tant. In elaborating on the duty not to intervene in matters within the domestic jurisdiction of a state, it says:

No state may use or encourage the use of economic, political or any other type of measures to coerce another state in order to obtain from it the subordination of the exercise of its sovereign rights and to secure from it advantages of any kind.

This latter provision is far from clear, but it seems to mean that two types of economic coercion are prohibited: that which attempts to coerce a state not to exercise its legal rights and that which attempts to extort advantages. The origin of this provision is to be found in article 15 of the Charter of the Organization of American States [TIAS 2361; 2 UST 2394] [I]t seems fair to say that the broad acceptability of this formulation results from its ambiguity. Under it . . . the United States can defend suspension of economic assistance pursuant to the ... Hickenlooper amendment [22 U.S.C. 2370 (e) (2)] on the grounds that the other state has no legal right to expropriate property without paying just compensation-and, on the contrary, that the other state has a duty to pay such compensation. In seeking to square the Arab boycott with the Declaration, the boycott's defenders label it a legitimate measure of self-defense, rather than an effort to secure advantages from Israel.

In view of the extensive use of economic coercion by one state against another throughout the twentieth century, and in view of these rather modest legal efforts to restrict it, existing international law can probably best be described as narrowing only slightly the permissive legal regime of the past. The direction of development of the law is toward greater restriction on the use of economic coercion, but it has been a slow movement with, thus far, limited effects.

Turning to the efforts under U.S. law and regulations to combat the adverse effects on Americans of the Arab boycott of Israel, Mr. Small noted that the mere fact that certain measures of economic coercion are not illegal under international law does not mean that they may not lawfully be resisted. He described U.S. efforts, as follows:

[O]ur efforts to prevent the intrusion of the Arab boycott or any other boycott into our society and into our economy are well within our rights under international law

For many years the Arab boycott was not a subject of great political excitement in the United States, but the oil embargo and the subsequent petro-dollar explosion changed all that...

[I]n early 1975... an unsuccessful but widely publicized effort by a Kuwaiti institution to have Lazard Freres excluded from an underwriting syndicate . . . not only touched off political concerns, but added a new fear that the growing economic strength of the Arab oil-exporting countries might be used to impose religious or ethnic discrimination on its trading partners, and that

the boycott might be aimed at excluding Jews from the economic opportunities generated by the Arab petro-dollars. In the wake of this incident, over fourteen separate legislative proposals were made, numerous congressional hearings took place, lawsuits were filed by interest groups, pressure developed for administration action, and some State legislatures passed laws. Together with already existing laws, practices and policies, these constitute an environment legally hostile to both discrimination and political boycott.

.. While discrimination is closely associated with the boycott in the minds of many who have urged the need for stronger legislative action, in fact discrimination is quantitatively only a minute aspect of boycott practice today, and not part of the boycott's official policy. The Federal Government will not acquiesce in any discrimination in employment. This principle is implemented in the executive branch through E.O. 11478 and the enforcement of title VII of the Civil Rights Act of 1964. President Ford announced various measures in November 1975 to tighten the safeguards against discrimination in the Federal Government, when he instructed Federal agencies not to take into account any exclusionary policies of a host country based on religion or national origin, in making selections for overseas assignments. He also instructed that visa rejections based on the policies of a host country, whether encountered by Federal contractors and subcontractors, or by Federal agencies themselves, were to be brought to the attention of the State Department-which would attempt to gain entry for those excluded individuals. The President also directed that the Export Administration Act regulations be amended to prohibit compliance with any boycott request which would discriminate against citizens or firms on the basis of race, color, religion, sex, or national origin. Further, the President proposed an economic coercion act to prohibit the use of economic means to coerce any person or entity to discriminate, and he urged governmental regulatory agencies and nongovernmental industry groups to take action to exclude discrimination from their areas of activity. [See the 1975 Digest, pp. 199-200.] Most recently, with the adoption of the Ribicoff amendment to the Tax Reform Act [post, pp. 581-583], boycott-related discrimination on the basis of nationality or religion will result in denial of certain tax benefits under the Internal Revenue Code. There are also numerous State laws which impose general prohibitions on discrimination.

Almost all Arab boycott issues involve, not ethnic or religious discrimination, but a politically motivated economic boycott of Israel. In these cases, the Federal Government has taken various measures to assure that it does not become involved with the boycott. For example, AID [the Agency for International Development] took steps to ensure that its projects are governed by competitive bidding; . . . the Export-Import Bank declines to finance transactions governed by contracts with boycott clauses and OPIC [the Overseas Private Investment Corporation] refuses to ensure any project governed by a contract with a boycott clause; the Commerce and State Departments stopped disseminating information about export opportunities drawn from documents containing boycott clauses; and . . . the Department of State

refuses to authenticate any documents which contain boycott statements.

While these Federal actions affected U.S. businessmen engaged in foreign commerce in a general way, the measure with the most direct impact on the business community was the reporting of boycott requests to the Commerce Department, required under the Export Administration Act [83 Stat. 841;50 U.S.C. App. 2402] and its implementing regulations. These reporting requirements have been preserved, along with the remainder of the export regulation program, despite the expiration of the Export Adminstration Act at the end of September of this year, by an Executive order issued under the authority of the Trading With the Enemy Act [ante, pp. 470-471]. . . . [N]ewly filed reports are open to public

scrutinyt is the Government's view, as evidenced by the civil

It

antitrust suit filed last January against the Bechtel Corporation, that refusing to deal with U.S. subcontractors blacklisted by Arab League countries, or requiring U.S. subcontractors to refuse to deal with others, in implementation of a boycott agreement, or understanding, . . . constitute[s] a violation of section 1 of the Sherman Antitrust Act.

