Sanctions issues

Patrick Crow
Washington, D.C.
[email protected]

U.S. sanctions blocking investments in certain other countries have been troublesome for international oil companies. Even more difficult, though, has been a rash of state and local sanctions laws.

Fortunately, a recent federal court ruling may have put an end to that mischief.

U.S. District Court Judge Joseph Tauro, sitting in Boston, ruled Nov. 4 that Massachusetts' "Burma Law" interferes with the federal government's powers to regulate foreign affairs.

Judge Tauro said that the state law was "designed with the purpose of changing domestic policy" and "state interests, no matter now noble, do not trump the federal government's exclusive foreign affairs power."

Massachusetts is expected to take the case to the First Circuit Court of Appeals.

The National Foreign Trade Council (NFTC), which represents 580 exporters, had challenged the state law, which barred companies trading with Myanmar (formerly Burma) from also doing business with Massachusetts government agencies.

U.S. Labor Sec. Alexis M. Herman said in September, "Our review indicates that the absence of the rule of law in Burma also means international labor standards are not protected. The Burmese people are subjected to forced labor, and child labor appears to be increasing."

Reactions

The U.S. International Trade Commission says that 18 U.S. states, cities, and counties have passed laws prohibiting residents from conducting business with Myanmar. ITC said that the Massachusetts law caused Apple Computer Inc. and Eastman Kodak Co. to withdraw from Myanmar.

NFTC Pres. Frank Kittredge said, "Chief Judge Tauro's ruling rests on clear constitutional grounds and should significantly deter states and cities from imposing their own foreign policy sanctions.

"We share concerns over reported human rights abuses in Burma; however, our system of government was not designed to allow the 50 states and hundreds of municipalities to conduct their own individual foreign policies."

The European Union had supported the lawsuit, claiming the law "raises questions about the ability of the U.S. to honor international commitments."

In October, the EU and Japan asked the World Trade Organization to establish a dispute resolution panel to determine if the Massachusetts law violated global trade agreements.

India, Pakistan

Meanwhile, President Bill Clinton has lifted most of the sanctions the U.S. imposed on India and Pakistan last May after both conducted nuclear weapons tests.

A recent budget law gave the President the power to selectively waive sanctions.

The decision restores India's and Pakistan's access to U.S. aid through the Export-Import Bank, Overseas Private Investment Corp., and Trade and Development Agency.

The U.S. said it would work with its allies to support financial agreements between Pakistan and the International Monetary Fund. The administration did not remove bans on military equipment sales to both countries, and it may still object to World Bank and other international lending for India.