International Trade

Pursuant to a congressional request, GAO evaluated the extent and effectiveness of restrictions on trade with Libya, and options for strengthening those restrictions.

GAO found that: (1) current sanctions prohibit all direct trade with Libya except for donated articles intended to relieve human suffering; (2) the sanctions also restrict the extent to which foreign manufacturers may incorporate U.S. goods and technology into materials intended for export to Libya; and (3) the sanctions allow the export of U.S. goods to Libya that first go to a third country for purposes other than predesignated export to Libya. GAO also found that: (1) although the sanctions have eliminated direct trade with Libya, the impact on the Libyan oil industry has been minimal because Libya now produces and markets oil formerly produced by U.S. companies; (2) extensive foreign availability of oil production equipment has also limited the sanctions' effect; (3) if the U.S. government cannot reach agreement with Libya on the resumption of U.S. oil companies' Libyan operations, the oil companies could lose their equity interest in large quantities of oil reserves; (4) foreign subsidiaries of U.S. firms are allowed to trade with Libya, but the level of such trade has declined significantly since January 1986; and (5) given limited foreign support for the sanctions, expanded sanctions could impose additional costs on U.S. firms without adversely affecting Libya.