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USTR Sends New Procurement Request to Governors

In the spring of 2004, seven governors removed their states from the list of states to be bound by the government procurement rules contained in the proposed Central American Free Trade Agreement (CAFTA) and other new trade deals. Governors acted after state legislators and others raised concerns about how these CAFTA provisions would undermine many common state purchasing laws and preferences – handcuffing state governments with restrictive “trade” rules that limit legislators’ policy options to promote good jobs and a healthy environment. Currently, a minority of 21 U.S. states remain bound to CAFTA’s procurement constraints, although the agreement remains unimplemented due to the lack of congressional support.

In Janury 2005, the National Conference of State Legislatures (NCSL) and the Intergovernmental Policy Advisory Committee (IGPAC) again raised concerns in a series of oral and written communications about the exclusion of state legislatures from the process used by federal trade officials to determine whether states would agree to be bound by trade agreement provisions. Among the reasonable requests made was for state legislators to be copied on communications to governors from federal officials requesting a state’s agreement to be bound.

Rather than seeking solutions, the United States Trade Representative (USTR) has continued to negotiate additional trade pacts that contain CAFTA-style procurement rules, and to ask governors for approval on behalf of their states, cutting state legislators out of the process. On Janury 27, 2005, USTR sent letters to governors requesting them to sign on to proposed free trade agreements (FTAs) with Panama and the Andean nations of Columbia, Ecuador, and Peru. USTR explicitly rejected even providing state legislators with notice of such requests.

Additionally, in its January 2005 letter to governors, USTR unveiled a new policy designed to punish states unwilling to be bound by trade pacts’ procurement constraints. USTR’s proposal would establish “reciprocity” rules that are designed to remove procurement opportunities now available to businesses in all states from businesses in states refusing to be bound to future agreements’ constraints. This proposal, which may violate constitutional Interstate Commerce Clause rules, and under any circumstances seems almost impossible to implement, would create an unequal playing field between states by attempting to allow only firms from states that sign on to trade pact procurement constraints to have access to the subfederal procurement markets of the nations involved in the agreement. Businesses in all states would maintain equal access to federal procurement opportunitites in these nations. Of course, this is just a unilateral USTR proposal, as these agreements are not yet signed and Congress may not yet be aware of the issue and its ramifications for states.

Remarkably, USTR is attempting to spin this policy as a benefit to states. In fact, it would be a troubling shift that underscores an unwillingness to address state officials’ legitimate concerns.

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