Foreign Policy Research Institute A Nation Must Think Before it Acts Foreign Affairs, Federalism, and Well-Meaning Mischief: A Constitutional Close Shave on Massachusetts’s Burma Law

Foreign Affairs, Federalism, and Well-Meaning Mischief: A Constitutional Close Shave on Massachusetts’s Burma Law

When the United States Supreme Court unanimously struck down a Massachusetts law that restricted the state’s government agencies’ purchases from companies doing business in Burma, the Court’s decision was, as a matter of constitutional law, fairly unremarkable and, in its analysis of the loci of power to make U.S. foreign policy, sensible, as far as it went. The June 19 ruling, however, left important constitutional questions unsettled and thereby left the door open for state and local politicians and interest groups to pursue sub-national foreign policies that could threaten the U.S.’s ability to conduct foreign relations coherently in an era of globalization.

The Court: Federal Burma Law Preempts State Law

The Supreme Court’s holding in Crosby v. National Foreign Trade Council rested on narrow legal grounds. Because Congress had passed and the president had signed legislation that imposed or authorized a variety of sanctions against Burma, federal law covered many of the same issues addressed by the state statute and provided mandatory and discretionary measures that overlapped incompletely with provisions in the Massachusetts law (which predated the federal law by merely three months).

The Court stressed differences between the two laws in three areas: the degree of flexibility in imposing sanctions, the scope of activities and entities reached by the law’s proscriptions, and the implications for multilateral diplomatic efforts to promote human rights and democracy in Burma. First, the Massachusetts act imposed automatic and inalterable restrictions where the federal act conferred considerable discretion on the president to waive sanctions upon certifying that U.S. national security interests so required, to lift a ban on bilateral aid, support for multilateral aid, and visas for government officials upon finding substantial progress on human rights and democracy in Burma, and to ban new investment by U.S. sources upon determining that the government of Burma had committed large-scale repression or acts of violence against the democratic opposition or taken new steps against pro- democracy leader and Nobel Peace Prize recipient Daw Aung San Suu Kyi. Second, the Massachusetts law went beyond the federal law by covering foreign as well as U.S. companies and individuals that do business in Burma, by addressing trade and preexisting investment as well as new investment in Burma, and by exempting only a very narrow range of contracts and transactions with Burma. Third, the Massachusetts statute locked a portion of the U.S. economy (Massachusetts’s annual $2 billion in state purchases) into a policy position opposed by many governments whose cooperation would be essential to the U.S. government’s ability to achieve the comprehensive, multilateral strategy toward Burma envisaged by the federal statute. In simple terms, these differences showed conflict between what state and federal lawmakers sought to do and, in such circumstances, federal law, unremarkably, wins.

Although characterized in some reports as a decision that rested merely on statutory interpretation and that eschewed constitutional grounds, the constitutional underpinnings of the ruling are clear, explicit and uncontroversial. In the technical language of constitutional federalism and under the principles embodied in the constitution’s supremacy clause, enactment of the federal legislation “preempted” conflicting state law on the same subject. In the broader conceptual vocabulary of the constitutional allocation of lawmaking authority, state lawmakers could not be allowed to undermine the approach that Congress and the president had adopted through the exercise of their constitutionally authorized powers, especially where the joint congressional- presidential action involved foreign relations.

After Crosby: Little Room for State “Burma Law” When Congress Speaks

Wherever a federal law covers much the same ground, there is little constitutional room left after the Court’s decision for state and local lawmakers to find other ways to replicate the types of sanctions and restrictions that the Massachusetts Burma Law imposed. The Massachusetts law fell notwithstanding the fact that it paralleled the federal law’s articulated aims of promoting democracy and human rights in Burma. It failed to survive the Court’s scrutiny despite the Massachusetts legislature’s having been clever or well-advised enough to try to peg the sanctions to an area of maximum state authority and discretion — the state’s power to spend government funds, rather than the more readily displaced state power to regulate private economic activity. And, the Court underscored, federal preemption of the Massachusetts act could and did occur without Congress having declared expressly its intent to displace state law. The appellate court in the case had gone further, citing earlier Supreme Court rulings as indicating a strong presumption that Congress intends to preempt an entire field from state regulation whenever it legislates on an issue involving foreign relations.

The statute was struck down even though its intrusion and impact on the U.S. pursuit of a national policy toward Burma arguably was minor or speculative. The state law reached only the public sector purchases of only one of fifty states. The act’s “ban” on state purchases from companies doing business in Burma did not apply if a company with no prohibited Burmese ties failed to bid on a procurement contract for essential goods and services or could not come within 10% of “banned” companies’ bids on any type of goods or services. Although the EU and Japan had lodged complaints against the U.S. over the law in the WTO, and several allies and trading partners had made clear their displeasure with the law, the outcome and impact of those actions remained uncertain. The courts reviewing the Massachusetts law had little patience for these arguments, with the Supreme Court taking seriously the concerns voiced by other nations and vouched for by the U.S. executive branch, and with the court of appeals insisting (albeit on a different doctrinal point) that the effects of the Massachusetts law must be considered from the perspective that it might become a prototype for measures by other states and localities.

