Index


Statement by Stuart E. Eizenstat
Under Secretary for Economic, Business, and Agricultural Affairs
U.S. Department of State
before the House Agriculture Committee

Mr. Chairman, members of the Committee, I am pleased to have this
opportunity to appear before you to discuss our view of the
relationship between agricultural commodities and products and
unilateral economic sanctions.

Easing Sanctions on Food and Medicine

For two years, the Administration has been working to improve the way
we use sanctions as a potential tool of foreign policy. We want to
ensure that, when we do use them, sanctions are carefully targeted to
advance our foreign policy goals while minimizing the burdens they
impose on other U.S. interests. We have had - and continue to have -
extensive discussions of these issues with the Congress with the goal
of achieving comprehensive sanctions reform by both Congress and the
Executive Branch.

On July 23, 1998, the President stated that "food should not be used
as a tool of foreign policy except under the most compelling
circumstances." Just over a month ago, on April 28, 1999, the
President announced that the Administration will generally exempt
commercial sales of agricultural commodities and products, medicines
and medical equipment from future unilateral sanctions, where we have
the discretion to do so. The Administration will also extend this
policy to allow commercial sales of food, medicine, and medical
equipment to currently embargoed countries where such sales are
currently not permitted.

What is this worth to American farmers? The Department of Agriculture
has estimated that those countries subject to existing sanctions on
sales of food and medicine -- Cuba, Iraq, North Korea, Libya, Iran and
Sudan -- imported some $6.3 billion of agricultural commodities in
1996, or roughly 2 percent of world trade. If U.S. exporters were as
competitive in those markets as they are in the larger world market,
and if those countries chose to purchase from the United States,
potential sales would amount to approximately $500 million, primarily
in bulk commodities such as wheat, corn, feeds and fodders, rice and
vegetable oils.

Why this change now? It has been implemented as part of our overall
approach to sanctions reform and is not directed at any specific
country. In, fact, the national security and foreign policy concerns
that originally led to the imposition of comprehensive economic
sanctions on these countries still pertain. What has changed is our
calculation of the impact of including food and medicine in unilateral
sanctions on our overall policy objectives. Sales of food, medicine,
and other human necessities do not generally enhance a country's
military capacities or support terrorism. On the contrary, funds spent
on food and medicines are not available for other, less desirable
uses. Our purpose in applying sanctions is to influence the behavior
of regimes, not to deny people their basic human needs.

The change announced by the President does not provide for the
automatic approval of agricultural and medical sales. Instead, it
shifts the presumption in favor of approving such sales. Contract will
still have to pass through a policy filter. To guide the case-by-case
review process, we are developing country-specific licensing criteria
based on the principle that the sanctioned governments should not reap
unjustified economic benefit from the adjustment to our sanctions
policy. All sales will have to be conducted at prevailing market
prices; in other words no USG subsidization. Sales will be restricted
to non-government entities or government procurement bodies not
affiliated with the coercive organs of the state. Thus, licensing
commercial exports of agricultural commodities and products, medicine
and medical equipment on a case-by-case basis to parastatals and
government purchasing agencies could be authorized.

Let me emphasize: there will be no USG funding, financing, guarantees
or other support of these sales because we believe it would be
inappropriate for these countries, in light of their continuing
conduct, to benefit from such taxpayer-financed programs.

To whom does this change apply? The United States prohibits or
restricts the commercial sale of agricultural commodities and
products, medicine and medical equipment to six countries: Cuba, Iran,
Iraq, Libya, North Korea and Sudan. Several exceptions to the
restrictions are already in force:

Commercial sales of food to Iraq are permitted under UNSCR 986 (the
"oil-for-food" program) and subsequent resolutions extending and
expanding that program.

Applications for commercial sales of humanitarian items to North Korea
are reviewed on a case-by-case basis. Since 1996, we have approved
several licenses for U.S. companies to broker the commercial sale to
the DPRK (North Korea) of corn, wheat, rice and sugar.

The sale of medicine, medical supplies and equipment to Cuba is
governed by the 1992 Cuban Democracy Act. Such sales are permitted
subject to specified conditions and end-use verification to guard
against diversion to prohibited purposes or users, which are reflected
in current Treasury OFAC and Commerce regulations. With respect to
agricultural commodities, Mr. Chairman, as you know we have authorized
the sale of food and agricultural inputs to private entities in Cuba,
pursuant to the President's January 5th announcement.

When the President imposed additional sanctions against Serbia, we
ensured that those measures were consistent with his April 28
announcement.

There have been no such exceptions or allowances with respect to U.S.
trade and investment embargoes affecting Iran, Libya and Sudan. The
USG has though, through its foreign aid policies, sought to respond to
the humanitarian crisis involving the people of Southern Sudan by
financing the purchase of bulk grains and other humanitarian items for
distribution by relief agencies outside the purview of the Sudanese
government. Indeed, humanitarian donations of articles intended to
relieve human suffering are allowed with respect to all these
countries.

