Brannon P Denning & Jack H McCall. Foreign Affairs. Volume 79, Issue 1. January/February 2000.
In the waning days of apartheid, South Africa found itself the subject of sanctions imposed not only by Congress but by a number of U.S. states and municipalities as well. These measures ranged from requirements that the state or city in question rid itself of holdings in South Africa or in companies doing business there to requirements that corporations bidding for government contracts likewise divest. Although the apartheid regime sought to challenge some of these laws, little litigation resulted, in part because few lawyers wished to associate themselves with such a loathsome government.
Local sanctions were not unprecedented. Decades earlier, in the 1960s, U.S. states had occasionally forbidden government purchases from communist countries or required that most state materials be bought domestically. In the 1980s, at the same time as the apartheid battle, some cities declared themselves “nuclear-free zones” and sought to keep nuclear waste or atomic weapons outside city limits. Again, although the constitutionality of such ordinances was questioned, few court challenges were brought. As with the anti-apartheid sanctions, no case made it to the Supreme Court.
In the early 1990s, as first the Cold War and then apartheid ended, so did state and local forays into foreign policy. But today this subfederal assertiveness is back with a vengeance. China, Burma (Myanmar), Nigeria, North Korea, Cuba, and Switzerland have found themselves targeted by state and local sanctions adopted in the face of strong State Department criticism. This time, however, the actual subjects of the sanctions-mainly American companies faced with the Hobson’s choice of abandoning overseas markets or losing lucrative government contracts-are challenging the statutes in court. And they are winning. One such case is about to be heard by the Supreme Court, and the outcome there should be similar. Local sanctions are being struck down, as well they should. Despite their laudable motives, such laws are not only bad policy-they are unconstitutional.
Letter of the Law
In National Foreign Trade Council v. Natsios, decided in June 19 99, the U.S. Court of Appeals for the First Circuit struck down a Massachusetts statute that banned companies with direct or indirect business interests in Burma from competing for state contracts. The statute’s terms were so broad that if a company owned a subsidiary in Burma, the parent company would be deemed to be “doing business with Burma” and be prohibited from bidding on contracts to supply goods to Massachusetts-even if the subsidiary was in a completely different line of business.
A federal district court had first struck down the statute in November 1998, ruling it an impermissible encroachment on the federal prerogative to conduct foreign affairs. The decision reminded states that federalism is a two-way street: just as the states have spheres in which the federal government may not intrude, Washington is supreme in the areas assigned to it by the Constitution. “State interests,” the district judge wrote, “no matter how noble, do not trump the federal government’s exclusive foreign affairs power.”
When its turn came, the court of appeals went even further. It found that in addition to transgressing the Constitution’s structural boundaries, the statute discriminated against foreign commerce, which states are forbidden to do. The Constitution grants Congress the power to regulate foreign trade; courts have long inferred from that grant limitations on a state’s power to discriminate in this area. (The very purpose for giving this power to Washington had been to end the conflicting state commercial policies that plagued the country under the Articles of Confederation.) The appeals court rejected Massachusetts’ argument that it had a right not to support, directly or indirectly, regimes whose human rights records it found objectionable. Laudable humanitarian aims, the court held, did not license states to violate the Constitution.
Finally, the court found Massachusetts’ approach contrary to the sanctions that Congress itself had adopted. According to the Constitution, federal laws are supreme; state laws expressly or implicitly in conflict with those of Congress must give way. Sometimes Congress explicitly declares an intent to preempt similar state laws. More frequently, Congress remains silent, and courts must determine whether there is any room for the states to supplement congressional action or whether such supplements would conflict with the intended congressional scheme. In Natsios, the court concluded that although the goals of the federal and state legislation regarding Burma were similar, the state sanctions conflicted with those of Congress and could not stand.
The appeals court offered Massachusetts the following consolation: “The passage of the Massachusetts Burma Law has resulted in significant attention being brought to the Burmese government’s human rights record. Indeed, it may be that the Massachusetts law was a catalyst for federal action.” The court also noted the role that Massachusetts’ congressional representatives played in crafting a federal response. “Nonetheless,” it concluded, “the conduct of this nation’s foreign affairs cannot be effectively managed on behalf of all of the nation’s citizens if each of the many state and local governments pursues its own foreign policy.”
