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EIZENSTAT SEES GROWING CONSENSUS
ON PROMOTING CHANGE IN CUBA
(Also discusses U.S. sanctions against Iran)
                                  January 7, 1998

Remarks by Stuart E. Eizenstat
Under Secretary for Economic, Agricultural, and Business Affairs
United States Department of State

Presented at a conference sponsored by the North American Committee of the National Policy Association
National Press Club, Washington, D.C.
January 7, 1998

Introduction

I would like to thank NAC president Malcolm R. Lovell for organizing today's event. I would also like to acknowledge Roger Noriega representing the Senate Foreign Relations Committee.

I understand this morning's sessions on the subject of sanctions were thought-provoking and I regret not being on hand to listen to the various thoughts and opinions on the subject. I do look forward to discussing this matter in more depth with you at the conclusion of my remarks today.

Today I will discuss two timely and important topics: best business principles and the use of sanctions. While these two subjects appear to be separate, they can be very important instruments in helping us achieve our foreign policy objectives.

In my remarks, I will focus on two current examples -- the Libertad Act, also known as the Helms-Burton Act, and the Iran Libya Sanctions Act more commonly referred to as lLSA. These acts have created more emphasis and focus on the issue of sanctions and have given impetus to a series of studies and discussions, like the one taking place today, on the effectiveness of economic sanctions. I believe that discussion, debate and analysis is constructive and we welcome ideas and input from the private sector, from Congress and from academicians and NGOs that can help improve the effectiveness of our policies and provide clarity to the goals and rationale of these actions.

The concept of sanctions is not new. Historians cite examples going back to ancient Greece in 432 BC. In the early 19th century, the U.S. imposed an embargo on Great Britain in retaliation for British attempts to limit U.S. trade with France. The U.S. imposed embargoes on sales to Japan in both World War I and World War II. As President Carter's domestic policy adviser, I personally participated in the decision-making process that led to the imposition of sanctions against the Soviet Union following its invasion of Afghanistan in 1979.

The U.S. has applied sanctions for foreign policy purposes a total of 115 times since World War I. Of those, 104 were since World War II and, according to the count of the President's Export Council, 61 of those were between 1993 and 1996. These figures do not include the use of sanctions at the state and local level, which have proliferated. This rise in the use of sanctions has caused legitimate concern in some circles.

The United States is not alone in the increased use of sanctions. The U.N. Security Council imposed sanctions only twice between 1945 and 1990, on Rhodesia and South Africa. Both cases were to address the denial of human rights and domestic abuses of power rather than to counter traditional threats to international peace and security. Since 1990, the U.N. has imposed mandatory sanctions on eight countries: Iraq, Serbia, Libya, Somalia, Liberia, Rwanda, Haiti, and Sierra Leone.

The EU, Japan, Canada, and the U.S. have imposed sanctions on Burma. The EU is withholding aid from Kenya until that country deals with problems of corruption and rigged elections. The East African states imposed sanctions on Burundi and the Economic Community of West African States (ECUWAS) on Sierra Leone.

As these examples demonstrate, sanctions are used for a variety of purposes: to change the behavior of a target country; to signal disapproval of a government's behavior; to limit a target state's freedom of action; and, to increase the cost of engaging in unacceptable behavior; to demonstrate support for human rights, democracy, counter-terrorism, and other policies.

Sanctions are not costless. The President's Export Council, for example, recently estimated the direct cost of economic sanctions to the US economy in 1995 at $15-19 billion in lost export sales and up to 250,000 jobs. It also argued that sanctions have an indirect effect through undermining confidence in the reliability of U.S. suppliers. They further claim that the cost to the U.S. economy and U.S. competitiveness can be disproportionate to the results achieved. State and local sanctions may conflict with our international obligations and confuse our foreign policy goals.

There are cases, however, in which sanctions achieved their stated objectives. In South Africa, sanctions helped bring down apartheid; in Iraq, sanctions have blocked Saddam Hussein's attempts to rebuild his war machine, and, even worse, acquire weapons of mass destruction; in Libya, sanctions have made Qaddaffi pay a high price for failing to turn over for trial those indicted for the massacre of PanAm 103; sanctions helped bring Serbia to the negotiating table in Dayton. But these have in common a multilateral effort involving many countries. The success of unilateral sanctions is more mixed -- but there is nevertheless still a role for them -- as we have done with Sudan and Burma.