Other Constitutional Grounds: Foreign Affairs and Foreign Commerce

Although the Court’s decision thus was in some ways broad and constitutional, it was in important respects narrow. In keeping with a not-always-honored judicial norm, the Court declined to decide bigger questions when deciding a single, smaller one would suffice to dispose of the case. What the Court thereby left open was the possibility that the Massachusetts Burma Law or something like it would pass muster, first, in the absence of any federal statute or, second, in the presence of a supportive federal statute.

Congressional silence generally may be — and should be — enough to make such state and local laws unconstitutional. The constitution, after all, vests power over the nation’s foreign affairs in the federal government, specifically the political branches. This federal power often has been characterized by commentators, the courts and the constitution’s framers as plenary or exclusive or nearly so. The constitution also grants Congress alone the power to “regulate Commerce with foreign Nations.” Under either principle, any state or local law that treads much at all upon this constitutionally federalized ground is, at best, deeply suspect and in need of a strong and specific justification or authorization, even if the president and Congress have left the field fallow.

The lower courts in the Massachusetts Burma Law case offered considerable support for this view of the two key constitutional provisions. First, the appellate court, like the trial court below, concluded that the Burma law unconstitutionally interfered with the federal government’s foreign affairs power. Invoking the Supreme Court’s thirty year-old leading case (Zschernig v. Miller, in which the Court struck down an Oregon statute barring inheritance by alien heirs who resided in many foreign countries, including the communist world), the court found the statute faulty because it exceeded the threshold of imposing merely an “incidental or indirect effect in foreign countries” and exhibited “great potential for disruption or embarrassment” in the nation’s foreign relations. The court pointedly rejected as irrelevant Massachusetts’s claims that the Burma law was an exercise of a core state power, or the pursuit of an important state interest.

Second, in the appellate court’s view, the Burma Law ran afoul of the foreign commerce clause because it facially discriminated against foreign commerce (by explicitly mandating unfavorable treatment of companies and persons operating in Burma or doing business with Burma), attempted to regulate conduct wholly outside the borders of the state and, indeed, of the United States (by seeking to change conduct that occurs in Burma), and interfered with the ability of the federal government to speak with one voice in foreign affairs (by adding or raising the prospect of a Massachusetts approach and other state and local approaches discordant with the approach adopted by Congress and pursued by the president acting with congressional authorization). Because it had these traits, the Massachusetts law could survive only if it served to advance a legitimate state purpose and did so through the least discriminatory means possible, or if the law addressed only the state’s role as an ordinary participant in the market and the foreign commerce clause permitted such a “market participant” exception. The court found the first three of these four elements lacking and expressed skepticism about the fourth.

Open Constitutional Questions: Congressional Silence or Authorization

On such plausible readings of relevant constitutional provisions and principles, there is little to suggest that the difference between preemptive federal legislation and the federal government’s legal silence is determinative or even independently significant in deciding the fate of the Massachusetts Burma Act and laws of its ilk. And, in the jargon-laden and code-word-ridden realm of constitutional jurisprudence, the appellate court’s adoption of a “threshold” (rather than a “balancing”) test for the foreign affairs power analysis, and its adoption and application of a “dormant foreign commerce clause” analysis do much to support the conclusion that federal inaction could suffice to sustain a challenge to such state and local laws.

But all of this is still not enough to drive a constitutional stake through the heart of the Burma Law and kindred ventures into foreign policymaking by sub-national legislation. It is far from clearly settled as a constitutional matter that the sounds of federal silence will drown out an ably drafted cousin or descendent of the Massachusetts Burma Law. The Supreme Court specifically refused to reach the foreign affairs power and foreign commerce clause questions, basing its holding solely on its finding of federal preemption of the state law. The Court emphasized that its finding of preemption was in large part a matter of deferring to the constitutionally expressed common will of the federal government’s political branches. And the Court remained explicitly agnostic (although also skeptical) about the constitutionality of state and local laws that had targeted apartheid-era South Africa and that had survived unsuccessful efforts to convince Congress to pass preemptive or prohibitory legislation.

Although the lower courts reached constitutional grounds other than preemption in striking down the Massachusetts Burma Law, they too hedged a bit. The appellate and trial courts both acknowledged the complexities introduced by the divided lower court rulings on the constitutionality of state and local government procurement laws prohibiting South African sources or favoring U.S. sources. And the court of appeals conceded that one leading Supreme Court case (Barclays Bank v. Franchise Tax Board) suggested that strong evidence of implicit congressional support for an otherwise problematic state law might save it from invalidity under the foreign commerce clause (if not under the foreign affairs clause).

