow a target country or entity to
rearrange its assets in advance of U.S. action. We have expressed our
willingness to work with the Congress on appropriate requirements. We
cannot accept excessively prescriptive procedural constraints on the
President's flexibility to impose sanctions. In general, Congress--
which as a legislative body can always override previous legislation in
the sanctions area--should be no more prescriptive of the Executive
Branch than it is of itself. At the same time, we acknowledge certain
key issues of concern to sanctions reform supporters, particularly
including requiring that the Executive Branch conduct (and report to
Congress) a rigorous cost/gain analysis before sanctions are imposed,
and requiring some sort of sunset provision for sanctions measures.
The Administration agrees that such a cost/gain analysis should be
conducted, though there would need to be flexibility in deciding how to
proceed in any particular case.
Sunset clauses tied to a set time period rather than a measures of
a sanction's performance are not appropriate. Many objectives of
particular sanctions may not be achievable within a pre-ordained time
period. I know no Member of Congress would want to give the targets of
sanctions the ability to wait the United States out by imposing time
bound sanctions in every instance. As an alternative, Mr. Chairman, we
have suggested instead that the President could annually review our
specific sanctions measures and, depending on his review of the
continued effectiveness of such measures, determine whether they should
terminate. If Congress does not approve of the President's decision, it
could enact legislation of disapproval.
Let me turn briefly, Mr. Chairman, to the question of sanctions on
food, medicines, medical equipment and other human essentials. Many of
the bills proposed would impact on the President's ability to impose
sanctions on such items. On April 28 the President announced that the
Administration will generally exclude agricultural commodities and
products, and medicines and medical equipment from future discretionary
unilateral sanctions regimes, and will extend that same principle to
existing regimes where we have the discretion to do so. We were
particularly gratified, Mr. Chairman, for your own expression of
support for these changes.
At the time of that announcement, the Administration noted that
there may be compelling circumstances where this would not be
appropriate: for example, where the offending regime is using import of
foods and medicines as an internal political tool, where a regime or
its officials derive unjustified economic benefit from such imports, or
where we or our allies are engaged in armed conflict. The President
must be given the flexibility to tailor and use sanctions--including
sanctions on food and medicine--as appropriate in any particular
situation.
We believe that any of the bills dealing with this issue should
conform to the principles I have just outlined. We do not believe that
those narrower bills should substitute for or divert attention away
from the broader issue of overall sanctions reform.
In sum, if our policies are to be effective, we must work
together--Administration, Congress, at the state and local level, as
well as the business community, including NGOs--to see that our use of
sanctions is appropriate, coherent, and designed to attract
international support. We hope to work with those in the Senate and in
the House with interest in this matter to craft an effective sanctions
reform package in 1999.
U.S. FOREIGN POLICY TOOLS--AN ILLUSTRATIVE MATRIX OF SELECTED OPTIONS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
FRIENDLY PERSUASIVE HOSTILE COERCIVE
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
DIPLOMATIC (Executive) Embassy: Open/Expand State Visits: Support Embassy: Reduced Staff Embassy: Close
Ambassador: Accredit Sr Officials Exchange: Ambassador: Recall for Ambassador: Withdraw
Support Consults
Visas: Liberalize Hostile Neighbors/ Visas: Restrict to targeted Visas: Suspended
Opposition: grps
Landing Rights: Extend/ Minimize Contact Landing Rts: Restrict Landing Rts: Suspend
Expand
Binational Commissions: ..................................... Binatl Comms: Pare Back Binatl Comms: Suspend
Establish/Expand ..................................... Intl Org: Oppose memb/ Intl Orgs: Urge Exclusion
position
Intl Org: Support Membership/ ..................................... Intl Confs: Oppose spons/ Intl Confs: Urge Exclusion
particip
Support Position ..................................... Communique: Hostile State Visit: Cancel
Intl Conf: Support Spons/ ..................................... State Visits: Oppose Sr Officials Exchange:
particip Cancel
Communique: Friendly ..................................... Sr Officials Exchange: Hostile Neighb/opposit:
Restrict Expnd Contact
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
POLITICAL (Executive & Legislative) LEGISLATIVE EXECUTIVE LEGISLATIVE EXECUTIVE
Resolutions: Friendly Proclamation: Friendly Resolutions: Hostile Proclamation: Hostile
Codels: Increase State/Local Exchanges: Codels: Fact-Finding Opposition: Host Visit
Sister City Missions
NBD: Increase Funding Agreements, State Offices, NBD: Restrict Funding ....................................
Intl Parliamentary Orgs: Overseas Support Intl Parl Orgs: Oppose ....................................
Support
Participation/Position ..................................... Opposition: Increase Contact ....................................
Opposition: Minimize Contact ..................................... Arms: Cancel Trans/Boycott ....................................
Arms Transactions: Support ..................................... ..................................... ....................................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CULTURAL (Executive & Legislative) Aggressive Broadcasts: Peace Corps: Expand Aggressive Broadcasts: Academic Exch: Suspend
Increase
Decrease/Suspend Public Exchange: Estab/ Academic Exch: Restrict Intl Athletic Events: Urge
Expand Exclusion
Academic Exchange: Intl Cult Orgs: Support memb Intl Athletic Events: Oppose Entrmt/Cultural Tours: Ban
from
Establish/Expand Scientific Coop: Estab/ Participation/Sponsorship U.S. Entry/Urge Exclusion
Expand
Intl Athletic Events: Internet Sites: Expand Entertmnt/Cultural Tours: Peace Corps: Suspend
Support Oppose
Participation/Support Sponsorship ..................................... Participation/Sponsorship Publication Exchange:
Suspend
Entertainment/Cultural ..................................... Peace Corps: Restrict Intl Cultural Orgs: Urge
Tours: Suspension
Support Participation/Sponsorship ..................................... Publication Exchange: Scientific Cooperation:
Restrict Suspend
..................................... ..................................... Intl Cult Orgs: Oppose memb ....................................
..................................... ..................................... Scientific Cooperation: ....................................
Restrict
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
ECONOMIC (Executive & Legislative) Debt Rescheduling: Permit/ Trade Controls: Liberalize Debt: Tighten Terms Debt: Suspend
Liberalize Terms Double Tax Agrmt: Negotiate Investmt: Restrict Promotion Pref Tariff Treatment:
Suspend
Pref Tariff Treatment: Tax Treaty: Negotiate Bus Contacts: Discourage Regional Trade Agrmts:
Expand
Reg Trade Agrmts: Permit IFIs: Support memb/position Trade Missions: Pare Suspend Participation
Particip
Trade Credits: Expand Financial Controls: Relax OPIC/EXIM/IDA: Restrict on Trade Credits: Restrict
Investment: Expand Promotion Assets: Release Targeted Basis Investment: Ban
Bus Contacts: Encourage Postal Coop: Expand Trade Controls: Limited Business Contacts: Ban
Trade Missions: Expand Aid/Tech Assist: Increase (commod/product-based) Trade Missions: Suspend
OPIC/EXIM/TDA: Open/Expand ..................................... Trade Restrictions: Limited OPIC/EXIM/TDA: Suspend
..................................... ..................................... (commodity/product based) Trade Controls: Expanded
..................................... ..................................... IFIs: Oppose memb/position Trade Embargo
..................................... ..................................... Financial Controls: Increase Double Tax Agr: Suspend
..................................... ..................................... Aid/Tech Assistance: Tax Treaty: Suspend
Restrict
..................................... ..................................... ..................................... IFIs: Urge Exclusion
..................................... ..................................... ..................................... Assets: Freeze
..................................... ..................................... ..................................... Postal Coop: Suspend
..................................... ..................................... ..................................... Aid/Tech Assistance:
Suspend
..................................... ..................................... ..................................... G7 Sanctions Group:
Activate
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
MILITARY (Executive: Legislative Training (IMET/E-IMET): Peacekeeping Forces: Training: Restrict Training: Suspend
Maintain
Consultation) Increase Coop w/Hostile Neighbors/ Officer Exchange: Restrict Officer Exchange: Suspend
Officer Exchange: Increase Opposition: Restrict Military Coop: Restrict Military Cooperation:
Suspend
Military Coop (joint Local Maneuvers: Restrict Conf-Bldg Measures: Restrict Port Visits: Suspend
exercises/
training/tech coop): Increase ..................................... ..................................... Conf-Bldg Measures: Suspend
Port Visits: Increase ..................................... ..................................... Peacekeeping: Withdraw
Confidence-building ..................................... ..................................... Coop w/Neighbors/Opp:
Measures: Increase
Increase ..................................... ..................................... Local Maneuvers: Increase
..................................... ..................................... ..................................... Show of Force
..................................... ..................................... ..................................... Act of War
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Prepared by: Sanctions Working Group, State Department Advisory Committee on International Economic Policy.
Keys: IFI = International Financial Institution, OPIC = Overseas Private Investment Corporation, EXIM = Export-Import Bank, TDA = Trade and Development Agency, GSM = General Sales Manager
(USDA Export Credits).
The Chairman. Stu, I want to say again we are going to miss
you around this place. You will not be testifying before this
committee automatically.
Mr. Eizenstat. Any time you ask, you know I will be here.
The Chairman. Well, thank you, sir. Last night, the Senate
voted on Cuban sanctions and I think the proponents of the
amendment got something like 35 votes. I am sorry, 43. Well,
somewhat less than half. It occurred to me that everybody I
heard speaking in favor of that amendment was in a playpen when
Batista left Cuba, and out in the boondocks was a guy named
Fidel Castro, and the New York Times and Edward R. Murrow and
others praised him as almost a savior, and just an intellectual
who was going to come and save the Cuban people.
His name was Fidel Castro. Well, Fidel Castro finally came
in. He did everything that brutality will cover. First he took
all of his political opponents and put them in jail, shot a lot
of them, and he created mayhem, and the Cuban people are to
this day terrified, and I am surprised he got 43 votes on this
thing, because I was not in a playpen when Fidel Castro came
around.
Now, why don't we have 6 minutes.
Senator Biden. Seven is fine, Mr. Chairman.
The Chairman. If terrorist States want to use their money
to buy American wheat rather than make bombs, that is fine with
me, but some of the legislation that has been introduced will
make available subsidized goods to terrorist States, and that
means that Americans would use their tax dollars to fund
cheaper goods going to the very States that our Government
labels as terrorists. Now, what is the administration's
position on this?
Mr. Eizenstat. Mr. Chairman, when the President made his
announcement on April 28, we made it very clear as your
statement of support confirmed, that we were talking about
commercial sales, not subsidized sales. Many of the countries
involved, in any event, are under statutory restrictions which
precluded such subsidized sales, and our position is that we
should not be subsidizing terrorist countries to purchase our
products, so we are basing this on the notion of commercial
sales.
Now, obviously we are looking at what our competitors are
doing as well in terms of their export credits, and we will
continue to look at that, but our policy is that sales ought to
be in a commercial basis and not subsidizing the target
country.
The Chairman. Well, maybe there are some in the Senate, and
I am not one of them if there are some, maybe there are some
who have time to do their own econometric studies of the cost
of sanctions to the U.S. economy. I am forced to rely on
outside sources whom I respect, and the question is, which
source can you believe?
Now, depending upon who is doing the talking and the study,
the numbers are all over the place. Some say that the cost of
sanctions is in the tens of billions of dollars. On the other
hand, I have seen reports by the Congressional Budget Office
and the Congressional Research Service and the Department of
Agriculture saying the cost of sanctions is a tiny percentage
of national income. Now, who do you think is right? How much
does it cost?
Mr. Eizenstat. Well, that is a good question, and again, in
part it depends upon how one defines a sanction. The broader
definition, I think the CBO's estimate was a loss of some $27
billion. We have not done an estimate ourselves for the
administration on the cost. The costs are there.
We think again the important thing is not to focus on the
precise dollar amount and get into an extended debate about
whose statistics are right. We know that there are lost sales
both in the agricultural community and in the business
community, and we also know that sanctions have merits in many
cases, and it is that balance that we need to make, and so I
think that rather than try and come up with a specific
quantitative figure, we know that there are certainly billions
of dollars of lost sales, and that the crucial issue is to work
with you and with the committee to try to make our sanctions
more effective and more cost-effective.
I think that we also have to remember, Mr. Chairman, that
as we go into the 21st century we increasingly do not have a
monopoly on any product. One of the things I learned back in
the Carter White House when we tried to impose a grain embargo
on the Soviet Union for their invasion of Afghanistan was that
when you are dealing with a fungible commodity like wheat
grain, that there are many other countries, in that instance
Argentina, more than willing to fit in, so we have to always
make sure that we are balancing the costs and the gains.
We know the costs are there, and rather than try, again, to
give you a specific dollar figure, we know there are costs, and
we should measure those costs in a specific case against the
likely gain of imposing the sanction, and that is the kind of
framework that I think we are best and most appropriately
engaged in.
The Chairman. Now, if I ask you a question it will run
over, so I will recognize Senator Biden.
Senator Biden. I would yield to Senator Sarbanes and then
follow Senator Lugar.
Senator Sarbanes. I want to thank Senator Biden for his
courtesy. I have an engagement to go to, and I did want to put
a couple of questions.
First of all, Mr. Chairman, I should observe that, you
know, the Deputy Secretary of the Treasury deals with a number
of issues that are relevant to the concerns and jurisdiction of
this committee, so I think we have a perfectly legitimate basis
to bring Mr. Eizenstat back before the committee on future
occasions, and I look forward to us doing that.
Mr. Eizenstat. It will not take a lot of arm-twisting.
Senator Sarbanes. The Congress takes the view toward a
particular country in terms of limiting or restraining the U.S.
dealings with it. The executive differs. Now, if we provide a
national interest waiver, in effect the executive can simply
negate the congressional judgment, could he not?
Mr. Eizenstat. Well, if you build in, as we are suggesting,
into the national interest waiver a requirement for notice and
expedited disapproval by the Congress within constitutional
processes, then we think that we have got the kind of balance.
Congress speaks in the area of foreign policy. It makes a
statement of what it thinks should be done. It recognizes that
the President in the end has to balance a whole range of
interests, impact on our allies, impact on our domestic
interests.
Senator Sarbanes. Would that congressional disapproval be
subject to a veto?
Mr. Eizenstat. Yes, we believe it should be.
Senator Sarbanes. So you in effect allow the executive, and
one third of one body of Congress, to determine the policy,
even though a substantial majority in both Houses may, in fact,
be in favor of a different policy.
Mr. Eizenstat. Yes, that is true, but as you know, there
are limits to what Congress can do.
Senator Sarbanes. I understand that, but I think the tool
you are suggesting falls short for that reason. Let me give you
another example.
Mr. Eizenstat. If I may say, Senator, if we do not, then
you put the President in the position, as we were with the
Glenn amendment, where we are completely in a straightjacket.
We have no diplomatic movement to try to leverage the action of
the target country.
