Anti-Boycott: Mixed Signals

Treasury Secretary Donald Regan said in early October that the Administration would "make greater efforts to see what can be done to ease the burden on U.S. companies" of laws which prohibit compliance or cooperation with the Arab boycott of Israel.

So far, however, according to business and government sources contacted by The Washington Report, there are no indications of any movement on this issue, and the consensus is that it is very unlikely that there will be.

The laws Secretary Regan was referring to are amendments, passed in 1977, to the Export Administration Act which make it illegal for U.S. companies or individuals even to respond to requests from an Arab entity for information on the boycott such as whether the U.S. party has ever had any business dealings with Israel. U.S. firms or individuals receiving such requests must report that fact promptly to the Commerce Department.

These "anti-boycott" rules and regulations—administered by the Treasury, Commerce and Justice Departments—have frequently been cited as the biggest obstacle to expanded U.S.-Arab trade. According to critics, the regulations were inspired mainly by domestic political considerations, and have the effect of intimidating American businesses, especially the smaller ones, into staying away from the Arab market altogether. No other country has such laws, it is pointed out, and the U.S.'s trade competitors in Europe and Japan unquestionably have scooped up lucrative contracts and orders lost by U.S. firms because of the anti-boycott measures.

U.S. business lobbies have always included the anti-boycott laws on their agendas for campaigns to get Congress to modify or repeal legislation seen as having a "disincentive" effect on export trade.

However, the sensitivity of the issue has made it difficult for business to lobby hard on the anti-boycott question, and reform of the laws has had few, if any, champions on Capitol Hill.

So it was that Secretary Regan's remarks came as something of a surprise to close observers of business issues. The Secretary was speaking at a press conference at the conclusion on October 8 of the seventh annual meeting of the U.S.-Saudi Arabian Joint Commission on Economic Cooperation, and some of those present believe he may only have been intending to be polite and tactful in the presence of the Finance Minister of Saudi Arabia, Mohammed Abalkhail, who was sitting next to him. Certainly there is nothing in the Reagan Administration's record to suggest it intends to loosen up. So far, the Administration has been getting progressively tougher as an enforcer.

When The New York Times suggested in an article a year ago that anti-boycott enforcement was "not a high priority" with the Reagan Administration, Deputy Assistant Secretary of Commerce Bohdan Denysyk responded by ordering Commerce's Office of Anti-boycott Compliance (OAC) to double the number of cases brought against American firms for cooperating with the boycott. A tough former prosecutor, Theodore Wu, was brought in to head up the effort.

Since then, "successful" prosecutions by the OAC have increased. In one set of prosecutions disclosed on September 9, ten firms were fined a total of $101,500. On October 19, three banks—UBAF Arab-American of New York, Continental International of Chicago and Wells Fargo of San Francisco—were fined a total of $76,000 for either honoring or failing to report letters -of -credit transactions with Arab parties which contained boycott language.

Several companies have filed lawsuits contending that the anti-boycott laws are unconstitutional; so far, these efforts have failed. One legal expert wonders whether the Administration's embargo on pipeline equipment to the Soviet Union might not serve as a precedent for those opposed to the anti-boycott laws. He argues that the pipeline embargo is, in effect, a "secondary boycott" of the type which the U.S. law opposes when applied by Arab states against companies trading with Israel.

The Export Administration Act comes up for renewal next year. One of Israel's strongest supporters in Congress, Representative Benjamin Rosenthal (D-N.Y.), wants to hold hearings on the anti-boycott issue, which he maintains is not being prosecuted stringently enough. If the anti-boycott issue is examined anew, business groups are expected to lobby at least for a "harmonization" of inconsistent Commerce and Treasury regulations.

In the meantime, the Commerce Department will continue to pursue the 400 cases which the OAC had on its docket at the end of June.