USA*ENGAGE is a broad-based coalition representing Americans from all regions, sectors and segments of our society concerned about the proliferation of unilateral foreign policy sanctions at the federal, state, and local level. Despite the fact that unilateral sanctions rarely achieve our foreign policy goals, they continue to have political appeal. Unilateral sanctions give the impression that the United States is "doing something," while American workers, farmers and businesses absorb the costs.

USA*ENGAGE leads a campaign to inform policy-makers, opinion-leaders, and the public about the counterproductive nature of unilateral sanctions, the importance of exports and overseas investment for American competitiveness and jobs, and the role of American companies in promoting human rights and democracy world wide. USA*ENGAGE promotes responsible alternatives to sanctions that actually advance US humanitarian and foreign policy goals, such as intensified US diplomacy and multilateral cooperation.

Concerned organizations, companies and individuals work together through USA*Engage to assure that unilateral sanctions initiatives are examined rigorously to determine the potential for accomplishing their stated objectives and for damaging US competitiveness and jobs. The coalition promotes responsible alternatives which advance US security, diplomatic and economic goals.

Prior to the creation of USA*Engage in 1997, there had been no organized voice urging careful examination of sanctions proposals. Congress, the Administration, and state and local governments had adopted sanctions without thinking hard about the cost to American companies, workers, and farmers, the likelihood that sanctions won't work, or potential alternatives.

USA*ENGAGE Fills this Gap

Building A Broad-Based Coalition - USA*ENGAGE brings together Americans from all regions, sectors and segments of our society to speak out for a more effective foreign policy. Even though a large number of American companies, farmers, and workers are hurt by sanctions that take away US export markets and undermine our international competitiveness, Congress and the Administration cannot hear from only activists promoting a narrow sanctions agenda. A large coalition provides the voice to ensure that American policy-makers listen to all interested parties, including those who oppose sanctions.

Developing the Case - USA*ENGAGE explains the benefits of economic engagement for American leadership and values, the ineffectiveness of past sanctions initiatives and the high cost of sanctions for American exports, investment, and jobs. We propose responsible alternatives that advance American values and foreign policy goals and provide our nation's leaders with effective tools.

Education - USA*ENGAGE has effectively recast the political debate on sanctions. We recruit respected foreign policy and economic experts to speak out against sanctions, actively engage the media, and provide outreach to key target states and Congressional districts.

Contacting Government Officials - USA*ENGAGE directly contacts Congressional, Administration, state and local officials. We reach out to Members of Congress by making them aware of the cost of unilateral sanctions for constituents in their districts, the ineffectiveness of sanctions in achieving American goals, and the role of alternative diplomatic tools.

Coalition Launch

The following is a complete transcript of statements, questions, and answers made at an April 16, 1997 press conference to launch the USA*ENGAGE coalition.

Participants:
Donald V. Fites, Chairman & CEO, Caterpillar Inc.
Congressman Lee H. Hamilton, (D-IN), US House of Representatives
Frank D. Kittredge, President, National Foreign Trade Council
Dean R. Kleckner, President, American Farm Bureau Federation
Congressman Jim Kolbe, (R-AZ), US House of Representatives
Senator Richard G. Lugar, (R-IN), US Senate
Congressman Donald Manzullo, (R-IL), US House of Representatives
James E. Perrella, Chairman, President and CEO, Ingersoll-Rand Company


Mr. Kittredge:

Good morning and welcome to our press conference. My name is Frank Kittredge. I'm the President of the National Foreign Trade Council, and we're just delighted to have you all here.

Today, as you know, we're announcing USA ENGAGE, the U.S. Alliance for effective engagement, a coalition of more than 400 companies, trade associations and other organizations from all sectors of the U.S. economy. We're undertaking a broadly based effort to encourage policymakers at the Federal, state and local levels to seek more effective ways of reacting to objectionable actions and policies of foreign governments other than by imposing unilateral economic sanctions.

Our chief objective is to open a serious, bipartisan dialogue with the Congress, the executive branch and with governors, mayors and other local authorities about the limited effectiveness of these unilateral measures, their cost to the U.S. economy, and about the importance of engagement, as well as other effective ways to achieve the objectives we believe we can all agree on.

And this is probably a good chance for me to read a letter that Former President Carter has written to Congressman Lee Hamilton, and I think it sums up in a very short letter what we really believe in.

"Dear Congressman Lee Hamilton.

I have learned that you are working with a coalition of business and farm groups, USA*ENGAGE, to help put a halt to the proliferation of laws imposing unilateral U.S. sanctions as a major instrument of U.S. foreign policy.

I believe that attempts to force U.S. requirements on an extraterritorial basis, as Helms-Burton does, are self-defeating. The net effect has been to engender serious problems between us and our European allies and, ironically enough, to strengthen, not weaken, Fidel Castro's hand in Cuba and in other nations.

The complicated question of how to have an impact on countries like Cuba or Iran requires a much more serious approach. Unilateral sanctions are clearly not the way and I hope you will be able to build support for much more positive and effective alternatives.