Senator Sarbanes. Well, you can make that argument before
we pass the measure, and it may be heeded and paid attention
to. If not, if the difference in perception on the part of the
Congress and the executive is so wide, you would have to come
back to the Congress.
In fact, you did that on the Glenn amendment, and the
Congress quickly allowed agricultural commodities to move
forward.
Mr. Eizenstat. Yes, but it then took the Brownback
amendment still further for us to make more progress in getting
Pakistan and India to make commitments to sign the
comprehensive test ban.
Look, we are dealing in an area here of great
constitutional----
Senator Sarbanes. Of course, that amendment now has lifted
the sanctions altogether, so you cannot even impose them.
Mr. Eizenstat. No, it did not do that. That is what the
Brownback 2 proposal was.
Senator Sarbanes. What do you think of that?
Mr. Eizenstat. We much prefer to have broadbased national
interest waiver authority, rather than having it lifted all at
once, because if it is lifted all at once, then we also lose
leverage on the other side, and that is again----
Senator Sarbanes. I am just trying to develop the
continuum. First of all, do you regard the limitation,
restriction or the conditioning of foreign aid as a sanction?
Mr. Eizenstat. Well, we would like to work with this
committee in terms of an actual definition, but obviously the
country who is denied what is otherwise being applied feels it
is.
Senator Sarbanes. So they regard foreign aid as an
entitlement, that if conditioned is an intrusion into a
relationship that is otherwise normal.
Mr. Eizenstat. I do not think anyone views it as an
entitlement. We obviously are subject to appropriations, and we
make that clear, but there is a certain reliance that has been
built up.
Senator Sarbanes. Suppose you come to us and ask to give
foreign aid to a particular country and we say that we do not
want to give foreign aid to that country unless certain
conditions are met. Suppose you say, ``No, we want these
conditions to be subject to a waiver.'' This would allow you to
waive the conditions and make the aid available.
Mr. Eizenstat. When we have our foreign aid bills we do not
suggest putting in waiver provisions in foreign aid. We try to
work out with the Congress in the foreign appropriations bills
conditions we can live with, and which the Congress can live
with.
Senator Sarbanes. If you can, you would have a national
interest waiver on the aid, as I understand your proposal.
Mr. Eizenstat. We have not suggested that in foreign aid
bills we put a national waiver.
Senator Sarbanes. Would this waiver that you are talking
about extend to foreign aid?
Mr. Eizenstat. We would like to work with you on those
things to which it would extend, but we think that in terms of
the traditional appropriation process, that putting into that
process national interest waiver authority is not necessary, if
we can work out in traditional ways that we normally do
conditions that are acceptable on both sides.
Senator Sarbanes. You are sliding off of the question, and
my time has expired. I will have to pursue this at another
time, because I do not think your response really takes that
question head-on.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator. Senator Lugar.
Senator Lugar. Thank you very much, Mr. Chairman.
Secretary Eizenstat, last week a Federal appeals court in
Boston affirmed the district court's ruling that the
Massachusetts Burma law was unconstitutional. Can you give us
the administration's view on this case, and that decision?
Mr. Eizenstat. We have not been a party to that case, and
we have not taken a formal position, but I would like to speak
generally to this issue, and I appreciate the opportunity.
We understand the concerns and frustrations that often give
rise to State and local sanction measures. A number of
governments around the world engage in conduct such as the
abuse of human rights in Burma that stirs public indignation
and prompts calls for a strong Government response. Our Burma
policy seeks improvement in three areas, human rights,
democracy, and counternarcotics, and this country frankly,
going back to 1989, has taken a leadership role in trying to
implement strong sanctions with respect to Burma.
At the same time, we are concerned about specific measures
that States have promulgated to voice their concerns. While the
intentions are good, the means can be either ineffective or
counterproductive. We have learned that the best way to create
positive change is through multilateral coalitions, and it is
difficult enough for the U.S. to have impact alone. It is even
more difficult for individual Sates to have an impact.
Other Governments react strongly to State and local
sanctions, and this aversion often shifts the focus of
conversations with our allies from the target country's
behavior to the foreign Government's objection to the
sanctions. Our trading partner's objections are even stronger
when they think the sanctions are inconsistent with our
international obligations.
That is why we think it is important for the Federal
Government and State government to cooperate closely on these
kinds of issues, and we are working hard toward this end. It is
important that we speak with one voice on foreign policy.
Senator Lugar. Well, I would agree with that, obviously. We
have all been talking about the sanctions issue largely in
terms of Federal legislation. I think the Burma case is
representative of a huge number of sanctions adopted by State
and local governments, and they are out there on the books now,
even some with regard to apartheid in South Africa that people
forgot to repeal.
Now, whether they were college boards or local councils,
what-have-you, which illustrates another basic problem in the
sanctions area, to what extent is there a constitutional
problem here, and maybe this will arise as the Burma case is
appealed, as it may be, or if the administration takes a view
on this, as to how this coordination is ever going to occur if,
in fact, groups of people throughout the United States adopt
foreign policy considerations of this sort, notwithstanding
anything the Federal Government is doing? Do you have a general
view as to how this ought to be pursued, what the
administration may do about it?
Mr. Eizenstat. Yes. We have tried to have, Senator, an
outreach effort to State and local governments. We met with the
National Governors Association. We have met with individual
States to encourage them to understand what our Federal policy
is in a particular areas such as Burma, and to make sure that
their policies are consistent.
For example, with respect to Burma, we carefully crafted
our Federal sanctions so that they would not have an
extraterritorial effect, they would impact only U.S. companies,
and it is important that other States, if they are going to
act, act in ways that are commensurate with that and not
contrary to it.
Senator Lugar. But you would still leave open the though
that State and local governments should have the power to go
into the economic sanctions business?
Mr. Eizenstat. Well, again, this is ultimately an issue for
the courts to decide. There is certain procurement authority
that States have that could be exercised, but again, we think
it has to be exercised within the context of the ultimate
constitutional responsibility of the executive branch and of
the United States to exercise foreign policy.
Senator Lugar. The Sanctions Policy Reform Act, S. 757,
that I and 38 other cosponsors have had in this Congress is
well-known to you, and you have worked with us on many of those
aspects.
Let me just mention, in your testimony today you have said,
we have proposed appropriate and flexible guidelines, and those
you have done in your statement. I would just encourage you, or
those in the administration who are working on this, to be
equally helpful with actually legislative language.
We have talked about this privately and publicly before,
but if there is to be some type of consistent cooperation as
this is drafted between the administration and Senators, that
administration language really is very important so that we do
not keep talking around the subject just in terms of
guidelines, and we really get down to the nitty gritty of the
issue. Can you give us any idea as to when the language might
be forthcoming, or why there has not been any language?
Mr. Eizenstat. Well, first, you are bringing coals to
Newcastle on this issue. We are working very hard on language,
and I am hopeful that that will be available in the timeframe
that this committee is working on its legislation so that we
can provide the most specific guidance possible.
Senator Lugar. Thank you very much. Thank you, Mr.
Chairman.
The Chairman. Senator Biden.
Senator Biden. Thank you, Mr. Chairman.
Stu, I would like to pursue very briefly in the time I have
where Senator Sarbanes left off.
You know this place. You have been around a long time. You
are very sophisticated, and you know how the political process
up here works. I doubt whether you disagree with what I am
about to say.
I think you have zero possibility--let me emphasize, zero
possibility--of getting a national interest waiver that is
uniform, that applies to all current sanctions, that would
essentially give you the ability with one-third plus one in
either House to lift sanctions, and because of that I worked
very hard on a proposal that is slightly different than what is
in the major bills out here.
Senator Dodd, Senator Lugar, and others have major
initiatives in this area where there is a way to get around
Chadha, and the way to get around Chadha is for you to have an
expedited procedure in the Senate whereby your national
interest waiver must be voted on to be approved by the Senate
and the House. You get your vote.
In my experience here after 27 years, the single most
important thing to get is the opportunity to debate the issue
in the open, so that the press, so that all the interested
parties are able to see it in the cold light of day, and it has
a tendency to uncover the lack of substance of the arguments of
the opponents or proponents when that occurs.
The admitted problem in that is that there is no way under
the House rules, and I do not fully understand the House, and I
am not being facetious when I say that, there is no way to get
an expedited procedure for such a vote in the House.
But I would suggest that you--I am not looking for an
answer now, but you look at that as a potential fallback
position, because I will be very, very, very, very surprised if
you get legislation out of here that allows for a national
interest waiver to be automatically implemented subject to the
Congress disapproving, which, as you accurately point out,
under Chadha cannot be a single House veto.
It is an institutional argument that I think is of
significant consequence. I happen to agree with the substance
of what you are attempting to do, because I happen to agree
with the policy of this administration, but from a
constitutional perspective I think that would be a serious,
serious mistake for the U.S. Congress to institutionally yield
on that point, and I am not asking you to respond.
In fact I would ask you to refrain from responding because
my time is about to be up, but let me go to a specific
question. I just want you to consider what I have said.
What I would like to do, though, is ask you the following
two quick questions in the time I have left. In my experience
here, and I was not quite in the playpen but I was close when
things were happening in the hills in Cuba, but in my
experience since then, unrelated to Cuba, it is not so much
that the American business and American enterprise complains of
lost sales. The damage done to them is in lost markets. Once a
sale is lost, oftentimes a market is lost.
Let me be very parochial and talk about chickens. It is a
big deal in my State, a $1 billion industry on the Delmarva
Peninsula. When sanctions are imposed, or when we are stiffed
somehow in, say, the Middle East, what happens, instead of
selling Delmarva chickens or Arkansas chickens or southern
chickens, there is a lost sale, and that is real.
But then what happens is, the market is replaced. You get
new sellers into that market, and then when the sanction is
lifted, you are dealing with fighting to get a market back, and
that is--so it is the lost market down the road that has the
greatest negative impact, in my view.
Which leads me to my question, and that is that one area I
think in order to answer the question of the Senator from
Indiana about the States, I think as a part-time teacher of
constitutional law there is no question the States are
prohibited from being engaged in this activity, and in my view
the Federal court is correct.
But it is going to rest or fall upon my initial comment to
you in my opening statement, and that is, what constitutes a
sanction, and is a sanction something that relates to the
conduct of foreign policy, and so along that line I am going to
submit in writing to you, since my time is out, and I
apologize, I must go out to Bethesda, but the Export Control
Act, is that a sanction? Some in my business community argue
that is a sanction, imposing controls on exports. I do not see
it that way. Is our foreign military sales and the way in which
they work a withholding of and are they sanctions? Is foreign
aid a sanction?
You gave somewhat of an answer to the Senator from
Maryland, but with all due respect I think you waffled a little
bit, understandably, on the specific question, so as we go
through this process you are going to continue to be, because
you know more about this issue than anyone in the
administration, notwithstanding you are going to be number 2 at
Treasury they are going to still keep looking to you here for
the resolution of this, and working with us.
And so I respectfully request that you consider (a) some
option between the introduction of a broad-based waiver
mechanism and the veto; (b) what constitutes a sanction and,
(c) whether or not this sunset notion is maybe the only
rational way to do this, even though I understand the
limitation it places upon you.
So again, I know we are going to have plenty of time to
talk about this, and I apologize for using my entire 5 minutes
to raise questions you have not had a chance to answer, but I
think this is a very important subject, and unless we determine
what constitutes a sanction and we determine a way to get
around somewhere between no national interest waiver and a
national interest waiver that implicates the entire
constitutional process, I am not sure we are going to make much
progress.
Mr. Eizenstat. Senator, if I may, first on your first
point, and you talked about you would be surprised. I have
always made it a hallmark of my public service never to
surprise the Congress. This is one case I hope you will be
surprised, because there are frankly many statutes on the books
that have national interest waiver authority. The Helms-Burton
Act, title 3, sections 9(c) and 4(c) of the Iran-Libya
Sanctions Act. As I mentioned to Chairman Helms, we worked very
closely on the Serbian----
Senator Biden. If I may interrupt you, that is true. That
is because Congress decided in that particular instance it made
sense.
What you are talking about and what we are talking about is
rationalizing the policy for all sanctions legislation.
Mr. Eizenstat. But these waivers have been used very
effectively by us to leverage conduct by the target country in
each of the instances. In Senator Helms' legislation we were
able to get the European Union to take a much higher view on
human rights than they otherwise would have----
Senator Biden. There is no question about that.
Mr. Eizenstat [continuing]. Without an expedited procedure.
We are suggesting an expedited procedure. And second, with
respect to the definition, you are quite right, if I had a
definition in my pocket I would have given it to you, and to
Senator Sarbanes. We do not.
I would say that in S. 575 that Senator Lugar has worked
very hard on a definition. We are not at this point prepared to
endorse it line for line, but it is a good faith effort to
begin that effort, and we are not suggesting that every
withholding of a benefit, or, as you would call it, an
entitlement is necessarily a sanction, but I believe we can
come up with an agreed definition of what a sanction is.
Senator Biden. I agree, and I am saying it is necessary to
do that. That is my point.
Mr. Eizenstat. I will also say with respect to States, and
you mentioned, as Senator Lugar did, you know, in dealing with
the Burma situation there is no question but that there was a
complication in our ability to get the European Union to
cooperate because their focus was on, instead, dealing with the
State action, so this is an area, again, where there is a lot
of need for dialog.
The last point, this whole issue, as we have seen from your
question, from Senator Sarbanes' and from the chairman's and
from Senator Lugar's, is an area where there is overlapping
constitutional authority. That is what our Founding Fathers
wanted. That is the genius of our whole Constitution, and
therefore we each have to be respectful of the prerogatives of
the other branch.
I am not sitting here in any way saying to you, you have no
right to pass sanctions. That would be ludicrous. That would be
inconsistent.
At the same time, the President as Commander-in-Chief at
the end of the day has to implement that foreign policy. He has
to make the balances between competing interests, foreign and
domestic, and if he does not have the ability, we call it
national interest waiver authority to make those kinds of
adjustments, then you put the President, any President in a
diplomatic straightjacket, which no Congress would want to do.
Last point.
Senator Biden. Some Presidents we would. Let's get that
straight. Let's not kid each other. The answer is yes, some
Presidents.
Mr. Eizenstat. But constitutionally that would then in
effect I think violate the whole concept of mutual respect for
the respective responsibilities, and that is what I am urging
in your drafting the legislation, to be respectful of each
other's constitutional responsibilities.
Senator Biden. I am way beyond my time. The struggle is,
who gets to impose the sanctions, not the conduct of foreign
policy generally. That is the struggle, I respectfully suggest
here, but that is another issue.
The Chairman. Senator Hagel.
Senator Hagel. Mr. Chairman, Thank you. I wish to add my
thanks, Mr. Chairman, to your willingness to spend some time on
this issue.
I believe--and the general issue of sanctions is one of the
most important issues that we will deal with over the next few
years, and not just because it deals with the immediacy of cost
and cost benefit, and whether we sell our ag products or our
medicines, and how that relates to foreign policy, but in a
world--and, Mr. Secretary, you said it exactly right--that is
in fact interconnected in every way, there is no such thing
that I am aware of today, and I believe you alluded to this in
your testimony, where one product is now a captive of the
American system, meaning, of course, as you said it, that we no
longer have a unique monopoly on products as we once did.
