Time for a new approach? Federalism and foreign affairs after Crosby v. National Foreign Trade Council.

• Author: Pascoe, James J.
• Position: Massachusetts law restricting purchases from firms doing business in Burma

ABSTRACT

On June 19, 2000, in Crosby v. National Foreign Trade Council--a much-anticipated decision involving the intersection of federalism and foreign relations--the U.S. Supreme Court struck down a Massachusetts law restricting state purchases from companies doing business in Burma. Crosby represents the Court's first consideration not only of local selective purchasing laws but, more importantly, its first consideration of the sort of subnational sanctions first developed by state and local governments during the anti-apartheid campaign of the 1980's. Thus, Crosby may pose an obstacle to human rights activism by local governments using economic sanctions to punish perceived human-rights offenders.

Because the Court's decision in Crosby was based on narrow, non-constitutional grounds, however, it probably will not stand as the final word on foreign policymaking by state and local actors. Indeed, the question of the extent to which the Constitution constrains local foreign policymaking remains unresolved, and the debate over this issue continues unabated. This debate has resulted in the formation of two camps: the majority, or conventional, view and the minority, or revisionist, view.

Adopting the arguments of the revisionist camp, this Note contributes to the debate by proposing a new approach to balance re-emergent federalism concerns against the need for a unified and consistent national foreign policy. As long as the Supreme Court continues to endorse a legitimate role for the states in domestic affairs, pressure will mount from commentators, local governments, and activists for the Court likewise to return to an understanding of foreign affairs that is closer to that which prevailed during the founding and first century of U.S. history. Furthermore, globalization and the growing ability of nations to target their retaliation against subnational actors have greatly weakened the functional argument for abrogating states' rights in the field of foreign affairs.

Given these trends, this Note argues that despite the setback of Crosby, it seems only a matter of time until the tide turns, and courts and commentators endorse a framework of foreign affairs law analysis more closely resembling that which prevailed in the United States for much of its history.

1. INTRODUCTION

   On June 19, 2000, in a much-anticipated decision involving the intersection of federalism and foreign relations, the U.S. Supreme Court struck down a Massachusetts law restricting state purchases from companies doing business in Burma. (1) Crosby v. National Foreign Trade Council represents the Supreme Court's first consideration of the sort of subnational sanctions developed by state and local governments during the anti-apartheid campaign of the 1980s. (2) Because it invalidated a state law imposing sanctions on a foreign nation, "the Court's ruling represents a significant setback for human rights activism on that model." (3)

   Yet, because the Court's decision in Crosby was based on narrow, non-constitutional grounds, commentators have not viewed it as the final word on foreign policymaking by state and local actors. (4) Indeed, as one frequent commentator on foreign affairs law has observed, "the broader question of constitutional constraints on state and local foreign policymaking comes away from Crosby largely untouched." (5) It is no surprise, then, that commentators believe that the debate over how federalism principles should apply in the realm of foreign relations will continue unabated. (6) This debate has resulted in the formation of two camps: the majority, or conventional, view and the minority, or revisionist, view.

   Adopting the arguments of the revisionist camp, this Note attempts to contribute to this debate by proposing a new approach to balancing federalism concerns against the need for a unified and consistent national foreign policy.

2. BACKGROUND

   1. The Massachusetts Law

      Massachusetts enacted the law invalidated by Crosby in 1996. (7) The law prohibited state agencies, in most instances, from buying goods or services from anyone doing business with the Union of Myanmar (Burma). (8) The law included domestic and foreign corporations and broadly defined "doing business." (9) In this respect, the law was similar to divestment laws passed by state and local governments in the United States during the 1980s as a way to oppose South Africa's apartheid regime. (10)

      The procurement sanctions statute authorized the Massachusetts Operational Services Division (OSD) to establish a "restricted purchase list" of companies "doing business with Burma" as defined in the statute. (11) Once OSD made a preliminary finding that a company was doing business with Burma, the company was placed on the restricted list, unless it was able to refute the finding. (12) Under the Massachusetts law, the Commonwealth could buy services or goods from a "restricted purchase list" company only when: (1) the procurement was essential and the restriction would eliminate the only bid or offer; (13) (2) the Commonwealth was purchasing certain medical supplies; (14) or (3) there was no "comparable low bid or offer" by an unrestricted bidder. (15) In bidding situations, the statute precluded a restricted list company from winning a bid with the Commonwealth unless its offer was at least ten percent lower than the lowest bid by an unrestricted company. (16)