Sincerely, Jimmy Carter."

That letter, by the way, is out on the table outside, if you haven't already -- if you don't already have a copy.

Now, today's event is designed to provide you with information about our position and our program, a report on the Institute of International Economic Study that has just come out, and the views of important Congressmen who will be joining us this morning.

Now, before starting, I've just got a couple of administrative notes. You'll see over here we have a web site. It's up and running, as some of you who were quick on it will have found out by now, and the address is in the red corner down there and those are also in your packet. And all the material that we have, is in your packet and other information, is available on the web. We urge you to use it, and we think you'll find it very useful.

Secondly, I'd like to take this chance to express our real appreciation to many of the associations, in addition to the steering committee, who have had a real hand in making this all possible. And I hate to name a few, but on the other hand, I really can't leave out the U.S. Chamber, the NAM, the BRT and the American Farm Bureau Federation, all of who have been enormous helpful.

Thirdly, we have a number of speakers this morning. We want to keep things moving. Please hold your questions until the end of the program.

Third, or fourthly, your packet has bios on all of the speakers, so I won't spend a lot of time introducing them.

So first off is Jim Perrella. Jim is the President, Chairman and CEO of Ingersoll-Rand. He also is the chairman of the National Foreign Trade Council and you can imagine he's somebody I listen to very carefully.

Jim?

Mr. Perrella:

Thank you, Frank, and good morning.

As Frank said, I am chairman of the National Foreign Trade Council, and also chairman of Ingersoll-Rand Company, which is a $7 billion per year company that makes industrial equipment and components to serve both developed and developing countries as they build their economic infrastructure.

We manufacture in over 100 locations around the world and derive over 40 percent of our sales from international operations. We have been a long-time member of the NFTC; in fact, we're one of its founding companies back in 1914.

Our NFTC members have been -- become very concerned by the dramatic increase in the use, as well as the proposed use of unilateral sanctions a as an instrument of U.S. foreign policy. Collectively, we decided that the NFTC should initiate a major bipartisan effort to educate policymakers, opinion leaders and workers of the unilateral economic sanctions and to build support for alternative policies.

The proliferation of unilateral sanctions poses a threat to a coherent U.S. foreign policy and undermines the competitiveness of U.S. industry. Not only have sanctions become more frequent, but they have also become broader in scope. These include the use of the extraterritorial measures and secondary boycotts. These proposals have acquired serious political momentum in Congress and in the executive branch.

The achievement of important U.S. international economic objectives and our relationships with our allies are being damaged by these ineffective and counterproductive foreign policy sanctions and by the threat of additional sanctions. I have firsthand knowledge of the problems this situation is raising for American exporters. I have traveled around the world visiting our overseas operations and it is very troubling to report that our customers frequently express their concern about the potential U.S. economic sanctions. Foreign customers are beginning to doubt the reliability of U.S. companies as future suppliers.

If you take a look at this map behind me, which is based on a study by the national association of manufacturers, you'll notice that all the areas colored in red have been subject to some form of unilateral U.S. sanctions since 1993 to 1996.

My company and the NFTC are not alone in our concern. Over 400 companies and trade associations have joined us today to form USA*ENGAGE. We are grateful for the support of the National Association of Manufacturers, the U.S. Chamber of Commerce, and The Business Rountable, and respected and distinguished foreign policy experts as Senator Lugar, Representative Hamilton, Representative Becerra, Representative Manzullo and Representative Kolbe.

I want to stress that this coalition is not just about big business. Cutting off our ability to export hurts our suppliers, hurts U.S. agriculture, and hurts American workers.

USA*ENGAGE coalition, which has been formed under the leadership of the national foreign trade council and Don Fites of Caterpillar, is founded on the core beliefs that American values are best advanced by engagement, rather than isolating ourselves, cedeing markets to foreign competition, or angering our allies through the use of secondary boycotts and extraterritorial actions.

USA*ENGAGE believes that bipartisan, active, diplomatic, culture and commercial involvement is the preferred way to achieve U.S. economic security and human rights objectives abroad.

The program will seek to dramatically increase the information available to policymakers, opinion leaders and workers. We intend to present effective alternatives to unilateral actions. Furthermore, we want to create a process that ensures that the Congress and the executive branch fully deliberate the costs of any future unilateral sanctions on the American economy, and also to evaluate the real likelihood of any real behavior change by the targeted country.

We have a large and enthusiastic coalition, a committed steering committee and a substantial task ahead. You're witnessing really just the beginning of a new process by which engagement will replace unilateral sanctions as America's weapon of choice.

And now I'd like to introduce done Fites, a major driving force of USA*ENGAGE. You also know Don as the chairman and chief executive officer of Caterpillar and as the chairman of The Business Rountable. Thank you. Don.