The world has changed in a way that we are all still trying
to process, and the rate of that change is almost incalculable
as you know so well every day. If that is the case, or if it is
halfway the case, and I believe it is the case, then we are
going to have to adjust our policies to these new challenges.
The question that Senator Sarbanes asked of you about cost-
benefit analysis, which is part of the Lugar bill, as you know,
is a relevant one for many reasons, but what we do not see in a
good amount of this analysis, and Senator Biden is starting to
get into it, Mr. Secretary, is what I call the layers of loss
here.
Obviously, we can measure some loss in the immediate cost,
or loss of sales, but the next layers down, which concern me
quite honestly more than anything else on the sanctions issue.
For example, not only the market share, as Senator Biden
mentioned, but then you take the next layer.
We then become known as a Nation or an industry that is no
longer a reliable supplier of whatever the product is, and
representing a farm State, you mentioned the grain embargo. We
still have not recovered from that action. Those markets cannot
trust us.
Then there is another layer of jobs, and then there may be
the most important layer that we lose, which brings me back to
my original point, and that is the unintended consequences of
what we are doing here, which apply directly to R&D.
One of the main reasons that we are the No. 1 nation, the
leader in the world, is because of our immense continuation of
investment into research and development, and now we are not
only dealing with sanctions policy, which is appropriate, but
we, as you know, this Congress is looking at reauthorizing the
Export Administration Act, tightening down--I hope we do not,
but certainly the momentum is moving in a way that we are going
to further tighten down our computer sales, our satellite sales
and other dynamics, moving them out of commerce, putting them
on munitions lists, and the consequences that this is going to
have long-term for this country I believe are incalculable. I
am surely not wise enough to sort that out.
Now, with that said, and I think you and I know where I
come from rather directly on this issue, let me ask you a
couple of just general questions here, Mr. Secretary. The two
main focuses that you put into your testimony as to where you
think the priorities are for any new sanctions policies that we
would not only entertain and develop and maybe pass up here,
one surely had to be flexibility, giving the President
flexibility that he would need, and I agree with that, and of
course effectiveness.
One of the points that you made as you talked a little bit
about food and medicine was that there might be, and I
paraphrase this, Mr. Secretary, there might be an occasion
where you could see a continuation of sanctions on food as a
result of a unilateral sanction. Could you give me an example
of where you think that might still be important, and why?
Mr. Eizenstat. Yes, sir; first of all, in the President's
April statement, which again we very much appreciate Chairman
Helms supporting, the President made it clear he wants to shift
the presumption, and the presumption ought to be that with
respect to humanitarian products, food, medicine, that they
would not be subject to sanction or embargo even with respect
to rogue States, and the reason for that is that first, that
does not hurt the regime. Often, it hurts average people.
Second, it gives the regime the opportunity to try to make
a point at our expense that we are trying to hurt the average
citizen in their country, and so it often is counterproductive.
And third, that it denies our farmers the opportunity to
sell to a country where our competitors are selling without any
constraint.
Now, at the same time, while this shifts the presumption,
there still needs to be a case-by-case, or at least a country-
by-country determination. We are in the process now, and in the
final stages of drafting our regulations dealing with this kind
of country-by-country issue, and I will give you specific
examples of when it might still be in our national interest not
to sell food, although again the strong presumption should be
that you should be able to sell food.
For example, if we were selling to a country with which we
were in armed conflict, I mean, we were in actual armed
conflict, suppose we were 3 weeks ago with Kosovo, I do not
think anybody would suggest that in the midst of bombing
Belgrade we would start shipping food to Belgrade.
On the other hand, as the President said recently, now that
we have a peace accord there, even though we have grave
problems with Mr. Milosevic and we are working with the
chairman on appropriate Serbian sanctions legislation, there
may be some reason for humanitarian sales of food.
A second example would be if we have an instance of a
regime that is monetizing the food. It is taking it, instead of
giving it to its citizens, and just selling it on the market
and putting the money in its pocket.
A third example is if we were to sell it to an entity that
was part of the coercive mechanisms of the State.
So those are all examples of why we do want to have in
general the opportunity of selling, and it was a major step
forward to say we are going to generally remove food and
medicine from sanctions, but at the same time there are
instances, as I have just indicated, when one would want to be
careful about the food situation, and keep some degree of
control. We hope it will be light, it will be efficient. We
have reached out to farm groups to make sure that the licensing
procedures will not be bureaucratic, and we believe that the
regulations which will come out shortly will be one that the
agricultural community is very pleased with.
Senator Hagel. Thank you. Mr. Chairman, thank you.
The Chairman. Senator Grams.
Senator Grams. Thank you very much, Mr. Chairman. I think
this is a very important hearing we are holding, and most of
the questions have already been asked, so I am not going to
reask those, but I think it is very good that this committee,
and the fact that you are here, Mr. Secretary, to talk about
this, and the administration's involvement, that we do need to
have some revisions on how we impose sanctions or embargoes on
whatever commodity or product it might be, and against whatever
country, or for whatever reason.
And sometimes it's been done probably with little thought
of why it was being imposed. It might have been a good
political vote at home sometimes, but in reality it has caused
a lot of problems for many workers, many parts of our economy,
et cetera, and I think the Lugar sanctions, taking into account
some of the consequences of these sanctions or embargoes, is
very important, and also the Ashcroft-Hagel bill, looking at
what you just talked about, looking at food and medicine and
other commodities, so this is going to be a tough issue to look
at, but it is something that is very important.
Like I said, most of the questions have already been asked.
I would just ask one question, and that is dealing with
sunsetting of some of these and where the administration
stands. We have had sanctions and embargoes on some countries
for as long as 40 years, nearly.
Is there a place where sunsetting should be--not
necessarily that the sanction would be removed at, say, a
certain period of time, but at least to force the Congress and
the administration to come back and address it and update it,
and see if the situation has changed, or maybe the embargo or
sanction should be modified or raised, but I think sunsetting
would put that pressure for review on both Congress and the
administration.
Mr. Eizenstat. Thank you, Senator Grams. That is a very
important issue. Let me say first in general that if our
unilateral sanctions are proven over time to be ineffective,
then rather than a show of strength for the United States, it
can often be interpreted as a sign of weakness.
At the same time, we think that one should not put a
precise timetable on the effectiveness of the sanction, and
that there are sometimes overwhelming national interests that,
for example with Iran, or with Cuba, where even though one
would have difficulty showing effectiveness in the traditional
sense, there may be other reasons. But in general effectiveness
ought to be the litmus test.
Now, sunset is a way of dealing with the issue of
effectiveness, and what we were suggesting is that in drafting
legislation, rather than saying that every sanction shall
terminate within 1 year or 2 years or 3 years if it is in
position, better to direct the President, and we are willing to
be so directed, to say that each year he has to give an annual
review and submit to the Congress a statement of why an
outstanding sanction remains effective and important to the
national interest.
And you could then have the opportunity, perhaps again
under an expedited procedure of overruling that, if you wish,
but it would at least put the President and, indeed, the
Congress on notice that each year you are going to take a look
at this and you are going to try to review it.
Senator Grams. Thank you, Mr. Chairman.
The Chairman. Senator Ashcroft.
Senator Ashcroft. Mr. Chairman, I want to thank you very
much for holding these hearings. You are well aware of my
interest in sanctions and sanction reform, and you even allowed
me to hold another hearing, and I express my appreciation to
you.
In the interest of the time I would like to submit a
statement for the record and then just ask a question or two.
The Chairman. Certainly, without objection.
[The prepared statement of Senator Ashcroft follows:]
Prepared Statement of Senator John Ashcroft
Mr. Chairman, thank you for holding this hearing on the role of
sanctions in U.S. national security policy. I have been active in one
particular area of sanctions reform, and my record in seeking to limit
the use of embargos against food and medicine is well known. You were
kind enough to allow me to hold a hearing in May specifically on U.S.
sanctions policy on exports of food and medicine.
While agricultural products and medicine should not be used in our
sanctions policy, except in the most dire circumstances, sanctions
generally play an important role in U.S. foreign policy. Without the
use of targeted sanctions, there is often little middle ground in our
diplomacy between the option of using military force and the option of
doing nothing to advance our national interest.
The outcry against sanctions has been deafening in the past year.
As the Chairman of this Committee recently pointed out in an article in
Foreign Affairs, however, statistics regarding a ``sanctions epidemic''
are overblown. Critics of sanctions have said they are not effective,
but I would challenge those critics to ask Slobodan Milosevic or Saddam
Hussein how effective sanctions have been.
This Committee recently completed its review of Richard Holbrooke
to be the U.S. Representative to the United Nations. Mr. Holbrooke
notes repeatedly in his book ``To End a War'' how sanctions on
Yugoslavia were essential to push Mr. Milosevic toward peace
negotiations on Bosnia. What we need to emphasize in the case of
Yugoslavia is that effective sanctions saved American lives. Our forces
are now deployed in the Balkans, and whether we agree with their
presence there or not, sanctions helped advance American policy without
constantly resorting to the use of military force.
With regard to Iraq, the Administration has acquiesced as sanctions
against that country have been weakened, but the sanctions regime
against Iraq--at least until recently--has been very effective in
restraining Saddam's repressive government.
As the cases of Yugoslavia and Iraq demonstrate, sanctions are
effective when used prudently and should be maintained as a useful and
necessary tool of U.S. foreign policy. Sanctions reform is needed in
several critical areas, however, particularly with regard to unilateral
U.S. embargoes on the export of our agricultural products.
A unilateral embargo against the sale of U.S. agricultural products
is bad farm policy and bad foreign policy. I have spoken often of the
commitment made by Congress three years ago in the Freedom to Farm
Bill. In the face of declining government financial support, we
promised to create ascending opportunity for our farmers by removing
domestic and foreign barriers to U.S. farm exports.
In fulfilling this pledge, we must confront foreign trade barriers
to U.S. agricultural products aggressively, but also remove unilateral
export embargoes that punish U.S. agriculture. Some foreign barriers
amount to speed bumps on the road to free trade, but a U.S. unilateral
export embargo is a brick wall our farmers cannot overcome. Unilateral
embargoes on our agricultural products create an environment of
descending opportunity where U.S. agriculture cannot compete
effectively in the international arena.
Mr. Chairman, I appreciate your work on U.S. sanctions policy. I
certainly agree with you that sanctions are a useful and necessary tool
to advance our national interests, particularly in containing those
countries which threaten U.S. national security. Sanctions should be
applied in a prudent manner, however, and punishing our own farmers and
workers through ineffective sanctions is irresponsible foreign policy.
Thank you again for holding this hearing.
Senator Ashcroft. I want to followup on a question that
Senator Hagel asked, and he asked about your suggestion of when
it would be that maybe food would be appropriate, and you said
that when a country is monetizing the food, and I guess I have
not been around long enough to understand how this would work,
but it seems to me that a country could either sell food for
more than it paid to us for the food for a profit, at which
time we ought to ask ourselves what in the world are we doing
selling food below the market price.
I do not know of a single farmer in my State that wants to
sell food to a rogue nation below the market price. I do not
really see that selling, monetizing food is a way to get rich.
The other way that they might monetize it is to sell it for
exactly what they paid for it, which you would assume would be
the world price, but would they be involved in the
transactional costs, so it would actually cost them and occupy
their government in transacting food. As a matter of fact, if
we can get these people to spend enough of their time and
resources just passing food through the system at no profit,
they will probably be less of a problem to us.
The last option, it seems to me, in terms of price would be
that they sell the food to monetize it for less than they gave
us for it, and if we can just pump them enough food at that
rate so they sell it for less than we gave it to them, we will
win that war in a hurry. We will drive them into bankruptcy.
I guess I am just not seeing this clearly. It seems that
the three options, they either sell it for more than they paid,
which we ought to have our head examined for not having sold it
at the market price to begin with. If they sell it for an equal
amount, that is a slow death. If they sell it for less than
they paid us for it, that is a fast death.
And the last two options hurt the country rather than help
the country, and it seems to me that to lift the sanctions
would be actually to press our advantage rather than to impose
the sanctions, which would be to keep them from injuring
themselves by selling at a loss or by selling at transactional
costs, which would impair their other objectives.
Can you comment on that?
Mr. Eizenstat. Sure. First, I think your point is
absolutely well-taken. When I was talking about monetization, I
was using that as an argument not to sell at subsidized levels.
If it is a commercial sale, you are absolutely right.
Another example, however, of when one would want to be
careful about the food situation is if you had evidence that
the rulers, instead of allowing the food to come to their
people, were diverting it for their own use.
Senator Ashcroft. What do you mean by that? If we are
selling hundreds of millions of tons, and they take their
capital and they eat a lot of rice, or do they just store it,
and if they immobilize their capital by storing vast sums of
food, it seems to me there are fewer weapons they can buy, and
fewer things they could do with their resources to destabilize
their circumstance or otherwise oppress individuals.
Mr. Eizenstat. Well, first of all you are pushing on a very
open door. I mean, that is why we did our policy in April, is
so that we would begin to sell. I was asked the question, are
there any instances when you would still not want to do so, and
for example, there is some evidence that food is used as an
internal political weapon in Iraq, in terms of who gets the
food, in terms of keeping it away from the Kurds, for example.
That would be something we would be concerned about, if it were
used to strengthen a regime, if there were under the table
payments.
Senator Ashcroft. I would like to know exactly how that
would work. I mean, if we would send them a lot of food that
they would keep away from the Kurds, it would mean that they
would immobilize a lot of the capital.
If just keeping it away from the Kurds meant that they
stored the food, I think that is an interesting sort of thing,
that they want to immobilize the resources of their culture so
that maybe hungry people can salivate over this warehouse, but
that would probably be against their long-term interests, to
take their capital, especially hard currency necessary to buy
food in a world marketplace, and to do that, to warehouse food
sort of in spite--I mean, I would like to know how that works.
Mr. Eizenstat. Saddam Hussein is not logical, and it is not
a question of warehousing food, but if he used the food for
those elements of society which he thought would be beneficial
to him, and kept it away from those he thought might not, then
that is an example.
I think we are in complete agreement on our general policy,
and we very much believe that food in general should not be a
weapon. I am only saying there may be instances where we are in
armed conflict, for example, where you have this kind of
diversion, where you just want to be careful. That is all.
Senator Ashcroft. Even the idea that he has less than
enough food for everyone so that he favors his--or the limited
few, it seems to me that would be an argument in favor of
increasing our exports so that he either immobilized his
capital by warehousing the food he was going to deprive people
of that he had in his possession, which would be a bad decision
by him, or if he had the food and he had to start feeding
people he would otherwise have discriminated against--I think
as these things actually are applied, that sometimes it is easy
to say, well, giving these people food would be very
counterproductive, but if they are buying food with their hard
currency instead of buying weapons, that is not
counterproductive in many respects for me, and so I am glad you
are working in this direction.
