We should begin a systematic search for alternatives to economic sanctions as they are currently applied. Sometimes it seems as though sanctions have become virtually the only tool in our foreign policy kit. When I see a list of potential target countries, I am reminded of the old saying: "When your only tool is a hammer, every problem starts to look like a nail." In thinking about the effectiveness of sanctions in general, I am inclined to wonder if we are hitting our thumbs more often -- and harder -- than the nail.

I do not question the goals of economic sanctions. Sanctions are often used in the fight against some of the most challenging problems in the world today -- human rights abuse, weapons proliferation, drug trafficking, and terrorism. And I recognize that there are times when the United States must stand alone for what we believe is right. In those cases, U.S. companies will always stand with our government. The Gulf war and subsequent policies toward Iraq are evidence of this.

But unilateral sanctions should be used only as the foreign policy tool of last resort. That is not the situation today. The United States has imposed sanctions against 10 nations. Stiffer sanctions are possible against some of these, and new sanctions may be imposed on six additional countries. Together, these countries represent a substantial chunk of the global market. The increasing use of sanctions endangers the ability of American energy companies (and many other U.S. companies) to compete in international trade. 

In many instances, unilateral sanctions do not have a major impact on the economies of the nations we target. Rather, sanctions actually end up hurting American businesses, workers, and consumers. All too often, unilateral trade sanctions can equate to unilateral commercial disarmament. From my own experience, I have seen the futility of unilateral trade sanctions. Two years ago, Conoco finalized plans to develop two offshore oil and gas fields in Iran. Today, the French company, Total, is developing those fields because Conoco was precluded from doing so by our government's imposition of unilateral sanctions against Iran.

There is also a large body of evidence which suggests that to change the governmental policies of another nation, economic growth and nurturing are far more effective than withholding goods and services. The sociologist Seymour Martin Lipset summarized the relationship between economic growth and democracy as follows:

One of the most powerful factors that alters political beliefs and values and increases the prospects for stable democracy is socioeconomic development. The weight of the evidence confirms a strong positive relationship between democracy and socioeconomic development and that this relationship is causal in at least one direction: Higher levels of development generate a significantly higher probability of democracy.

Market-oriented economic development causes social changes that impede authoritarian rule. These include widespread education, the opening of society to the outside world, and the development of an independent middle class. The result is a growing sector of educated and skilled citizens in business, the professions, education, and the government.

I recognize there are times when unilateral sanctions are the best choice to be made after other options prove lacking, but I worry that other options are not getting a fair hearing, such as the option to exploit commercial interactions to build closer ties.

Examples of this include the business relationships that now exist between American companies and nations, such as Vietnam and Russia, that once were our military and political enemies. In 1994, Conoco became the first U.S. energy company to develop a new oil field in the former Soviet Union with a Russian partner company. I believe virtually every American company now doing business in Russia would agree that our government has effectively championed our interests there. Together, America's government and businesses have helped preserve Russia's fragile new democracy by transforming the controlled economy of the past into a free market economy of the future. This is an example of how American economic strength can be effectively used as part of our nation's foreign policy.

Another example is seen in China. China has recently opened many of markets to Western investment. The Government of China has been changing with the flow of investment into the country. The political benefits of such reform can be quite direct. As Henry Rowen wrote: "The message is clear: Once a totalitarian regime ventures down the path of market reforms, it loses control of its information organs." Professor Pei Minxin of Princeton University described the impact of such changes in China:

The most compelling case here was the introduction of home satellite dishes to increasingly affluent Chinese customers in the early 1990s. Using imported hi-tech components, Chinese manufacturers began to mass-produce home satellite dishes . . . .

The infiltration of liberal Western ideas undermined official doctrines. Simultaneously, it legitimized liberal democratic values, giving ideological support to the fledgling pro-democracy movement . Most importantly these changes are occurring in China with the Chinese Government and the Chinese people moving together. The U.S. is not using economics as a weapon, but as a catalyst for change.

In short, opening an economy to the outside world vastly expands the flow of information. The internet, television, books, newspapers, copying machines, foreign magazines, all the various forms of popular entertainment and intellectual thought begin to flow, spreading ideas like democracy, human rights, and the rule of law. These ideas fall on fertile ground in an expanding and assertive middle-class that is skeptical of, and threatened by, corruption, and abuses of power.

Had we imposed stiff sanctions on China these changes might not have been possible. In fact this level of change might have been significantly reduced were we not to pursue a policy of economic investment and instead moved further toward an isolationist policy.

Unilateral sanctions not only result in American companies losing out to companies from other nations. They also can cause U.S. firms to be viewed as risky suppliers and business partners by nations that otherwise would be eager customers for our goods and services.

