Michael P. Malloy
Excerpt from the Trading with the Enemy Act
During the time of war [or during any other period of national emergency declared by the President,] the President may...
(B) investigate, regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest by any person, or with respect to any property, subject to the jurisdiction of the United States.
The Trading with the Enemy Act (TWEA) (1917, ch. 106, 40 Stat. 411), which authorized the use of economic sanctions against foreign nations, citizens and nationals of foreign countries, or other persons aiding a foreign country, is the oldest such statute still in use by the United States. Most U.S. sanctions programs (like those against Iran, Libya, terrorists, and, before the 2003 war, Iraq) contain the same basic features. Although authorized by more recent statutes, these programs follow an approach to sanctions that has been in use under the TWEA from 1917 to 1975. The constitutionality of the TWEA, based on the foreign affairs powers of the United States, has been consistently recognized by the courts in such cases as Propper v. Clark (1949), Zittman v. McGrath (1951), and Freedom to Travel Campaign v. Newcomb (1996). Because it is important that the foreign affairs of the nation be conducted in a consistent and coherent manner, the courts have tended to give great respect to the president's judgment and discretion. As a result, presidential actions taken under TWEA are rarely challenged successfully in litigation.
The key provision of the TWEA is section 5(b), which delegates to the president powers of economic warfare during a time of war or any other period of national emergency. Since 1977, when the International Emergency Economic Powers Act was enacted, the use of section 5(b) has been limited to periods of declared war. The exception is programs, such as the U.S. trade and financial embargo against Cuba, that were in existence before the 1977 change in section 5(b).
TWEA IN U.S. HISTORY
Congress enacted the TWEA in anticipation of U.S. involvement in World War I. The original act was intended to grant the president broad discretion and authority to regulate foreign currency transactions, transactions in gold or silver, and transfers of credit or evidences of indebtedness or property during a time of war "between the United States and any foreign country, whether enemy, ally of enemy or otherwise, or between residents of one or more foreign countries." In creating the TWEA Congress sought to establish a set of restraints on international commerce, based on traditional common law and international legal principles that made commerce with declared enemy states and their nationals illegal. During the two world wars, the TWEA was used against states that were declared enemies of the United States. From 1933 to 1977, it was also used in situations not involving declared war (like the Korean conflict of 1950 to 1953) against states pursuing policies considered hostile to U.S. interests.
In March 1933 Congress amended the TWEA with virtually no debate to apply not only during periods of declared war but also "during any other period of national emergency declared by the President." Over time, the active involvement of the United States in World War II and a series of international crises (primarily those resulting from the Cold War between the United States and the Soviet Union during the second half of the twentieth century) broadened the perceived purpose of the TWEA. The act came to be seen as an overall weapon of economic warfare, whether or not the United States was formally at war.
On April 10, 1940, twenty months before U.S. entry into World War II, President Franklin D. Roosevelt used section 5(b) to impose prohibitions on transfers of property in which Norway or Denmark or any citizen or national of those countries or any other person aiding those countries had any interest, unless the transactions were licensed by the Department of the Treasury. The president took this step in response to the invasion of the two countries by Nazi Germany. He hoped to prevent extortion of property subject to U.S. jurisdiction from its rightful owners in the occupied countries. The president repeatedly expanded the April 1940 Executive Order to cover other countries occupied by the Axis powers of Germany, Italy, and Japan, and eventually to cover the Axis powers themselves.
This broader purpose of "economic warfare" was carried over into the World War II sanctions program. It was also the basic purpose of the post-World War II sanctions programs enforced principally by the Treasury and Commerce Departments. For example, President Harry S Truman declared a state of national emergency on December 16, 1950, invoking the TWEA as the legal basis for imposing financial and trade restrictions against the People's Republic of China and North Korea during the Korean conflict. Truman's declaration was the legal basis for the postwar TWEA controls that remain in effect to this day.
A major legislative change occurred in 1977 with the return of the TWEA to its status as a legal authority to be used only in wartime. Congress was concerned that presidents had invoked "national emergency" powers too easily from 1933 through the 1970s. Despite these congressional concerns, however, the existing uses of the TWEA were continued until September 14, 1978. Under the amended statute, these uses could be extended for successive one-year periods by presidential determination and in fact have been routinely extended on a yearly basis. As a result, two "national emergency" sanctions programs continue to operate under the TWEA: (1) the Treasury Department's Foreign Assets Control Regulations, originally established in 1950, which imposed full economic sanctions on North Korea and nationals thereof until June 2000 and continues to impose significant, though selective, sanctions against North Korea; and (2) the Treasury Department's Cuban Assets Control Regulations, originally established in July 1963, which continues to impose full economic sanctions on Cuba and its nationals.
Despite the continuing use of the TWEA and other, later statutes as the legal basis for economic sanctions, legislators and other policy makers, as well as scholars, have frequently questioned whether economic sanctions are effective in achieving their various goals. For example, despite the Cuban sanctions, the Communist regime of Fidel Castro remains in power. On the other hand, unilateral U.S. sanctions imposed on Iran during the hostage crisis of 1979981 appear to have been significant in obtaining the release of U.S. embassy personnel held hostage in Teheran by the Islamic Republic of Iran. Likewise, in the early 1990s internationally supported U.S. sanctions against Iraq significantly contributed to ending Iraq's occupation of Kuwait and containing the threat that Iraq posed to its other neighbors at that time.
Each sanctions episode tends to exhibit unique features, making it difficult to reach hard and fast conclusions about the effectiveness of sanctions as a general rule. As a result, the national and international debate over the effectiveness of sanctions will undoubtedly continue.
See also: UNITED NATIONS PARTICIPATION ACT.
Carter, Barry E. International Economic Sanctions. Cambridge, U.K.: Cambridge University Press, 1988.
Hufbauer, Gary C., and Jeffrey J. Schott. Economic Sanctions Reconsidered. Washington, DC: Institute for International Economics, 1985.
Malloy, Michael P. United States Economic Sanctions: Theory and Practice. The Hague, Netherlands: Kluwer Law International, 2001.
U.S. Senate Special Committee on the Termination of the National Emergency. Emergency Powers Statutes: Provisions of Federal Law Now in Effect Delegating to the Executive Extraordinary Authority in Time of National Emergency. 93d Cong., 1st Sess. 1-6 (Comm. Print 1973).
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