Moreover, silence (much less active preemption) from federal lawmakers cannot be counted on. After the Supreme Court handed down the decision in Crosby, proponents of the struck-down law vowed to seek federal legislation that would endorse or authorize state and local measures similar to Massachusetts’s Burma Law. If efforts of that type were to succeed, the Supreme Court almost certainly would uphold the state and local laws that surely would ensue. In challenging such measures, opponents could raise good arguments that constitutional objections grounded in the foreign affairs power or the foreign commerce clause should be unaffected by such congressional legislation, and that the courts should strike down such laws under the general constitutional principle that Congress and the president may not cooperate, even in the realm of foreign affairs, to permit that which the constitution otherwise forbids. In particular, foes of a new wave of state and local Burma laws could stress that federal authorization of multifarious state and local “voices” would not make them any less a threat to the nation’s ability to speak with “one voice” in foreign affairs (the constitutional imperative that seemed most to concern the courts in the Massachusetts Burma Law case), and that federally authorized sub-national regulation of foreign commerce arguably is not the congressional regulation of foreign commerce that the constitution authorizes.

Nonetheless, such arguments would run up against a powerful — and at times excessive—tendency in the Supreme Court’s broader jurisprudence (much of it echoed in the Court’s opinion in Crosby) on the separation of powers and the delegation of federal lawmaking authority. The Court’s disposition is one of great deference to joint congressional-presidential judgments, including in the realm of foreign affairs and in cases where constitutionally prescribed allocations of governmental power are being rearranged. That which the Court would find constitutional, however, sometimes is not wise, or constitutionally responsible, for Congress and the president to undertake.

The Door Ajar: Opportunities for Local Foreign Policymaking

The possibilities for sustaining something like the Massachusetts Burma Law leave considerable room for making mischief for U.S. foreign policy in an era of growing globalization. Globalization doubtless increases the probability of such state statutes and local ordinances being enacted. The Massachusetts Burma Law and the controversy surrounding it are irreducibly the products of a world in which the pool of potential suppliers of goods and services to state government agencies includes a substantial number of companies with some business interests in a relatively obscure, isolated and far-away land. Absent such globalization, the law would have been indistinguishable in its practical effect from a symbolic resolution by the state legislature deploring conditions in Burma (a path that the courts suggested could have been acceptable). Absent such globalization, Massachusetts legislators and the constituencies they represent likely would not have been subject to several factors that doubtless motivated the legislation, including a sense of potential complicity in the Burmese government’s activities, a significant degree of connection to the political and human rights situation in Burma, and a capacity to influence companies’ and, in turn, the Burmese junta’s behavior.

Such features are hardly unique to Massachusetts and Burma. As the parties noted in Crosby, states or localities already had enacted around twenty such laws on Burma alone, with more in the works. Similar laws are on the books targeting Northern Ireland, Nigeria, Cuba and China, among others. Unsuccessful efforts have taken aim at these and other countries, including Switzerland. Many of the non-Burma provisions very well could pass scrutiny under the narrow, preemption-focused analysis that is all that the Court so far has adopted

And it is not certain that Congress would refuse to enact legislation authorizing such state laws if the courts were to articulate doctrines making that necessary. Despite the complaints from proponents of the Massachusetts Burma Law that the federal Burma legislation and the Supreme Court decision indicate the iron grip of big business interests over all branches of the federal government, alliances among some mixture of human rights advocates, proponents of states’ rights, critics of a president’s foreign policy, liberal opponents of right-wing foreign states, conservative opponents of leftist foreign states, pro-labor critics of free trade and others could prove formidable in bringing pressure to bear upon or within Congress. Indeed, some of these forces secured passage of the federal law which does, after all, authorize significant sanctions against Burma. The type of legislation in question — which would merely permit (or confirm congressional agnosticism about) state or local laws and which would not prescribe particular policy content — would play to some of the worst instincts in Congress. These include a tendency heavily to discount foreign policy costs when immediate domestic political gains are available, and a preference for “auditioning” controversial foreign policy measures before having to commit to public judgments about their wisdom (a vice that received its most formal legal embodiment in the War Powers Resolution).

Well-Meaning Mischief: Son of Burma Law and U.S. Foreign Relations

If the Massachusetts Burma law or variations on its theme are, by any of these mechanisms, allowed to go forward, the impact on the conduct of U.S. foreign policy could be serious. Despite being rather limited in reach and bite, the Massachusetts Burma law elicited responses that complicated American diplomatic undertakings and foreign relations. The EU and Japanese-initiated proceedings at the WTO already had caused friction in important relationships and doubtless would have gone forward if the Supreme Court had ruled the other way. ASEAN, the EU and Japan — all important players in any multilateral effort to pressure Burma as well as key allies and partners for the U.S. more generally — made loud objections to the approach adopted in the law, eliciting and reinforcing complaints from the executive branch about the international difficulties the law was creating.