If sanctions are deemed unavoidable, more should be done to win support from other nations so that sanctions can be multilateral, rather than unilateral. It is joint pressure from many countries that is more likely to bring meaningful results. A good example is the high degree of unity between the United States, the European Union and other nations to impose trade restrictions and embargoes on the regime of Saddam Hussein in Iraq. Instead of viewing American economic strength as a stick in international policy, our government should view it as the carrot.

If we cannot convince our allies to act with us, and yet we feel compelled to act alone, at least revisit the decision from time to time. Don't wind up the economic sanctions clock and walk away. I urge our leaders to periodically analyze the direct and indirect cost of unilateral sanctions to American citizens and to build in renewal provisions that require regular assessment.

American industry can spread investment throughout the world, help develop new markets, aid the economies of emerging nations and create economic opportunity. Hopefully, these actions will further the ideals of our nation and the goals of our foreign policy. History has shown that political obstacles can crumble under the weight of economic forces.

South Korea is an excellent case study to show that this is more than theory. On May 18, 1980 South Korean special forces killed more than 200 civilians while suppressing pro-democracy demonstrations in the provincial capital of Kwangju. The crackdown provoked a huge outcry in the United States, with calls for the imposition of economic sanctions. The Carter Administration considered both the imposition of economic sanctions and the withdrawal of U.S. troops, but decided that national security imperatives precluded either action. Instead, the United States retained open economic relations with a Korea ­­ despite the authoritarian government, the suppression of dissent by intelligence agencies, and documented violations of human rights.

Korea, thus became a test case of engagement. The Korean economy continued to grow, Korean students and executives continued to be trained in American universities, and U.S.-Korean trade and investment increased dramatically. In 1982 total trade in goods between the U.S. and Korea was $10.9 billion. By 1995, trade in goods had increased to $48.3 billion. All this took place despite continued unrest and government repression in the 1980s. At the same time, the United States engaged in hard-nosed diplomacy to induce the Korean government to become more democratic. This effort reached a peak in 1987, when the United States made clear that it would not countenance military intervention in renewed demonstrations, and exerted strong diplomatic pressure on the Korean government to hold fair presidential elections.

South Korea now is widely regarded as a legitimate, pluralistic democracy, with widespread freedom of expression and limited human rights problems.(note: I have the reference for this) Significant problems remain, including issues of corruption and labor relations. But overall, Korea has been a major success.

What happened between 1980 and 1997? The short answer is that the Korean people demanded democracy and human rights from their government, and had the power to obtain it. Per capita income rose more than 130% from less than $3300 per year to more than $7500 year,(note: I have the reference for this) and 75% of the Korean population now identifies itself as middle class.(note: I have the reference for this) These statistics reflect the growing diversification of the economy and urbanization of the population. As one observer noted:

Urban autonomy gave rise to the autonomy of NGOs [non-governmental organizations] and public interest groups . Many of these were advocacy groups, professional organizations, religious groups and civic organizations Pluralism also has come from . . . the growth of the business community, the rise of incomes of the population as a whole, and the growth of the middle class.(note: I have the reference for this)

Korean democracy has roots in rising living standards, economic diversification and the political activism of the Korean middle class, supported by the United States. In retrospect, the clashes of 1979-80 were a sign that the authoritarian regime's days were numbered. They were a symptom of the increasing incompatibility of economic growth and engagement, on the one hand, and repression on the other. The American policy of continued engagement with Korea, combined with strong pro-democracy diplomacy, furthered the development and diversification of the Korean economy and thus furthered the interests of democracy and human rights. One might wonder where the level of U.S. investment would be and what the state of Korean politics might be had we taken another approach to the situation in 1978.

We know that we cannot stand idle and do nothing in the face of flagrant human rights abuse, weapons proliferation, drug trafficking, and terrorism. For our part, Conoco has encouraged the respected Center for Strategic and International Studies (CSIS) in Washington, D.C., to undertake a comprehensive review of the effectiveness of unilateral sanctions and possible alternatives to sanctions. The CSIS has expertise in the areas of international markets and U.S. foreign policy, and it is my hope the center will provide alternatives to trade sanctions in the months ahead.

It is time for U.S. corporations that do business worldwide to take a more active role on the world's stage. It does little good for us to simply complain about unilateral sanctions. We must find ways to shine a stronger light on the ways American business and industry help promote our nation's ideals around the world. Toward that goal, I urge other chief executive officers to join me in looking for ways to help our government examine its foreign policy goals without putting American industry at a disadvantage in the world trade competition of the 21st century.