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Burma Case I: The European Union and Japan v. The Selective Purchasing Law of the Commonwealth of Massachusetts

One of the most important promises that U.S. GATT negotiators made to the American people was that the integrity and sovereignty of state laws would not be affected by U.S. participation in the GATT regimes. Unfortunately, a pending case brought by the European Commission (EC) threatens to demonstrate that this promise will not be kept. In this case, a democratically achieved statute-- passed by the Massachusetts legislature and signed by its Governor-- designed to promote democracy in Burma is the subject of a WTO challenge. Below are the facts in chronological order.

On December 3, 1993, Massachusetts Governor William Weld sent a letter to USTR Mickey Kantor on the subject of the Agreement on Government Procurement (AGP), the ancillary agreement to the GATT, which regulates government purchasing. He observed that his "administration has no present intention of modifying the aforementioned [government procurement] processes in a manner inconsistent with the [AGP] Code's principles" (emphasis added). A few months later in Morocco, at the conclusion of the Uruguay Round negotiations, Kantor signed the AGP; Massachusetts and 36 other states were listed in an annex as having agreed to its terms.

Two and a half years later, on June 25, 1996, Governor Weld signed into law H-2833 -- "An Act regulating state contracts with companies doing business with or in Burma (Myanmar)." The new law (1996 Mass. ALS 130) was straightforward -- corporations that want to do business with Massachusetts, a governmental consumer of goods and services, cannot do business with the autocratic regime in Rangoon. Governor Weld explained the reasoning in his remarks at the time of the bill signing: "Burma is the South Africa of the 1990's. In most respects this bill is similar to the anti-apartheid 'selective purchase' program which we inherited from the previous administration. Just like South Africa, the calls for sanctions against the current Burmese government are coming from within the country."

On January 22, 1997, the EC dispatched a "demarche" to the U.S. State Department, invoking the AGP, protesting the Massachusetts law and reserving its rights under the WTO dispute settlement procedure. On February 3, the entire Massachusetts congressional delegation sent a letter to Jacques Santer, the President of the European Commission, in which they expressed their strong objections to the EC demarche: "we do not believe it is appropriate for the European Union to involve itself in the internal affairs of Massachusetts. If the European Community chooses to place dollars ahead of human rights, it has that sovereign right, but the European Commission should not attempt to intimidate Massachusetts into changing the standards it has established for doing business with the state government."

The Japanese government promptly joined the EC challenge to the Massachusetts law. The European Parliament, however, passed an unanimous resolution (June 12, 1997) specifically urging the EC "not to take action against the act regulating state contracts with companies doing business with or in Burma passed on 25 June 1996 by the Commonwealth of Massachusetts, under the dispute settlement procedure of the World Trade Organization." Unfortunately, the EU, which consists of 626 Parliament members, has virtually no power. The EC, on the other hand, has both legislative and executive power. Thus when the EU passed the resolution, the EC was able to ignore the wishes of the European Parliament and continue to serve multinational corporate interests.

Meanwhile, the Clinton Administration was reluctant to confront Massachusetts over the law and the EC threat of a WTO challenge. However, the selective purchasing law remained popular with the people, politicians and the press. Not surprisingly, the Clinton Administration looked to big business to intervene with Massachusetts officials. For instance, on March 14, 1997, in a speech sponsored by the European Institute, Commerce Secretary William Daley described Administration efforts to persuade U.S. industry to pressure Massachusetts to repeal or amend the law.

Eventually, the U.S. responded to the EC. On June 5, 1997, USTR Charlene Barshefsky wrote to EC Vice President Sir Leon Brittan, describing her efforts to resolve the issue ("... continuing to work with Massachusetts officials on the existing Burma law") and appealing for forbearance ("...initiating WTO dispute settlement proceedings at this time on the Massachusetts law would frustrate our efforts ... to reach a satisfactory result and hinder our efforts in other states as well").

But it was too little, too late, and Brittan responded on June 16: "On this issue, it would not appear that progress has been made and there are no indications that Massachusetts is considering amending this law, in spite of the efforts that you have been making, which I greatly appreciate. The Community therefore now considers that it has no option but to pursue this matter formally through the WTO..." Four days later, the E.C. formally requested consultations before the Dispute Settlement Body of the WTO and Charlene Barshefsky issued a media advisory expressing regret.

Various grassroots advocacy groups, labor unions, religious, and non-profit organizations could foresee the potential far-reaching implications of the EU/Japan lawsuit on state and local sovereignty and in 1997 formed the Ad-Hoc Coalition for the Defense of the Massachusetts Burma Law. The ad-hoc coalition, organized by Public Citizen s Global Trade Watch, has two primary goals. The first goal is to educate the public about the important role selective purchasing legislation plays in democracies by allowing local governments to put their tax money where their values are. And the second goal is to encourage the Clinton Administration to defend the Massachusetts Burma Law. In pursuit of these goals, the ad-hoc coalition delivered a letter to USTR Charlene Barshefsky on August 6, 1997, urging her to defend the Massachusetts Burma Law.

When the WTO Ministers meet in Geneva in the summer of 1998, the EC/Japan WTO suit against the Massachusetts Burma law will be ripe for formal dispute resolution. Unless the Massachusetts legislature -- and in particular, the author of the law, Representative Byron Rushing of Boston -- amends the legislation to bring it into compliance with the AGP(1), the Clinton Administration will be compelled to defend the Burma law, in Geneva. They can argue that Governor Weld's 1993 letter does not constitute an acceptance of AGP terms for future procurement policy (not anticipated at the time). They can insist that the documented Burmese heroin trade falls within the "public morals" or "plant life" exception in Art. XXIII(2).

Unfortunately, many international trade lawyers and scholars have concluded that the Massachusetts selective purchasing law, as currently crafted, does contravene the AGP. It is an open question whether, if the AGP and WTO dispute resolution procedures had trumped state law during the 70's and 80's struggle against apartheid, Nelson Mandela would still be in jail. Speculation aside, the point of this analysis is that the original promise that the WTO would not undermine state sovereignty will be broken if and when the Panel in Geneva rules for the E.C. and Japan. The Clinton Administration should vigorously defend Massachusetts throughout the formal dispute resolution process; and if the WTO rules as expected, they should lose.(3)



Notes


  1. The Massachusetts law can be made GATT-legal by changing the dollar thresholds which trigger the 'selective purchasing.' Under the AGP, state procurement contracts worth $500,000 and more(Annex 4), and construction contracts worth at least $7million (Annex 5), must be awarded according to its narrow, bottom-line provisions.
  2. "[N]othing in this agreement shall be construed to prevent any Party from imposing or enforcing measures: necessary to protect public morals, order or safety, human, animal or plant life or health or intellectual property; or relating to the products or services of handicapped persons, of philanthropic institutions or of prison labor."
  3. Then the U.S. should withdraw from the AGP, or, alternatively, all U.S. states should pass laws removing a range of policy options, including selective purchasing, from the reach of the GATT.

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