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WTO likely to address Massachusetts

Journal of Commerce
Monday, December 22, 1997
WTO likely to address Massachusetts-EU tiff

The WTO, designed to decide disputes between nations, may take on a feud
over Myanmar that involves state governments.


BOSTON -- The World Trade Organization, formed to sort out trade conflicts
between the world's nations, apparently will soon weigh rules controlling
bidding on state contracts in Massachusetts.

Legislation enacted by the state and other local governments penalize
companies doing business with Myanmar, the country formerly known as Burma,
which is ruled by a repressive military junta.

European Union officials share a distaste for the Myanmar government. EU
members ended preferential trade treatment for the country, withdrew
ambassadors and enacted an arms embargo.

But they also are angry at extra-territoriality of American efforts to
force its trade policies on other countries, dealing not only with Myanmar,
but also Cuba, Libya and Iran. So they appear ready to take the dispute on
the various local Myanmar sanctions to formal dispute resolution by the WTO.

A third round of talks in Geneva last week between U.S. and EU trade
negotiators failed to resolve differences. Consultations have already gone
beyond the normal time limits laid down by WTO rules, making it likely that
the EU will seek a dispute resolution panel.

"They could ask for it at any time," a U.S. official said.

A major problem for all U.S.-EU negotiations is that the two sides come to
the table with unequal powers. While the EU binds its members to honor its
agreements, the federal government can only enforce its authority over
trade policy through the courts.

There is little that Washington can do to keep state legislatures in line
and almost nothing to stop municipalities from getting into the act.
Massachusetts state Rep. Byron Rushing, a Dorchester Democrat who helped
kick off the Myanmar sanction movement with a state law there, said a
state's power to purchase selectively is not the same thing as trade.

But if the EU has to consider all those U.S. entities every time it
negotiates a treaty, it might find it impossible to reach any
trans-Atlantic pacts. The EU and Japan see the subfederal sanctions as
violating the 1994 General Procurement Agreement to keep government
purchasing open to all bidders on both sides of the Atlantic.

Massachusetts initially said it would honor the procurement pact but then
enacted a 10% penalty against bidders on state contracts for companies
doing business with Myanmar. Seventeen cities, including New York and San
Francisco, followed suit.

Some members of the European Parliament are considering a move to give the
United States "a dose of its own medicine" by barring investments in U.S.
states that impose the death penalty, Reuters reported.

Mr. Rushing said in an interview that he hopes the issue will not proceed
to WTO dispute resolution and urged that U.S., EU and Massachusetts
officials meet in some informal setting to resolve the dispute.

Mr. Rushing, who sponsored similar South Africa curbs in 1988, wants the EU
to adopt the U.S. ban on future investment in Myanmar. There are
suggestions that Massachusetts could repeal its selective purchasing law if
the EU agrees.

The initial reaction from EU officials is that member nations are unlikely
to agree to any measure in response to pressure, even one with which they
may happen to agree. Sitting down with a subfederal U.S. entity could also
set a troubling precedent.

As in other sanctions cases, the impasse in U.S.-EU relations has long
since obscured the real problem of what to do about Myanmar, and officials
on both sides just want the problem to go away.

As for possible European retaliation over the death penalty, it is unlikely
to touch Massachusetts, which recently defeated a capital punishment
measure by one vote. Mr. Rushing opposed the bill.