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OIL TAX VOTE

The real test of Congressional will came with the vote on the controversial oil equalization tax. This hefty $37.3 billion tax would, over a three year period, raise the cost of domestic oil to the current world price. It would induce conservation by requiring Americans to pay the true replacement cost of oil consumed without providing a windfall to oil producers. Instead the taxes will be returned to the people through the tax system and special payments. And the possible economic shock of increased oil prices will be neutralized.

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INFORMATION NOTE ON THE U.S. ANTIBOYCOTT LEGISLATION

(Paper submitted by the U.S. Congress delegation)

Since 1965, U.S. law has declared participation in foreign boycotts or restrictive trade practices to be against American policy. Unfortunately, this policy was not strongly enforced. When trade between the United States and Arab countries expanded after 1973, American companies had no clear basis on which to resist participation in the Arab boycott of Israel. In 1976, the U.S. Commerce Department reported that, from April through September of that year, American exports to Arab states made in compliance with boycott conditions totalled more than $3 billion. This was double the total for the preceding six months.

Faced with these statistics and a growing outcry from the American public, the U.S. government took the following actions:

-By Presidential order, effective December 1, 1975, all American firms and individuals were prohibited from discriminating against other Americans on the basis of race, colour, religion, sex or national origin. -The U.S. tax laws were changed in late 1976 to deny certain foreign tax benefits to U.S. companies cooperating with international boycotts. -The President signed in June 1977 a comprehensive law outlawing all U.S. participation in international boycotts.

VARIOUS ARAB BOYCOTT ASPECTS

To understand the intent of these laws, one must distinguish among various aspects of the Arab boycott of Israel.

First, the boycott interferes with basic civil rights. Numerous individuals and firms are barred from doing business directly or indirectly with Arab states solely because of their race, religion or sex, or the race, religion or sex of their officers, directors or shareholders. Of the more than 1,800 companies and individuals believed to be on 21 secret Arab blacklists, many are there simply because their officers or directors are Jewish.

This is the most reprehensible aspect of any boycott. The new U.S. law absolutely forbids Americans from complying with boycott demands based on these factors. I understand the French Penal Code was also recently amended to prohibit French public servants and citizens from agreeing to such discriminatory requests.

The second major aspect of a boycott is economic. In this, we must distinguish between primary and secondary boycotts. Under a primary boycott, citizens of one state are forbidden from doing business with citizens of another. In practice, for example, Americans may not trade with Cubans and Arabs may not trade with Israelis. Citizens of countries which are not parties to the dispute are not affected. A primary boycott is a regrettable, but widely accepted, tool of international warfare. The American antiboycott legislation does not interfere with the operation of such primary boycotts.

Under a secondary boycott, one of the enemy states tries to extend its trade restrictions to neutral, third countries. In practice, the Arabs deny trade not only to Israelis but also to Americans and Europeans who do business directly or indirectly with Israelis. The effect of a secondary boycott is to divide the industries of innocent countries into those companies which can do business with the boycotting state and those which cannot. This discrimination seriously restricts freedom of trade and limits competition. The Arab boycott of Israel is virtually unique in imposing these secondary restraints upon third parties.

The antiboycott law signed by President Carter attacks this secondary boycott by forbidding American companies and individuals from agreeing not to do business with Israel as a condition of doing business with the Arabs. It also tries to prevent black-listing of firms doing business with Israel by forbidding Americans from responding to boycott-related requests for information about their business dealings with Israel or with firms which do business with Israel.

The law covers not only American firms operating in the United States but also any permanent U.S. establishment of a foreign firm and any subsidiary controlled by a U.S. firm resident in a foreign country, except where the U.S. law conflicts with the law of that foreign country as to activities exclusively within that foreign country.

IMPACT OF LAW AWAITED

It is too early to predict the full impact of this antiboycott law since regulations will not become effective for at least three months. But for several reasons we feel that the effect of the law on U.S./Arab relations will not be severe or long-term. First, the Arabs have demonstrated on numerous occasions that they will not allow their secondary boycott to interfere with a productive trade relationship. Many American companies, principally hotel chains, banks and defense contractors, trade with the Arab states and Israel. Second, many Arab businessmen have privately objected to the secondary boycott since it restricts them from doing business with blacklisted American companies such as CocaCola, Ford and Xerox. Third, Arab boycott operations have already been changed to take account of the 1975 restrictions imposed upon American compliance with requests for discrimination based upon race, colour, religion, sex or national origin.

There is another cause for uncertainty as to the impact of the American antiboycott legislation. We do not yet know the extent to which similar action will be taken by other trading partners of the Arabs. We note a few very encouraging signs. In addition to the French law referred to earlier, regulations in the Netherlands and Germany, we understand, restrict compliance with certain aspects of the Arab boycott. Furthermore, the Canadian Government în October indicated it would deny official support to any trade conducted in compliance with the Arab boycott. The new British Foreign Secretary also announced in Parliament in March that he was "firmly opposed to boycott" and would "welcome discussions with the new American Administration about their new measures." Finally, written remarks of EC Commissioner Claude Cheysson in the Parliament in November indicated that the boycott was contrary to the "spirit and principles of the cooperation which the Community wishes to establish with the Arab countries" and might violate Articles 85 and 86 of the Treaty of Rome as well as bilateral agreements between the Community and several Arab States. We welcome these initiatives on the part of the European Community and look forward to a broad international commitment to oppose secondary boycotts which inhibit open competition and impair free trade.

Monday, July 11, 1977, Afternoon

SUMMARY

II. CONCURRENT WORKING GROUP SESSIONS

A. WORKING GROUP ON HUMAN RIGHTS

(Papers by Mr. Cousté, Mr. Fraser, and the Working Groups 1)

The Joint Working Group decided to go through the 12-point suggested program proposed by the EP Working Group in its first meeting on March 23, 1977. Several members, however, thought a more general discussion should be undertaken as well.

The following specific actions refer to the numbered items in the paper "Comments of the U.S. Working Group on 12-Point Program for Human Rights Cooperation Suggested by the EP Working Group" which appears on p. 25:

Items 2, 3, and 4.-These proposals, which concern, respectively, joint or parallel resolutions, joint interventions and joint missions of inquiry, by the two parliaments, were considered together. The working group decided to establish a procedure to coordinate these matters to permit (a) an exchange of information and (b) rapid consultation toward the goal of common action on human rights. Since items 5 and 6, regarding hearings on human rights, are related to the three above items, the working group included hearings also as a subject for the proposed procedure.

The group will have reports from both the European and American members at the next meeting on the work, studies and actions on establishing this procedure.

A PARLIAMENTARY BULLETIN

Members discussed the staff and the political questions involved in carrying out any procedure for joint actions on human rights. Different methods of conducting hearings were also discussed. All of these problems should be considered in more detail at the next meeting, it was agreed.

Items 7, 9, 10, and 11.-These items refer, respectively, to a bulletin on human rights for parliamentarians, to the development of the right of asylum and to caring for refugees and exiles, to consultations of the United States and the EC with the United Nations and other organizations and to possible economic and commercial sanctions against repressive regimes. All deserve in-depth study, the members agreed with reports to be made at future meetings of the group.

1 See p. 25.

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