Mr. Eizenstat. Absolutely, and that was the whole thesis of
the President's April 28 announcement to exempt food and
humanitarian goods from sanctions. I am only suggesting that
there may be some limited instance where even that you might
want to take a look at.
An example. If we were bombing Belgrade, we would not
necessarily be wanting to sell Milosevic food at the same time.
The Chairman. Senator Lugar.
Senator Lugar. Thank you, Mr. Chairman. Just apropos of
Senator Ashcroft's commentary, as members of the Agriculture
Committee know, and the chairman has served as chairman of that
committee for a long time, we routinely hear testimony from the
European Community in which, to the tune of $50 or $70 billion
a year, they are harming all of the countries of Europe by
subsidization, gross subsidization of farmers in Europe.
Now, from an economic standpoint, this is irrational. The
Senator makes a good point. This is $50 to $70 billion the
Europeans could not spend on their defense budgets, to keep
track of their NATO obligations, for example, and so we would
encourage them, as opposed to subsidizing agriculture to that
tune, to in fact improve their aircraft so they can work with
us.
Senator Ashcroft. I would say amen to that.
Senator Lugar. But they have chosen the other path. We have
the problem with even the Russian aid of this year, of trying
to trace meticulously where it went, and what the distribution
would be, simply because there was the possibility that it
might hit a Russian port and go no further, then off to another
port, to the enrichment, perhaps, of the Russian Government per
se, but we are still--there are certain officials in the
Government who deposit the money outside the country, which has
also been a routine function.
This is of some sympathy with Mr. Eizenstat. There just are
endless permutations of the problem, which comes about because
agriculture, of all things in the world, is by far the most
subsidized, the most protected, the most anti any type of fair
or free trade situation, and that confounds us yet again and
again as we try to make these policies.
Mr. Eizenstat. I would just say, as you know, I was
Ambassador to the European Union with the consent of this
committee some years ago, and I testified many times before
your Agriculture Committee, and I would say to you that the
agriculture budget of the European Union is literally 50
percent of their entire budget.
Imagine, 50 percent of their entire budget, $50 billion,
and the feeble effort that they made a few weeks ago in their
so-called Agenda 2000 to try to reduce those was, while a step
forward, certainly inadequate, and one of the real goals we
have in the new WTO round is to eliminate those export
subsidies and reduce the eternal subsidies.
They put us at continued competitive disadvantage, and it
will be very difficult for them to enlarge, to include Poland
and other countries in Central Europe, if they keep the current
agricultural policy, the common agricultural policy in place
without substantial change.
The Chairman. Thank you very much. Now, we will have
another round of questioning, and I would like to ask you a
couple more.
Stu, the whole sanctions debate it seems to me always comes
down to one philosophical and ethical question, or at least it
should, and that is, when a country is a State sponsor of
terrorism, or a country that exports illegal drugs, or a
country that commits genocide against its own people, should
this change our relationship with that country even if every
other country in the world turns its head as if nothing is
happening?
This is what we are talking about in a number of instances,
Stu, and I do not want to emphasize my own feelings about
things, but to my mind moral leadership is what made me proud
to be an American in the first place, and that is the way I
feel about it as I go to other countries, that at least we are
moral people. De Tocqueville talked about that.
Now, of course, others disagree wholeheartedly, arguing
that unilateral sanctions are futile, feel-good gestures.
Would you comment on this?
Mr. Eizenstat. One of the great things about this country--
and I have had the privilege that you helped give me of serving
abroad, representing our country, and you get a different
perspective on the United States and how critically important
our leadership, political and military, is to the rest of the
world, and how much we are depended upon for that.
There obviously are times when we will have attempted to
use diplomatic efforts and they will not have succeeded, and we
will try to get a multilateral sanctions regime together, which
will be more effective if we could do it, and we will not have
been able to do it, and then we are faced with a tough
decision.
Iran is a good example. We tried, Secretary Christopher
before Secretary Albright tried and tried and tried to get such
a regime together and we were not able to, and in the end we
felt we had to act unilaterally because our own interests were
so much at stake.
What we are simply saying is not in any way that we should
not act unilaterally at times. We have acted unilaterally with
the Sudan. We have acted unilaterally with Burma. We have acted
unilaterally with Iran.
Rather, that when we do act unilaterally we ought to make
sure that we have weighed the costs and the gains, we have made
sure that we looked before we leaped, we have made sure that we
are making a statement that has some impact, and it is not
going to so disadvantage us in other respects that outweighs
the benefit.
And that by definition, Mr. Chairman, is not something that
you can put a blueprint over. It has to be done on a case-by-
case basis, and that is where we think that the flexibility
that the executive branch needs and the legislative branch
needs comes into play.
The Chairman. I agree with you. Just so we do not depart
from the moral base in our decision. If we violate that, to
hell with us, you know.
Now, if we sanction for dumping, and we do, and a lot of
people urge that we do more of it than we do, why do we not
sanction for murder?
Now, I hear in the debate a lot of my friends who say that
it is abhorrent to cutoff foreign aid to a country that shovels
cocaine into our streets. Now, I do not see anything wrong with
cutting off aid to any country that ships cocaine into this
country, and you know whom I am taking about. Then they say it
is just good business to sanction countries that dump too many
avocadoes or something in our market, so the basis of their
judgment escapes me.
Do you have that feeling once in a while?
Mr. Eizenstat. This is where the confusion occurs, and I am
sorry Senator Sarbanes had to leave, because I would like to
come back to this issue. We do not believe that sanctions
reform legislation should apply, for example, to general trade
legislation, our 301 legislation, and I would say Senator
Lugar's legislation does not attempt to apply it there, and
most others do not as well, nor to the environmental area. For
example, the shrimp-turtle issue we do not think it should
apply in those situations. We are talking about its use for
foreign policy purposes.
Now, with respect to drugs and cocaine, as you know, there
is a certification process that has to be made, but here again
the Congress--and this is the genius of the Constitution. The
Congress has spoken on this issue. It has said we think
countries which dump, or do not do an adequate job of policing
their narcotics are real problems, and we have concerns about
foreign aid to those countries, but we are going to give the
President certain flexibility to make certifications.
So the more you can build in that kind of comity between
the branches, that kind of symmetry and accommodation, the more
you really reinforce what our Founding Fathers intended, which
is that there be a sharing of responsibility in this area.
I think it is important that we do not mix trade sanctions
with that that would be a more traditional foreign policy
sanction against an Iraq or a Cuba or an Iran.
The Chairman. Very well. I have one more.
Senator Hagel. I really only have one question, Mr.
Chairman. Thank you, Mr. Chairman.
Mr. Secretary, I am sorry that Senator Lugar is not here,
because I wanted to followup on a point he made regarding the
European Union. We may be making more progress than we realized
last week. Mr. Chairman, I was invited to have lunch with the
Ambassador to the United States from the European Union
nations, and at that lunch where I spoke they served steak.
They assured me it was Nebraska beef. I am not sure if it
was, but I did take note and took some heart out of the fact
that their diet now is, at least while they are here in the
United States, is much consumed with American beef, so I wanted
to pass that on to you and let you know that your leadership
has taken hold, even though----
Mr. Eizenstat. I am told President Chirac came here and the
first place he went to was a steakhouse, but this actually
points up a very serious issue, and it is serious for any
person concerned with the health of our American agricultural
sector, and that is I believe the biggest systemic problem we
have in the agricultural trade area and, if I may say so, in
the trade area in general, is this whole issue of so-called
food safety, the hormone issue, and what we call biotech, or
genetically modified products.
Now, I would say in both of your States in 5 years 100
percent of the commodities made in North Carolina and Nebraska
will either have some genetic modification, which is nothing
more than an advance on a hybridization which has been going on
for 100 years, or it will be combined with other commodities
that are GMO products.
If we have a barrier, as we are beginning to face in the
European Union, to all genetically modified products, then we
are going to confront an enormous problem to our foreign
exports that will be intolerable, and what we have said to the
European Union is, look, we test these. The FDA tests them, the
USDA tests them. We are not asking you to take these on faith,
but for goodness sakes develop a science-based, objective,
transparent process.
We find now on every GMO agricultural product we have to
go, if I can put it this way, through hell to get these
approved. They are politicized on every product, BT corn,
soybeans. Develop a transparent scientific-based product.
Now, with respect to beef, what we have said is, Secretary
Glickman and Charlene Barshefsky, our Ambassador, have proposed
a labeling process so consumers will know they are getting
USDA-grade meat, so you have got a right to know, and the
consumer is being told.
That is the way we ought to resolve these issues, but we
really are facing a very serious confrontation, and it has
enormous potential impacts on our agricultural sector.
Senator Hagel. You are exactly right, and that wraps around
this entire issue, the larger issue of trade, and all of the
effects and dynamics of it, and sanctions, quite frankly, is a
dynamic of it.
But here is my question, and maybe you mentioned it and I
missed it here this morning. The President's April 28 speech
and decision to move forward on a new track on medicine and
medical supplies and food, when will those implementation regs
be presented?
Mr. Eizenstat. We are in the very, very final stages. We
are making all the policy decisions. I think frankly those
decisions will be made very shortly and the regs will be out
very soon, and I underscore very.
Senator Hagel. Weeks. Days.
Mr. Eizenstat. Weeks.
Senator Hagel. Thank you. Mr. Chairman, Thank you.
The Chairman. Thank you, Senator.
Let me just say on a personal note, it is interesting to me
to hear the dialogue between you and Chuck Hagel. He has not
been in the Senate as long as I have, but he certainly made his
mark, and I consider him one of the most competent Senators we
have around, and to hear the two of you talk is very
interesting to me.
Well, time has gotten away from us, and I would ask without
objection the record will remain open for 3 days for any
questions Senators may wish to submit in writing for Secretary
Eizenstat.
Mr. Eizenstat. May I make one final point?
The Chairman. Please do.
Mr. Eizenstat. I want to thank you, Mr. Chairman, for your
leadership in getting the OECD antibribery convention through
last year. We just delivered a report today to the committee
which shows real implementation by the OECD countries.
There are now about 60 percent of all exports covered by
the some 15 countries that have ratified. We believe by the end
of the year another five or six countries will have done so,
and this will be a tremendous step forward in leveling the
playing field for our corporations. It would not have happened
without your leadership, and we are most appreciative of it.
We hope on the OAS convention as well we can work with you
on that, too.
The Chairman. Well, you are the one who deserves the
credit, I just brought up the idea, and I thank you, sir.
Now, let me say this for the record, and for your
information. I am going to request a very distinct and clear
clarification on how fertilizer exports are viewed in order to
ensure that no overly broad or unnecessary restrictions are
imposed on the manufacturers of fertilizer, and I hope you will
keep your mind on that, even though you will not be there.
Mr. Eizenstat. As you know, Treasury has the OFAC sanctions
responsibility, and I am hopeful that the State Department will
be good enough to let me continue to work on this issue.
But on fertilizer, we made it very clear in our April 28
statement that inputs like fertilizers and pesticides would not
be covered by the President's statement because of the dual use
concerns that you and I have talked about.
The Chairman. But there is a lot of nervousness out there,
and it is coming to my office, and I want them to feel as
comfortable as possible that we are doing what is essential but
not doing anything that is not necessary that may possibly hurt
them.
In any event, Stu, and I am going to be informal about it,
thank you for coming this morning. As always, you have been
great.
There being no further business to come before the
committee, we stand in recess.
[Whereupon, at 12:45 p.m., the committee adjourned, to
reconvene a 3:30 p.m., July 21, 1999.]
Additional Questions Submitted Subsequent to the Hearing
Responses of Under Secretary Stuart Eizenstat to Additional Questions
Submitted by Senator Chuck Hagel
Question. Has the U.S. restriction on the importation of raw
Sudanese gum arabic led to a reduction in Sudan's global sales of this
product?
Answer. No. Sudanese trade statistics indicate that, on the
contrary, Sudan has increased its gum arabic exports by approximately
1,000 metric tons per year--mainly to France and other American trade
competitors--since the U.S. trade embargo was imposed. French imports
of gum arabic from Sudan, for example, jumped from 5,556 tons in 1997
to 10,701 tons in 1998. U.S. import data for January and February of
1999 show that France has replaced Sudan as the leading exporter of gum
arabic to the U.S. with a record 51% share of the U.S. import market,
up from 28% for the same period in 1998.
Question. Who would be most harmed by retaining this unilateral
economic sanction? The government of Sudan or American gum arabic
refiners and American companies that use refined gum arabic?
Answer. Economically, the Sudanese regime has not been adversely
affected at all by the U.S. ban on the import of Sudanese gum arabic.
In fact, Sudan is exporting more gum arabic than ever before. American
gum arabic refiners, on the other hand, may soon be forced to shut
down, and American companies that use refined gum arabic could wind up
paying higher prices to overseas competitors who are acquiring a
monopoly on this necessary substance.
Global Trade Information Services statistics show that France, for
example, has roughly doubled its Sudanese gum arabic imports during
this period, while at the same time almost doubling its exports of
processed gum arabic to the U.S. Further trade statistic indicate that
for 1997-98, U.S. imports from Sudan decreased by 1,000 metric tons
(from 3,500 to 2,500), while imports from France increased by 900
metric tons (from 4,400 to 5,300). The apparent economic effect of the
U.S. ban, has thus been to shift processing of this unique substance to
America's trade competitors.
Importers Service Corporation (ISC), the main American gum arabic
processing company, claims that they will have to shut down within a
year absent some relief from the economic embargo. Frutarom, Inc.
(formerly Frutarom Meer), has already begun to lay off employees at its
New Jersey plant. Within a year, then, overseas competitors may have
driven U.S. processors out of business, and may have acquired a
monopoly on this unique and--to date--irreplaceable substance.
Politically, U.S. comprehensive sanctions on Sudan have isolated
the Sudanese regime, which is reknowned for atrocities it continues to
commit during its civil war, its support for terrorism, destabilizing
its neighbors, and human rights abuses including slavery.
______
Responses of Under Secretary Stuart Eizenstat to Additional Questions
Submitted by Senator Jesse Helms
Question. Mr. Secretary, as I mentioned at the July 1 Foreign
Relations Committee hearing on The Role of Sanctions in U.S. National
Security Policy, I wish to ensure a careful review of certain
substances that could be affected by the lifting of sanctions in the
President's announcement. While I in no way seek overly broad or
unnecessary restrictions of fertilizer products, I am concerned that
three substances--diammonium phosphate (or ``DAP''), anhydrous ammonia,
and calcium cyanamide--might be useful for making biological and/or
chemical weapons. Is it correct that ``DAP'' has utility in certain
biological weapons cocktails? Do the other two chemicals have utility
for the manufacture of chemical warfare agents?
