25 August 1997
The Canberra Times (Australia)
Nigel Holloway

US Cities Act to Curb Some Asian Trade

WASHINGTON - Peter Vallone, the Speaker of the New York City Council, is on a crusade. He has tabled legislation intended to curb what he sees as the persecution of Christians in 15 countries, including China, Indonesia, Vietnam, Laos, Pakistan and North Korea.

If passed, his Bill will force the city to withdraw deposits from banks doing business in these countries -- and stop buying goods and services from companies operating in them.

"This city has enormous economic might overseas, and we should use it when necessary to end human injustice," Vallone said when introducing the Bill in May. The city's annual spending totals $38 billion, the fourth-largest public-sector budget in the United States after those of the Federal Government and the states of California and New York.

Vallone's Bill is a sign of the profound change taking place in the way Americans approach human rights. Whereas Washington used to take the initiative in imposing sanctions on pariah states, now local governments are taking the lead. And corporate executives, both foreign and American, are worried that the trend will complicate their lives enormously.

Frank Kittredge, president of the National Foreign Trade Council, a lobby organization in Washington, says, "We deplore the proliferation of state and local sanctions and are extremely concerned about the impact not only on trade, but on broader foreign policy." Burma's military junta is the chief target at the moment. The Federal Government passed its own sanctions legislation against Burma last September. By now 12 cities, one county and one state have passed selective-purchasing laws that bar companies operating in Burma from bidding for such things as public-works contracts. Four more states and two cities have sanctions laws pending. Indonesia is starting to feel the heat, too, and California is considering a selective-purchasing law aimed at China.

The target countries are not the only ones unsettled. The European Union has challenged the US at the World Trade Organization in Geneva, saying a Massachusetts law barring government purchases from firms working in Burma violates WTO rules on government procurement. This type of boycott makes no distinction between an American firm and a foreign one any company that does business in Burma becomes a target.

The Investor Responsibility Research Center in Washington, a private corporate-information supplier, has compiled a list of 333 non-Burmese companies doing business in Burma. The list would be even longer for a larger economy such as Indonesia.

Of course, there's a danger that local governments, however well intentioned, will paint themselves into a corner. If New York passes its law on religious persecution, few large companies could do business with the city.

This prospect has already arisen in Berkeley, California, long a bastion of political correctness. At the end of July, the city passed a selective-purchasing law against companies doing business in oil-rich Nigeria. Since Berkeley already had a law on Burma, it faced the possibility that it would not be able to buy petrol from any of the major oil companies.

The city subsequently found one firm, British Petroleum, which did not appear to be doing business in either country. In the end, finding companies to do business with may not be impossible: most of the selective-purchasing laws allow exemptions when it would be too expensive or difficult to find an alternative. For instance, Berkeley made an exception for Motorola, which operates in Burma, because it depends on the company for communications. FOR MOST large companies, the proliferation of sanctions laws has hurt their public image more than their bottom line. Few American municipalities have vast sums to spend; Berkeley's annual budget is only $204 million. But even for those with big purses sanctions are a double-edged sword: local governments that hold companies hostage to international human-rights concerns can hurt their standing with the business community.

There are two other reasons for thinking America's sanctions movement won't get completely out of control.

One is that the larger the sanctions target, the fiercer the corporate opposition. That's why some observers believe Massachusetts' selective-purchasing legislation against Indonesia won't pass. Too many big firms - Raytheon and Gillette, to name two - stand to lose.

The second reason is constitutional. Although localities have a sovereign right to spend their money as they see fit, the US Constitution gives Washington control of foreign policy.

With the growing push to put more sanctions legislation on the books, the US Supreme Court may ultimately have to decide where local sovereignty ends and foreign policy begins.

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