Tuesday, June 24, 2014

The Long Arm of U.S. Law Undermines Sovereignty and Democracy Around the Globe

Six years after the financial crisis that devastated the housing market, leaving millions of American homeowners facing foreclosure or with little or negative equity in their largest investment, not a single American bank has been charged with a crime. Citigroup this week agreed to a $7 billion settlement related to mortgage securities, but they are only paying civil penalties. While the settlement doesn't preclude future criminal charges, none have been announced. But the federal government is finally bringing down the hammer – not on any bank that caused or was complicit in the crisis, but on foreign banks that do business with Cuba and other countries like Sudan and Iran that the U.S. unilaterally declare are off limits.

French bank BNP Paribas is expected to settle a criminal case with the U.S. government for up to $9 billion. Their crime is violating American laws that representatives of the French people never agreed should be imposed on companies operating on French soil.

The U.S. is punishing foreign companies because they have failed to go along with the U.S.'s economic war that has lasted more than half a century. This war was conceived of and carried out because the Cuban people had exercised their self-determination to form a political arrangement that U.S. Cold Warriors would not allow them to choose. The Cold Warriors decided to use coercion through their dominance of the global economic system to make the Cuban people suffer until they regretted and ultimately abandoned their chosen socioeconomic system.

“The majority of the Cuban people support Castro. There is no effective political opposition,” wrote Assistant Secretary of State for Inter-American Affairs Lester D. Mallory in 1960. “The only foreseeable means of alienating internal support is through disenchantment and disaffection and hardship… every possible means should be undertaken promptly to weaken the economic life of Cuba… a line of action which… makes the greatest inroads in denying money and supplies to Cuba, to decrease monetary and real wages, to bring about hunger, desperation and overthrow of government.”

Since the blockade is based on the Trading with the Enemy Act of 1917, the U.S. is at war with Cuba. The Act, which gives the President power to restrict trade between the U.S. and its enemies, can only be used during times of war.

The U.N. General Assembly would clarify beyond a shadow of a doubt that such action was in blatant violation of international law with Resolution 2625 of 1970: “No state may use or encourage the use of economic, political or any other type of measure to coerce another State in order to obtain the subordination of the exercise of its sovereign rights and to secure advantages of any kind… Every state has an inalienable right to choose its political, economic, social and cultural systems, without interference in any form by another State."

Fifty three years later the blockade has served its violent purpose by causing economic damage the Cuban government estimates at more than $1.1 trillion as of April 2013. They argue that based on the Geneva Conventions and Declaration Concerning the Laws of Naval War, the blockade constitutes an act of genocide.

The effects on the Cuban people have been catastrophic, but this has never appeared to bother the U.S. government. Nor has the fact that 99% of the world’s nations voted in the General Assembly (188-2) in October 2013 that the blockade is illegal and must end - the same way they have voted each and every year for the past 22 years. The closest margin was in 1993, when the U.S. garnered the broad support of Israel, Albania and Paraguay against a measly 88 nations in opposition.

Other governments do not appreciate the subversion of their democracy and their sovereign rights. The French Economy Minister Arnaud Montebourg said last month “the U.S. has an unfair advantage in the global ‘economic war’ because of a law that authorizes prosecution of foreign companies for activities outside American soil. He called for fair and equitable treatment of the bank,” according to USA Today.

Many smaller foreign companies have also been caught in the U.S.’s illegal, extraterritorial web of laws in the past few months. An Argentina-based travel agency settled for $2.8 million fine for offering services to people who traveled to Cuba. A large Netherlands travel company settled for $5.9 million for similar charges. A Canadian subsidiary of AIG, who sold policies to people traveling to Cuba, cost the insurance giant $279,038 in fines to Uncle Sam.

The French complaint may rekindle previous European challenges to the blockade that have never been settled. In May 1996, the European Communities took the case to the WTO for what they argued were violations of that organizations rules in the Helms Burton Act, which had been signed into law by President Clinton in 1996. Despite the laws extraterritorial provisions that prevented international financial institutions such as the IMF and World Bank from granting credit to Cuba, Clinton signed the bill into law, eager to pander to reactionary Anti-Castro voters in Florida and New Jersey, a strategic group important for his re-election.

The European Committee “claim(ed) that US trade restrictions on goods of Cuban origin, as well as the possible refusal of visas and the exclusion of non-US nationals from US territory, are inconsistent with the US obligations under the WTO Agreement.”

The U.S. government took the bizarre position that it would refuse to take part in the proceedings. The incoherent logic to this threat was that the Act was a matter of “American national security,” of which the WTO “has no competence to proceed.”

The U.S. didn’t end up invoking its national security exemption, which the European countries feared would wreak havoc on the whole international trade system, as negotiations continued.

“Most scholars worried that, if this assertion of the national security defense succeeded, that defense would have no limits on it, and it could be used by any nation at any time to defend any trade barrier,” writes John A. Spanogle, Jr., Professor of Law at George Washington University.

In the end, the European countries backed down and the WTO panel convened on the matter was suspended with the issue unresolved.

Nearly 20 years later, it seems the political tides may have turned. With a huge French financial giant threatened with serious fines, not just chump change, it’s possible that the American charade that is the blockade may have encountered serious, sustained opposition. With the BNP case setting a precedent, the door is open to fines possibly even greater in the future for "crimes" people in the countries where such companies are based do not consider illegal.

Since the U.S. dollar is the world's reserve currency, most international transactions pass through New York. The U.S. uses this monopoly on the world's financial system to step in between the two parties and impose its own orders - sovereignty be damned.

Argentina has found itself in the cross hairs of the extraterritorial application of U.S. laws in its ongoing dispute with "vulture funds" who purchased that nation's debt. In 2002, Argentina exercised its sovereign right to default on its debt and rebuilt its economy in record time, pulling residents out of the mire of inflation and insecurity back to reasonably comfortable standards of living, only to now see it all potentially come unraveling before their eyes.

Last month, the U.S. Supreme Court declined to hear Argentina's appeal of a lower court ruling that the debt must be paid back. The "vulture funds" - who swept in to buy bonds for pennies on the dollar in the hope of letting Uncle Sam use his muscle to push around pesky little countries like Argentina - show no sign of backing down. A capitulation by Argentina would set a disastrous precedent for poor countries who use default as an alternative to the misery of austerity.

"Sovereigns have to be able to default," Karen Hooper told Bloomberg Business Week. "They have defaulted continuously since money was invented."

Other countries are starting to catch on that the convenience of the status quo is not worth risk the price of the U.S.'s arbitrary and unilateral wrath. Especially after the government shutdown last fall, international governments and investors are starting to realize that the United States is not even stable itself - which was the rationale for using the dollar in the first place.

A world where the U.S. can no longer inflict tremendous financial damage on other countries simply because it doesn't believe in the principles of sovereignty and democracy would be a welcome relief for the billions of people outside of U.S. borders.