Mr. Fites:

Thank you, Jim. This is an exciting day and I want to be the first to compliment the national foreign trade council, Frank, for the leadership that you've brought to USA*ENGAGE. Both Caterpillar and The Business Rountable are proud to be members of this impressive coalition. We share your concerns about the proliferation of unilateral foreign policy sanctions, and we're pleased to be able to play a constructive role in this effort.

Like you, when I first meet our overseas customers and potential customers, the issue of sanctions frequently comes up. That's because when you buy a Caterpillar bulldozer or off-highway truck, you're making a decision that's going to last you for decades. Any uncertainty about our ability to provide long-term product support from the United States gives our Japanese and European competitors a significant competitive advantage.

It's no accident that at a time when the U.S. is contemplating new unilateral sanctions against China, Indonesia and Burma, our biggest competitors, Komatsu of Japan, is making important new investments in each of these countries.

We're also finding that our European and Japanese competitors are taking full advantage of the recent U.S. sanctions against Colombia.

What's frustrating is that it wasn't that long ago when our policymakers seemed to have a keen understanding about the limitations and counterproductive nature of unilateral sanctions. In Peoria, we still recall the early 1980s when Caterpillar was in effect directed by the U.S. Government to turn over the Soviet market to our Japanese competitors. The objective seemed worthy -- discourage the ussr from building its gas pipeline to western Europe. But the results were devastating. As a result of those U.S. sanctions, the Japanese displaced Caterpillar's 85 percent market share in the Soviet Union. Twelve thousand man years of work was transferred from Illinois to Japan.

Caterpillar and other U.S. exporters were tainted as unreliable suppliers. Komatsu of Japan knew this which allowed it to more effectively compete against Caterpillar on a global basis, and that legacy is still with us today. And of course the Soviets completed their pipeline ahead of schedule. I might add that even though Russia now has a popularly elected government, our customers there still wonder if we can be counted on as a reliable supplier.

After the pipeline debacle and what occurred as a result of the Soviet grain embargo, we thought the notion of unilateral sanctions and secondary boycotts were so discredited that they would be rarely used as a foreign policy tool, but that's no longer the case. In a few minutes, Dr. Fred Bergsten from the institute of international economics will talk about the costs of unilateral sanctions.

Before he does, I'd like to say a few words what this coalition, USA*ENGAGE, will be advocating. Our first order of business is educational. The coalition's unapologetic in its belief that engagement is a powerful tool to advance American values. We recognize that engagement can take many forms. It can be diplomatic, cultural, religious, political, and military, but it has been our experience that trade and investment is a particularly powerful tool that advances American values around the world.

We believe that unilateral sanctions not only undermine American leadership and competitiveness, but are often counterproductive. For that reason, we think U.S. policymakers should be exceedingly careful and deliberative when considering calls for unilateral sanctions.

But we also believe it's not enough to just remind our leaders that unilateral sanctions don't work. Nor is it sufficient for us to only emphasize the high cost associated with such policies. The business community needs to do a better job providing constructive alternatives that advance American values.

In that regard, a lot of what USA*ENGAGE will be advocating isn't new, but it is most important. At Caterpillar, we share senator Lugar's view that it's critical for us to provide our foreign policy professionals with the tools needed to pursue a policy of effective engagement. To do that, the United States must be willing to play, not just a leadership role, but the leadership role in the multilateral institutions.

That requires commitment and that requires resources.

At the same time, our leaders need access to bilateral tools. The overseas private investment corporation, the trade and development agency, the export-import bank, and the various exchange programs have proven to be very effective. But these programs only work if they're adequately funded and allowed to operate in the countries where they can do the most good.

To compete in a global marketplace, our leaders need to realize that 95 percent of our potential customers live outside the United States. Allow me to conclude by emphasizing that the members of USA*ENGAGE fully recognize that much of the world remains a dangerous place. We realize that at times sanctions may be needed to protect the national security. If that is the case, then unilateral sanctions should be considered, but even then, only after Congress and the executive branch have exhausted other alternatives, such as diplomatic initiatives and multilateral pressure.

If unilateral sanctions must be used, they should be judged in terms of, first, whether they actually can achieve the intended results. Second, the potential sacrifice of other national interests, and third, the cost imposed on Americans.

Finally, existing unilateral sanctions should be subject to a meaningful accountability review every two years.

Put all this another way, USA*ENGAGE believes engagement is a powerful tool to advance American interests. In contrast, a unilateral sanction can isolate America, taking away the influence and credibility we gain by just being there.

Before reimpose unilateral sanctions, we should ask ourselves: How can America lead if it takes itself out of the game?

It's time that we stop using unilateral sanctions as Americans' foreign policy weapon of choice.

At this time, I'd like to introduce a man who is very well qualified to talk on this subject and who represents the largest exporters in this country, the Nation's farmers, Dean Kleckner, President of the American Farm Bureau Federation.

Dean?

Mr. Kleckner:

Thank you very much, Don, Frank and others here.

As President of the American Farm Bureau Federation and a farmer myself from Iowa and a member of the advisory committee on trade policy and negotiation, ACTPN, I'm happy to add the voice of agriculture to the work of USA*ENGAGE.