It is clear. . . that the domestic legal environment relating to foreign boycotts of friendly nations is a hostile one . . . . It is reflected by governmental refusal to participate in boycott-related transactions even peripherally, by antitrust prosecution of secondary boycott agreements affecting U.S. commerce, by attaching potentially costly tax consequences to conclusion of secondary and certain other kinds of boycott agreements, and by allowing public scrutiny of the performance of American companies with regard to boycott-related requests which they receive, whether for primary or secondary boycott cooperation. This public scrutiny should permit us to acquire a better understanding of what is occurring and thereby enable us to decide what, if any, further measures may be necessary

*

On the question of a possible need for development of international law to raise an external barrier to the boycott, Mr. Small concluded:

[I]nternational action would, theoretically, be less costly than unilateral action as a means of further reducing or eliminating involvement of our system in a boycott we oppose. It may also be desirable to develop international legal barriers as a means of protection for the United States itself as a potential target of economic coercion against which unilateral measures may be unavailable. In deciding this issue. . . one would have to examine carefully whether, on balance, we would wish to accept the implications of such new law for our own use of economic leverage. Perhaps more importantly, we would also have to consider the formidable practical and political problems attendant on any

effort to place responsible and internationally agreed limits on boycotts and other forms of economic coercion. In any event, seeking international legal prohibition of the use of primary or secondary boycotts for political or security reasons would be a radical shift in this country's long-held belief that international law should move very deliberately in trying to prohibit measures of economic coercion.

We are continuing to oppose boycotts of friendly nations actively, as a matter of firm national policy. Even prior to the recent changes in U.S. law and regulation, many firms sought to and succeeded in eliminating boycott conditions from their contracts, letters of credit, shipping documents and other aspects of their transactions. We have encouraged this through diplomatic representations and regular contacts with the U.S. business community. Such a pragmatic easing of boycott intrusion into U.S. commerce can serve to advance our mutually beneficial relations with the Arab countries and Israel and in turn strengthen our ability to promote a fair and lasting settlement of the Middle East conflict... that, in turn, is likely to be the only development which will totally solve the problem of the Arab boycott of Israel. Dept. of State File L/NEA.

Anti-boycott Measures

The anti-boycott provisions (known as the Ribicoff Amendment) of the Tax Reform Act of 1976 (P.L. 94-455; 90 Stat. 1520), approved by President Ford on October 4, 1976, deny certain tax benefits to taxpayers which "participate in or cooperate with" an international boycott in certain ways. Foreign source income attributable to boycott-related activity loses the tax benefits of the foreign tax credit, Domestic International Sales Corporations (DISC), and the deferral of U.S. tax on foreign source income. The Act requires the Secretary of the Treasury to publish within 30 days after signature of the Act a list of countries which "require or may require" participation in or cooperation with an international boycott.

A taxpayer is required to file with the Secretary of the Treasury reports with respect to, among other things:

(a) its operations in the listed countries and any other in which the taxpayer knows or has reason to know that "participation in or cooperation with" an international boycott is required as a condition of doing business within such country or with the government, a country, or a national of such country;

(b) any participation in or cooperation by it with an international boycott;

(c) requests which it has received to participate in or cooperate with a boycott.

Under the Act a taxpayer is deemed to have participated in or cooperated with an international boycott if, as a condition of doing business directly or indirectly within a country or with the govern

ment, a company or a national of a country, it agrees, either explicitly or implicitly, to refrain from:

(a) doing business within a boycotted country or with the government, companies, or nationals of that country;

(b) doing business with a U.S. person engaged in trade within a boycotted country or with the government, companies or nationals of that country;

(c) doing business with any company whose ownership or management is made up, all or in part, of individuals of a particular nationality, race or religion, or to remove or refrain from selecting corporate directors who are individuals of a particular nationality, race or religion;

(d) employing individuals of a particular nationality, race or religion;

(e) shipping or insuring products on a carrier owned, leased, or operated by a person who does not participate in or cooperate with an international boycott.

However, the law permits a taxpayer to:

(a) agree to meet the requirements imposed by a foreign country with respect to an international boycott if a U.S. law, regulation.or Executive order sanctions participation in or cooperation with that international boycott;

(b) agree to comply with a prohibition on the importation into a boycotting country of goods produced in whole or in part in any boycotted country;

(c) agree to comply with a prohibition imposed by a country on the exportation of products obtained in that country to any boycotted country.

See Title X (Changes in the Treatment of Foreign Income). §§ 1061–1067, of P.L. 94-455; H. Rept. 94-658 and 94-1515; S. Rept. 94-938 and 94-938, Pt. 2, and 94-1236.

On November 3, 1976, the Secretary of the Treasury published. effective that day, the initial list of countries which "may require participation in, or cooperation with, an international boycott, as a condition of doing business within such country, or with the government, a company, or a national of such country (within the meaning of section 999(b) of the Internal Revenue Code of 1954).” The list follows:

Fed. Reg., Vol. 41, No. 213, Nov. 3, 1976, p. 48384. On Nov. 10, 1976, the Secretary of the Treasury issued guidelines relating to the provisions of the Tax Reform Act of 1976. The guidelines are grouped according to the following subject areas: boycott reports; definition of "operations"; definition of "reason-to-know" of official require