But are sanctions effective? The answer is not easy, and many would argue that the record is mixed. The standards proposed by a firm dependent on sales to Burma would certainly differ from those applied by a committed human rights activist who would see any interaction with that government as immoral. Sanctions advocates believe them to be both effective and symbolic in demonstrating U.S. leadership and prodding other governments to reform. However, sanctions critics argue that unilateral sanctions usually miss the target country and its leaders, even as U.S. companies lose contracts and jobs -- often permanently.

The State Department is reviewing the use of this controversial tool. The first step is to get our own house in order. Thus, we are establishing a department-wide "Sanctions Team" to develop a set of principles and policy options to make economic sanctions more effective as a tool of foreign policy. This "Sanctions Team" will also find better ways to implement sanctions and, in doing so, work directly with Congress, NGOs, and others. Legally mandated sanctions related to non-proliferation and arms transfers will continue to be administered under existing procedures and would not be part of this new effort.

Several principles should guide our search for a better, more effective way to integrate sanctions into foreign policy.

• We should resort to sanctions only after other diplomatic options have been fully tried and failed. We should seek international support for, and participation in, any sanctions regime before taking unilateral measures. International or multilateral sanctions, even if not as severe as we would prefer, may actually prove more effective than a more stringent unilateral measure initiated by the United States.
• We should design sanctions carefully so that the target feels the pain and unnecessary hardships to the innocent are prevented.
• If our policies are to be effective, we must work together -- administration, Congress, state and local communities, the business community, NGOs -- to see that our use of sanctions is appropriate, coherent, domestically supported, and able to attract international support.

Before I get into the use of sanctions with respect to Iran, Libya and Cuba, I wanted to briefly discuss the use of the term secondary boycotts. We have found in our discussions with governments and the private sector that there is no generally accepted definition of the term "secondary boycotts." Some have applied it to certain U.S. laws, including the Libertad Act and lLSA. It has been suggested that the term refers to any measure of one state that could influence decisions of foreign firms with respect to their dealings in a third state; and that all such measures are illegal now, or should be so.

In response to such assertions, the United States Government has pointed out that a wide variety of measures imposed to advance the policies of one state have the potential to influence foreign firms. For example, an EU ban on the import of furs caught in leghold traps would have precisely such an impact. We have also pointed out that it is entirely legitimate for a state to respond to such threats as proliferation and terrorism by such sanctions as conditions on commercial assistance programs such as Ex-Im Bank, as authorized under ILSA.

I do not believe that we will improve the effectiveness of our response to such threats or will reduce tensions that result from disparate policies by brandishing the label "secondary boycott." Instead, I believe that the United States and its allies should make greater efforts to improve cooperation in developing concerted responses to threats to their common interests. Through enhanced, high-level consultations on these matters, the participants can seek to avoid disparate policies, including unilateral actions, that could adversely affect their respective interests. There ideas are currently a matter of active discussion between the U.S. and the EU as an outgrowth of the understanding that Sir Leon Brittan and I negotiated last April.

ILSA

Iran's support for terrorism, its efforts to obtain weapons of mass destruction and missile delivery systems, and its efforts to disrupt the peace process in the Middle East have threatened our friends, allies, and interests in the Persian Gulf, the Middle East and beyond. We have worked to develop a multilateral consensus inhibiting Iran's efforts to acquire weapons of mass destruction and deter support for global terrorism. There is general agreement with our allies about the threat posed by Iran, but less agreement about appropriate measures to counter that threat.

We are actively engaged in a continuing dialogue with our allies to bring our policies with respect to Iran into closer alignment and apply the sort of multilateral pressure that is most likely to produce change in Iran's behavior.

The lLSA legislation itself specifically admonishes the President to work to "establish a multilateral sanctions regime against Iran, including provisions limiting the development of petroleum resources, that will inhibit Iran's efforts to" support terrorism and obtain weapons of mass destruction. Such an approach affords the greatest opportunity to achieve these foreign policy objectives. But, whatever the outcome of this effort, we must be prepared to act unilaterally if necessary when critical national interests are at stake.