As has been stated already, sanctions play into the interests of our foreign competitors and rarely, maybe never, have the effect of changing the course of national governments. We believe that higher living standards and the ability to create a safe and stable environment throughout the world depend upon mutually beneficial trade among nations. Economic and social policies must promote, rather than hinder, growth in world trade.

Agriculture, as Don Fites said, has a big stake in world trade. Unilateral sanctions and secondary boycotts have created havoc in international markets whenever enacted. American farm bureau believes that all agricultural products should be exempt from all embargoes except in cases of armed conflict. You just simply don't trade with people that you're fighting with in armed conflict.

A strong and productive agriculture is essential to our national defense and must be considered along with all industry when formulating national policy. To maintain peace in the world, we support a foreign policy that's not achieved by unilateral sanctions and boycotts, which destroy our markets. The freedom to farm legislation, the '96 farm bill, makes producers more dependent on and supportive of open and freer world markets. We support this new farm program which leaves no room for international sanctions.

Agriculture currently exports 25 percent of our production. Frankly, folks, without exports we're dead as farmers. Loss of these markets through sanctions would simply kill us, would devastate the industry.

Agriculture strongly applauds our lawmakers, Senator Lugar and others here. We applaud you and the others that put appropriate language in the '96 farm bill. It requires that if a future export embargo is imposed on any country for national security or foreign policy reasons, and if no other country with an agricultural economic interest joins the U.S. sanctions within 90 days of the imposition of the embargo, USDA must then compensate producers by either making payments to them, by making available funds for export promotion or providing commodities to developing countries.

The government must be responsible for the economic disadvantages brought on its own citizens when sanctions are enacted. Sanctions must not be unfunded mandates.

Sanctions take us out of trade competition and give -- and give our markets away. Two examples. And Don, you mentioned at least one of those. Agriculture is still feeling the effects of the Russian grain embargo that occurred after the Soviet invasion of Afghanistan. In the early '70s, a second one, we embargoed soybean to Japan. Japan was farming full-time at that point. I remember that very, very well. Japan was very quick to respond. They established soybean production in South America to meet its needs, to meet their needs. We were no longer seen as a reliable supplier. If I'd have been the Japanese, I'd have done the same thing. We lost and have never fully regained important markets in both these instance answer there are other instances also other than these two.

Recent sanctions have opened the doors for our competitors to move into developing economies where sanctions have most often been used. We're in a catch-up game right now in Vietnam. And if contemplated sanctions are imposed on China, Indonesia and Burma, our government will have effectively killed our trade opportunities in the most heavily populated and fastest-growing markets of the world. In 15 or 20 years, those countries will have as many middle-class consumers as there are now in the United States, Europe and Japan, and we're in the process of killing our chances.

U.S. agriculture needs a reputation as a reliable supplier of high-quality products. Sanctions destroy our customers' faith in us as reliable suppliers and result in a lost market share.

I am proud to be a part of USA*ENGAGE, look forward to working with each of its members. Focusing our national leaders on a foreign policy of engagement through Di low Massey, culture, religion, political and military strength, but most of all, through trade and investment, not through sanctions. I thank you and Don, I don't know who I'm supposed to introduce so I'm just going to sit down.

Mr. Kittredge:

I'll take it. Thanks, Dean, very much. Obviously one of the important parts of the program is as we've said, sanctions do have a great cost and Fred Bergsten is here to tell us about their latest study. As has been said, Fred is the director of the institute for international economics. He's probably one of the most highly regarded trade and economic authorities in Washington and I dare say in the international community. Fred, it's a great pleasure to have you.

Mr. Bergsten:

I thank you very much. As many of you know, we at The Institute For International Economics have done intensive studies of sanctions over literally the last 15 years. We have produced a whole library of studies on sanctions, and our team, led by Gary Hufbauer, Kimberly Elliott, who are here, have become, I think it's fair to say, the experts on this topic probably in the entire world, certainly in this country. We're now doing a third edition which brings up to date the work we have done. That work literally includes studying every case of sanctions in the 20th Century to try to determine its impact on the target countries that it was aimed at and also, of course, on the U.S. economy itself.

What we are releasing today in advance of our new set of publications are some conclusions about the impact on the U.S. economy. There are two ways to analyze the impact of sanctions on our own economy. One is what you might call a bottoms up approach. It's to look at individual companies, as has been indicated here today by two of the corporate leaders, three of the corporate leaders, including Dean Kleckner, to look at individual company cases, industry stories and the result of lost markets to them. We're working on that and we're going to develop an analysis of that type, as well.

But what we're releasing today is an aggregate analysis in which we look at the totality of the U.S. trade picture and try to discern how it has been affected by the proliferation of sanctions that the U.S. has applied over the year.

We employ something called a gravity model, which is explained in detail in our full study that you have in your kits. What it essentially does is predict the natural flow of trade between all pairs of countries if distance per capita income and the usual economic variables carried the day and then we adjust for factors that deviate from that natural pattern, such as sanctions.

