1 May 1998
The Wall Street Journal Interactive
Dow Jones Newswires
Laurie Lande

U.S. Trade Group Files Lawsuit Challenging State Sanctions

WASHINGTON -- An association that represents major U.S. corporations filed a federal lawsuit Thursday to prevent the state of Massachusetts from enforcing a law that bars state contracts with companies that do business in Burma.

The National Foreign Trade Council filed the suit in the U.S. District Court in Boston as a test case to determine the constitutionality of state and local trade sanctions that have been enacted across the country. 'This is a clear constitutional issue, and we believe there are strong grounds to overturn the law,' said NFTC President Frank Kittredge. 'We're prepared to litigate this to the Supreme Court, no matter how long it takes.'

At issue is a two-year-old Massachusetts law that effectively prohibits U.S. or foreign companies that do business in Burma - now called Myanmar by the country's ruling military - from providing goods and services to state agencies. The law, enacted to try to punish Burma's ruling junta for human rights abuses, also applies to U.S. subsidiaries whose parent company does business in Burma.

Other cities have adopted similar statutes, but Massachusetts is the only state to have done so.

The legal challenge is based on three premises, according to the filing: The U.S. Constitution vests responsibility for foreign policy with the federal government; the Massachusetts law violates the Foreign Commerce Clause of the U.S. Constitution, which prohibits state laws that discriminate against foreign commerce; and that the law conflicts with trade sanctions enacted by Congress and the President to implement a federal strategy that encourages political change in Myanmar.

There are already federal sanctions against Burma. Citing human rights violations and a lack of democracy, President Clinton last May issued an executive order banning new U.S. investment in Burma. The order followed legislation calling for new trade sanctions against Burma if the military military increased their harassment of Burmese opposition leaders. Texaco Corp. subsequently sold its Burma assets to a foreign company after that announcement.

Thirty NFTC members, including ARCO, Federal Express Corp. and Procter & Gamble Co., Unocal Corp. and Halliburton Co. are affected by the Massachusetts law, Kittredge said.

The lawsuit is the latest move by business groups to take a more aggressive stance to fight the growth of federal and local sanctions. NFTC has formed an affiliate called USA Engage specifically to fight such sanctions. In addition, both groups have put their weight behind legislation pending in Congress that would mandate a review of the potential effects of new trade sanctions before they are imposed.

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