At the same time, we are continuing our examination of the South Pars and Balal investment cases to establish whether sanctionable activity under ILSA has occurred. We are moving expeditiously to complete our work, but have not yet reached any decisions in these cases. Let me emphasize that we are serious about implementing this law and have not ruled out any options. Sanctions remain a real, live option in both cases if these activities are found to be sanctionable.

In analyzing sanctions legislation, it is important to be factual and precise as to the effect and limits of the actions. For example, the conditioning of Ex-Im financing under ILSA is essentially a withdrawal of a U.S. benefit to a foreign company that makes a substantial investment "that directly and significantly contributed to the enhancement of Iran's ability to develop petroleum resources." It is not an action against a foreign government.

The Libertad Act

Sanctions on Cuba are illustrative of one of the principal goals of economic sanctions -- to press for fundamental change of a regime that has an uncontroverted history of bad behavior internationally and brutal repression of its people. While our allies and major trading partners may disagree with our embargo of Cuba and have opposed provisions of the Libertad Act, they do agree with us on the key goal of encouraging democracy and human rights in Cuba.

Our current policy with respect to Cuba reflects our commitment to seeking a concerted multilateral approach to bring about fundamental change in Cuba. Sanctions are just one element of this much broader approach. Last year, the President, for the first time in the 38 years since Castro took power, launched a major effort to develop a multinational approach to promote democracy in Cuba. The President's initiative built on years of bipartisan policy towards Cuba. After months of effort, thorough consultation with the Congress and the Cuban-American community, and thousands of miles of travel by myself and many dedicated people, we have succeeded in launching an unprecedented, multilateral effort that has changed the terms of the discussion about Cuba.

Once again, with any kind of law that is directed to foreign companies, it is important to be precise as to the intents and limits of the actions. Part of our outreach effort with our friends and allies was to clarify certain incorrect perceptions and misunderstandings in regards to the Helms-Burton Law. Helms-Burton is a targeted piece of legislation that does not penalize trade and investment in Cuba. Rather, it only applies to those companies that deal directly in expropriated property taken from U.S. citizens by the Castro government. In clarifying these misperceptions and directly answering questions foreign governments had about this law, we were able, in some measure, to move the focus away from our differences and to our shared objectives -- promoting democracy in Cuba.

This multinational effort to promote democratic change in Cuba does not consist only of governmental activity. Non-governmental organizations -- NGOs -- have made a growing and important contribution to this cause. Last year, the leading Dutch NGO Pax Christi sponsored a landmark conference for European NGOs on the need to increase cooperation on programs directed toward the development of civil society, human rights and democracy in Cuba. And last April, the ruling Dutch political parties held a conference on human rights and a peaceful democratic transition in Cuba. This conference brought together established political parties and NGOs to coordinate and enhance programs aimed at supporting democracy and human rights movements in Cuba, called for the release of Cuban political prisoners, and called on the Cuban government to allow "a peaceful transition towards a democratic society ruled by respect for rule of law."

In the government sphere, there has been a growing effort to encourage democratic change in Cuba among Latin American governments. The leaders of Argentina, Nicaragua, and El Salvador have made statements calling on the Cuban government to begin the process of democratization and to respect the commitments Castro himself made to democracy and human rights at the 1996 Ibero-American Summit. The EU developed a "Common Position," an historic, legally binding commitment of all 15 members and the European Commission to press harder for human rights and democratic change in Cuba. This "Common Position" served as a stepping stone to the April 11 understanding that recommits both sides to continue their stepped up efforts to promote democracy in Cuba and to encourage other nations to do so.

As part of our April 11 understanding with the EU on the Libertad Act, we are committed to developing binding disciplines on investment in properties expropriated in a manner inconsistent with international law, and to address questions of conflicting jurisdiction, including sanctions. Achieving this would have benefits on both sides of the Atlantic, including enhanced protections for U.S. and European investors ... and would greatly increase pressure on the Cuban government for change.

That is why we have proposed in our talks with the EU the enhanced high-level consultations to which I referred earlier. Closer cooperation with our international partners in responding to threats posed by states that refuse to respect international norms will be more effective in changing unacceptable behavior and will be less likely to result in conflicting policies which undercut our respective interests.