When economist takes on a study of this type, they always hold their breath, because you never quite know how good the results are going to turn out to be. In this case, we were relieved and delighted because the results turned out to be statistically very robust. We had thousands of observations because there had been lots of cases of sanctions. We had trade between all of the OECD countries and all of their trading partners, so we had masses of data and the results stack up very well in a statistical and reliability sense.

The conclusion is that the sanctions in place in 1995, which targeted 26 different countries as shown on the map, cost U.S. exports 15 to $20 billion in that year.

As long as that level of sanctions remain in place, there will be an annual cost of 15 to $20 billion. Indeed, since more sanctions have been added since 1995, the cost could be expected to be rising since that time.

Now, 15 to $20 billion is not only a lot of money, it translates into a lot of jobs. We estimate that the loss of export jobs involved was on the order of 200 to 250,000 in that year. So this is an instance where it's not just companies, it's workers who are hurt in a significant sense.

Moreover, what is extremely significant is we know export jobs are the highest paying jobs in the economy. On average, export jobs pay 12 to 15 percent more than the average manufacturing wage. The export wage premium is something like 4 to $5,000 per worker. When you play that through, the lost to the full economy of this export wage premium is over $1 billion per year.

Lower income, lower standards of living, lower payoff to American workers as a result of the sanctions, costing exports, costing these better jobs that otherwise play such an important role in our society.

The study that we come to today is also reassuring to us because it's consistent with the findings of another study we did about four years ago in which we tried to analyze the impact on the U.S. economy of all export disincentives by our own government, inadequate programs of export finance and alike. And our new findings reinforce, buttress and elaborate that set of conclusions, suggesting very high cost to the economy, its work force and its real standards of living and national income.

Now, the other side of the equation is of course the potential benefits from the sanctions. And here I rely literally on the 15 years of work that our team has done where they have analyzed, literally, almost every case of sanctions to try to see what its impact was on the target country. Did the sanctions work?

Our team developed a very creative methodology. First of all, did the U.S. achieve its foreign policy goal in the target country? And secondly, did the sanction contribute to achieving whatever outcome was resultant? They then add those two factors together to get a score of whether the sanctions worked, add those up and see whether the results were on the whole successful or not.

The results are stunning. In the last two decades which we've studied, the 70's and '80s and we're now updating for the '90's. The latest data show that U.S. sanctions were successful in achieving their impact on the target country in only 17 percent of all of the attempted cases. That is a dramatic decline in effectiveness from the 1950s and 1960s when the success rate was about 50 percent. But when you might recall, the U.S. was the dominant economy in the world, and there weren't so many other people out there to fill the gap.

The result ratio is only 17 percent in the last two decades. We're updating the studies now. We have no reason to believe that those numbers are going to look any better in the future.

And so the bottom line is that when you compare these two sides of the equations, the cost and the benefits, sanctions, to put it bluntly, look like a pretty lousy policy instrument. The cost to the economy are high. The payoff in terms of the stated objectives of foreign policy are very low. And therefore, it seems to us on the basis of an extensive amount of work that this is not one of the policy initiatives that should be adopted and extended in the future. To the contrary, we should be looking for alternatives. Thank you very much.

Mr. Kittredge:

Well, thank you, Fred, very much.

Our Congressional friends have all been very patient, and we appreciate the fact they have. I'd like to start off this part of the program with Senator Lugar, as you all know, Republican from Indiana, Chairman of the Senate Agricultural Committee, Member of the Foreign Relations Committee, and probably regarded as a leading foreign policy expert in the Senate. Senator, thank you very much.

Senator Lugar:

The formation of USA*ENGAGE fills a critical need for leadership and public education in this country. Most U.S. trade sanctions and embargoes have been unilateral and they have not succeeded in changing the behavior of regimes against which they were aimed. Unilateral sanctions have not generally served the United States' interests for a variety of reasons. First, they give a competitive edge to foreign companies and they penalize the United States' firms.

Having been excluded from a market, American companies cannot easily or quickly reenter. In the meantime, foreign competitors have established supplier relationships and gained the confidence of customers.

Secondly, sanctions create the illusion of action, allowing us to defer more decisive steps that might be justified by the nature of the security threat.

Third, sanctions restrict our ability to take advantage of any changes in a foreign regime that might provide an opening for dialogue. We are less likely to be in a position to engage the adversary because the trade embargo creates a sometimes insurmountable obstacle to the dialogue.

Fourth, sanctions make it more difficult to gain trade liberalization. By giving the United States a reputation as an unreliable supplier, sanctions make other countries reluctant to lower their barriers to our products for fear of becoming dependent on us and then having to suffer the consequence if we decide not to sell to them. This problem has been particularly acute in agricultural trade.

