Your firm, Day-O Shoes, Inc., manufactures deck shoes in the Caribbean island country of Haiti. Haiti is the poorest nation in the Western Hemisphere. Your plant there employs more than 400 workers and has always considered itself a good citizen of both Haiti and the United States. Most of the shoes are imported for sale into the United States, where you maintain a 30 percent share of a competitive market. In 1991, the freely elected President of Haiti is removed from office by military offi- cers who install a dictator of their choice. In response, the President of the United States exercises authority under the International Economic Emergency Powers Act and issues an executive order imposing a complete embargo on trade with Haiti. The Treasury Department’s Office of Foreign Assets Control is charged with enforcing the embargo. Facing the impending embargo, your firm shut down its production operations there one week prior to the date set for the embargo. Feeling some obligation to the unemployed workers, your company’s chief executive ships over ten tons of food and clothing to the people who have lost their jobs. Believing that the United States is serious about the embargo and that it will remain in effect until the rightful president is returned to Haiti, your firm ships its U.S.-made raw materials, such as rubber soles and leather uppers, from Haiti to your other factory in Costa Rica. However, you soon discover, much to your surprise, that your competitors are continuing to produce and stockpile their shoes in Haiti in the belief that the embargo will soon be lifted. Three months after you cease operations, the U.S. government decides to lift the embargo because it has resulted in the loss of 50,000 Haitian jobs. With no inventory of finished shoes and your raw materials en route to Costa Rica, your firm is unable to fill existing orders. Your competitors are ready to ship their shoes from Haiti immediately.
1. Evaluate the course of action taken by Day-O Shoes. How did Day-O Shoes balance its responsibility under U.S. law to comply with the embargo with its need to remain competitive in the industry? What could it have done differently? Evaluate the ethics of Day-O’s actions.
2. Was Day-O Shoes required to stop producing in Haiti? Were its competitors violating U.S. law by continuing to produce and stockpile their inventories? Were they violating any moral code or even the “spirit of the law” by continuing to produce there? Evaluate the risks taken by the competitors in continuing their operations in Haiti during the embargo.
3. The embargo was intended to put economic pressure on Haiti to encourage political reform. Is the U.S. government saying that the embargo worked too well? Do you think that the embargo was lifted because of its impact on the Haitian workers or on U.S. firms doing business there? Critics argue that the U.S. government’s attempts to use trade policy as a means of conducting foreign policy lead to confusion and uncertainty and are counterproductive. Evaluate this argument.