Let me turn now to best business principles. I first note that the United States discourages investment in Cuba. We do not believe that investment under the current circumstances helps promote change. We recognize, however, that some companies are continuing to seek investment opportunities in Cuba. Therefore, promotion of best business principles has been a significant element in the President's initiative to develop a multilateral approach to promote democracy in Cuba. I believe we are at an historic juncture in the effort to develop international best business practices that apply to Cuba. Very different groups with different histories and concerns are turning their attention to this issue.

Best Business Principles

The idea of the private sector taking steps to support fundamental human rights and basic worker rights is not new. The "Sullivan Principles" that applied to South Africa, the "McBride Principles" for Northern Ireland, and the "OECD Guidelines for Multinational Enterprises" are all important reference points for the concept of "best business practices." In the 1990s, principles were developed to encourage businesses investing in the Soviet Union to promote basic human rights.

In the U.S., worker rights are evaluated in connection with such programs as the Overseas Private Investment Corporation (OPIC) and the General System of Preferences (GSP) program. In 1996, President Clinton announced an initiative to encourage U.S. companies working abroad to support human rights and labor rights. Internationally, a coalition of Canadian businesses published in September the "International Code of Ethics for Canadian Business." Cuba has been the object of special attention in the past, with the development in the early 1990s of the "Arcos principles," named after the leading Cuban dissident Gustavo Arcos.

Important steps have been taken in the past several months. The Trans-Atlantic Business Dialogue (TABD) at its conference in Rome on November 6-7 advanced the work it had begun last year. This annual conference of U.S. and European business leaders called for businesses to adhere to "best business practices" in every country in which they operate and stated support for "the objectives of promoting democracy, combating terrorism, and safeguarding fundamental human rights." In my remarks to the conference, I highlighted the application of these principles to Cuba.

Other private sector organizations have also pressed for best business principles. In December 1996, the federation that represents some 90 percent of all Dutch employers (VNO/NCW) publicly endorsed the TABD's statement on business principles. The Confederation of British Industries also approved a strong statement on best business principles.

The North American Committee has built upon these previous efforts in producing its constructive set of business principles for Cuba. I discussed the concept of business principles with Canadian and Mexican business leaders in my visits to their countries about a year ago, including with Miguel Jauregui, who is with us today. The principles describe basic concepts of human rights and workers rights. Given the Cuban government requirement that international investors pay wages in dollars directly to the state while the state pays workers only a tiny fraction in the national currency, the authors have included specific reference to the right of a business enterprise to directly hire employees and the rights of an individual to contract for his own labor.

In November, the growing movement in the private sector to support best business principles in Cuba received an important boost front NGOs. Pax Christi brought together several European NGOs to form the "European Platform for Democracy and Human Rights in Cuba." After a conference in Rome in November, the Platform's communique urges European investors in Cuba to "voluntarily subscribe and comply with the ... 'Arcos Principles' that include guarantees of workers rights."

All of this demonstrates an emerging consensus among a broad community of NGOs, religious groups, and activists focusing on human rights in Cuba. These organizations operate independently and do not subscribe to a partisan political view. To put it bluntly: They are not controlled by anyone.

This presents an opportunity and a challenge -- to transform the activities of the disparate groups now focusing on business principles for Cuba into a coordinated effort to encourage implementation of the NAC's principles and the Arcos principles. What is needed, I believe, is to combine the resources and results -- orientation of the business community with the idealism and abilities of non-governmental organizations, perhaps through formation of a working group to explore best business practices for Cuba.

I encourage all of you here today to consider what you or your organization could do to advance these ideas. We recognize that this is a matter in which the private sector and non-governmental groups -- not the government -- should and must lead.

Concerted action on best business practices could have desirable results. For example:

-- increased cooperation among governments and between governments and the private sector to elaborate and implement best business principles could substantially contribute to the encouragement of fundamental change in Cuba.

-- such action-oriented cooperation could potentially serve as a model in other situations and could, by contributing to a broad multilateral approach, influence the shaping of sanctions policy.

As we approach a new millennium, our challenge is to create effective policies that make this world safer and promote democracy and human rights throughout the world. We must continue to work together to develop the most effective means of achieving these broad and noble objectives. Thank you and I look forward to your comments and questions on these important subjects.