Ethics and Trade Sanctions

It used to be the case that third-world countries had to go through Western-dominated institutions like the IMF or the World Bank to finance national projects. Moreover, if the United States imposed trade sanctions, people of subjected nations suffered from a lack of access to American goods and services.

As the Washington Post recently noted, however, there is now a long list of developing countries enjoying record periods of growth, with robust economies leaving them without a need for IMF cash.

[A]s developing nations have capitalized on surging commodity prices and shared in the economic coming of age in China and India, more countries are forgoing IMF loans and the strict demands that come with them.

While the IMF or World Bank could in the past lever their financial power to reduce trade barriers, promote more sound economic policy, or even force democratic reforms, today the emergence of the BRIC bloc (Brazil, Russia, India, and China) leaves developing countries with more options. Zimbabwe is no exception.

The United States has a series of sanctions in force that restrict trade with Zimbabwe. Any U.S. person or company that even helps a foreign entity "facilitate" a deal with Zimbabwe can be held liable for fines, imprisonment, or both. (The U.S. Treasury Department has a primer on the sanctions) But as the Cato institute has pointed out, almost identical sanctions in Burma have "proven to be a failure on all fronts." This is due, in part, to the fact that BRIC nations are offering extremely favorable deals in order to secure access to Zimbabwe's natural resources. And Chinese law firms have gotten good enough that Chinese businesses don't need to use outside help to structure the deals.

For people working in China, China's actions and the U.S. trade sanctions pose certain ethical and legal issues. This became readily apparent to me when a friend working for a Beijing business sent me an SMS which read as follows: "Boss wants me to participate in meeting about project in Zimbabwe. Should I participate?" It would be nice to say that there was a one word response I could send back, but there wasn't.

Cross-border China-related deals can sometimes cause personal and professional conflicts. U.S. businesses and American citizens have to parse vaguely-worded regulations like the Zimbabwe trade sanctions for fear of landing themselves in jail back home for a deal they did overseas. American attorneys place also place their licenses at risk if they "commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects[.]" (ABA Model Rules of Professional Conduct 8.4) In terms of Chinese law, foreign attorneys practicing on the Mainland must also balance between practicing Chinese law (illegal), international law (legal), and representing Chinese clients overseas (legal). And, for the less morally ambiguous amongst us, we have to think about the ultimate impact of our actions on the world around us, particularly when repressive regimes like Zimbabwe's are involved. It's a lot to consider.

As I said to my friend, though, generally if you have to ask the question, you should probably avoid the deal. And he did.