The First Circuit’s decision is binding precedent only in Maine, Massachusetts, New Hampshire, Rhode Island, and Puerto Rico, and Massachusetts has appealed it to the U.S. Supreme Court, which has yet to hear the case. Meanwhile, 29 other state and local governments outside the First Circuit have passed or proposed 42 similar sanctions. Passage of is other such laws was attempted but has failed in 13 states or municipalities so far. Although no new statutes or ordinances have been passed since the Natsios decision-even in the wake of recent crises in East Timor and Pakistan, which might otherwise have provoked them-proponents of local sanctions beyond the jurisdiction of the First Circuit, vowing to fight for the right to dictate foreign policy, have refused to repeal existing laws or suspend their operation.
Delusions of Grandeur
What has so emboldened cities and states? Two factors stand out: the increased role for the states brought on by globalization, and the rise of nongovernmental organizations (NGOs), particularly those promoting human rights worldwide. The latter have succeeded in replacing the classical view of international relations and international law as high-level affairs conducted among elite policymakers with one in which grassroots organizations now reach millions worldwide through the Internet and the fax machine. An American-led NGO was largely responsible for the drafting and adoption of the recent treaty banning land mines, despite the opposition of the U.S. government-a result unthinkable 25 or 30 years ago. Policy entrepreneurship among NGOs out to abolish the death penalty has driven recent challenges to death sentences imposed on non-U.S. citizens, on grounds that they were arrested and held in violation of the Vienna Convention on Consular Relations (which guarantees detainees in foreign countries the right to contact their consulates). Similarly, NGOs have furnished much of the impetus for the state and local sanctions.
Meanwhile, state policymakers have been emboldened to play a more active role in foreign affairs, once thought to be the exclusive province of the federal government. And why not? After all, states compete for foreign business, many states with large urban centers host foreign consulates, and some contain large numbers of resident aliens or recent immigrants who retain close ties to their homelands. Given the new realities of international relations, defenders of the sanctions claim, state and local governments should take the lead in combating international human rights abuses. Their taxpayers, they add, should not be asked to support repressive regimes or the companies that do business with them.
Little direction in the devolution debate has come from the federal executive branch, and state and local governments have interpreted this silence as tacit approval. Apparent state disregard for the Vienna consular convention was motivated not so much by indifference to international agreements as by ignorance; the State Department, until recently, made little effort to educate state and local law enforcement agencies about their responsibilities under the convention. Likewise, although the State Department made its opposition to some local sanctions known, the Clinton administration did not file a brief in Natsios, apparently fearful of offending human rights activists and sanctions’ congressional supporters.
Talking ‘Bout the Constitution
Subfederal sanctions have a visceral appeal, particularly given the horrible human rights records of targets such as Burma. Sanctions have even captured the hearts and minds of those holding wildly divergent political views: anticommunist conservatives cherish them as tools to use against nations like Cuba and China, while liberals and human rights activists invoke them to bash regimes like Indonesia’s. Yet despite their peculiar transideological charm, local sanctions represent an attempt by states to co-opt the power to set foreign policy-a power that the Constitution, as the courts have long recognized, quite clearly allocates to Washington.
Articles I and II of the Constitution place primacy for the conduct of foreign and military affairs squarely with Congress and the president. The regulation and taxation of foreign commerce, immigration, declarations of war, the appointment and reception of ambassadors, the definition and punishment of offenses against international law, the command of U.S. military forces, the negotiation and approval of treaties-all -are left to the federal government. The federal, not the state, judiciary hears cases involving ambassadors, consuls, public ministers, and controversies involving states and foreign countries, citizens, or subjects. Moreover, states are expressly forbidden by Article 1, Section 10, of the Constitution from entering into treaties, alliances, agreements, or compacts with foreign powers; from making war; and from laying certain taxes on foreign commerce without congressional consent.