As the President noted, there are circumstances under which we would
not allow commercial sales of food, medicine, and medical equipment.
Such circumstances might include, for example, armed conflict
involving the United States or its allies; or instances where the
regime would seek to use such food and medical items as a tool of
internal politics, for example, by denying food and medicines supplied
to the general population while diverting them to its armed forces or
its political supporters; or where the regime or its officials would
derive an unjustifiable economic benefit from these imports.

Proposed Legislation

This House is currently considering several pieces of legislation
dealing with the use of agriculture as tool of sanctions.

The Administration's view is clear. We believe that, in general, food,
medicine and medical equipment should not be used as a tool of foreign
policy absent compelling circumstances. Because there clearly are
circumstances under which such exports would be inappropriate,
however, the President must have sufficient flexibility to tailor our
response to the specific situation with which he must deal. This
flexibility should also include the ability to impose a licensing
regime on sales where such a requirement is appropriate. In our
proposal for broader sanctions reform, we have stressed that this sort
of flexibility should be provided through the inclusion of "national
interest" waiver authority. While we do not believe that legislation
is necessary to put these principles in effect -- witness the
President's decision of April 28 -- S.566, the Agricultural Trade Act
of 1999 introduced by Senator (Richard) Lugar, seems to have made a
good faith effort to meet these standards. We believe that that bill
should be incorporated into a broader sanctions reform package.

The Freedom to Market Act (H.R. 212) introduced by Representative
(George) Nethercutt would require the GAO (General Accounting Office)
to undertake a comprehensive review of all existing sanctions. It
would prohibit restrictions on the export (including financing) of
food and other agricultural products, medicines or medical supplies as
part of any policy of existing or future unilateral sanctions unless
the President determines and so reports to the Congress that that
national security interest so requires. Many of the provisions of that
bill we believe would be inappropriate. We would not, for example,
favor legislation that would require the U.S. taxpayer to fund sales
to terrorism list countries. We also believe that any sanctions
legislation should include national interest rather than national
security waiver authority.

The "Selective Agricultural Embargoes Act" (H.R. 17) introduced by
Representative Tom Ewing would require the President to report to the
Congress within 5 days after the imposition of an embargo on an
agricultural commodity that is not part of a comprehensive embargo. If
the Congress enacts a joint resolution of approval, the embargo would
terminate on the earlier of the date determined by the President or
one year after the date of enactment of the joint resolution. If the
Congress passes a joint resolution disapproving the embargo, it will
terminate within 100 days from date of imposition. The provisions of
the bill would not apply during any period in which the U.S. is in a
state of war declared by Congress, or national emergency declared by
the President.

The Ewing bill, which has already passed this Committee, would have
essentially no impact on current policy. All current restrictions
imposed unilaterally on the export of agricultural commodities (North
Korea, Iran, Libya, Sudan, Cuba, Serbia) are applied as part of
comprehensive embargoes and thus are not affected by the bill's
provisions. The provisions of the bill do not apply if the President
has declared an "national emergency" which is precisely the way that
most discretionary unilateral sanctions are imposed. In addition, the
Administration would oppose any provision which requires a joint
resolution of approval of a Presidential recommendation. The
Administration would also oppose any provision which would require
that sanctions automatically be terminated at some future date certain
irrespective of whether the behavior that led to the imposition of the
sanction has ceased. Sanctions measures should be performance rather
than time bound.

Section 4 of HR 817, "the United States Agricultural Trade Act," also
introduced by Mr. Ewing deals with the question of economic sanctions.
Section 4 would exempt from unilateral sanctions PL 480, Section 416
of the Agricultural Act of 1949, programs administered through Section
1113 of the Food Security Act of 1985 and commercial sales involving
agricultural commodities, including fertilizer, unless the President
determines it is not in our foreign policy or national security
interest, and so reports to Congress. Section 5 of that legislation
dealing with Congressional oversight and consultation on agricultural
trade negotiations, would appear to impermissibly intrude on the
President's constitutional powers in the areas of foreign affairs and
diplomatic negotiations.

These and other bills in both the House and Senate, including the
legislation introduced by Representatives Ewing, Nethercutt, Paul,
Rangel and Serrano deal with the more narrow issue of agriculture
sanctions reform. Other legislation, notably that introduced in the
House by Represenative (Phil) Crane and in the Senate by Senator Lugar
deal with the broader issue of overall sanctions reform. We do not
believe that the narrower agricultural bills should be seen as a
substitute for broader sanctions reform.

As you know, Mr. Chairman, we have suggested an approach to the
broader issue of sanctions reform that we believe would be both
productive and acceptable and achieve the essential objective of this
legislation, that is to impose improved discipline on the use of
sanctions by both the Congress and the Executive Branch. While many of
our ideas are similar to those in the Crane and Lugar bills, we have
emphasized these two main points: first, we need fewer procedural
hurdles. Legislation that would impose inflexible procedural hurdles
on the President undercuts the idea of sanctions reform. Second, and
of even greater importance, is the need for broad national interest
waiver authority. Our experiences with Helm-Burton, ILSA and the Glenn
Amendment sanctions only serve to underscore the need for this
authority.

We are committed to continuing to work with the Congress, Mr.
Chairman, to craft an approach to sanctions reform that can be
supported by both the Executive and Legislative Branches. We would
like to see acceptable legislation pass this Congress.

Thank you.