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).
Trading With Enemy Act 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.
Major Amendment
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.
Effictiveness
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 1979–1981 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.