For years the memory of embargoes discouraged U.S. farm groups and legislators from supporting market oriented reforms to our foreign policies, they reasoned that the government was going to cut farmers' overseas sales arbitrarily, to continue to play a paternalistic role in subsidizing farm income and manipulating farm production. Finally, in 1996, Congress ended the old subsidy systems and underlined the importance of world market signals and the need for reliability in shipments.

Fifth, unilateral sanctions serve as an ongoing source of tension between us and our allies, complicating our efforts to cooperate in other ways, perhaps in joint action against the very countries we wish to sanction.

And six, trade sanctions may damage the United States' economy as much, if not more than, the economy of the targeted country. For all these reasons, the work of USA*ENGAGE is critical.

America's ability to lead in the new century will depend upon our economic strength. If we squander that strength by deliberately penalizing United States firms with no realistic prospect of getting much in return, both our economic vitality and our effective diplomatic leadership will be in question. Consistent with this, we need to reauthorize fast-track authority and to do so without extra requirements having little to do with trade.

Speaker Gingrich wrote to the President last week reminding him that ever since Congress granted the President fast-track authority in 1934, the President has been the single most effective and forceful world leader in lowering trade barriers. Unfortunately, President Clinton has been without fast-track authority for almost three years.

And we need to provide adequate funding in our international affairs accounts in order to carry the message of active United States engagement and capability for leadership in world affairs.

I welcome this new endeavor as a very, very important foreign policy and trade initiative and look forward to strongly supporting it.

Thank you.

Mr. Kittredge:

Let's turn to the House side, if we may, and as you all can see, Representative Lee Hamilton, democrat from Indiana, is here. And as you all know, the Ranking Minority Member and former Chairman of the House International Relations Committee, and recognized as one of the most knowledgeable and experienced foreign relations expert in the House.

Congressman Hamilton:

Good afternoon to all of you. I'm delighted to be here to support USA*ENGAGE. I want to thank James Perrella and Frank Kittredge, Don Fites, Dean Kleckner and of course my colleague from Indiana, Senator Lugar. I'm on a good team with those people and I want to express my congratulations to them for the work that has already been done.

I believe that the United States ought to have economic sanctions as a policy tool. There are often times when military force isn't the answer and diplomacy fails, and I can readily understand why my colleagues turn to economic sanctions from time to time. They are, for Members of Congress, at least, often an attractive policy option.

But the United States has been turning to economic sanctions more and more in recent years, much too frequently in my judgment. And the kind of sanctions we are applying are different. We are broadening their scope, we're using a wider range of restrictions to target a wider range of foreign conduct. And during the past year, we've broken with our long-standing policy against secondary boycotts, and we've adopted two measures signed now into law that penalize foreign firms for activities in countries that we have targeted.

I believe USA*ENGAGE has correctly diagnosed the problem, and you've had some very good and articulate statements made here this morning and I'm not going to repeat what they have said.

Why do we support the objectives of USA*ENGAGE? For me, it's three reasons. One, information and data. The fact of the matter is, we've got a whole long list of laws in this country that permit the President of the United States to apply unilateral sanctions by himself, several dozen of them by my count. Some of them have worldwide application. Not one of these laws, to my knowledge, requires the President to make a cost-benefit assessment to understand whether a proposed sanction is going to achieve its intended objectives, what its impact is going to be on U.S. interests, or what it's going to cost us.

So one of the things that USA*ENGAGE is saying is, we ought to understand better and we ought to write that process of understanding better into the law before the President or the Congress impose sanctions. And they want to improve the database, so I support what we're doing because they want to strengthen that database, and Fred Bergsten and his group have begun that process and I commend them for it. I support it because it requires us, in their recommendation, to put into place a process so that we understand the impact of the sanctions, which we do not today.

And finally, of course, I underscore what USA*ENGAGE says about the fact that engagement is much more likely than isolation to promote the policy changes and the political evolution that we seek in countries around the world. And we understand, I think, that when engagement doesn't work, and on occasion it does not work, then we will sometimes have to resort to military force or even to sanctions.

So I like the posture of openness that USA*ENGAGE has in all of this.

I want to support what Senator Lugar has said with regard to fast track coming up now as a major debate in the Congress very soon, fully funding the 150 account likewise is terribly important and several of these gentlemen have been leaders in that effort so that we can continue to be vigorous and aggressive in the pursuit of the American national interest. I'm very pleased to offer my support to USA ENGAGE. I congratulate the leaders of that group for what they've already done, and I look forward to working with them for further successes.

Mr. Kittredge:

Thank you, Congressman, very much.

Let's turn to the other side over here, if we may. Representative Don Manzullo, a Republican from Illinois, Chairman of the Small Business Procurement Exports In Business Opportunities Subcommittee and very active on trade and export support.

Congressman Manzullo:

Thank you very much.

Ultimately, this press conference is not about corporations, it's not about government policy. It's about those people who get up at the crack of dawn every morning, pack their lunch boxes, get their kids off to school and go in to work at the industries across this nation.