It is hardly credible to look at the Constitution’s assignment of power and its proscriptions on state involvement in foreign affairs and to argue that, absent an express ban, states are free to impose sanctions on foreign countries. Such an argument epitomizes interpretative literalism at its most wooden and ignores the historical context in which constitutional powers were assigned. For all that the original supporters and opponents of constitutional ratification disagreed, both sides would have accepted the absolute necessity for uniformity in the conduct of foreign relations. Few dissented from James Madison’s statement in the Federalist no. 42 that the powers to conduct foreign affairs constitute “an obvious and essential branch of the federal administration.” “If we are to be one nation in any respect,” Madison wrote, “it clearly ought to be in respect to other nations.” Alexander Hamilton noted elsewhere that since the actions of the individual states in the foreign policy arena would be charged against the United States as a whole, the power to set policy must reside at the federal level. In the Supreme Court’s contemporary phraseology, the United States must speak “with one voice” on such matters.
Proponents of state and local sanctions today dismiss Hamilton’s concerns, arguing that international actors are now much more sophisticated. Yet when Japan and the European Union protested Massachusetts’ Burma law before the World Trade Organization (WTO), the action was brought against the United States, since Massachusetts, as a subnational government, has no WTO standing. Similarly, when Switzerland was hit with local sanctions in 1998 for not releasing the bank accounts of Holocaust victims, a major Swiss retailer responded by boycotting American products from states that had neither imposed nor intended to impose sanctions.
There are other, more esoteric, constitutional objections to laws like Massachusetts’. Sanctions burden foreign commerce. As discussed in the Natsios decision, the Supreme Court has sharply limited states’ powers to regulate interstate and foreign trade. State regulation touching foreign commerce has historically been more tightly circumscribed than that affecting commerce between states. After all, a babble of state regulations would drown out the “one voice” of the federal government.
Even where regulations are allowed, states must not discriminate against trading partners from other states or countries. Yet the current subfederal sanctions do just that. To argue that the restrictions apply to interstate and foreign companies alike (i.e., to anyone who trades with Burma) is to miss the point. The relevant discrimination, which Supreme Court case law prohibits, is between companies (foreign or domestic) engaged in foreign commerce and those that are not, or at least not with the pariah regimes targeted by the statute.
Nor, as Natsios recognized, does the narrow “market-participant” doctrine apply here to excuse the discrimination. (This doctrine allows states some leeway to interfere with commerce when they themselves are directly involved in the transaction.) The Supreme Court has refused to apply the exception to foreign commerce; moreover, sanctions, like taxes, constitute a “Primeval governmental activity” of the sort unavailable to ordinary commercial actors and are thus beyond the scope of the exception.
The First Circuit’s decision in Natsios should remind states that just as there are constitutionally mandated realms into which the federal government cannot intrude, the federal government also has its own exclusive provinces. Furthermore, policing the demarcation between federal and subfederal governments, as the First Circuit has done, is the appropriate province of the judiciary. Although Congress has the unquestioned power to halt all sanctions initiatives if it wishes, doing so would divert legislative resources from other national concerns or force Congress to react long after damage has been done to the nation’s foreign policy In this case, moreover, the executive branch proved an unreliable guardian of its prerogatives: the Clinton administration, wary of unfavorable publicity, declined to get involved.
Of course, to invalidate sanctions like Massachusetts’ Burma law does not leave state and local governments without reasonable alternatives. Subnational governments can, of course, craft nonbinding resolutions to condemn repressive foreign regimes. More effectively, their officials can lobby congressional representatives who would ignore such requests at their peril, come election time-to act. These options are not foreclosed by the First Circuit’s decision. If state and local governments wish to exercise their constitutional rights in calling for a cohesive foreign policy against oppressive governments, they can use means other than sanctions. Private citizens and NGOs, too, can organize boycotts to pressure businesses to quit countries with poor human rights records. Such measures can have a powerful effect, as apartheid-era activism demonstrated.
Supreme Court Justice Joseph Story, in his influential 1833 treatise on the Constitution, wrote that “notwithstanding our boasts of freedom and independence,” Americans were victims “of our own imbecility” in relations with other countries under the Articles of Confederation, because states insisted on conducting foreign policy themselves. Despite the otherwise welcome invigoration of federalism in the legislative and judicial branches of government, Washington still must be given pride of place in the conduct of foreign affairs and the regulation of foreign commerce. Without the central government’s lead, the United States risks returning to the Balkanization of its national interests that necessitated the Constitution in the first place.