U.S. economic sanctions imposed on India and Pakistan after those countries detonated nuclear explosive devices in May 1998 appear to have had a relatively minimal overall impact on India and a minimal but somewhat more pronounced adverse impact on Pakistan, reports the U.S. International Trade Commission (ITC) in its publication Overview and Analysis of the Economic Impact of U.S. Economic Sanctions with Respect to India and Pakistan.

The ITC, an independent, nonpartisan, factfinding federal agency, recently completed the investigation for the Committee on Ways and Means, U.S. House of Representatives.

The sanctions were required by section 102 of the Arms Export Control Act (also known as the "Glenn Amendment"). As requested, the ITC's report identifies the U.S. industries and agricultural commodities that were affected by the Glenn Amendment sanctions; analyzes the effects of the sanctions on the U.S. economy; and analyzes the likely impact of the sanctions on India and Pakistan. Highlights of the report follow.

• Based on a telephone survey of over 200 U.S. companies and associations, the Commission found that U.S. companies most affected by the Glenn Amendment sanctions were those involved in the sale of wheat and certain other agricultural products; industrial machinery; transportation, construction, and mining equipment; electronics products; and infrastructure development services.

• The loss of trade and project finance support from the U.S. Export-Import Bank and the Overseas Private Insurance Corporation, as required by the Glenn Amendment sanctions, particularly hindered the ability of some U.S. companies to operate in India. The Commission received several reports that the Glenn Amendment sanctions have contributed to the perception of U.S. companies as unreliable international suppliers.

• The Glenn Amendment sanctions appear to have had a relatively minimal overall impact on India, and a minimal but somewhat more pronounced adverse impact on Pakistan. Humanitarian activities in India and Pakistan appear minimally affected because the Glenn Amendment sanctions do not apply to the provision of food, humanitarian aid, and medicines and medical equipment. However, for both countries it is difficult to isolate the effects of the U.S. sanctions from other concurrent economic events, such as each country's domestic economic policies or economic sanctions imposed by other countries.

• The Glenn Amendment sanctions prohibit the provision of export credits and export guarantees by the U.S. Department of Agriculture (USDA), although this prohibition has been waived through September 30, 1999. Recent trade data indicate that reimposition of this component of the sanctions most likely would adversely affect U.S. wheat exports to Pakistan, which is an important customer for white wheat grown in the U.S. Pacific Northwest states and which relies on USDA export credits for such purchases.

• Quantitative estimates from a global general equilibrium trade model indicate that economic effects of the Glenn Amendment sanctions on the United States, India, and Pakistan are likely to be small. For the United States, the sanctions impose a total cost of $161 million. For India and Pakistan, the sanctions impose total costs of $320 million and $57 million, respectively. The major alternative suppliers benefitting from reduced U.S. exports to India and Pakistan under the Glenn Amendment sanctions are Japan; Europe; the rest of Asia; and Australia, New Zealand, and other South Pacific trading partners.

The foregoing is from the ITC's report Overview and Analysis of the Economic Impact of U.S. Economic Sanctions with Respect to India and Pakistan (Investigation No. 332-406, USITC Publication 3236, September 1999). The report will be available on the ITC's Internet server at www.usitc.gov. A printed copy may be requested by calling 202-205-1809 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E Street, SW, Washington, DC. 20436. Requests may also be faxed to 202-205-2104.