I represent the 16th District of Illinois, which stretches from the Mississippi river to within one county of -- of lake Michigan. We have upwards of 1500 industrial facilities. We have the tool and die center of the world and the fastener capital of the United States. Back in 1981, when the recession hit, we led the Nation with 26 percent unemployment. The city of rockford which had under 14 0,000 people, lost 100 of its 1,000 factories and 10,000 high-paying jobs.

One of the reasons that we stress exports so much back home is the fact that the broader we cast our net to get world market share, the better it is for the American worker. After all, the larger the base you have with -- in which to sell your product, the chances are that should any economic downturn come in the geographical area, the easier it is on the American worker to keep his job. And that's why we're here this afternoon.

And it's not only the -- the legislative initiatives that give rise to some of these unilateral restraints on trade, but sometimes it's the ones done administratively, such as the Ex-Im Bank and its continuous refusal to grant loans to American companies to be involved in the three largest projects. That rings very close to home, because in the district I represent, we probably have a hundred small companies, very small companies, that feed larger companies such as Caterpillar, and when Caterpillar's denied the opportunity to engage in projects such as three gorges because of the policy of the Ex-Im Bank, that's also what we're here about.

And the purpose here today is to blast open these foreign markets, to let the United States become a prime player, and to make sure that if the United States wants to enter into these unilateral type of restraints that there should not only be a cost but a policy benefit analysis; in other words, before the restraint is put in, what will the cost be on the American worker? And will the policy sought actually work?

Thank you very much for the opportunity to be here.

Mr. Kittredge:

Last but not least by any means is Jim Kolbe, Republican of Arizona, we all know is a real trade activist and extremely important in the passing of both NAFTA and GATT, and we're delighted to have him here.

Congressman Kolbe:

Thank you, Frank. I think I am up here as the cleanup batter here today.

But I am pleased to be here with many of my distinguished colleagues, members from the business community, the agricultural community and, yes, even an economist like Fred Bergsten here.

The United States has a vested interest in the promotion of economic liberalization, of democracy, of freedom of human rights all around this globe. Our values, our security and our prosperity can be advanced only by sustained power, by sustained public and private sector involvement in world affairs. The Cold War may be over, but the world continues to look to us for leadership at all levels, and we must stay engaged.

I believe we have a responsibility, in fact, I think it's a moral imperative to lead by example. But there are some who believe that the United States should lead by decree. To think American can effectively imposed its will on other nations is usually very naive. Those who call for such measures simply don't understand how the global marketplace works today or how the global political marketplace works.

When America imposes its sanctions in a unilateral fashion, we succeed only in taking ourselves out of the game, as you've heard here over and over this morning. And it's American workers, it's American consumers who are the ones that ultimately lose.

I'm not saying that sanctions can never work or that unilateral sanctions are never appropriate. Sanctions are certainly appropriate in response to a threat to U.S. national security. What I am saying is that unilateral sanctions must not become a knee-jerk reaction to every foreign policy issue, to every foreign policy problem we face.

Too often these unilateral economic sanctions are imposed without taking into account their effectiveness or their long-range impact, either on our national security or on our economy. We have to remember that unilateral sanctions are just one tool of foreign policy and usually they should be the last one to be deployed.

Nor am I saying that America should not stand up for what is -- for what it believes to be right. America has always served as a beacon of hope for over two centuries for people who have yearned for liberty and for free did and we must never fail to hold high that torch. Speaker Gingrich I think said it very well in China a couple of weeks ago when he said that friends cannot be true friends if they do not speak from the heart, if they do not say what is on their mind. As Americans, we will always care about human rights and we will deplore the trampling of these rights.

So I applaud USA*ENGAGE for their courage, their foresight at taking on what I think is an increasingly important political issue. I applaud USA*ENGAGE for undertaking the educational work that has to be done to help educate the American public, the business community, Members of Congress.

The United States plays an important leadership role in the world. It's time for us to realize that if we are going to remain a leader on trade, on national security, on human rights, we have to act like a leader and we must remain engaged. Thank you.

Mr. Kittredge:

Thank you, Jim, very much.

Well, I guess I would say it's now your turn. We -- we have some time for -- we're probably cutting into most people's lunch hour, buts we do have some time for questions, if you would like. I'd like to ask you to identify yourself and your association or your affiliation when you ask questions. I'll try to field them and pass them off to our battery of experts here.

Question:

I wanted to know which sanctions have worked and why they did work and why -- will you mention some of the ones that failed to work.

Mr. Bergsten:

Unfortunately, the methodology we have used here, which I have described as a top down, does not disaggregate individual sanction cases for their individual effects. What we do is group them altogether, look at how they affect the overall pattern of trade flows between all these different pairs of countries we are going to be looking at individual sanctions cases as we go to the more disaggregated analysis. Looking through individual companies and individual sectors, we'll try to have an answer for that question later, but the approach we've taken so far doesn't enable us to give you an answer to that particular very important question.

Mr. Kittredge: Others?