      Massachusetts passed the bill--known locally as the "Burma law"--after Aung San Suu Kyi, the Nobel-prize-winning leader of Burma's democratic opposition, implored foreign companies not to do business with Burma's ruling junta. (17) The Massachusetts legislature "obliged her by dusting off an old anti-apartheid sanctions bill, changing the words `South Africa' to `Burma' ... and passing it." (18)

   2. Similar State and Local Laws

      According to one study, the federal, state, and local governments of the United States have imposed 142 unilateral sanctions on forty-one countries since 1993. (19) According to another study commissioned by the National Association of Manufacturers (NAM), sanctioned countries represent 2.3 billion potential consumers of U.S. goods and services and $790 billion worth of export markets, or ten percent of the world's total. (20)

      Human rights activists and government officials modeled their campaign to mobilize state and local governments in the campaign against Burma on laws aimed at South Africa's apartheid regime; some 130 cities and twenty-eight states in the mid-1980s passed such legislation, much of the legislation similar to the Massachusetts enactment. (21) Recently, more than a dozen cities and counties, including New York City and Berkeley, California, have followed Massachusetts and adopted sanctions to prohibit government agencies from buying goods and services from companies doing business in Burma, China, and Nigeria. (22) California, Connecticut, New Jersey, New York, North Carolina, Rhode Island, and Texas all considered similar sanctions at the state level before ultimately rejecting them. (23)

      Among the state and local governments that joined Massachusetts' campaign against Burma by passing or considering "selective purchasing ordinances" were the cities of Berkeley, New York, Oakland, and San Francisco, as well as the governments of smaller towns, such as Madison, Wisconsin. (24) To date, more than a dozen cities have passed anti-Burma legislation. (25)

      One consistent feature of these sanctions is that "they go beyond barring the political entity itself from dealing with the targeted country to imposing the dreaded secondary boycott on companies that do business in the targeted country." (26) All of these local initiatives "employ immediate economic disengagement as a punitive measure against the oppressive regime in Rangoon." (27) As discussed below, this feature raises questions concerning the states' invocation of the market participant exception to the dormant commerce clause. The National Foreign Trade Council's (NFTC) challenge to the Massachusetts law in Crosby v. National Foreign Trade Council is particularly important because it represents the only legal challenge to selective purchasing laws. (28)

   3. Domestic Opposition to the Laws

      While opponents of economic sanctions are critical of the efficacy of sanctions imposed by the federal government, they are especially troubled by the questionable constitutionality of state and local trade curbs aimed at foreign countries and companies, such as Massachusetts' Burma law. (29) To such critics, local action in matters that touch on foreign affairs represents the replacement of the old, unified conduct of U.S. foreign policy with an interest group-based foreign policy that permits small but vocal activist groups to impose their political agendas on U.S. foreign policy. (30) Or, as one journalist has stated, "trying to monitor the foreign policy of 50 states and 7,284 municipalities is, to put it mildly, a nightmare for companies and national governments alike." (31)

      U.S. businesses opposed the passage of state and local sanctions against Burma and other nations on economic grounds. (32) Apple Computer, for example, eliminated its operations in Burma in October 1996, citing the threat to its business posed by Massachusetts' adoption of the sanctions law. (33) Eastman Kodak and Hewlett-Packard likewise cited the law as the reason for their decisions to divest Burmese holdings. (34)

   4. International Protests Against the State and Local Laws

      Massachusetts' "blacklist" also included major Japanese and European firms, including Guiness, Nissan, Siemans, Sony, and Toyota. (35) After its passage, the law provoked protests from Japan and the European Union, both of which challenged the measure in the World Trade Organization as a violation of U.S. obligations under the WTO Agreement on Government Procurement. (36) Among other complaints, these governments raised the issue that by passing its selective procurement law...