Can Trade Buy Political Change?

The question of how to use trade as an instrument of foreign policy is being revived by a number of otherwise unrelated events.

There are new reports of Chinese-Pakistani cooperation in the development of nuclear and missile technology. US law says if these are true, economic sanctions have to be applied. But sanctions would have collateral effects that would damage other US interests, especially in China.

There is political unrest in Indonesia, and the government has been heavy-handed in suppressing dissent just at the time that the US is ready to sell F-16 aircraft. This is an embarrassment. But maybe the F-16s ought not to be sold anyway.

Finally, it is tempting to get tough with Cuba, Iran, and Libya in this US election year, and trade restrictions are a popular way to do it. But they are also irritating some good friends such as Canada, Great Britain, and Germany.

What all of these otherwise diverse cases have in common is that they contemplate the use of an economic instrument (trade) to achieve a political objective: in Pakistan, nonproliferation of nuclear weapons; in Indonesia, protection of human rights; in Cuba, promotion of democracy; and in Iran and Libya, suppression of terrorism. It is not necessarily inappropriate to mix ends and means in this way, but it does complicate matters. The unwary practitioner may shoot himself (and his country) in the foot.

Diplomacy is about persuading other governments to do (or not do) something you want. Trade is only one of several tools available. It can be a carrot (trade concessions) as well as a stick (trade restrictions), but it is never cost-free.

Any time we restrict trade, we lose exports we would otherwise make. If the restriction works - if, for example, we slow the pace of nuclear proliferation - we may think the price of lost exports is acceptable. But if we never get the export market back - if the target country finds other suppliers - we may see it in a different light. And if the policy doesn't work, we lose both ways.

Block that blockade

The historical record is mixed. As the clouds of World War II gathered in the 1930s, President Franklin D. Roosevelt found no support for his proposal of a "quarantine" of aggressor nations. Nor could General Douglas MacArthur persuade the Truman administration to blockade China after the Chinese intervened in the Korean War. MacArthur startled a Senate committee by noting that although a rifle kills a single man, and the atomic bomb "may destroy them by the hundred thousands ... a blockade threatens destruction by the millions." The senators recoiled from the responsibility for a Chinese famine.

One of the more useful instruments of the cold war was something called COCOM, short for Coordinating Committee, a group of West European nations plus the US and Canada, that issued guidelines for what could and could not be exported to the Soviet bloc. These controls undoubtedly caused economic problems in the Soviet bloc; but we cannot be sure how much they contributed to the bloc's demise. The purpose, however, was not so much to weaken the bloc as to keep it from getting stronger.

How to be more effective

More recently, an embargo imposed by the United Nations has devastated the economy of Iraq but has failed in achieving its chief objective: The removal of Saddam Hussein from power.

Like any other instrument of foreign policy, trade is likely to be more effective if it is used in conjunction with allies, but only if the allied cooperation is voluntary. One of the troubles with the current US sanctions against Cuba, Iran, and Libya is that the US is using coercion to get the cooperation of other countries. We not only restrict our own trade and investment but we apply sanctions against other countries which do not similarly restrict their trade and investment.

This is a secondary boycott, and in most circumstances it is illegal. The United States complained mightily, and justifiably so, when the Arab states tried to impose a secondary boycott against Israel.

It ought to give us pause that the countries which are complaining about our policy now are among our best friends. When the Canadians, the British, the Germans, indeed most countries, see things differently than we do, it suggests that we ought to take another look.

A secondary boycott looks tempting to a thoughtless policymaker, because support from other countries will reinforce our own policy. But such coercion is more likely to cause resentment than support. Then the United States is undercut in three ways: It has irritated a friend; the friend may well take for itself the trade opportunities which the US has foreclosed; and the country which was the target of the US policy in the first place has not been hurt.

*Pat M. Holt, former chief of staff of the Senate Foreign Relations Committee, writes on foreign affairs from Washington.