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Push to head off clash on Burma tra
Subject: Push to head off clash on Burma trade curbs
Push to head off clash on Burma trade curbs
Guy de Jonquieres, Financial Times, 24 April 97
Hard on the heels of their bitter dispute over the Helms-Burton anti-Cuba
law, Brussels and Washington are seeking to head off a US attempt to use
trade sanctions to achieve foreign policy goals. This time, controversy
centres on legislation passed not by the US Congress, but the state of
The European Union is protesting about a Massachusetts law enacted last
year which prohibits purchases by state-owned bodies from companies "doing
business" in Burma. The state has black-listed about 150 foreign companies,
including Honda, Nestle, Siemens and Unilever, and some 40 US concerns,
including Mobil, PepsiCo and Procter & Gamble. None of the companies is
reported to have been excluded from bidding for a state contract so far,
but the EU says the law violates a World Trade Organisation agreement
committing Massachusetts and 36 other US states to open public procurement
to international competition. The EU is threatening to challenge the law in
the WTO's disputes procedures.
Neither Washington nor Brussels wants such a confrontation, since it could
force the federal government to defend in the WTO a law which manifestly
US diplomats have been in talks with Massachusetts authorities and will
meet European Commission officials in Washington on Monday, hoping to reach
The dispute is regarded as an important test case, because the
Massachusetts legislation reflects a growing trend. By some counts, more
than 30 US states, counties and cities have enacted or plan sanctions laws.
Most aim to put pressure on Burma over its human rights record.
Recently, the range of targets has widened. The Massachusetts state
assembly is working on a bill designed to penalise Indonesia for its
repression of the former Portuguese colony of East Timor. New Jersey,
Chicago and the state and city of New York are considering sanctions
against Switzerland because of its role in the Nazi gold affair.
Many of the proposals call for secondary boycotts against companies with
business interests in the target countries. The New Jersey bill is
particularly sensitive; several Swiss companies, including Ciba-Geigy and
Novartis, have their US hedquarters and extensive operations in the state.
Sanctions enthusiasts insist they are acting legally. "We have the right
and ability to use state-level restrictions to respond to legitimate public
concerns," says Mr. Marc Pacheco, a Massachusetts senator co-sponsoring the
state's Indonesia bill. But critics say the laws are crude weapons crafted
by politicians seeking votes.
Growing alarm has led US and foreign companies, and several foreign
governments, to mountlobbying campaigns in Washington and state capitals.
They say sanctions hurt US exporters, have little effect on target
governments, risk international retaliation and discourage foreign
investments on which many US state economies depend.
Signs are these arguments are having some impact. California recently
deferred consideration of a Burma sanctions bill; Senator Pacheco plans to
re-work his Indonesia proposal to bring it into line with WTO rules. There
is also talk of a similar amendment to Massachusetts' Burma law.
That might settle the immediate dispute with the EU. But it could merely
encourage a switch to other, equally controversial, measures not prohibited
by WTO rules, such as state bans on investments in companies with business
links to countries accused of human rights abuses. Mr. Pacheco is
considering inserting such a ban in his Indonesia bill.
US supporters of sanctions laws do not accept they are ineffective or
self-defeating. They claim US state investment bans against South Africa
helped bring about its change of government, and recent anti-Burma laws
have prompted companies such as PepsiCo and Apple Compter to sever ties
with the country.
Opponents fear US President Clinton's imposition this week of federal
sanctions on Burma will add fuel to the fire. Some think his action will be
seen as vindicating sanctions, and encourage human rights groups and ethnic
communities to press state legislators to pass further discriminatory laws.
"There is a danger that any group which cares about political conditions
anywhere in the world will be pushing its own sanctions proposal, directed
against Greece, Turkey, Pakistan or wherever," says Mr. Tod Malan, head of
the Organisation for International Investment, a Washington-based body
which represents multinational companies.
Opponents say state sanctions laws are unconstitutional becuse they
encroach on the federal government's right to determine foreign policy.
They claim the administration could easily halt such legislation by
challenging it in court, but has shrunk from doing so.
"Washington is scared to death because it does not want to be accused of
being soft on human rights," says one state government official. Some
observers believe controversies about foreign campaign contributions have
also weakened the administration's will to act.
"If President Clinton sued Massachusetts over its Indonesia sanctions
bill," said one, "his political opponents might allege that he was doing so
because Indonesian interests had helped fund his re-election campaign."
But unless Washington decides to lay down the law, some companies believe
their only hope of stemming the sanctions tide may be to turn to the US
Washington's imposition of economic sanctions against Burma amounts to
interference in Rangoon's internal affairs, Vietnam said yesterday, Reuter
reports from Hanoi.
Economic sanctions were contrary both to the principles of equality and
mutual benefit and the global trend in international relations, the
Vietnamese foreign ministry declared. On Tuesday, the US said it would ban
new investment by American companies in Burma because of what Washington
described as deepening politial repression by the ruling State Law and
Order Restoration Council (Slorc).
Slorc has been accused by human rights groups and western governments of