SEPTEMBER 18, 2002

Mr. Chairman, Members of the Subcommittee, I am William Reinsch, president of the National Foreign Trade Council, an association of nearly 400 U.S. companies engaged in international trade and investment. I am also appearing as co-chairman of USA*Engage, a broad-based coalition of over 670 American companies and trade and agricultural organizations that support sanctions reform.

We strongly oppose enactment of H.R. 4483, the "Syria Accountability Act of 2002." It is a measure that will undermine U.S. diplomatic efforts in the region while depriving American companies of current and potential business opportunities that also help bring our two countries closer together. We share the foreign policy goals the bill seeks to achieve: cessation of Syrian support for terrorist groups, Syrian compliance with U. N. Security Council resolutions regarding the integrity of Lebanon, withdrawal of Syrian forces from that country, and cessation of Syrian transshipments of Iraqi oil outside of the U.N. program and of Syrian development of weapons of mass destruction. This legislation would bring none of these objectives nearer to realization. On the contrary, it would further isolate Syria from the U.S. and weaken progressive forces that favor moving Syria away from a state-controlled economy.

There are four principal reasons for our opposition to H.R. 4483: (1) it is a unilateral economic sanction that cannot and will not achieve its stated objectives; (2) it would impose real costs on U.S. workers and firms and foreclose future commercial opportunities without any offsetting foreign policy benefits; (3) it is counterproductive to minimize the presence of U.S. companies in Syria and the incentive they can provide Syria to move toward market reforms; and (4) it would seriously limit presidential flexibility in making policy in a very complex and dangerous situation at a critical juncture in the Middle East.

1. Unilateral economic sanctions have an unblemished record of failure. Time and again the U.S. has responded to adverse overseas developments by cutting off trade, investment and financial transactions with other nations as a means of changing the behavior of their governments. Since 1996 the U.S. imposed 84 new unilateral sanctions. Because of the widespread foreign availability of nearly all items exported by American companies and the globalization of international capital markets, countries targeted by our unilateral sanctions are very rarely impaired in gaining access to the products or financing they seek. At most, they may pay a small premium or have to be content with less quality. Neither is likely to be a decisive factor in altering their behavior.

Multilateral sanctions have a somewhat better record if they involve the cooperation of the major trading partners of the target country. South Africa was subject to U.N., OECD and European Union, as well as U.S., sanctions, and together they contributed to the end of apartheid. But there is no such multilateral sanctions regime in place against Syria, nor is there likely to be. The foreign policy objectives of H.R. 4483 are vastly disproportionate to the very minimal increase in pressure that these sanctions are likely to exert on Syria. It is that disproportion that is their fatal flaw.

2. While H.R. 4483 is unlikely to have any impact on Syrian behavior, it would uniquely disadvantage and displace U.S. firms that are conducting, or want to conduct, business there. Syria already appears on our list of state sponsors of terrorism, so exports of sensitive products are already controlled. Even so, there are almost 400 U.S. firms currently doing business with Syria, either directly or as suppliers to other companies. A large percentage of these companies are small and medium-sized enterprises with operations in 184 congressional districts in 42 states and the District of Columbia. They represent virtually every sector of the U.S. economy, including agriculture, construction and engineering, telecommunications, medical products, aerospace, financial services, natural resource extraction, automotive and information technology. Although Syria is a country of only17 million people with a per capita income of $2500, it does represent sales, incomes and jobs for thousands of Americans employees of these nearly 400 companies.

Syria is currently negotiating a free trade agreement with the EU, which will increase European competition against U.S. exports. This disadvantage would only be compounded by the sanctions authorized by H.R.4483. Currently more than half (55%) of Syria’s exports are to the European Union and over 25% of their imports are from the EU. 16% of their imports come from Ukraine. While U.S. exports peaked at $389 million in 1996, they have declined since then to $224 million thanks in large part to existing sanctions and European competition. In addition, Syria has a free trade agreement with Jordan and an open border with Lebanon, complicating any effort by the U.S. to impose sanctions that increase leverage on Syrian behavior or whose impact is confined to Syria.

3. In a globalized economy, the flag more often follows trade than the reverse. By introducing our economic systems and standards abroad, American businesses integrate developing countries into the world economic system, paving the way for a similar political integration and the development of democratic and transparent institutions internally. This legislation would eliminate that possibility by radically diminishing the already limited American commercial contact with Syria, thereby foregoing the significant benefits of economic engagement. The political significance of an open door to U.S. commerce lies in the support it lends to market-oriented elements in Syria that can help the country develop in directions more friendly to the U.S. Commercial engagement can be a counterweight to the Baath party old guard who seek to prevent President Bashar al-Assad from changing his late father’s policies. A worsening economic situation in Syria strengthens conservative elements and makes it harder for the country to move in the positive directions taken by its regional neighbors, Jordan and Morocco. That, in turn, makes it harder for us to achieve our larger foreign policy goals in the region.

4. The most troubling feature of H.R. 4483 is the serious limitation it places on the President and the critical flexibility he needs to deal with our country’s most serious foreign policy challenge – peace in the Middle East. The bill would impose a statutory, mandatory prohibition, not subject to presidential waiver, on U.S. exports to Syria of dual-use items, including such things as medical equipment, gas-processing control systems, and equipment related to the safety of commercial passenger airplanes. This is a significant expansion and extension of unilateral sanctions and Congress’s role in imposing them. In addition, the President already has more than adequate sanctions authority under the International Emergency Economic Powers Act (IEEPA).

In a letter and statement of position to the chairman of the Senate Foreign Relations Committee in May, Secretary Powell said that H.R. 4483 would "have a negative effect on our efforts to bring down the violence, avoid the outbreak of regional war, and help the parties to a path to comprehensive peace." He added, "New sanctions on Syria would place at risk our ability to address a range of issues directly with the Syrian government and to change Syrian behavior." In response to a letter asking about his administration’s Syria policy, President Bush has written, "Imposing the new sanctions regime envisioned by the Syria Accountability Act would limit our options and restrict our ability to deal with a difficult regional situation at a particularly critical juncture."

We fully endorse Secretary Powell’s desire for "carefully calibrated engagement" with Syria, and we believe strongly that such engagement must include expanded private sector as well as official relationships. H.R. 4483 proposes to move in exactly the opposite direction and would do great harm to our goal of peace in the Middle East. For that reason we strongly oppose the bill.