The United States, World Trade and the Helms Burton

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					                 The United States, World Trade and the Helms Burton Act
           An edited version of this paper appeared in Current History (February 1997)

                                          Peter Morici
                                      University of Maryland

        On February 24, 1996, Cuban Mig-29 fighters gunned down two Cessna 337s in the
Florida Straits flown by members of Brothers to the Rescue, a humanitarian organization.
President William Clinton, recognizing the importance of the Cuban-American vote and Florida
for the November elections, reversed his position and endorsed the then pending Helms Burton
Act.1 This law seeks to force foreign businesses to participate in the United States economic
embargo of Cuba; however, it directly contradicts international law and undermines the long-
term goals of United States international economic policy.
        Helms Burton empowers the State Department to deny entry visas to the top officials and
representatives of companies that use or benefit from property in Cuba confiscated from
Americans after the 1959 revolution. This would effectively exclude these firms from exporting
to, or doing business in, the United States, even when their products and activities having nothing
to do with Cuba. Grupo Domos, a Mexican telecommunications company, and Sherritt
International, a Canadian mining firm, have already been sanctioned.
        In addition, the Helms Burton Act gives United States citizens and businesses the right to
sue foreign companies that use or benefit from confiscated property in Cuba, and United States
courts may order the assets of foreign companies seized to pay judgements. President Clinton
has suspended provisions enabling private law suits until August 1, 1997, while his
administration seeks to use this provision to leverage cooperation from foreign governments in
crafting multilateral sanctions against the regime of President Fidel Castro.
        Instead of cooperation from foreign governments, the Helms-Burton Act has provoked
harsh protests, because it is an extraterritorial application of United States law. Specifically, the
law attempts to regulate the behavior of foreign nationals outside of the boundaries the United
States and violates the sovereign prerogatives of foreign governments to regulate the commerce
of their citizens with Cuba.
        Foreign governments do not deny that Americans are entitled to compensation for
expropriated property; however, they correctly assert, it is Cuba that owes compensation not
foreign companies now using the property. Prior to the Brothers to the Rescue incident,
Secretary of State Warren Christopher stated that granting Americans the right to sue in United
States courts "would be hard to defend under international law."
       Moreover, by excluding from the United States, foreign companies that choose to do
business with Cuba, Helms Burton imposes a secondary boycott and potentially violates
numerous provisions of the international trade agreements administered by the World Trade

     Enacted on March 12, 1996, the formal name is Cuban Liberty
and Democratic Solidarity Act, and its sponsors were Senator Jesse
Helms and Representative Dan Burton.
Organization (WTO). These agreements are intended to grant foreign goods and services freer
and fairer access to United States markets, and the European Union has filed a WTO complaint.
For its part, the United States claims exemption under WTO national security provisions.
        These national security provisions are vague and largely untested, and it is difficult to
predict how a WTO dispute settlement panel would rule. Many trade policy experts are
concerned, should the WTO rule against the United States and the United States fail rescind
Helms Burton, a crisis of credibility could result for the fledgling WTO dispute settlement
process. This is not likely.
        Most American companies are not likely to seek to have foreign nationals excluded from
the United States or to sue foreign companies, because in part, they likely would face retaliation
abroad. Hence, the damage to international commerce posed by Helms Burton, though real, is
not likely to be large. Should the United States fail to comply with a WTO decision, the WTO
would authorize aggrieved countries to withdraw trade benefits from the United States equal to
the value of their lost commerce. Tariffs could be raised on selected American products but the
scope of these penalties would not likely be large.
        The real dangers posed by Helms Burton are broader. Although the Cold War has ended,
the United States continues to shoulder substantial responsibilities for ensuring security and
respect for human rights, even in places where other nations have a greater stake and adequate
resources. In Bosnia, for example, European leaders view United States support and troops as
essential for achieving a long-term solution, even though the expanded European Union has a
larger economy and population than the United States. In contrast, in Cuba, the United States
faces a regime 90 miles from its shores that has harshly suppressed human rights and has sought
to export its revolution through military adventures; yet as the United States has sought to isolate
Cuba, its allies have cultivated a brisk and profitable trade with Cuba.
        European, Canadian and Latin American arguments that expanding commercial ties and
constructive engagement may now be the best way to foster democratic change in Cuba may have
merit; however, an American humiliation in the WTO over policy towards Cuba could make
Congressional leaders and the American public more susceptible to isolationism and economic
nationalism, less inclined to support sending American troops to troubled spots like Zaire, and
even more skeptical and suspicious about United States participation in international institutions
like the WTO and United Nations.
        As importantly, a fundamental goal of United States policy is to expand the scope of
national economic practices subject to the disciplines of the WTO and regional trade agreements,
including foreign investment policies, antitrust enforcement, labor standards, and environmental
regulations. The United States often suggests basing new international agreements on
established international law and codes, or national practices that have become customary among
advanced industrialized economies. In this way, the United States seeks to make international
norms more binding under international trade agreements.
        For example, in the North American Free Trade Agreement, the United States, Canada
and Mexico pledged to accord one another investors "treatment in accordance with international
law, including fair and equitable treatment and full protection and security." Helms Burton--by

permitting Americans to sue Canadian and Mexican companies to obtain compensation for
property expropriated by Cuba--directly violates this provision.
         Helms Burton undermines the United States ability to negotiate rules for trade that assure
its competitive exports and multinational corporations freer and fairer treatment abroad, because
it calls into question the United States resolve to live by the rules it prescribes for others.
        It is time for the President and the Congress to recognize that threatening foreign
companies using property confiscated from Americans in Cuba is creating more costs than
benefits, and the President should take the leadership in seeking repeal of these provisions of
Helms Burton. In the meantime, President Clinton may continue to suspend private law suits for
periods of six months beyond August 1. He should assure United States allies that he recognizes
their concerns and that he will take these steps.