Question:

I'm from "The Washington Times." We have seen a proliferation of state and city level boycotts. How do you, first of all, address these and, secondly, what effect are these new state-level laws going to have on the U.S.' ability to sit down and negotiate with our trading partners in coming years?

Mr. Fites:

I think that's an excellent question. The proliferation of state and cities making their own trade laws, so to speak, are becoming more difficult not only for U.S. companies to deal with but trade negotiators. As they negotiate with the Japanese, with the Chinese, with the Europeans, they are increasingly faced with these challenges that who do you speak for?

We are facing boycotts in Boston, we are facing boycotts in San Francisco. So I think this certainly complicates the ability of our U.S. trade negotiators to sign agreements we needs to open markets around the world. I think it's becoming a critical issue and one that probably needs to be addressed by Congress and the administration.

Question:

If I could continue, how do you address them? I mean, is the U.S. going to be forced to extract an agreement with the state before it goes to the table?

Mr. Fites:

I don't know. I presume a Federal law could be overriding in that regard, particularly in terms of trade. So I would assume it would be addressed in that fashion. As a company, we address it with great care and try to find a way to convince the people that it's better to buy a U.S.-made product, even though they might have a embargo on than buy a product made in Japan or made in Europe in that regard.

Mr. Kittredge:

There is a study on the web page that's's available that talks about the whole question of Federal preemption. And if you click on that, you'll find it.

USA*ENGAGE will be addressing the whole question of state and local sanctions with one of our committees directly involved and directly responsible for that. We recognize that as a very serious part of the problem and one that we have to address.

Anybody else?

Question:

Are there any Congressmen left? I can't see.

Mr. Kittredge:

Right here.

Question:

I'm sorry.

Mr. Kittredge:

Would you identify yourself.
Question:

Laurie Lande from Dow Jones and The Wall Street Journal.

You yourself and the other two Congressmen here have at times voted for sanctions bills, for instance, the Iran-Libya sanctions bill passed unanimously. Isn't it a bit hypocritical to be saying here the sanctions are bad yet you voted for it? And can you also list for us what areas of the world that you see future sanctions threats, where are the strongest likelihood of sanctions threats in this Congress?

Congressman Kolbe:

Well, I don't want to be defensive about it, but I -- as I said, I did not rule out sanctions under any circumstances. And I would say that the case of Iran, Libya is a clear case of a renegade country, of a rogue country, and we have just found this week that even Germany is now finding out that the policy there of engagement has led only to further violations of its own internal laws and to their engaging in further acts of terrorism.

So there are exceptions, and I made that clear in the statement that I made.

As to where the future areas that these sanctions might be implied, I don't think that I can pick out any one area. I mean, you could -- we don't know exactly what's going to happen in the future, but I would say that we have ongoing issues, like the MFN issue, which is a form of, of course, a unilateral sanction that we use. We have the issue of certification of countries for cooperation on drugs, which is in an area of political which ends up with sanctions them in another area.

And, indeed, I've just introduced legislation which would form a commission to take a whole look at that and see whether that certification process is working and how it might be improved. I think, clearly, it's not working the way we would like it to work. It's not gaining the kind of cooperation we would like and it ends up, I think, actually losing cooperation.

So that's an example of a process that's used on a purely political purpose there and ends up having some political and economic ramifications.

So those are some of the areas that I think we're going to have to continue looking at.

Question:

And if I could just ask a follow-up, sir. The compromise that was reached Friday with Mr. Eisenstat on Helms-Burton with the EU, do you anticipate Congress giving the administration the changes that they want? I mean, we've seen some different signs from different legislators.

Congressman Kolbe:

Well, I think we have to wait and see yet how that compromise gets translated, the specific agreements. Now,it's a conceptual thing that's been agreed upon.

As I understand basically, the President would continue to give the waiver. The action by Congress would be, which is because it's nonwaiverable and would require action by Congress, deals with the area of the visas, granting the visas to individuals from companies who are engaging in this, and that we would change that.

But in return, the European countries would, A, pull the case from the WTO and would agree to a regimen that would adhere to nontrafficking in expropriated properties. If we could translate that idea as I've stated as simply and as broadly as that into the specifics of how much it would work, I think there's a very good chance Congress would act to make the changes. After all, as Senator Helms and Congressman Burton have said, the objective is to stop trafficking in expropriated properties, not to engage in specific actions against European countries or companies from overseas, but to -- to achieve the purpose, and that I think is what all of us would like. We don't believe that companies should -- countries and companies should engage in trafficking in expropriateed properties for which no compensation is provided.

Question:

And if Congress doesn't grant, you said a very good chance if Congress doesn't grant. What's --

Congressman Kolbe:

I'm not going to speculate at this point whether it does or not. You can speculate yourself, the deal isn't there if Congress doesn't do so. But I think if you have the support of people like Senator Helms and Congressman Burton, when they can have a chance to take a look at this, I think there's a good chance we can do it.

Thank you.

Mr. Kittredge:

Thank you very much. We look forward to working with you in the months ahead and thank you all very much for being here.