Date: 11/3/1997

Published In: San Diego Daily Transcript

Author/Reporter: Shahriar Afshar

Former San Diego City Manager, Jack McGrory, once said that he liked working for a city because it was the closest layer of government to the community. The implication is that the actions or inactions of city government affect you more directly than anything else that may come out of Sacramento or Washington D.C. True or false? The answer is true when it comes to potholes and library hours. The answer is false when it comes to the ability of San Diego based international companies to compete overseas.

Here is the problem. When the U.S. government imposes unilateral trade sanctions against a foreign government, it deprives among many others, San Diego companies of their global vision. This leaves the road clear for foreign competition to freely expand while the U.S. and San Diego economies loose jobs and money. An isolated sanction on a small country may not be an issue. However, U.S. and San Diego companies are being devastated by the proliferation of unilateral as opposed to multilateral trade sanctions against countries that provide an economic value and a return on investment.

According to information gathered by USA ENGAGE, a coalition of 600 U.S. companies opposed to unilateral trade sanctions, the list of U.S. sanctioned countries is growing. The following is a list of countries currently identified in 104th Congress legislation as appropriate targets for economic sanctions: Burma, China, Colombia, Cuba, India, Indonesia, Iran, Iraq, Libya, Mauritania, Mexico, Nigeria, North Korea, Pakistan, Peru, Russia, Serbia, Sudan, Syria, Thailand, Trinidad, Tobago, Turkey, and Zaire. The recent disputes over U.S. automobile exports into Japanese ports has also made Japan an appropriate candidate for this list. There are even a few countries and regions potentially subject to extraterritorial sanctions or secondary boycotts based on trade and investment with U.S. sanctions targets. Presently, this list includes Europe, Turkey, and even Canada for their trade with Cuba, Iran, and Libya.

Both of our NAFTA partners are now subject to U.S. sanctions. Canada is included on this list because of a consortium with Great Britain. Bow Valley Energy Ltd., a Canadian company, has negotiated a bid to service oil wells in the Balal oilfields of Iran. The deal will be worth more than US$40 million. Under the Iran-Libya Act of 1996, the U.S. can sanction any country that invests more than $40 million in Iran. However, the Canadian ambassador to Iran recently stated that the two countries should expand their trade relationship even further. The U.S. response could cool relations with its biggest economic partner and neighbor, overshadowing the fact that the U.S. has sold more goods to Canada than any other country in each of the last 50 years. According to the Canadian Embassy in the U.S., trade between Canada and the U.S. supports thousands of highly skilled jobs on both sides of the border.

Additionally, according to the Iran Imports and Exports Magazine, Iran is proceeding with business as usual. Iran has created free or special trade zones, economic and industrial zones, and recently concluded contracts worth 270 million dollars in foreign investment joint ventures. The Japanese, Indian, German, South Korean and Bosnian companies will all invest 49% for industrial production matched with Iran's 51%.

Over time, U.S. foreign policy has isolated American businesses in its attempt to contain Iran. Iraq was also part of the U.S. "Dual Containment" strategy, a policy generally thought of in most foreignpolicy circles as one wrong solution to two separate issues. Nonetheless, since 1987, Presidents Reagan, Bush, and Clinton have all signed Executive Orders that gradually made any direct economic contact with Iran illegal for U.S. businesses. The election of the new Iranian President and a woman Vice President for the Environment has rekindled a cautious optimism in the U.S. government. However, the U.S. and Iran have both stated that unless the behavior of the opposite government changes, there is little to talk about. This stalemate does not include the ongoing dialogue of the Hague Tribunal where three Iranian, three American, and three independent judges have been meeting for many years to arbitrate matters of diplomatic necessity. In addition, the U.S. did send humanitarian aid to Iran after the last major earthquake in that region.

The U.S. government has been under pressure by dozens of organizations, predominantly backed by U.S. companies, engaged in lobbying efforts to stop the misuse of sanctions. U.S. allies are not supportive of the sanctions either. President Clinton recently reported to Congress that the sanctions are having a negative impact on the Iranian economy while Iran contends that its sluggish economy has more to do with the slow recovery from the Iran-Iraq war. The fact is that Iran has learned to survive economically with or without U.S. trade and investment.

All of this international intrigue is taking its toll on one major U.S. company right here in San Diego. Solar Turbines Inc., the billion-dollar San Diego subsidiary of the Caterpillar Corporation, is the world's leading producer of centrifugal-type natural gas compressors. Prior to U.S. trade sanctions, Solar had a long standing and prosperous relationship with Iran. The company has over 375 plants in Iran, developed over a 30-year period. Each plant requires a great deal of service and maintenance. The majority of the plants are either idle or being serviced by the foreign competitors of Solar Turbines.

However, San Diego still benefits locally from Solar Turbines' operations globally. According to UCSD CONNECT, Solar Turbines is forgoing close to $50 million dollars a year by not being able to service its gas turbine plants in Iran. This translates to San Diego's economy losing approximately 400-500 jobs directly attributable to Solar Turbines inability to conduct business with Iran.

U.S. foreign policy towards Iran has isolated U.S. companies like Solar Turbines. Unilateral sanctions are not having their intended effect and instead are negatively impacting San Diego's economy. Ironically, the new Secretary of State, Madeleine Albright, has stated that "When we help other nations to grow, we also create opportunity here at home." Unfortunately, the Secretary's proactive statements have not led to a decisive change in U.S. foreign policy. Until the U.S. government begins to listen to its corporate leadership, San Diego and U.S. companies will continue to come in second when it comes to competing overseas.

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Copyright © 1997-1998 Iranian Trade Association. All rights reserved. Information in this document is subject to change without notice. Other products and companies referred to herein are trademarks or registered trademarks of their respective companies or mark holders.