Trade sanctions used to be Washington's almost exclusive preserve. But now, to the consternation of U.S. business, states and cities across the nation are muscling in and making sanctions a booming American growth industry. Already, trade and investment with 35 nations that buy a fifth of the world's $4 trillion annual exports are subject to U.S. penalties of some sort, according to the National Association of Manufacturers. And the trend is accelerating.
Frightened business groups are mounting a lobbying counteroffensive. Former U.S. trade ambassador Clayton Yeutter is heading a push by the National Foreign Trade Council, which represents 560 U.S. companies, to persuade Congress to stop the epidemic. Yeutter wants congressional hearings to broadcast the message that sanctions enacted in a fit of outrage, however justified, gnaw at American corporate sales and profits. "We need to evaluate each situation carefully and determine if we are going to achieve the desired result," he says.
ALARM BELLS. Yeutter's chances of radically changing matters are slim. The lobbying campaign raises hot-button issues, such as states' rights. Alarm bells started jangling, for instance, when Massachusetts joined a slew of American cities--from Oakland, Calif., to Ann Arbor, Mich.--in imposing trade sanctions on companies trading with Burma last year. The measures ban or penalize bidding by sanctions-busters for public contracts. Massachusetts is now mulling a similar move against Indonesia, whose human rights abuses in East Timor are the focus of growing protests.
The state-imposed sanctions have angered America's trading partners as well. Both Japan and the European Union have complained to Washington that the measures are illegal because they flout World Trade Organization accords. Business argues that the rules, adopted at U.S. insistence, are important weapons against unfair foreign trade practices.
But business won't be getting much help from Congress. Some legislators have their own agendas, from beefing up sanctions against Cuba to renewing those against Colombia. And many want the White House to use its powers to ban future U.S. investment in Burma. If that happens, warn business advocates, the U.S. could be pitched into a major fight with the nine-nation Association of Southeast Asian Nations (ASEAN), which Burma is scheduled to join in July. In that event, contends Ernest Z. Bower, president of the U.S.-ASEAN Council for Business & Technology Inc., "we not only lose business, we lose the opportunity to affect the pace of change in the entire region."
Business' biggest beef is that U.S. sanctions are mostly Lone Ranger-style, unilateral efforts. Too often, they result in foreign companies being handed contracts on a plate while the offending regime goes unpunished. Along the way, the U.S. also loses its capacity to influence other nations' policies on outstanding issues ranging from drug enforcement to human rights. That's just what El Segundo (Calif.)-based Unocal Corp. is arguing as it attempts to rescue its 28% share of a $1 billion offshore natural gas well and pipeline project in Burma.
But Yeutter is going to need more compelling arguments to stem the rising tide of U.S. trade and investment restrictions--and quickly. New York City is considering boycotting Swiss financial institutions over the Nazi gold affair. And the handover of Hong Kong to China in mid-year could stir up new sanctions demands if Beijing tampers with democratic rights there. At this rate, exporters may soon be looking back on today's Burma sanctions as the good old days.