Answer. DAP could possibly be used as a nutrient for microorganism
growth; anhydrous ammonia has no direct chemical or biological weapons
(CBW) applications, but is necessary to manufacture some chemical
weapons (CW) precursors (key ingredients used in turn to produce
chemical agent); and calcium cyanamide could conceivably be used as a
precursor for the CW agent hydrogen cyanide.
All three of these chemicals have numerous legitimate commercial
uses. For example, all three are widely used to produce fertilizer and
pesticides; DAP is used for flameproofing wood and textiles and
purifying sugar; anhydrous ammonia is used in refrigeration and the
chemical and pharmaceutical industries; and calcium cyanamide is used
in the herbicide, steel, and iron industries. Anhydrous ammonia is
currently, by volume, the fifth largest chemical produced in the United
States.
Question. Given the nature of these substances, and the nature of
the terrorist list states in question, do you believe that a rigorous
end-use monitoring/export control regime could be fashioned to ensure,
with high confidence, that these chemicals are not diverted to CW or BW
purposes?
Answer. Because these chemicals are widely available from foreign
sources, constructing a monitoring regime that could provide high
confidence that these substances were not being diverted to CBW
programs would be extremely difficult. Even if such a monitoring regime
was possible, the U.S. does not have the diplomatic relations with many
of the terrorist list countries that would be required to install and
operate such a regime, or even to perform end-user checks such as pre-
license checks and post shipment verifications.
Question. Would you be concerned with the possibility that the
export of these substances by the United States to terrorist list
countries could provide key ingredients for use in the development of
chemical or biological weapons?
Answer. As these chemicals are not contained on either the
Australia Group (AG) control lists or the Chemical Weapons Convention
Schedules, they are not recognized multilaterally to be ``key''
ingredients in CBW manufacture.
However, there are a large number of dual-use chemicals not on the
AG lists or the CWC Schedules that do have a potential of being used in
a CBW program. The United States and many other AG countries control
such substances through catch-all controls, which require exporters to
obtain an export license if they know or have been informed that the
export in question will be used in a CBW program. On the one hand,
catch-all controls would apply literally to all chemicals; on the other
hand, because they only are relevant to those transactions we have
reason to believe could contribute to CBW programs, they do not impose
any significant burden on legitimate trade.
Naturally, we would be concerned about the possibility that exports
of these substances could be used in CBW programs. But it would be
illegal for such items to be exported from the U.S. for CBW purposes.
Also, we must recognize the wide availability from many foreign sources
and the myriad legitimate uses, of these chemicals.
Question. If it were discovered that chemicals supplied by the
United States to these nations had been used for CW or BW purposes,
what would the impact be upon U.S. efforts to secure multilateral
cooperation in combating the proliferation of CW and BW?
Answer. Naturally it would not be legal for a U.S. exporter to
knowingly supply these substances to a foreign CBW program. We would
deal with any such activity accordingly. Obviously, our objective is to
prevent any inadvertent or illegal transfer to such programs.
THE ROLE OF SANCTIONS IN U.S. NATIONAL SECURITY POLICY--PART 2
----------
WEDNESDAY, JULY 21, 1999
U.S. Senate,
Committee on Foreign Relations,
Washington, DC.
The committee met, pursuant to notice, at 3:33 p.m. in room
SD-419, Dirksen Senate Office Building, Hon. Jesse Helms
(chairman of the committee) presiding.
Present: Senators Helms, Lugar, Hagel, Grams, Ashcroft,
Dodd.
The Chairman. The committee will come to order. This is a
treat for me. This is one time I know everybody on the panel, I
know how to pronounce his name. And Joe Biden's train isn't
here yet.
I think the fact that Joe goes home every night to his
family and goes to some trouble, that speaks well of him, and I
am proud of him, but I appreciate all four of you being here to
participate in the second in a series of Foreign Relations
Committee hearings regarding the use of sanctions as a tool in
U.S. foreign policy.
Secretary Albright visited with me, and we talked about
this, and it is a very effective thing for the Government to
engage in. As all of you know, on July 1 the committee held the
first hearing with Under Secretary of State Stuart Eizenstat to
hear the administration's views on this important issue.
Today's hearing is meant as an opportunity for Senators who
have authored a variety of very different sanctions reform
bills to present their ideas to and before our committee. Now,
most of the bills which have been introduced this year are
aimed at reforming the process of both authorizing and imposing
sanctions. They run the gamut from lifting sanctions in most
cases to selectively regulating the President's ability to
impose sanctions.
In addition to that, some of the bills establish procedures
for congressional consideration of sanctions in the future,
dictating time-lines for consideration in committee, and on the
Senate floor.
The goal of these hearings is to see whether there may be
room for consensus within the administration and this committee
on the sanctions issue itself. Now, this is a hearing to hear
your views, gentlemen, on the sanctions issue, so I will not
take up any more time presenting my views, as they are well-
known.
The various questions that we are here to discuss are
important, and a record will be made of them, of course, as we
speak, and I firmly believe that if we are all willing to work
together in good faith, there can be room for compromise and
consensus and, indeed, I am hopeful that we can achieve a
meeting of the minds and agree among ourselves and with the
administration on a consensus reform package within the coming
weeks.
We usually start on the right, as you see it and my left,
so Senator Lugar, we will hear from you, the former chairman of
this committee and the distinguished chairman of the Senate
Agriculture Committee, Senator Lugar.
[The prepared statement of Senator Helms follows:]
Prepared Statement of Senator Jesse Helms
I certainly appreciate all four of you being here today to
participate in this, the second in a series of Foreign Relations
Committee hearings regarding the use of sanctions as a tool in U.S.
foreign policy.
As you all know, on July 1, the Committee held its first hearing
with Under Secretary of State Stuart Eizenstat to hear the
Administration's views on this important issue. Today's hearing is
meant as an opportunity for the Senators who have authored a variety of
very different sanctions reform bills to present their ideas before the
Committee.
Most of the bills which have been introduced this year are aimed at
``reforming'' the process of both authorizing and imposing sanctions.
They run the gamut from lifting sanctions in most cases, to selectively
regulating the President's ability to impose sanctions. In addition,
some of the bills establish procedures for Congressional consideration
of sanctions in the future, dictating time-lines for consideration in
committee and on the Senate floor.
The goal of these hearings is to see whether there may be room for
consensus within the Administration and this Committee on the sanctions
issue.
This is a hearing to hear your views on the sanctions issue, so I
will not take up too much time presenting my own views, which are well
known to most Senators. But at the outset, let me make a few very brief
points: I do not believe that there is a sanctions epidemic in the U.S.
today (a fact I sought to document empirically in a recent essay for
Foreign Affairs magazine). However, I also know that there is a farm
crisis in America, and that while sanctions are by no means the cause
of that crisis, we have a responsibility to do everything in our power
to help our struggling farmers increase exports. If there is any
possible way to increase farm exports, without doing damage to our
moral and national security interests in the process, I am more than
willing to try.
Moreover, I believe it may be worth considering whether or not we
should take some steps to rationalize the way the United States
government considers the use of economic sanctions; to ensure that
policy makers have all the facts in front of them about costs and
benefits when they make decisions; and to ensure that we regularly
review the effectiveness of our various sanctions policies.
These are the questions we are here to discuss this afternoon. I
firmly believe that if we are all willing to work together in good
faith, there can be room for compromise and consensus. Indeed, I am
hopeful that we can achieve a meeting of the minds, and agree among
ourselves and with the Administration on a consensus reform package
within the coming weeks.
With that said, there appear to be three main questions that
deserve attention today, and which I hope our witnesses will address
for us this afternoon:
1. Should Congress consider an overall sanctions reform bill,
or should we stick to the narrower issue of allowing some
increased food and medicine exports, as represented in the
Ashcroft and other bills?
2. Should the President be given a blanket waiver, to use
anytime he wishes in the national interest, to avoid imposing
sanctions? And
3. Should Congress and the Executive Branch be required to
meet a series of binding guidelines prior to legislating or
imposing new sanctions?
These appear to be the main differences between your bills. In
addition, some of the proposed bills make concessions to sanctions
based on national security (bowing to restrictions, for example, on the
munitions list items); others do not. I hope that we can discuss those
differences today as well.
I have told Members I intend to trespass as little as possible on
their busy schedules, so without further ado, I turn to my esteemed
colleague, Senator Biden.
STATEMENT OF HON. RICHARD G. LUGAR, UNITED STATES SENATE
Senator Lugar. Thank you very much, Mr. Chairman. We
appreciate your arranging these hearings to discuss sanctions
reform before the Foreign Relations Committee. Each of the
bills stems from shared concerns that our approach to
unilateral sanctions needs adjustment. This view is shared on
both sides of the aisle by Members of differing political
persuasions.
We have been seeking sanctions reform for some time. I
introduced the sanctions policy reform bill in November 1997.
That was subsequently debated as an amendment to the
agricultural appropriations bill last July. I was pleased by
the close vote on our amendment, and an analysis following the
vote suggested if we had debated it as a freestanding measure
rather than as an amendment to an appropriations bill we might
have achieved majority support.
But in any event, this year I have been joined by 29
original cosponsors in introducing S. 757, the Sanctions Policy
Reform Act, that now enjoys bipartisan support of 39
cosponsors. I am gratified that seven members of this committee
are cosponsors, and parenthetically I would note that 10
members of the Agriculture Committee are cosponsors in good
part because of enthusiasm of the farm community about foreign
trade and exports.
I believe that the debate on sanctions has advanced beyond
the question of the need for reform. Clearly, there seems to be
a consensus our policy needs refinement. Since this is where I
believe the debate stands, I would like to use my time here to
briefly summarize for the record what my bill, S. 757, intends
to do and what it does not do.
First of all, S. 757 addresses the need for comprehensive
reform of our sanctions policy. It is a nonissue specific bill.
It embraces all proposed new unilateral economic sanctions,
although it cites the principle that agriculture and medicine
should be exempt from future sanctions.
Our bill requires certain steps that we believe will
improve the way we consider and evaluate new sanctions. These
include procedural, informational, and reporting requirements
in both the Congress and the executive branch. If new sanctions
are imposed it requires periodic evaluation and reporting on
how well they are achieving our foreign policy goals, and the
costs and the benefits of these new sanctions.
I should add that any sanction reform involving only
agricultural exports or humanitarian assistance, which I
support in principle, should not be a substitute or a surrogate
for comprehensive reform. Second, S. 757 does not prevent a
debate on any proposed new unilateral economic sanction in
Congress. It can stimulate more discussion than now exists on
Presidential proposals to impose new sanctions. The bill merely
lays out a more careful and deliberate process so that debate
can proceed with more timely and better information about
proposed new sanctions.
Third, the bill does not prevent a vote in the Congress on
any new unilateral sanctions. S. 757 would require the Congress
have the best information on any proposed sanction before
acting on it.
This information would include the likely costs and effects
of new sanctions on the United States economy and on the target
economy, the possible collateral effects on allies and friends
as well as other countries, what other policy options had been
explored, why the particular sanction was chosen over other
sanctions or policies, the expected international support for
the proposed sanctions, and the prospects that the proposed
sanctions will achieve the foreign policy objectives that
prompted the sanctions in the first place.
Fourth, S. 757 is not an antisanctions bill. I believe that
all 39 cosponsors agree that unilateral economic sanctions
should and must remain a tool of American foreign policy, and
that there are occasions where there is little choice but to
employ sanctions to accomplish an important national interest
or cherished national value, such as human rights,
nonproliferation, terrorism, narcotics and others. Our belief,
however, is that this tool should be employed judiciously, and
only when there is reasonable expectation it will advance our
interest, express our values, or achieve the objectives over
which it was proposed.
Fifth, the bill seeks to achieve parallel disciplines or
requirements in the Congress and the executive branch. It will
not surprise colleagues to learn that representatives from the
administration believe the bill would impose a tougher set of
standards and requirements on them than it does on the
Congress, and I am certain there are Members of Congress who
feel the bill does precisely the opposite.
The bill imposes specified disciplines in both branches,
because unilateral sanctions are the responsibility of Congress
and the President. Our bill represents our best thinking on how
to do this. It also seeks more transparency in proposing new,
unilateral economic sanctions while preserving the flexibility
of the President to weigh the disciplines if doing so is in the
national interest.
Sixth, the disciplines and requirements of S. 757 pertain
only to new unilateral economic sanctions proposed by the
Congress or the President.
Our bill is prospective only. It does not affect existing
sanctions. My own view is that we should review the
effectiveness of existing sanctions, both. We felt it was wiser
to address future sanctions alone in this bill. The sole
exception is a provision that grants the President national
security interest waiver authority on the Nuclear Proliferation
Prevention Act, the so-called Glenn amendment, which
automatically imposes U.S. sanctions on any country which
detonates a nuclear device.
There is widespread opinion in this body that a waiver
authority is acceptable and necessary. The Congress has acted
on several occasions to modify the Glenn amendment, and Senator
Brownback of our committee has taken a leading role in this
effort.
Seventh, our bill includes a flexible sunset provision that
would mandate determination of any new sanction after 2 years.
It contains provisions that would require periodic reports on
the effectiveness of new sanctions and their costs and effects
after implementation so an informed judgment could be made on
whether to continue, revise, or repeal.
As the bill now reads, there is a provision which sets a 2-
year time limit on new sanctions, but the Congress or the
President could authorize their extension.
Eighth, while our bill is intended to achieve comprehensive
reform, it is limited to unilateral sanctions, unilateral
sanctions which are economic, and which are new, and which are
intended to achieve a foreign policy objective. It excludes
those trade remedies or other trade sanctions imposed because
of market access restrictions, unfair trade practices, and
violations of U.S. commercial or trade laws. Existing statutes
are designed to deal with these issues.
I should also add, our bill does not address the complex
set of issues relating to State and local sanctions intended to
achieve a foreign policy goal.
Ninth, our bill pays special attention to American
agriculture and agricultural exports. Our bill argues that food
and medicine should not be used as a tool of foreign policy and
that if they are included in any new sanctions the legislation
must include a detailed explanation for doing so.
It authorizes assistance to American farmers and ranchers
whose exports are especially vulnerable to retaliation or
foreign substitution. American agriculture is heavily dependent
on exports. The production from 1 of every 3 acres we plant
must be exported. Our bill simply states that, prior to the
imposition of new sanctions, we should know what the likely
impact will be on U.S. agriculture. It authorizes compensation
to offset lost exports through expanded export assistance
permitted under current statute and agreements.
Tenth, and finally, our bill lays out a detailed set of
guidelines or prescriptions which can be useful as a template
for shaping our policy toward sanctions.
Section 5 of the bill provides a sensible checklist of
principles on how sanctions could be more effective in the
conduct of American foreign policy.
Mr. Chairman, I have worked carefully with the private
sector, the administration, with our colleagues in the House
and Senate, especially representatives of the agriculture
community. I have benefited from the hearings in the
Agriculture Committee and last year before Senator Hagel's
subcommittee in this committee. S. 757 represents our best
thinking on how to improve the effectiveness of U.S. economic
sanctions. We have been open to suggestions from all parties on
ways to improve the bill, and we welcome those contributions.
