Off the precipice: Massachusetts expands its foreign policy expedition from Burma to Indonesia.

• Author: Schmahmann, David R.

TABLE OF CONTENTS

1. INTRODUCTION II. THE VASTNESS OF U.S. INTERESTS IN INDONESIA III. THE UNCONSTITUTIONALITY OF THE MASSACHUSETTS

   ANTI-INDONESIA MEASURES

   1. Supremacy Clause

   2. Foreign Commerce Clause

   3. Federal Law Preemption of the Massachusetts

   Anti-Indonesia Bill

   1. U.S. Aid to Indonesia under the

      Generalized system of Preferences

   2. The Export-Import Flank of the

      United States

   3. The International Natural Rubber

      Agreements Contemplation of Extensive

      Trade with Indonesia

   4. Congress's Rejection of the

      Massachusetts Approach IV. CONCLUSION

1. INTRODUCTION

   In 1996, the Massachusetts legislature made Massachusetts the first state in the United States to impose trade sanctions on the government of Burma.(1) These sanctions penalize companies that do business with Burma by making it nearly impossible for them to do business with the Commonwealth of Massachusetts.(2)

   The wisdom of a Massachusetts foreign policy with respect to Burma has been questioned.(3) Moreover, even a cursory reading of U.S. Supreme Court cases and the U.S. Constitution makes it absolutely clear that the Massachusetts foreign policy initiative with respect to Burma is unconstitutional. Two of the authors have analyzed these constitutional issues and recently published their analysis in the Vanderbilt Journal of Transnational Law.(4)

   The impact of Massachusetts's anti-Burma legislation is circumscribed by the limited foreign multinational corporate presence in Burma.(5) Even so, the Massachusetts initiative provoked a furor in the European Union and Japan because of its likely contravention of the World Trade Organization Convention on government procurement.(6)

   In taking on Indonesia as its next foreign policy initiative, the Massachusetts legislature risks taking the people of the state into even riskier territory with repercussions that may go well beyond the contemplation of state lawmakers.

2. THE VASTNESS OF U.S. INTERESTS IN INDONESIA

   Indonesia is the fourth most populous country in the world and is the world's largest Muslim country.(7) The United States has a broad range of interests in this huge country and its economy. The Indonesian economy has a growth rate of seven to eight percent per year, and is projected to be the fifth largest economy in the world by 2020.(8) While the Investor Responsibility Research Center reports that there are only eighteen publicly traded U.S. parent companies with direct investment or employees in Burma,(9) there are 240 such companies with ties to Indonesia.(10) Annual bilateral trade between the United States and Indonesia is about $12.3 billion.(11) The United States is one of Indonesia's largest foreign investors, with direct investments totalling more than $12 billion between 1967 and 1996.(12)

   U.S. exports to Indonesia have quadrupled since 1987. In 1995, U.S. exports to Indonesia grew by nearly twenty percent to $3.4 billion, and are estimated to have reached $4.0 billion, or 9.7% of Indonesia's total imports, in 1996,(13) and support more than ninety-five thousand jobs in the United States.(14) In 1996, U.S. imports from Indonesia reached $8.2 billion.(15) Indonesia received $96 million in U.S. economic aid in 1995, and $71 million in U.S. economic aid in 1996.(16) Indonesia is also a key member of the Association of Southeast Asian Nations (hereinafter ASEAN), which is America's third-largest source of imports and its fourth-largest export market.(17)

   Finally, Indonesia is significant to U.S. interests for its rubber production. The United States is by far and away the world's largest importer of natural rubber and seventy-five percent of the world's natural rubber supply is produced in just three countries: Thailand, Indonesia, and Malaysia.(18)

3. THE UNCONSTITUTIONALITY OF THE MASSACHUSETTS ANTI-INDONESIA MEASURES

   1. Supremacy Clause

      The anti-Indonesia law proposed by Massachusetts is nearly identical to its anti-Burma law, and the analysis that leads to the conclusion that the anti-Burma law violates the Supremacy Clause of the Constitution applies with equal force.(19)

      Briefly stated, the argument is this: the Supremacy Clause(20) gives the federal government an exclusive power to conduct U.S. foreign policy. Local enactments designed to chart a distinctive local course in foreign affairs risk running afoul of this constitutional mandate. The Supreme Court has been Unambiguous in defining the boundary of permissible local actions:

      The Federal Government, representing as it does the collective

      interests of the forty-eight states, is entrusted with full and

      exclusive responsibility for the conduct of affairs with foreign

      sovereignties. "For local interests the several states of the Union

      exist, but for national purposes, embracing our relations with

      foreign nations, we are but one people, one nation, one power."

      Our system of government is such that the interest of the cities,

      counties and states, no less than the interest of the people of the

      whole nation, imperatively requires that federal power in the field

      affecting foreign relations be left entirely free from local

      interference.(21)

      In another landmark decision, Zschernig V. Miller,(22) the Supreme Court defined the scope of "affecting foreign relations" broadly.(23) In that case, the Court held that an Oregon statute, even in the undeniably local matter of inheritance, was unconstitutional when it prohibited residents of East Germany from inheriting Under Oregon wills.(24) The Court struck down the statute because it "affects international relations in a persistent and subtle way," and because local statutes "must give way if they impair the effective exercise of the Nation's foreign policy."(25) The Court made its decision in spite of an amicus brief filed by the Justice Department indicating that the Department had no objection to Oregon's statutory stand against Communism.(26) Justice Stewart responded to the brief by saying that the allocation of power between the states and the federal government was so fundamental to the Constitution that it could not "vary from day to day with the shifting winds at the State Department."(27) Thus, even local Statutes that Support U.S. foreign policy objectives are out of their depth if they affect international relations in a persistent and subtle way.

      The logic of this is clear: "If a state action could defeat or alter our foreign policy, serious consequences might ensue. The nation as a whole would be held to answer if a State...