1 May 1998
Reuters
Donna Smith

U.S. business group challenges state sanctions law

WASHINGTON (Reuters) - A U.S. business group asked a U.S. district court Thursday to strike down a Massachusetts law that prohibits companies trading in Myanmar from providing goods and services to the state government.

The National Foreign Trade Council (NFTC) said the lawsuit was an important test case to decide whether state and local governments have the constitutional right to in effect have their own foreign policy independent of federal government.

"The overall purpose of the suit is a test case to get a federal judicial decision on the constitutionality of state and local sanctions. To set a precedent that is valid nationwide," Daniel O'Flaherty, vice president of the trade council, said in an interview with Reuters.

"We have asked the court to enjoin Massachusetts from implementing its law while this is underway and we have asked them to expedite it so it doesn't take forever," he added.

The Massachusetts law, introduced out of concern about human rights abuses in Myanmar, rankled U.S. trading partners already upset by federal laws aimed at foreign companies doing business in Cuba and making big investments in Libya and Iran.

The European Union and Japan sought consultations with the United States over the Massachusetts law and the EU has threatened to ask the World Trade Organization (WTO) in Geneva to set up a panel to decide on the EU complaint.

"This case raises many of the same concerns that we have," Ella Krucoff, spokeswoman for the EU in Washington, said of the NFTC suit.

In Massachusetts, Assistant Attorney General Tom Barnico said the state would vigorously defend its law and the state officials involved.

U.S. trade officials have been working with the state to try to change the law in a way that it would not violate world trading rules and still maintain the intent of the law. The chief sponsor of the Massachusetts law recently introduced an amendment in the state legislature aimed at addressing concerns raised by U.S. trading partners.

U.S. Trade Representative spokesman Jay Ziegler would not comment on the business group's challenge to the Massachusetts law, but said U.S. trade officials were committed to defending the Massachusetts law.

The NFTC said 30 of its 580 corporate members were on the list of companies unable to do business with Massachusetts under the sanctions law and therefore had legal standing to challenge it.

The group said the court challenge was based on three premises:

-- That the U.S. constitution gives the federal government responsibility to conduct foreign relations;

-- That the state law violates the foreign commerce clause of the Constitution;

-- That the state law conflicts with sanctions enacted by the U.S. Congress and the president to implement a federal strategy for encouraging political change in Myanmar.

The business trade group, along with another organization started last year called USA Engage, has been working to discourage the use of unilateral trade sanctions by federal as well as state and local governments as a weapon in international disagreements.

The groups argue that trade sanctions cost U.S. businesses some $15 billion to $20 billion in lost exports in 1995.

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