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Business Vs. The Righteous: Why Trade Sanctions Are Softening

Last spring, U.S. plans to punish rogue nations with tougher trade sanctions were sprouting like Washington daffodils. Not anymore. After months of outraged complaints by American allies and growing opposition from U.S. business, the Clinton Administration and Congress are quietly backing away from economic behavior modification.

One of the reasons: sanctions fatigue. The use of trade and investment bans to pressure tyrants and governments that trample on human and religious rights has spread all the way to city councils. Now it's dawning on lawmakers at all levels that righteousness means lost business and damaged relations with allies and trading partners. Meanwhile, the Clintonites--with a wink from Hill leaders--are looking for ways to soften existing sanctions.

BACKING DOWN. The latest example is the quiet easing of the U.S. trade embargo on Cuba. Taking a cue from Pope John Paul II--who criticized American sanctions during his January visit to Cuba--the Administration announced on Mar. 20 that it will allow flights into Havana for humanitarian and family visits and permit up to $1,200 in annual gifts to island relatives. It also gave preliminary approval for a trade show in Cuba for U.S. makers of medical gear and pharmaceuticals. That could lead to the first such exhibition in 40 years. The next likely move: selling food to Cuba and expanding medical sales.

The Administration also plans to ignore provisions of the 1996 Helms-Burton Act authorizing Americans to sue in federal court for loss of expropriated property in Cuba. The Clintonites have never fully enforced the law, fearing a challenge in the World Trade Organization on grounds that it tries to impose U.S. laws on foreign corporations. In return, the European Union will probably let the mid-April deadline on its WTO complaint against the Helms-Burton Act to lapse.

Don't expect the Administration to enforce the penalties provided in the 1996 Iran-Libya Sanctions Act anytime soon, either. It calls for sanctions against foreign companies that invest more than $20 million in Iran or Libya. Although President Clinton signed it with great fanfare, he backed down when France's Total, Russia's Gazprom, and Malaysia's Petronas called Washington's bluff with a planned $2 billion investment in Iran's oil and gas fields. Officially, the White House has been studying the deal for six months while quietly hoping it will collapse. Meantime, the Administration has been holding congressional critics at bay with hopes of a rapprochement with Iran.

Other limits have also been eased. The Administration will not press human rights complaints against China in the U.N. And when the Maryland legislature took up a bill to sanction Nigeria for human rights abuses--just as it once punished South Africa for apartheid--the State Dept. lobbied to kill it.

Other states are feeling pressure to overturn foreign-policy efforts. In Massachusetts, for example, a coalition of more than 500 businesses, the National Foreign Trade Council, is threatening to take the state to federal court over a 1997 law barring companies that do business with Burma from getting state procurement contracts. That has alarmed grass-roots activists. "If we tell states they can't assert their own values in government procurement, then we have killed democracy," says the Sierra Club's Daniel Seligman.

Unilateral sanctions will always be a cheap way for lawmakers to express displeasure with other countries. This year, a trade-embargo bill could pass Congress that would punish Sudan for religious persecution. But it exempts the only import that the U.S. wants to buy: gum arabic, used in soft drinks. As business keeps up the pressure, sanctions are increasingly being reduced to such toothless gestures.

— With assistance by Gail Degeorge

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