I understand the administration has developed some
suggestions. They have suggested we consider a Presidential
national interest waiver authority on all future unilateral
economic sanctions. They have also urged us to rethink the so-
called sunset provision and substitute language calling for an
annual review with an option to continue or terminate. I am
open to these suggestions. I have not yet seen from the
administration the promised language.
Finally, let me conclude by saying our sanctions policy
must be part of a coherent and coordinated foreign policy that
is coupled with diplomacy and consistent with our international
obligations and national interest. When we seek to influence
other countries whose behavior we find disagreeable or
threatening, we should ponder how best to do that.
In my judgment, economic sanctions are not always the best
answer, but if they are, they should be debated and structured
in a way that they do as little harm to ourselves and our
friends and our allies as possible. This is the essence of S.
757, the Sanctions Policy Reform Act.
I ask for the support of the committee in furthering this
legislation, and I thank you, Mr. Chairman, for the opportunity
to testify.
[A news release from Senator Lugar follows:]
[News Release--July 21, 1999]
Lugar Calls for More Thoughtful Sanctions Policy
U.S. Senator Dick Lugar told the Senate Foreign Relations Committee
today that ``if unilateral economic sanctions are the answer, they
should be debated and structured in a way that they do as little harm
to ourselves and our friends and allies as possible.''
Lugar is the sponsor of The Sanctions Policy Reform Act of 1999 (S.
757), which has been cosponsored by 38 other Senators. The bill would
require advanced impact studies on sanctions, review of a sanction to
make certain it has the desired effect and a sanction to sunset after
two years unless Congress and the President reauthorize it.
``Our sanctions policy must be part of a coherent and coordinated
foreign policy that is coupled with diplomacy and consistent with our
international obligations and national interests. When we seek to
influence other countries whose behavior we find disagreeable or
threatening, we should ponder how best to do that. In my judgment,
unilateral economic sanctions are not always the best answer,'' Lugar
said.
``I believe we can make our foreign policy more effective by
improving our procedures and the timeliness and quality of information
about new sanctions. We should know the costs and benefits of new
sanctions in advance of a Congressional vote or Presidential decision.
If sanctions are imposed, we should have periodic assessments of their
effectiveness and success. We should terminate sanctions when they are
no longer effective,'' Lugar said.
Lugar testified today that his bill:
Addresses the need for comprehensive reform of U.S.
sanctions policy;
Does not prevent a debate on any proposed new unilateral
economic sanction;
Does not prevent a congressional vote on a new unilateral
economic sanction;
Is not anti-sanctions. It is an effort to have a more
thoughtful sanctions policy;
Requires the Congress and executive branch to follow the
sanctioning process;
Is prospective, pertaining only to sanctions considered in
the future;
Has a flexible sunset provisions;
Addresses only unilateral economic sanctions;
Pays special attention to the problems of American
agricultural exports; and
Establishes clear guidelines for shaping sanctions policy.
In May, the Senate Agriculture, Nutrition and Forestry Committee
approved Lugar's Agriculture Trade Freedom Act (S. 566). The bill would
exempt the commercial sales of agricultural commodities, livestock and
value-added products from U.S. imposed unilateral sanctions. This would
be subject to review by the President who could override an exemption
for foreign policy or national security reasons. The bill applies to
current and future sanctions.
The Chairman. Senator Lugar, thank you very much, an
excellent statement. Senator Dodd.
STATEMENT OF HON. CHRISTOPHER J. DODD, UNITED STATES SENATE
Senator Dodd. Thank you very much, Mr. Chairman. I
appreciate as well the opportunity for Senators Lugar and Hagel
and Ashcroft and myself to present to you some ideas here on
how we might improve, and I think Senator Lugar said it well,
to improve our sanctions policy.
I think too often this issue has been defined as those who
want to do away with sanctions altogether or those who want to
continue them as is, sort of a status quo, and I think the
outline that Senator Lugar has given you is one that I would
wholeheartedly endorse.
I have a couple of suggestions I would make. I have also
read the legislation that Senator Ashcroft and Senator Hagel
have, and I think what you are going to hear--Mr. Chairman, I
am always hesitant to tell you what you are going to hear from
any witness, let alone four Senators, but it is not the
competing ideas but complementary ideas is how I see it, and I
am a sponsor, in fact, of all of these other bills that you are
going to hear about today, so I appreciate again the
opportunity for us to get a chance to sort of air some of these
ideas and how we might work together.
Senator Lugar, for example, Mr. Chairman, as you well know,
has long worked hard to define legislative guidelines and
procedures for both the legislative and executive branches to
follow in the imposition of future sanctions, and you have
heard him just lay that out.
He has also undertaken the difficult task of defining what
we mean by unilateral sanctions, and that is an issue that has
been needed for a long, long time, and I commend him for it.
Let me add that without Senator Lugar's leadership on this
subject for many years, on sanctions over the last years, we
would not be where we are today, discussing pending legislation
and contemplating a committee markup on this matter in the not-
too-distant future.
Senators Hagel and Ashcroft have also worked, Mr. Chairman,
as you know, to come up together with language provisions to
address the problem of sanctions on the sale of food and
medicine. I am very supportive of Senator Hagel's and Senator
Ashcroft's efforts, and I am an original cosponsor of their
legislation as well.
Members of the committee, I know we are well aware of my
particular interest and concern with respect to the use of food
and medicine as a foreign policy weapon against other
countries. I believe, Mr. Chairman, it is inconsistent with
American values and ideals, damages our international moral
authority, and unnecessarily harms American farm families who
already suffer from one of the worst domestic farm economies in
a decade or more.
I have introduced three separate sanctions-related bills,
Mr. Chairman, S. 926, the Cuban Food and Medicine Security Act,
S. 927, the Sanctions Rationalization Act, and S. 1161, the
Economic Sanctions Reform Act of 1999. The focus of these
legislative initiatives has been to provide streamlined
guidelines for both the executive and legislative branches to
follow in considering the imposition of future sanctions, as
well as to provide critical waiver authority to the President
to guarantee that sufficient flexibility is preserved in the
context of legislatively mandated sanctions, both current and
prospective.
I have also introduced legislation to stop once and for all
the policy of prohibiting the sale of food and medicine to the
Cuban people, legislation which currently has 24 cosponsors.
The House companion bill has 146, Mr. Chairman.
I will touch briefly later in my remarks on what I see as
the necessary ingredients for crafting a comprehensive
sanctions reform legislative proposal, drawing on the bills
that are before us today. I would hope that this committee
would be able to undertake such an effort in the very near
future. Today is the first step in attempting to do so.
I would like to digress if I can for a moment to try and
provide some historical perspective, Mr. Chairman, on how we
have gotten to where we are today with respect to U.S.
sanctions policy, and why there is a growing sense of urgency
to take a hard look at current practice in this area.
Eighty years ago, Mr. Chairman, President Woodrow Wilson,
formally added economic sanctions to America's foreign policy
arsenal for the very first time in our Nation's history, saying
that with sanctions as a weapon, and I quote him, ``there will
be no need for force,'' end of quote.
In the intervening decades, Mr. Chairman, we have taken a
greater liking to sanctions than President Woodrow Wilson could
have ever imagined. I doubt very much that he would approve the
way in which we employ that tool today, nor the results
accomplished by these sanctions.
When President Wilson described his idea of sanctions as a
diplomatic tool, he was trying to convince the Senate of his
day to ratify the American membership in the League of Nations.
The sanctions he envisioned were broad, multinational efforts
designed to effect specific results under limited
circumstances. He also intended sanctions to serve as one
component of a multistage escalation of diplomatic pressure,
rather than a complete response.
Our method of imposing sanctions today bears almost no
resemblance to Woodrow Wilson's original concept. Sanctions
have become the first response to actions which are
objectionable to the United States, very often. They are also a
response in and of themselves, rather than part of a coherent
escalation of pressure.
In addition, Mr. Chairman, the vast majority of American
sanctions are not the multilateral efforts President Wilson
envisioned. Rather, in most cases they are unilateral efforts
which anger our allies, damage our global standing, and hurt
our own businesses and people and, lest we excuse the drawbacks
of unilateral sanctions with the arguments that the benefits of
American foreign policy outweighs the harm, let me be very
clear, there are very rarely such benefits.
That is why pressure for meaningful sanctions reform has
intensified over the last year or so. U.S. interests have been
sacrificed, yet there have been no visible offsetting
successes, namely, altering the offending behavior of policies
of the sanctioned countries.
We in this body I think often think of sanctions as
costless actions, since they require no governmental
appropriations. As business leaders and workers across the
country, however, the perception is simply erroneous. In 1998,
the United States had sanctions of one sort or another in place
against 26 different nations, including China and India, the
two most populous nations in the world. Those sanctions covered
well over half of the world's entire population, cutting
American firms off from billions of potential customers.
According to a highly respected Washington-based think
tank, the Institute for International Economics, the economic
sanctions currently in effect cost American businesses $20
billion annually in lost export sales, and cost America's
workers 200,000 high wage jobs.
Those figures, however, Mr. Chairman, only tell part of the
story. The cost of business does not end when the sanctions are
repealed. Rather, the absence of American companies allows
foreign competitors to make inroads, leaving American concerns
defenseless in a battle against well-entrenched foreign
competition, as well as lingering popular resentment toward our
Nation when the barriers are finally lifted.
Now, we all know that for every economic study like the one
I have just cited, Mr. Chairman, that finds the cost of
sanctions to be significant, critics will cite other studies
that have been done to find the contrary. I believe that the
best way to gauge who is right on this question, of course, is
to listen to the level of public criticism that is being
leveled against our sanctions policy currently.
By that measure, Mr. Chairman, I would say that the
American public is on the side of those economists who have
found the costs too high. Nearly 700 large and small U.S.
business associations and farm groups across this Nation of
ours have joined together as a coalition called the U.S.A.
Engage, in order to promote sanctions reform legislation along
the lines of the legislative proposals that you have before you
today.
Were there not real economic harm, Mr. Chairman, being done
by our policies in Washington, we all know that such an effort
would not have been mounted by people who have a lot of other
important things to do, other than form associations.
I am not arguing, Mr. Chairman, that certain sanctions are
not legitimate foreign policy tools, nor that, if used
appropriately, they can be useful. There are certainly
occasions when Congress can, should, and must, in my view,
consider sanctions-related legislation, or the President ought
to do so by Executive order. For example, I strongly support
existing sanctions against Iraq and Yugoslavia.
However, I would make the point Senator Lugar has made,
that Congress in particular is ill-equipped to legislatively
alone micromanage our foreign policy on a day-to-day basis, yet
too often the sanctions legislation we enact in this body tries
to do just that.
In the final analysis, the power to negotiate with foreign
governments and leaders rests almost exclusively with the
executive branch. Anything which detracts from the President's
ability to negotiate, including legislatively mandated
sanctions with no waiver authority, or little or not waiver
authority, damages his or her ability to exact concessions and
come to an agreement which best serves U.S. national interest.
Sanctions in my view, Mr. Chairman, will always warrant a
place at times, perhaps a prominent place, in our foreign
policy arsenal. Working with our allies, they can have the
power that Woodrow Wilson described shortly after witnessing
the horrors of World War I. At the same time, Mr. Chairman, we
must not be so infatuated with sanctions that we forget that we
have other options at our disposal, some of which have been
around for more than 2 centuries, namely, good old-fashioned
diplomacy.
Let me turn now to describe very quickly in a conceptual
way what I see as the most important components that must be
part of a consensus bill. First, we should codify the recently
articulated administration policy foreswearing the use of food
and medicine as a foreign policy weapon, as Senator Hagel and
Ashcroft have proposed, and you will hear from them shortly on
that. This policy has been too harmful to everyone concerned
and, as I said earlier, has eroded our moral standing
internationally.
Second, we should draw from Senator Lugar's legislation
with respect to the guidelines he has crafted to govern the
imposition of future sanctions by both Congress and the
executive branch, and I would hope that we could work to
simplify these guidelines somewhat so that they are easily
understood and therefore more likely to be adhered to.
Third, we must ensure that the President has available
sufficient flexibility to allow him or her to conduct U.S.
foreign policy effectively while also ensuring that the
Congress remains a partner in developing and supporting these
policies by proposed waiver authority that Senator Lugar has
referenced already, together with expedited congressional
procedures so that Congress can play a role.
Fourth, multilateralized sanctions should always in my
view, be a preferred option whenever the imposition of
sanctions is under consideration. Multilateral imposed
sanctions have a far better likelihood of succeeding than those
that are unilaterally imposed, but I would never suggest that
we ought to eliminate unilaterally imposed sanctions, Mr.
Chairman.
Fifth, there must be some process for periodic review of
the sanctions that are imposed by both branches, and for
terminating those sanctions when they no longer serve our
interests, either sunset provisions such as those contained in
Senator Lugar's bill, or some form of generic authority to
permit the President to terminate them in such instances I
think is necessary.
Sixth and finally, we must have a common understanding
about what we mean when we talk about economic sanctions. I
know this is of particular interest to Senator Biden and
Senator Sarbanes. I would urge the committee to take a look at
the definition of sanctions described in my bill S. 1161. It is
fairly simple and straightforward, but encapsulates a workable
definition of economic sanctions.
It states in part that sanctions is, and I quote, ``any
measure taken by the United States that is designed to advance
U.S. foreign policy or national security interests that
constrains economic activities and U.S. Government programs and
benefits that would otherwise be available.''
Mr. Chairman, if we can craft comprehensive sanctions
reform legislation which incorporates the components that I
have mentioned and others you will hear about today, I think we
will enable the U.S. Government, both the executive and the
legislative branches, to be more precise in the choice of
sanctions, more realistic with respect to what is achievable,
better informed of the potential costs to the U.S. economy and
the American people, and far more sensitive to the potential
impact on innocent populations and on relations with other
Governments.
In conclusion, Mr. Chairman, with economic sanctions fast
becoming the very core of U.S. foreign policy, I believe that a
more thoughtful and comprehensive approach to them is
desperately needed before we do serious harm to our national
interest, and I look forward to working with you and other
members of this committee and interested Senators to advance
that goal.
I thank you, Mr. Chairman.
The Chairman. Senator Dodd, thank you very much. Senator
Hagel.
STATEMENT OF HON. CHUCK HAGEL, UNITED STATES SENATE
Senator Hagel. Thank you, Mr. Chairman. I appreciate you
very much holding this hearing on sanctions reform, and thank
you for giving me an opportunity to share some of my thoughts
on sanctions.
First, let me state and echo what our colleagues, Senators
Lugar and Dodd, have already said. We need to retain sanctions
as a foreign policy tool. Sanctions can be effective when they
are multilateral and carefully targeted, but much too often
they are used not as a policy tool but as a policy substitute.
