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News Release

Memorandum to the Press: New Institute Study

June 18, 1996

Contact:    C. Fred Bergsten    (202) 328-9000

Washington, DC—The United States has angered many governments—including staunch allies such as Canada, Germany, and the United Kingdom—by enacting the Helms-Burton bill, which requires sanctions against some foreign firms that do business in Cuba. In response, several of these countries are proposing laws to keep corporations operating in their territories from complying with the US law.

The Cuban sanctions bill is but the latest example of the need for new international rules to set standards for governments' treatment of international corporations, according to the author of a new Institute study. In Global Corporations and National Governments, Edward M. Graham proposes that rules be negotiated in the World Trade Organization (WTO) binding international corporations to obey the laws and policies of each nation in which they do business. Where the laws of different nations conflict, each subsidiary of the corporation would follow the laws of the host nation—that is, the nation in which the subsidiary is incorporated and does business. Some exceptions would be allowed for national security reasons (so that, for example, such obligations would not facilitate nuclear weapons proliferation).

Such rules would build a clear international consensus against legislation such as the Helms-Burton bill, which in any event is unlikely to generate benefits sufficient to offset the ill-will generated among US allies. While these rules might constrain certain aspects of US foreign policy, they also would protect the United States from attempts by foreign governments to use the US subsidiaries of foreign-controlled firms to enforce their own foreign policy goals.

This topic is on the agenda of the WTO ministerial meeting to be held in Singapore in December. The conflict that Helms-Burton has fomented between the United States and its major allies underscores the urgency and importance of these discussions.