States barred from boycotting foreign governments

States and cities may not engage in economic boycotts aimed at influencing foreign governments to adopt more humane and democratic policies.

Instead, the US Supreme Court says that is the exclusive job of the president and members of Congress who are empowered under the US Constitution to conduct American foreign policy.

In a unanimous decision announced yesterday, the high court struck down a Massachusetts law that barred granting state contracts to any companies doing business with the repressive military junta that rules Burma (renamed Myanmar in 1989).

The state law, passed in 1996, was patterned on boycotts enacted in the 1980s by 25 states and 164 cities across the US to encourage peaceful change in South Africa. Twenty-two US cities and counties have adopted Burma boycott laws similar to the Massachusetts law, including New York City, Los Angeles, and San Francisco.

Massachusetts spends roughly $2 billion a year and the Burma law had affected 346 companies, 44 of them based in the US.

The companies, members of the National Foreign Trade Council, challenged the constitutionality of the state law in federal court. Both a federal judge and a federal appeals court had earlier agreed with the trade council.

In its decision, the Supreme Court found that the Massachusetts Burma law was preempted by a federal law passed by Congress establishing certain sanctions against Burma.

"The state act undermines the president's capacity in this instance for effective diplomacy," writes Justice David Souter for the court. "The state act is at odds with the president's intended authority to speak for the United States among the world's nations in developing a comprehensive, multilateral strategy to bring democracy to and improve human rights practices and the quality of life in Burma."

The ruling is a setback to supporters of the Massachusetts law. But some analysts say the high-profile effort has already proven effective in deterring companies from dealing with Burma.

Analysts say they do not expect the ruling to result in a rush of US and other multinational firms seeking deals in Rangoon or Mandalay.

Opponents of the state law are greeting the court's decision as an important establishment of constitutional safeguards meant to maintain a balance of power between the states and the national government.

It will also smooth relations with US trade partners who were concerned that they might face a barrage of trade restrictions from each of the 50 states and countless city governments if the Massachusetts law was allowed to stand.

Shortly after Massachusetts passed its Burma law, Congress adopted its own Burma policy that bars any new investment by US companies in the Southeast Asian nation.

But Congress decided to permit companies with existing contracts in Burma to continue doing business there.

Lawyers for the trade council argued that such congressional action preempted the Massachusetts law.

But Massachusetts countered that Congress was aware of the state's boycott at the time it passed its own Burma policy, and if Congress wanted to preempt the Massachusetts Burma law it has the power to do so.

The high court disagreed, ruling that the state law was preempted and that its application violated the Constitution.

(c) Copyright 2000. The Christian Science Publishing Society