Senator Ashcroft and I have recently combined our two
related food and medicine sanctions reldief bills. Both of us
will be discussing the new combined bill rather than our
previous separate bills, but before discussing our food and
medicine sanctions relief bill, Mr. Chairman, I would like to
address the broader issue of sanctions reform.
In my opinion, there are three necessary elements to broad-
based sanctions reform. They are reforming the sanctions
process, adding Presidential flexibility, and exempting food
and medicine. Each of these elements are contained in the bills
being discussed here today.
We have heard rather deliberately from Senators Lugar and
Dodd about those bills. The first and most important element of
any sanctions effort is broad-based reform of the process, or
for imposing unilateral economic sanctions. This element is
best represented by S. 757, the Sanctions Policy Reform Act,
introduced by Senator Lugar, which I believe everyone at this
table is a cosponsor of, and which Senator Lugar has very
deliberately defined.
Those of us who have been active in sanctions reform are
open to ideas and suggestions. Senator Lugar's bill has
undergone a series of refinements over the last year, as he has
described. My food and medicine bill, the original bill that I
had introduced, was also refined through discussions with
Senator Ashcroft and others.
The important thing for any genuine sanctions reform effort
is to set up a process both in Congress and in the executive
branch which ensures a thoughtful and deliberate system for
imposing unilateral sanctions. The second component of
sanctions reform is the need for greater flexibility in the
President's authority to waive mandatory sanctions.
Sanctions are often put in place with the best of
intentions. Once they are in place, they are often difficult to
get rid of, however, and inhibit the President's ability to
deal with the real foreign policy dynamics of the moment. We
saw this very clearly with the imposition last year of
mandatory sanctions placed on India and Pakistan due to the
Glenn amendment, which contained no Presidential waiver
authority.
Congress then had to act. We had to come back and act in
order to grant special temporary waiver authority, but not
before real damage had been done to our policy objectives and
economic interests in the region. When the waiver authority is
provided too often, it can only be used in prescribed
circumstances, or only to prevent damage to our national
security interest.
A general national interest waiver makes more sense. The
bill that best meets this need is S. 927, Senator Dodd's
Sanctions Rationalization Act of 1999, which he has described.
This legislation would give the President the authority to
waive sanctions that are found to be ineffective or
counterproductive to America's foreign policy objectives, but
it also recognizes the appropriate role of Congress and
guarantees quick congressional review and disapproval of any
misuse of this Presidential waiver authority.
I believe strongly that Presidential flexibility is
critically important to any sanctions reform, and this leads
me, Mr. Chairman, to the third element of sanctions, reform
legislation, on which Senator Ashcroft and I have taken a lead.
This is the Food and Medicine for the World Act. Members of the
committee should have a copy of the Dear Colleague that we sent
out yesterday seeking additional original cosponsors.
We also have provided a summary of the bill. The Ashcroft-
Hagel bill merges provisions contained in our earlier separate
bills to exempt food and medicine from unilateral economic
sanctions. Three other Foreign Relations Committee members are
original cosponsors so far of this bill, Senators Dodd,
Brownback, and Grams.
Senator Ashcroft will go into more detail on the specific
provisions of our new legislation. Simply stated, however, the
bill would remove food and medicine from both existing and new
unilateral sanctions. However, it does recognize that there may
be rare circumstances where export controls may be necessary.
It would permit the President to block food and medicine
exports in times of war, if it is a dual use item controlled by
the Commerce Department, or if the product could be used in the
manufacture of chemical or biological weapons. The bill
recognizes that there could be reasons to restrict food and
medicine exports in other circumstances. It provides expedited
procedures that guarantee a swift up or down vote on any
sanction the President may recommend.
And finally, the bill would continue to restrict loan
guarantees for sales to governments on the terrorism list. It
recognizes that there is a difference between market rate cash
sales and sales guaranteed in some way by the U.S. taxpayer.
Ultimately, this bill establishes a basic principle--food
and medicine are the most fundamental of human needs and should
not be included in unilateral sanctions.
Mr. Chairman, as you recognize, and as every member of this
committee surely does, the rate of change in today's world is
unprecedented. Trade, and particularly trade in food and
medicine, is the common denominator that ties together the
nations of the world, the peoples of the world. American
exports of food and medicine acts to build bridges around the
world. It strengthens ties between peoples and demonstrates the
innate goodness and humanitarianism of the American people.
Additionally, we need to send a strong message to our
customers and competitors around the world. Our agricultural
products are going to be consistent, and our producers
consistent and reliable suppliers of quality and plentiful
agricultural products.
In passing the Freedom to Farm bill in 1996, for example,
Congress promised to help open up new markets, and premier
American agriculture as a reliable supplier to the world.
Congress also committed to sanctions and trade reform as part
of Freedom to Farm, but USDA reports that the value of
agriculture exports this year will drop to $49 billion. This is
a reduction, a reduction from $60 billion just 3 years ago.
American agriculture is already suffering from depressed prices
and reduced global markets, making sanctions reform even more
important.
Once foreign agriculture markets are lost, for whatever
reason, it can take decades, if ever, to restore them. We
recall in 1973 the U.S. banned soybean exports to Japan. What
did that accomplish? Well, it turned Brazil into a significant
soybean producer, and America has never fully recovered its
soybean market share in Japan.
Another example is the Soviet grain embargo of 1979, which
cost the U.S. $2.3 billion in lost farm exports in USDA
compensation to farmers. Argentina stepped in to claim that
market, and the former Soviet States have been very timid
buyers of U.S. farm products ever since.
But this is not just about doing what is right for the
American farmer and rancher. This legislation also makes good
humanitarian and foreign policy sense. Our bill will say to the
hungry and oppressed of the world that the United States will
not make their suffering worse by restricting access to food
and medicine.
It will also make it harder for an oppressive government to
blame the United States for the humanitarian plight of its own
people. In today's world, unilateral trade sanctions primarily
isolate those who impose them.
This leads me back to my initial comments. We need to have
fundamental reform in our sanctions process, not just carve out
food and medicine. I strongly support the broad scope of
legislation that is being presented here today.
Mr. Chairman, I thank you again for launching the
committee's comprehensive look at U.S. sanctions policy. We
have a diversity of views on this committee on the use and the
effectiveness of unilateral sanctions. We all respect that.
However, I hope that we can come together, and I know that is
your objective, as you stated at the opening, to make the use
of sanctions when they are necessary and appropriate more
effective, more flexible, and in the vital interests of
America's foreign and trade policies.
Mr. Chairman, thank you.
The Chairman. Senator, a very fine statement. That is the
piece de resistance, I believe it is called.
Senator Ashcroft.
STATEMENT OF HON. JOHN ASHCROFT, UNITED STATES SENATE
Senator Ashcroft. I will not deliver my statement in
French.
But thank you, Mr. Chairman, for holding this hearing on
sanctions, and particularly I want to thank Senators Lugar and
Hagel and Dodd for their thoughtful approach and their
contribution to the discussion in this area. I, too, have a
proposal that we have worked together on, and now that proposal
is joint among us, but it would be inappropriate for me to
suggest that this was my proposal in the sense that the real
thoughtful consideration of it had been exclusively mine or
even predominantly mine. I am grateful for the opportunity to
work in the context of the thoughtful discussion provoked by
these, my colleagues.
Since we are here today to discuss various sanctions bills,
let me begin by putting the issue of sanctions in what I
consider to be a broader context from my own perspective. I do
believe that sanctions play a very important role in our
national policy. Without the use of targeted sanctions, there
is often little middle ground in U.S. diplomacy between doing
nothing and military force.
Sanctions should be maintained as an important tool to
advance our U.S. national interest. They should not be the
exclusive or only tool. As everyone here knows, I am advocating
sanctions reform with regard to unilateral U.S. embargoes on
agriculture and medicine. Such reform along the lines that
Senators Hagel, Dodd, and I are proposing in that narrow area
of medicine and food would make use of other targeted sanctions
even more effective.
Initially, we had separate bills on agricultural sanctions
reform, but we pulled together the best parts, I believe, of
the different proposals and formulated a new bill that
addresses multiple concerns raised in last year's debate on
last year's agricultural sanctions reform, and I would like to
summarize briefly what our bill does, and then I would like to
show how our approach to end unilateral embargoes on food and
medicine is good foreign policy and good farm policy.
The general framework of the bill is what I call a
handshake approach to sanctions reform for food, fiber, and
medicine. This bill would not tie the hands of the executive,
but it would require the President to shake hands with Congress
before embargoing agriculture and medicine.
Let me be clear about this. This bill would not restrict or
alter the President's current ability to impose broad
sanctions, nor does it preclude sanctions on food and medicine.
Rather, the bill says the President may include food and
medicine in a sanctions regime, but he must first obtain
congressional consent.
Under the bill, Congress would review the President's
request to sanction agriculture and medicine through an
expedited procedure, and if it was in the interests of the
United States to sanction food and medicine, Congress could
approve the President's request.
We added a special provision in the legislation with regard
to countries already sanctioned. For the seven countries under
broad sanction regimes, we want to afford the President and
Congress sometime to review sanctions on the food and medicine
on a country-by-country basis in this arena. Therefore, the
bill would not take effect until 180 days after it is signed by
the President.
This would give both branches of Government enough time to
review current policy and act jointly if they decide that the
current sanctions against food and medicine should be
maintained in any one of these circumstances.
There are certain instances, though, that I believe the
President should have the authority to sanction food and
medicine even without congressional approval. A declaration of
war is one such circumstance, and the legislation maintains the
President's authority to cutoff all food and medicine sales
immediately without congressional consideration.
The bill has a few additional provisions that were not
addressed in previous agriculture sanctions reform proposals.
First of all, the bill specifically excludes all dual use items
and products that could be used to develop chemical or
biological weapons. There are not many agricultural or medical
products that have military applications, but the bill provides
safeguards to ensure that our national security is not harmed.
Let me make it clear that this genuinely a bill that
supports the policy of putting products which will eliminate
suffering and hunger into the hands of those that need it the
most. It is not about providing dual use items to tyrants for
military use or acts of terrorism.
Second, we have made sure that no tax money would be used
to subsidize exports to any terrorists. We specifically exclude
any kind of agricultural credits or guarantees for the
governments that are sponsors of international terrorism.
However, we do allow credit guarantees to be extended to the
private sector and nongovernmental organizations.
This targeted approach helps us show support for the very
people who need to be strengthened in these countries, the
oppressed populations, and by specifically excluding terrorist
governments we send a message that the United States in no way
will assist or endorse the activities of those nations which
threaten our interests.
Now that Senator Hagel and I have explained the bill in
conjunction with these other discussions, I would like to
explain why this proposal is not only good foreign policy but
is also good farm policy. First of all, ending unilateral
embargoes against sales of U.S. food and medicine is good
foreign policy. As the leader of the free world, America must
maintain adequate tools to advance security and promote civil
liberty abroad.
The last thing I want to do is to send a message to a State
sponsor of terrorism that the United States is legitimizing its
regime. As I mentioned at the beginning of my testimony,
sanctions are necessary foreign policy tools against
governments which threaten our interests.
Richard Holbrooke, who was recently before this committee
seeking confirmation as the U.S. Representative to the United
Nations, has explained in his book, ``To End a War,'' how
sanctions on Yugoslavia were essential to push Slobodan
Milosevic toward peace negotiations on Bosnia. Regardless of
whether we agree with U.S. deployment in the Balkans, effective
sanctions saved many lives, and they helped advance American
policy without resorting only to the use of military force.
We must have tools available to punish our enemies who
would threaten our interests and our allies. Quite frankly, the
outcry against sanctions has been deafening in the past year,
and as you pointed out in an article in Foreign Affairs, Mr.
Chairman, statistics regarding a sanctions epidemic are
overblown.
Clearly, the United States should maintain this critical
foreign policy tool of targeted and effective sanctions to
promote our security. That being said, ending embargoes against
food and medicine is another element of good foreign policy.
Sanctions are more effective when they are targeted at
economic sectors which have the potential to enrich governments
that threaten our interests. That is why the President's
decision last year to waive provision of the Iran-Libya
Sanctions Act designed to impede development of the energy
sectors in those countries was so harmful.
Targeted sanctions are needed to deprive hostile regimes of
the resources they could use to threaten the United States.
Allowing foreign governments to use their hard currency to
purchase food and medicine means they will have less foreign
currency to purchase weapons and dual use items. We need to
ensure that our sanctions policy has the effect of reducing not
increasing foreign countries' available resources for terrorist
activities.
We also need to ensure that the unilateral embargoes we do
impose punish, not benefit foreign tyrants. For example, one of
the little-known aspects of the Soviet grain embargo concerns
how much money the Soviets saved as a direct result of the U.S.
``punishing them'' with an embargo.
At a recent Foreign Relations Committee hearing, Robert
Kohlmeyer, of World Perspectives, testified that the Soviets
were able to cancel 17 million tons of high-priced purchases
from U.S. farmers and replace them with purchases from other
countries at lower prices. Kohlmeyer, at the time of the
embargo, estimated that our anti-Soviet embargo saved the
Soviets about $250 million, not exactly the intended result.
Throughout our history, America has been a Nation that
promotes freedom worldwide. We should continue to talk
truthfully about political oppression in other countries. We
should do so, though, without purposefully denying people who
suffer under such regimes the food and medicine they need to
survive.
How can we ever expect to topple a regime by starving those
who are oppressed by it? Our foreign policy interests should be
to strengthen, not weaken those who could resist an oppressive
regime. We need to stop using food as a weapon against the
innocent. Instead, we should use targeted sanctions as a weapon
against the guilty.
It would be a terrible disaster, in my judgment, to think
that a foreign dictator could explain starving those over whom
he rules and whom he oppresses, saying that I cannot give you
food, the Americans will not sell it to me, and then allow him
to spend his currency to provide the kind of technology or
weaponry which could be threatening to the interests of the
United States or freedom in general.
The second issue I would like to raise today is this.
Ending unilateral embargoes against the sale of U.S. food is
good farm policy. Just last week, the American Farm Bureau and
all State Farm Bureaus across the Nation released an AgRecovery
Action Plan, and they requested $14 billion in emergency
funding. Now, this is serious, and it is a request I do not
take lightly.
I have given serious consideration to why a farm crisis has
occurred, and what is in the forefront of my mind are the
reasons for which the U.S. Government is responsible. Congress
has promised to open foreign markets for farmers. While the
Farm Bureau's AgRecovery Action Plan asks for immediate
financial assistance, it also asks Congress to put an end to
unilateral embargoes on agriculture.
USDA estimated there has been a $1.2 billion annual decline
in the U.S. economy during the mid-1990's. This translates into
the loss of many, many jobs, and a lost job for a farmer is not
just the loss of income, it can mean the loss of the farm, and
the traditions of an agricultural culture that have influenced
this country.
Maintaining a steady and fairly consistent supply of food
is also important domestically. It is said by some that these
agricultural embargoes do not have a significant negative
impact on the U.S. Well, I disagree that the kind of impact I
just described is not significant. Also, certain sectors are
hurt even more.
