ACTION: The Chamber supports a conduct-based approach to economic sanctions that targets specific, clearly articulated objectives; favors multilateral measures to ensure effectiveness and avoid “backfill”; and maintains executive flexibility to respond to changing circumstances.
Economic sanctions have become a frequently-used tool of U.S. foreign policy in the post-war era, and with good reason: Policymakers need to have options that lie between diplomacy and military action to advance key American interests overseas. Too often, though, sanctions are wielded as a blunt instrument without sufficient regard for their effectiveness or possible collateral damage to other U.S. interests. The risk is not only that sanctions will fail to achieve their primary foreign policy objectives but that they will erode U.S. credibility in the long haul and harm international economic ties that sustain economic growth and jobs at home.
To maximize the effectiveness of economic sanctions, policymakers should adhere to certain principles. First, sanctions legislation and executive action should be calibrated carefully to achieve specific, clearly articulated objectives. Fundamentally, these objectives center on altering the future behavior of a foreign government. The aim of sanctions should not be punitive: Sanctions that do nothing but impose hardship on the citizens of another country will only undermine U.S. interests in the long run, erode America’s international standing and “soft power,” and are at odds with America’s humanitarian values and support for human rights.
Sanctions must also be multilateral to achieve their aims. Success in bringing economic pressure to bear on a given country increasingly depends on support from a broad range of foreign governments, only some of which are close U.S. allies. After all, the United States is a minor trade and investment partner for most of the countries targeted with sanctions in recent years.
History demonstrates that unilateral sanctions uncoordinated with other significant economies immediately present opportunities for non-U.S. competitors to “backfill” commercial opportunities as U.S. firms are forced to exit the market. In these circumstances, U.S. governmental action simply hands lucrative foreign markets to American companies’ competitors on a silver platter, with real-world implications for jobs, competitiveness, and earnings back home.
Sanctions should be conduct-based, not broad or sectoral. Sanctions should focus on documented malign conduct and those who engage in it. Some of the most effective sanctions employed by U.S. authorities in recent years have been focused on foreign government officials, executives of state-owned or state-directed enterprises, and specific foreign firms. Targeting foreign individuals and entities and their financial holdings and ability to travel has been highly motivating in many instances. Given that these sanctions are generally applied to undemocratic regimes that tend to be unmoved by blunt sanctions that harm their own citizens, this targeted approach has added attractiveness.
Sanctions should allow flexibility for the executive branch. Sanctions are often contemplated in a context of armed conflict, which can shift rapidly, and executive branch officials must be provided the leeway to alter course. Failing to provide a degree of discretion for the executive branch would constrain its ability to direct U.S. foreign policy as provided by the Constitution.
In addition, sanctions should seek to avoid spillover to third-country markets. The application of U.S. sanctions to joint ventures and other enterprises in third countries exacerbates the “backfill” problem mentioned above and multiplies the harm to U.S. industry without adding in any way to the sanctions’ effectiveness. The reach of secondary sanctions into third countries incites economic, diplomatic, and legal conflicts with U.S. allies and frustrates joint action.
Finally, sanctions must avoid overreach—or they will erode U.S. influence. U.S. influence and leverage are substantial, but they are finite resources that may be exhausted through overuse. For example, the United States retains substantial economic leverage through its leadership role in the Society for Worldwide Interbank Financial Telecommunication (SWIFT) financial messaging network that financial institutions use to transfer information securely. However, U.S. use of this influence in ways that lacked broad support has led allies and other countries to begin the development of alternate systems that will allow commerce to flow around the barriers raised by U.S. sanctions. In the end, sanctions overreach puts at risk the country’s future ability to impose sanctions.