State and Local Trade Sanctions: A THREAT TO U.S. INTERESTS.

• Author: Lash, William H. III

"An obvious problem with states and cities adopting international trade sanctions is the lack of experience most local legislators have in foreign affairs...."

Understanding international trade policy and foreign policy used to be simple. The Trade Representative and Secretary of Commerce were acknowledged as the representatives of the U.S. in trade matters, while the Secretary of State was the voice of foreign policy. That no longer is the case. States, and even cities, are entering the international arena, using the trade hammer to promote their own foreign policy.

For example, Massachusetts' efforts to link human rights and trade policy threaten to embroil the nation in a dispute before the World Trade Organization. Legislation pending in Massachusetts would impose a host of trade sanctions ranging from barring investment of state pension funds to imposing barriers on government procurement on corporations doing business in Indonesia.

For Massachusetts, this is purely legislative business as usual. Previously, the state imposed trade sanctions in government procurement on firms engaged in trade with Myanmar (formerly Burma).

Studies on the impact of sanctions imposed for political ends demonstrate that, historically, they are ineffective in remedying the offensive situation. Moreover, the Clinton Administration has moved away from linking human rights and trade policy by granting Most Favored Nation status to China.

Similarly, targeting Indonesia is contrary to the stated trade policy of the U.S. Although the Department of State has identified Indonesia as a perennial violator, the Department of Commerce repeatedly has targeted that country as a big emerging market for special trade attention. Additionally, the U.S. has been a leading advocate for Indonesian financial relief from the International Monetary Fund. The state's move towards sanctions sends a confusing message to America's partners and would thwart attempts at international monetary relief in Indonesia.

Massachusetts has published an extensive list of companies ineligible for state contracts due to trade in Myanmar. This list is a virtual "who's who" of multinational companies, including Caterpillar, Federal Express, Mobil, Texaco, Sony, Toshiba, Guinness, Unilever, and Procter and Gamble.

This dangerous trend of local governments developing trade policies has many imitators. San Francisco has a prohibition against awarding government contracts to firms doing business in Myanmar. A $40,000,000 telecommunications contract was awarded to Motorola over rival Ericsson, which had a $3,000,000 contract to provide services in Myanmar it would not breach to appeal to San Francisco. Other cities--such as New York: Berkeley, Oakland, and Santa Monica, Calif.; Ann Arbor, Mich.; and Madison, Wis.--have adopted similar ordinances.

Many of the state and city restrictions and trade sanctions can be traced to earlier antiapartheid legislation. In fact, some new state laws simply were old anti-apartheid statutes with the words South Africa deleted and Myanmar or Indonesia inserted in their place. There is a world of difference between the U.S.'s relationships with Indonesia and South Africa. The American public largely was in agreement regarding the repressive policies of apartheid. Many of the U.S.'s trading partners shared this sentiment and joined in support of these sanctions. In the current round of state-imposed sanctions, there is a lack of a national consensus as well as any international support.

State sanctions against Myanmar are less likely to be effective. It is not a major trading partner, with an estimated seven percent of exports earmarked for America. U.S. presence in Myanmar easily can be replaced by investment or trade from the European Union (EU) or the Pacific Rim.

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