The National Association of Wheat Growers estimated that
sanctions have shut U.S. wheat farmers out of 10 percent of the
world wheat market, and the Washington Wheat Commission
projects that if sanctions were lifted this year, our wheat
farmers could export an additional 4.1 million metric tons of
wheat, a value of almost half a billion dollars to the U.S.
American agricultural community.
America's soybean farmers could capture a substantial part
of the soybean market in sanctioned countries, for example, an
estimated 90 percent of the demand for soybean meal in North
Korea, and 60 percent of the demand for soybeans in North
Africa. Soybean farmers' income could rise by an estimated $100
to $147 million annually, according to the American Soybean
Association.
The Missouri Farm Bureau just finished a tour of the entire
State, seeking the input of Missourians on the farm economy.
Their report, delivered to me this week, had a clear message.
Missourians want to halt unilateral food embargoes.
A transition in our policy I believe would not only be good
farm policy, ending unilateral embargoes, but I believe it
would be good foreign policy, advancing our commitment to
freedom values around the world.
Mr. Chairman, I thank you for your tolerance in allowing me
to complete these remarks, and for your holding of this
hearing, and I would just express as I close, my hope that we
will find an opportunity to mark up this kind of legislation
before the end of this month, so that when we go home to spend
some time with our constituents in August, that we will be able
to indicate to them that not only have we held a significant
series of hearings, but that we have acted on this legislation
to move it toward enactment on the floor of the U.S. Senate.
I thank you.
[A news release from Senator Ashcroft follows:]
[For Immediate Release--Wednesday, July 21, 1999]
Ashcroft Seeks Help for Farmers Through Removal of Trade Sanctions
senator tells committee about farmers' need for opportunities
Washington--The U.S. must open up further export opportunities for
farmers facing dire economic conditions by removing agriculture trade
sanctions, U.S. Senator John Ashcroft said today. Ashcroft, a member of
the Senate Foreign Relations Committee, testified before the Committee
concerning a bipartisan proposal to help farmers sell more farm goods
abroad.
Ashcroft said: ``Farmers in Missouri and across America are
experiencing a financial crisis that will require emergency assistance
from Congress. While multiple factors may have contributed to this
situation, a significant cause is unilateral agricultural embargoes.
These trade sanctions have led to an estimated $1.2 billion annual
decline in the U.S. economy, and a loss of 7,600 jobs--2,600 jobs in
the farm sector alone. A lost job for a farmer is not just the loss of
income. It can mean the loss of a farm, a homestead, and all the
traditions of farm culture that could have been passed on to the next
generation. With Missouri ranking number two in the nation in its
number of farms, I will seek to halt the financial erosion of farms
caused by embargoes on our farm products.
``Farmers and ranchers tell me repeatedly that they want more of
our help abroad, and less of our interference at home. We must tear
down U.S. export embargoes that block our food and fiber from being
sold to other nations. Removing barricades to agriculture exports will
create increased opportunities for our farm families in the 21st
Century.''
Senators Ashcroft, Chuck Hagel (R-NE), Max Baucus (D-MT), and
Christopher Dodd (D-CT) are proposing a measure that would prevent food
and medicine from being used in trade sanctions unless Congress
approves a request from the President. During wartime, the President
may cut off all food and medicine sales immediately without
Congressional consideration.
``Sanctions are necessary foreign policy tools against governments
which threaten our interests and instill fear in the hearts of those
around the world. But our foreign policy interests should strengthen,
not weaken, the people who are in most need of our food and medicine.
We need to stop using food as a weapon against the innocent. Instead,
we should use targeted sanctions as a weapon against the guilty,''
Ashcroft said.
The agricultural industry is the largest job sector in Missouri and
a backbone of the state's economy. The 102,000 Missouri farms ranked
the state second nationally in 1997 in the number of farms. These farms
produced and sold more than $5.56 billion worth of agricultural
products in 1997, including nearly $1.55 billion in sales overseas.
Missouri is the second leading state in beef cows, second in hay
production, fifth in pork and turkeys, and sixth in soybeans and rice.
The Chairman. Thank you. We are going to have a vote
shortly. I do not know when it is, but I suggest--since we are
all members of this committee, and you are certainly four
distinguished members, and I appreciate your participating--
maybe I ought to ask one question, and in this case I am going
to ask it to Senator Lugar, and we could just interrupt each
other and you can ask a question, and all of us can
participate. We want to add to the thinking. And this guy is
taking it down, and I hope you can understand my southern
accent.
Now, Senator Lugar, the bill you have introduced is a
prescriptive one, I believe, and includes a somewhat complex
set of requirements for both the legislative and executive
branches prior to legislating or imposing sanctions. Now, other
bills contain more hortatory language about guidelines for
sanctions.
My question to you, sir, is, do you believe it is vital
that there be mandatory prior procedures for the imposition of
legislation on sanctions?
Senator Lugar. Yes, Mr. Chairman, I think there should be.
These prescriptions, as you have described them, and they are
meant really to try to take the argument out of the hortatory
language situation down to the concrete, and are the result,
really, of many changes over the course of many months as
industries have come in, or people involved in the State
Department or human rights, or Stu Eizenstat or others who
contribute to this argument so that the law can be as precise
as possible.
And having said it should be precise, that means that
people can change precise words, and it is not simply left out
in the air, and that is my intent, but I hope we can have a set
of procedures.
I appreciate the comments that my colleagues made today
that there are probably several issues here, procedural ones,
then specific items, food and medicine were mentioned as
important, and agriculture I have talked about a lot, but that
is a part of the trend.
And then the whole idea of the checks and balances, what
should be the Presidential waiver authority, what is logical,
given the fact the President must conduct foreign policy, but
what are our obligations in the Congress and the check and
balance, so that is a very important part, as my colleagues
have pointed out, that I would agree with.
The Chairman. Do any of you want to comment on his comment?
Senator Dodd. Just, Mr. Chairman, I think Senator Lugar has
said it well, and as I tried to make reference, it has become
so easy in a sense I think we have lurched toward the sanctions
solution. It is one that is hard to resist.
I mean, something happens some place and we are all
offended by it, and one of our colleagues puts together a bill
and offers an amendment, and says, do you think we ought to say
something to that dictator X, or Y, or situation C, and we are
not debating the sanction at that point. We are then
discussing--the vote looks like you did not want to respond to
that dreadful action, or that bad person, so we end up with a
body of support that sort of disregards the effects of what we
are doing.
I think the fact that we have, as I mentioned, I think half
the world, 29 nations that are today subjected to sanctions by
the United States, is an indication of how too easily we have
kind of arrived at that solution, and so what Senator Lugar has
suggested I think makes some sense, because it causes all of us
to say, look, I do not disagree. We want to do something about
that situation, but let us now think it through.
It is not going to take long, but let us go through the
process here so that when we take that action it will not only
be good politics for domestic consumption, but that it will
have the desired impact, that it will hopefully have the
potential of reversing the action or involving others to
support it, so it slows it down a bit.
It is not going to be very appealing for drawing that quick
amendment out of the pocket on the floor when something happens
at 9 last night and you want to respond to it the following
morning on the floor of the Senate, but I think we will end up
with a far more deliberative process, and what everyone has
said here, we want to make sanctions work better.
The Chairman. Senator Hagel, how about you?
Senator Hagel. No, thank you.
The Chairman. Senator Ashcroft.
Senator Ashcroft. Mr. Chairman, I appreciate the thoughtful
comments made by my colleagues, and I would just ask if the
committee would please receive a couple of letters regarding
the food and medicine sanctions proposal we have made. There
are 36 national agricultural organizations.
The Chairman. Certainly, without objection, they will be
included in the record.
[The information referred to follows:]
Missouri Farm Bureau Federation,
P.O. Box 658, Jefferson City, MO,
June 17, 1999.
The Honorable John Ashcroft,
United States Senate,
Washington, DC 20510
Dear Senator Ashcroft: Missouri Farm Bureau, the state's largest
general farm organization, strongly supports the Ashcroft-Hagel-Baucus-
Kerrey amendment that provides US agricultural producers with much-
needed protection from unilateral trade sanctions. Furthermore, I
commend the sponsors of the amendment for recognizing the damage
inflicted upon our nation's farmers when food is used as a weapon.
This amendment is especially important given the current weakness
of the US farm economy. Ill-conceived trade policy that prevents US
agricultural exports not only has financial ramifications for our
farmers but also provides new market opportunities for our competitors.
This amendment exempts agriculture from unilateral trade sanctions,
yet recognizes there may be instances where such drastic action is
warranted. When a situation arises where the President feels it is
necessary to include agriculture, the amendment provides a procedure to
obtain this authority.
Unilateral trade sanctions have proven to be a tool best to avoid.
I commend your efforts and urge other Senators to support this
important amendment.
Sincerely,
Charles E. Kruse, President.
______
June 17, 1999.
The Honorable John Ashcroft,
United States Senate,
Washington, DC 20510.
Dear Senator Ashcroft: We are pleased that you and other supporters
of sanctions reform are preparing to offer an amendment to the State
Department Reauthorization bill on Friday.
The amendment, ``Food and Medicine for the World,'' would exempt
agricultural and medical products from unilateral sanctions unless the
President submits a report to Congress asking that the sanctions
include agriculture and Congress approves his request by joint
resolution. If a sanction is imposed on agricultural exports following
joint resolution approval, it would sunset in two years unless the
process is repeated at that time.
We strongly support this amendment and believe it would result in
true sanctions reform for U.S. farmers and ranchers. As you know,
unilateral sanctions inflict the most damage on U.S. producers. They
often result in no change in the target country as these nations simply
source their agricultural purchases from our competitors. The end
result is that our producers are branded unreliable suppliers and lose
access to important markets for decades to come. This amendment would
begin to restore the U.S. reputation as a reliable supplier of
agricultural products.
Access to export markets is more important than ever given the
decline in projected exports for 1999 and depressed commodity prices
worldwide. We endorse your efforts to keep our export markets open.
American Farm Bureau Federation, American Soybean
Association, Archers Daniel Midland Company, Cargill, Central
Soya Company, Inc., Cerestar USA, ConAgra, Inc., Continental
Grain Company, Corn Refiners Association, Farmland Industries,
Inc., Florida Phosphate Council, Independent Community Bankers
of America, North American Millers' Association, National
Association of Animal Breeders, National Association of Wheat
Growers, National Barley Growers Association, National
Cattlemen's Beef Association, National Chicken Council,
National Council of Farmer Cooperatives, National Corn Growers
Association, National Grain Trade Council, National Grange,
National Grain Sorghum Producers, National Oilseed Processors
Association, National Pork Producers Council, National
Renderers Association, Pet Food Institute, Sunkist, USA Rice
Federation, United Egg Association, United Egg Producers, U.S.
Rice Producers Association, and U.S. Wheat Associates. Inc.
Senator Grams. I did not have any questions, Mr. Chairman.
I just wanted to thank all the Senators for being here and
outlining their bills, and I think as has been mentioned here
sanctions have not been a weapon of last resort but a weapon of
first resort, and each of their testimonies, I think they have
covered most of our concerns and outlined I think a lot of good
points that we need to consider, and I want to thank them for
their testimony.
I think I am cosponsor of all the bills, and so I look
forward to working with you on all of this, and I look forward
to working with the chairman, and I hope we can mark this up,
and I look forward to working with you on that.
So I just wanted to be here to add my support and thank you
for your testimony.
Senator Dodd. Mr. Chairman, I personally want to thank
Senator Grams. He has been helpful on a number of these efforts
we have had on the sanctions front, and while he is not sitting
on this side of the table today, he deserves to, and he has
been a lead Member on this issue.
The Chairman. Senator Lugar.
Senator Lugar. I would only add, Mr. Chairman, that
sometimes it may be that our country will want to take an
action that is self-sacrificial. This is not inconceivable. We
have done that many times.
But I think it probably is important to assess at the
beginning the cost to Americans of a foreign policy activity in
terms of their jobs, their income, or various other things that
may be involved, as well as to our allies and our friends while
we are busy trying to figure the cost to the target, and
frequently we calculate that, or presume to do that, not
oblivious of the cost to ourselves, but perhaps not with the
balance sheet in mind.
So this is not entirely a bookkeeping procedure, but in a
way there is some accounting, because in the real world we try
to adopt policies in the Congress that help Americans and on
balance at least we try to do that deliberately. We do not
always succeed, but we start out that way, and I think we
should do that with the sanctions bill.
The Chairman. Senator Hagel, any further comment?
Senator Hagel. I would only add, Mr. Chairman, that in a
world that is growing closer and closer together, all 6 billion
people on the face of this Earth who are now connected, not
just economically but in so many ways, is going to force us as
a Nation, as a great power in the world, to reassess our
policies to make those policies relevant to the challenges of
this next great century.
I think sanctions are certainly part of that review, and it
is relevant, it is correct, and all great powers deal with
these things through the course of history, and as the world
gives us tremendous opportunity to do even more good than this
country has done in the last century, then this issue is going
to be very important as we move into the next century, so thank
you for your attention, Mr. Chairman.
The Chairman. Thank you, sir. Do you have any further
comment?
Senator Ashcroft. Mr. Chairman, it is very kind of you to
continue to allow me to think of new things to say.
I am sure if we keep coming back I will think of something.
I would like to just say, we are facing a very serious
crisis in American agriculture, and I think our farmers have a
right to ask us to provide them with the opportunity to market
their goods unless it is against the interests of this country,
and this is not a trivial matter. We watched hog prices go to 8
cents a pound this last year in the Midwest, and the best
economists in my State regarding agriculture say that other
farm products are going to see similar devaluations.
I think in that setting we have to do what we can, And I
look back at this U.S. Congress which several years ago enacted
what was called the freedom to farm, and we have emphasized the
word farm, but we have not emphasized the word freedom. I think
we need the freedom to market goods unless there are very
serious reasons not to that can be agreed upon by the Congress
and the President.
We have not really responded by providing freedom to
market, and we have not responded by providing freedom from
regulations, which we promised farmers in that enactment, which
was, I think, the right thing to do toward our agricultural
community, we should be diligent to pursue the freedom for
farmers to market, and we should be diligent to do it in a
timeframe that suggests to them we are sensitive to their
plight, that we are understanding of the fact.
We are just not viewing the potential of some farm
distress, but there is a genuine crisis there that animates me,
and that is one of the reasons that I am eager to do what we
can do as early as we can to mark this bill up and bring it to
the floor.
The Chairman. I have asked the staff to be ready to accept
any further comments you may want to add on the grounds, John,
that I have never made a speech in my life, beginning with the
first one, that when driving home I failed to think, why didn't
I say so-and-so, so we will give you a chance to say so in
writing, and it will be made a part of the record.
Let me just say this. I sometimes do not know how to say
nice things, but today the four of you have made me proud to be
on the same committee with you. Thank you for coming. Thank you
for your testimony.
If there be no further business to come before the
committee, we stand in recess.
[Whereupon, at 4:32 p.m., the committee adjourned.]