July 1997
The Export Practitioner
Steven Spear

50 Different Departments of State

President Teddy Roosevelt, in 1902, articulated a foreign policy principle that has served subsequent administrations well: "Speak softly and carry a big stick." These days, though, Roosevelt might find it difficult to coin such a pithy phrase for clubbing pesky foreign adversaries into submission. In a trend that threatens to undermine the White House's authority to negotiate trade agreements and alienate US allies at the same time, US states are approving their own foreign policy initiatives. Thus, a variation on Roosevelt's time-tested utterance has emerged: "Speak loudly and carry 50 small truncheons."

The most activist state in the local foreign policy movement is Massachusetts, which in June 1996 passed a bill prohibiting transactions by state agencies with companies that do business in Burma. Although no company has been excluded from bidding, the state has "blacklisted" over 150 foreign companies, including Honda, Nestle and Siemens as well as over 40 US companies, including Mobil and PepsiCo.

Massachusetts' bold foray into international diplomacy prompted a visit from State Department and the US Trade Representative officials in April to get the law repealed or at least watered down. The delegation also made stops in other states in a effort to slow the trend.

Flattered by the attention from the feds, Massachusetts recently introduced a bill that will impose sanctions on Indonesia, another Asian tiger with questionable human rights credentials. Again, the bill is bringing Washington dignitaries to Boston. US Ambassador to Indonesia, J. Stapleton Roy, traveled to Massachusetts to meet with local lawmakers in an effort to stop the bill.

The traditional method for states to express their disapproval of foreign countries was to pass resolutions. But state legislatures have apparently tired of passing non-binding morality ploys and are opting instead for action that could actually affect US companies. "That's why we're passing selective purchase bills, because that gets (State's) attention," noted Rep. Byron Rushing, chief sponsor of the bill.

Massachusetts' actions, and other state attempts at legislating US foreign policy, have earned the attention of the target countries as well. For instance, Japan and the European Commission argued that the Massachusetts Burma law violated US obligations under international trade treaties and threatened to take the matter to the World Trade Organization (WTO). Yet the European Parliament - the European Commission's legislative body - did an about face when it voted unanimously to recommend that the commission not file a formal complaint with the WTO over the law.

The sponsors of the Massachusetts Indonesia bill have agreed to soften the bill by excluding certain contracts in an attempt to appease the administration. The modification, according to the sponsors, will allow the bill to conform to the WTO's government procurement laws.

As for federal officials and the Administration, their attempts to head-off such actions has only met with indifference. According to a June 5 letter from US Trade Representative Charlene Barshefsky to Sir Leon Brittan, vice president the EC, US officials have been meeting quietly with state officials in an effort to "assist them in crafting legislation that takes into account US international obligations."

But many believe that legal action by the Clinton administration is the only means to overturn the state laws. State attempts at crafting foreign policy actions raise a number of constitutional issues, according to legal scholars. At issue is the Constitution's provisions expressly restricting states' powers to regulate foreign commerce and prohibiting the usurpation of federal authority by the states.

For the administration, though, suits against the states over constitutional matters are a rather conspicuous way to handle this particular flap. At issue, after all, is the country's trade policies toward countries with nasty human rights records - a debate the Clinton White House is not exactly eager to provoke.

"Washington is scared to death because it does not want to be accused of being soft on human rights," noted one Massachusetts official. In the meantime, the number of states and localities that are passing measures is continuing to grow. New York City and San Francisco, for example, recently passed selective purchasing regulations against Switzerland and Burma, respectively. Other states, including California, North Caroline, New Jersey, Texas, Connecticut and Rhode Island have passed or are considering passing similar measures.

The trend could create a crazy patchwork quilt of regulations that amounts to serious headaches for American businesses. Howard Lewis, vice president for trade at the National Association of Manufactures notes that "we were very concerned about the proliferation of sanctions at the federal level [but] the fact that we are now beginning to see an explosion of sanctions at the state and local levels clearly underlines that this thing has gone too far."

And the trend threatens to weaken the authority of the executive branch as it negotiates trade agreements with foreign countries, according to Professor Robert Stumberg, director of Georgetown University's Center for Policy Alternatives, "The US government would no longer simply be a representative of the states, but a referee between the states on one side and multinational corporations and countries on the other."

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