WTO/Burma: What Do You Do When A City Enacts Its Own Foreign Policy?

[Steve Kretzmann <steve@moles.org>]

  >>19 August 1997
  >>Investor's Business Daily
  >>Charles Oliver
  >>
  >>What Do You Do When A City Enacts Its Own Foreign Policy?
  >>
  >>State and local governments pass economic sanctions -'boycotts on steroids'
  >>
  >>Frances David faces an unusual dilemma. She's trying to figure out where
  >>Berkeley, Calif., is going to buy fuel for the city's vehicles.
  >>
  >>The City Council has barred managers from buying fuel from firms with ties
  >>to Nigeria or Burma in protest of human rights abuses there. The bans rule
  >>out most of the major oil firms.
  >>
  >>"We're looking at independent refiners and other alternative sources," said
  >>David, the city's acting finance director. Berkeley isn't alone.
  >>
  >>If you do business in Burma, forget about doing business with the state of
  >>Massachusetts. Or with Madison, Wis. Or New York City. Or Alameda County,
  >>Calif. All have recently passed so-called selective purchasing laws.
  >>
  >>The trend of state and local governments passing such laws is growing.
  >>Twelve cities, one county and one state have barred governments from doing
  >>business with firms with ties to Burma. Other cities and states are
  >>considering such laws.
  >>
  >>But some fear that selective buying rules will wreak havoc on government
  >>budgets and drive taxes up while doing little to improve the social woes of
  >>targeted countries.
  >>
  >>The laws may also clash with international trading rules. The European Union
  >>recently filed a complaint with the World Trade Organization challenging the
  >>Massachusetts law.
  >>
  >>Moreover, there's serious doubt that economic sanctions help make positive
  >>social change. A study of more than 100 sanctions dating to World War I by
  >>the Institute for International Economics found that they don't work.
  >>
  >>"The bottom line is that sanctions, especially unilateral ones, rarely have
  >>much of an impact on the behavior of the country they're aimed at," said
  >>Kimberly Elliott, a research fellow at a think tank in Washington.
  >>
  >>"We believe that they just add to the overall problem and create confusion,"
  >>said Frank Kittredge, president of the National Foreign Trade Council, a
  >>business trade group.
  >>
  >>These laws also put the weight of government purchasing behind a boycott.
  >>They put millions of dollars in contracts at risk, and they affect firms
  >>that don't have a direct consumer link, such as construction firms.
  >>
  >>Supporters say taxpayers have a right to decide how their money's spent.
  >>They claim such activism represents democracy at its best. "Selective
  >>purchasing laws are just boycotts on steroids," said Simon Billenness of
  >>Franklin Research and Development, a self- described socially responsible
  >>investment firm.
  >>
  >>Burma, a Southeast Asian nation bordering Thailand and China, has been
  >>singled out because of its record of human rights abuses. But Burma isn't
  >>the only country in activists' crosshairs.
  >>
  >>More than 30 cities and states will buy only from firms that have signed the
  >>MacBride principles. These require firms doing business in Northern Ireland
  >>not to discriminate on religious grounds.
  >>
  >>Berkeley won't buy from firms with ties to Nigeria. Neighboring Oakland may
  >>join that ban. Human rights abuses have been cited as the reason.
  >>
  >>New York City is looking at a ban on purchases from firms with ties to
  >>China. And New Jersey is reportedly mulling a move against Switzerland for
  >>laundering Nazi gold.
  >>
  >>Such laws began popping up decades ago, says Todd Putnam, editor of the
  >>National Boycott News magazine. The effort came of age during the fight
  >>against apartheid in South Africa. In the 1980s, dozens of cities and states
  >>banned buying from firms with ties to South Africa. In the case of Burma,
  >>activists think the boycotts will propel that country's leaders to end
  >>repression and abuses of human rights. Will it work? They point to South
  >>Africa, where they believe an international boycott helped bring an end to
  >>apartheid.
  >>
  >>Kittredge says the National Foreign Trade Council shares the concern for
  >>human rights. The problem, he says, is there are just too many ways around
  >>sanctions. If U.S. firms can't do business in Burma, other firms will.
  >>
  >>"U.S. firms can have a positive influence on the policies of those nations,"
  >>he said. "But sanctions isolate a nation, and the U.S. can lose all
  >>influence - economic, religious and cultural."
  >>
  >>He points to South Korea and Taiwan as success stories. These nations
  >>changed from authoritarian rule to democracies. Trade with the U.S. helped,
  >>he says.
  >>
  >>And sanctions bring a cost.
  >>
  >>Berkeley is an extreme example. Along with sanctions on Burma and Nigeria,
  >>it also bars doing business with firms with ties to the defense industry,
  >>and it won't buy from firms involved with nuclear power.
  >>
  >>Now, the city's finance department says it spends roughly a quarter of its
  >>time trying to comply with these various restrictions. "That involves
  >>determining which firms are off-limits, finding alternative sources for
  >>various items and answering questions from the media," said David, the
  >>acting finance director.
  >>
  >>Whether the restrictions force the city to spend more is unknown. Berkeley,
  >>like most governments that pass such laws, leaves itself an out. The
  >>purchasing manager can waive the restrictions if there are no alternative
  >>suppliers, if observing the ban would affect public health or safety, or for
  >>other compelling reasons.
  >>
  >>Critics also say that such laws might violate the Constitution, which gives
  >>the federal government sole authority to make foreign policy, and expressly
  >>bars states from interfering with foreign trade.
  >>
  >>Still, the constitutional issue may not matter.
  >>
  >>The European Union has challenged the Massachusetts law under the rules of
  >>the World Trade Organization. Under agreements signed by the U.S., states
  >>can't place "political" conditions on their procurement contracts.
  >>
  >>If the U.S. loses that fight, which seems likely, it could have to go to
  >>court to force Massachusetts to change its law. And, if these laws aren't
  >>repealed, the WTO would let Europeans levy sanctions against the U.S. - not
  >>just the states and cities themselves.
  >>
  >>
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