Seething About Trade Sanctions

By Charles Alexander

Farmers, businessmen and scholars call them self-defeating

President Reagan's economic retaliation against the Soviet Union for its role in the Polish crisis is raising anew some time-worn questions. Do such sanctions work? Are they at best only symbolic? Are they perhaps misguided missiles that ultimately inflict more damage on the country imposing them than on the target nation?

Farmers are among the loudest skeptics. They fear that Reagan will go further and impose a new embargo on grain shipments, which would swell the U.S. agricultural surplus and depress farm prices and incomes. Their concern stems from their bitter experience with the embargo that President Carter declared two years ago after the Soviet invasion of Afghanistan. Says Jared Hoover, who farms 1,400 acres outside Abilene, Kans.: "I can understand suspending talks on a new agreement with Moscow. But we should have enough history under our belts to teach us a lesson. Despite Carter's embargo, the Russians got all the grain they needed. They didn't suffer as much as we did."

The current grain pact, which allows Moscow to buy up to 23 million metric tons a year, expires in September. If it is not renewed, the Soviets might suffer severe food shortages next winter. But soon they would undoubtedly line up alternate grain suppliers as they did during the last embargo. That might have a lasting negative impact on U.S. farm exports. Says John Dunbar, Dean of Agriculture at Kansas State University: "Argentina, Brazil, Canada and Australia would all like long-term deals with Moscow. If we are perceived as an unreliable supplier, a lot of our former business with the Soviets could go elsewhere permanently." Adds Clifton Luttrell, chief agricultural economist at the Federal Reserve Bank of St. Louis: "There's no doubt that an embargo would hurt us more than it would them."

Reagan's ban on high-technology exports to the Soviets will have virtually no effect unless similar actions are taken by America's allies. The Soviet Union imports no more than 3% of its machinery, computers and other sophisticated equipment from the U.S., but relies heavily on Western Europe and Japan. At a meeting last week, the foreign ministers of the ten European Community nations agreed to a promise that their countries would not take actions to undermine the U.S. sanctions. But they adopted no sanctions of their own. Next week, the Coordinating Committee on Export Controls (CoCom), through which the Western nations and Japan fashion agreements on high-technology transfers to Communist countries, will hold a secret session in Paris to consider a unified stand on trade restrictions.

American companies doubt that the U.S. will receive full backing from its allies. Caterpillar Tractor Co., which is losing an $80 million contract to supply the Soviets with 200 pipelaying machines for their planned natural gas pipeline from Siberia to West Germany, expects a Japanese company to fill that order. Fumes a Caterpillar executive: "Reagan's not denying pipelayers to Moscow, only our pipelayers."

Other industrialized nations were quick to take advantage of Carter's ban on American high-technology exports two years ago. A French company, for example, landed a contract to build a Soviet steel plant that was originally scheduled to be constructed in part by Armco Inc. of Middletown, Ohio. James H. Giffen, president of Armco's international subsidiary, thinks that Europe will be equally unsupportive of Reagan's sanctions. Says he: "We applaud President Reagan for his sympathy with the Polish people. But we have to wonder whether sanctions are an effective way of communicating concern. You have very little leverage with the Soviets if you can't get your allies to go along with you."

American businessmen had hoped that Reagan would loosen trade restrictions rather than tighten them. Says an executive at a major oil company: "We had been counting on this Administration to give those of us interested in East-West trade some clear principles on which we could build long-range relations with the East. Unfortunately, imposition of these sanctions makes it difficult for us to know precisely whether we should or shouldn't plan on doing business with the East. It seems just as bad now as it did under Carter from our point of view."

The use of economic reprisals for political purposes has a long and undistinguished history, dating at least as far back as England's sporadic naval blockades of France during the Napoleonic era. In this century trade sanctions have become the warfare of first resort. The U.S. and such international bodies as the League of Nations and the United Nations have employed embargoes to punish Mussolini's Italy, Franco's Spain and many other countries. In almost every case these tac tics failed dismally because the target nations found new trading partners or willing smugglers to get around the restrictions. Concludes John Letiche, professor of international economics at the University of California at Berkeley: "The history of trade embargoes is a history of evasion."

Sanctions often ultimately strengthen rather than weaken their intended victim. The U.N. embargo of Rhodesia, which began in 1966, spurred that country to improve greatly its own domestic manufacturing capacity. Some scholars believe that the same thing could happen in the Soviet Union. Says Robert L. Paarlberg, a professor of political science at Wellesley: "Sanctions might stimulate the Soviets to develop more indigenous technological capabilities that might in the long run strengthen the Communist state."

Despite their poor record and unpredictable results, economic reprisals will undoubtedly remain a tempting weapon in international confrontations. Says Political Scientist Robert Gilpin of Princeton: "Sanctions never work to change a country's policy, but they will always hurt, and they are an important political gesture." Yet the nebulous political effects of such gestures should always be weighed against the concrete economic costs and benefits. -- By Charles Alexander. Reported by Lee Griggs/Abilene and Gary Lee/Washington

With reporting by Lee Griggs, Gary Lee

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