EU rejects Massachusetts plan on My

[sbillenness@xxxxxxxx]

EU rejects Massachusetts plan on Myanmar; may go to WTO
The European Union fears setting a dangerous precedent.

by Michael S. Lelyveld, Journal of Commerce staff
Journal of Commerce
March 20, 1998

BOSTON -- The European Union has rejected a compromise with Massachusetts
over its contracting curbs aimed at Myanmar and signaled that the conflict
will be escalated at the World Trade Organization unless the state yields
soon.

In a letter to Undersecretary of State Stuart Eizenstat last week, the head
of the European Commission delegation in Washington, Hugo Paemen, said that
pressure is mounting for a WTO dispute resolution panel to settle
complaints about the Massachusetts law on Myanmar (formerly Burma).

A showdown has been in the works for more than a year over the selective
purchasing law that places a 10% premium on state contracts with companies
doing business with military-ruled Myanmar. The EU says the statute
violates the 1994 General Procurement Agreement with the United States that
was supposed to guarantee open competition for government contracts on both
sides of the Atlantic.

Mr. Paemen said that European member states "are pushing us more and more
strongly to move ahead" with the WTO complaint process. He warned that
unless EU terms are accepted, "the calls for a WTO panel will be impossible
to resist." In his letter, Mr. Paemen listed a series of measures that the
EU has already taken against Myanmar, saying that they had also been
outlined to state Rep. Byron Rushing, the Boston Democrat who wrote the
Myanmar law. The steps include an arms embargo, withdrawal of tariff
privileges and suspension of high-level contacts. The EU recently decided
to spend over $1 million on a liaison office to promote cooperation with
Myanmar opposition groups, Mr. Paemen said. Officials are considering
further assistance to democratic forces and a possible scholarship fund for
Burmese students. But Mr. Paemen firmly rejected economic sanctions, as
urged by Mr. Rushing during a recent meeting with EU and State Department
officials.

According to EU sources, the problem is that Mr. Rushing's compromise
proposals cannot even be considered without implying that the EU has
entered into negotiations with a U.S. state. Such an interpretation is seen
as setting a dangerous precedent.

"We're caught in an impossible situation here," said one official. Mr.
Rushing, who wrote a similar law on business with South Africa in 1988,
could not be reached for comment.

The EU apparently sees no alternative to a solution on its own terms. The
amendment it seeks would exempt large contracts covered by the
trans-Atlantic procurement pact to defuse the conflict.

The procurement agreement only covers deals larger than about $5 million
for construction contracts and $500,000 for goods and services. So far, Mr.
Rushing has shown no sign that he will introduce such an amendment.

Even if an amendment were made, it is not clear whether it would address
complaints about the selective purchasing statute that have been lodged by
Japan.
-------------------------------------------------------