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US Rethinks Trade Sanctions Policy

Using trade penalties against China and other countries may hurt US business most of all

THIS week Joel Johnson, vice president of international operations at the Aerospace Industries Association, heard disturbing news from State Department contacts about their newest strategy to press for progress in China's human rights.

Aware that revoking most-favored-nation (MFN) trading status could hurt US exporters and consumers as much as the Chinese and cause a backlash from the US business community, the Clinton administration is considering other ways to reach its objectives. The latest recommendation, to withdraw US Export-Import Bank financing for China-bound US exports, prompts Mr. Johnson to say: ``That would jeopardize the couple of billion dollars' worth of aerospace deals we do a year there and put 40,000 jobs on the line.''

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Washington's trouble in developing a strategy to deal with Beijing is just one of many vexing problems it has with foreign governments considered threats to US national security, recalcitrant trade partners, or both. The administration has no common ``sanctions'' approach toward these nations. In fact, issuing bellicose statements one day and conciliatory ones the next, US officials have shown themselves divided in their approach toward any given country.

In recent days, they have sent mixed messages to North Korea, whose nuclear program profoundly concerns leaders here and abroad. Defense Secretary William Perry warned last week the US is prepared to block North Korea's development of a nuclear arsenal militarily. At a town meeting on Tuesday, President Clinton called for stiff economic sanctions against Pyongyang and cautioned against escalating tensions by ``talking tough.''

Japan, South Korea, and Russia - central to Washington's strategy to squeeze North Korea - have expressed discomfort with Washington's admonishments and have hinted they will pursue dialogue before backing Pyongyang into a corner.

If US efforts to further isolate North Korea economically show how difficult it is to draw on international support for sanctions against nations who pose security concerns, Washington's search for allies to impose sanctions against countries based on economic grounds - such as a multilateral response to Japan's closed markets - is practically hopeless.

Johnson, who has worked as a senior official on trade issues at the State Department, and at the Senate Foreign Relations Committee, says the more narrow the measure, the less likely it is to fail. He refers to Mr. Clinton's aim at Japan last month with his revivial of the ``Super 301'' section of the 1988 trade law that unilaterally imposes sanctions on nations considered to be obstructing free trade.

Designed to target some industries and sectors for retaliatory action, Super 301 effects some change in Japan's behavior, he says. ``If we didn't do anything, they'd ignore us entirely.'' While some observers worry a trade war will ensue, Johnson says it's easier for targets of sanctions to respond to focused demands, adding that ``asking a government to commit suicide [by making concessions beyond what constituents will tolerate] to fundamentally change their political system'' is doomed to fail.

``It's time to be more calculating about the economic costs of lost exports due to sanctions and controls,'' says Syracuse University professor J. David Richardson, author of a recent study on the subject.

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``The administration is schizophrenic: It's both pro-high tech and commercial and pro-sanction.'' Export losses are having a ``big impact on smaller and medium-sized firms, and an especially negative impact on workers from high-value-added industries,'' he says.

Speaking before the American Foreign Service Association, William Reinsch, undersecretary of state designate for export administration, concedes some historical glitches in policies. The Reagan-era grain embargo against the Soviet Union ``slapped a control on items without regard to the domestic impact or the likelihood of the sanction achieving its objective,'' he says.

While US-inspired, internationally supported export controls and sanctions against rogue governments, like Haiti and Iraq, work well, he says, ``the list of problems they have not solved is far longer than a list of successful outcomes.''

Vietnam is an example, where the administration is lifting sanctions to coax compliance with requests. Washington has worked to cultivate Vietnam's cooperation on issues concerning US POWs. In September, the White House modified the embargo against Vietnam ``to recognize POW/MIA progress ... and to stimulate further results.'' By February, Clinton abandoned the trade embargo. Assistant Secretary of State for East Asia Winston Lord calls it ``the best way to achieve the fullest possible accounting for our POW/MIAs.''

``We are not granting Vietnam special economic privileges,'' he says. ``We retain considerable political and economic incentives to ensure that the government of Vietnam does not waver from its commitment to continue its cooperation on POW/MIA issues ... exposing the Vietnamese society to outside trade, investment people, information, and ideas, as a result of the president's decisions, should work to open up the political system of Vietnam.''

To do less with China would be hypocrisy, business advocates say. If the administration removes US Export-Import Bank financing for China? ``They'll go buy [European] Airbuses,'' Johnson says.

Jane Cicala, a Boeing Commercial Airplane Company director, is watching administration sanction moves closely. ``China will need 800 new airplanes over the next 10 years. That's $41 billion worth of business. One billion dollars of Boeing exports equals 10,000 aerospace jobs. All of this is seriously at risk if MFN is denied,'' she says.

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