One need not stretch the imagination very far to envision the problems that might attend the proliferation of state and local acts imitating the Massachusetts Burma Law. U.S.-China relations provide perhaps the most cautionary example. There are issues aplenty that could trigger (and on occasion have triggered) state and local sanctions laws targeting China: occupation of Tibet, coerced abortion, repression of non-state-approved Christian groups, treatment of political dissidents, use of forced prison labor, and lax environmental practices, to name a few. Massachusetts Burma Law-like sanctions targeting China certainly would have a wide reach and thus seem to offer a promise of bringing effective pressure to bear, while at least extracting the state or locality’s public from distasteful complicity in actions on a scale that dwarfs Burma. Surely the number of companies doing business in China and potentially within the scope of state or local China Laws vastly exceeds the hundreds that made the list kept by the administrator of the Massachusetts Burma Law. And, of course, the impact on U.S. foreign relations and the occasions for significant conflicts and worsened relations with allies and with the targeted state are all far greater with China than with a small and near-pariah state like Burma. Given the public and partisan passions that PRC human rights practices evoke and the “no win” quality that often seems to dog the politics of China policy in Washington, one cannot completely discount the risk that Congress would do the wrong thing by failing to preempt (or by authorizing) such laws.

In practice, the sense of the importance of U.S.-China relations and the established reluctance to impose federal government sanctions on China very well might prevail, with the president or the president and Congress together taking the necessary steps to undercut a “Cambridge China Ordinance” or the like. But, as the saga of the Massachusetts Burma Law and the existence of many similar acts suggests, much damage can be done if active federal preemption is the only constitutional bar.

What’s Really Wrong with Local Foreign Policy: Incoherence

The risk, in short, is one of increased incoherence in the conduct of U.S. foreign policy, which could be costly in many all-too-familiar ways, several of them so evident that they made it into the Court’s narrow legal analysis in Crosby. The executive may have to expend political or material resources to overcome the impediments that state and local laws create for the pursuit of presidential or presidential-congressional agendas. At best, the U.S. collectively may incur considerable costs in efforts that cancel one another out. Worse, the U.S. will appear to be an uncertain and unreliable partner to other states, sending forth conflicting signals and proving unable to make or to deliver on negotiated promises. The U.S. also may be seen as an often-lawless player, given the especially strong penchant of state and local lawmakers, even more than their federal counterparts, to disregard such niceties as treaty obligations under the WTO or other agreements. By having fifty or even tens of thousands (once local governments are included) of active foreign policymaking organs, in addition to the often-fragmented federal government, U.S. foreign policy could become substantially more vulnerable to partial interests at the expense of national interests.

As this litany of problems suggests, the kind of incoherence that the progeny of the Massachusetts Burma Law would introduce into U.S. foreign policy is not only a matter of inconsistency and waste; it is a matter also of courting substantively worse policy, by making even harder the already-difficult objective of achieving careful and reasoned trade-offs among national ideals and interests, and by vesting foreign policymaking power in entities that see only small and unrepresentative slices of foreign relations issues, have limited relevant expertise and experience, and face particularly problematic incentives in addressing issues that greatly affect U.S. relations with foreign states. Simply put, states and localities may be invaluable laboratories of domestic democracy, but they can be a Frankenstein’s laboratory for foreign relations.

Such practical-political factors are among several possible and partially overlapping reasons (almost of all of them at least touched upon in the courts’ opinions overturning the Massachusetts Burma Law) to find the specter of fragmented and disparate, state and local-level foreign policy troubling. Other underlying grounds for opposition include the legal-metaphysical: the capacity to conduct foreign relations vested directly in the United States as a whole and presumptively in the federal government upon the U.S.’s entering the community of nations; it is not, as some would have it, like the other federal powers which reside in the states subject only to the limited delegation to the national government effected by constitutional compact. They also encompass the constitutional-originalist: whatever the current wisdom of the arrangement, the framers gave the national government exclusive power in the field of foreign affairs so that the nation could speak with one voice and act with clear purpose and maximum efficacy in a dangerous world.

In the aftermath of the Supreme Court’s decision, the picture remains mixed and unsettled. For some time, the fight over what the Court left open will continue in city halls, state houses, Congress, the executive branch and the courts. With Crosby, there is hope, but not certainty, that the obstacles to coherent U.S. foreign policy which the Massachusetts statute briefly put on the road to Mandalay and Rangoon will not be allowed to be erected on the road to Shanghai and Beijing or elsewhere — at least not without clear federal acquiescence or, preferably, permission which, ideally, would not be forthcoming but which, if given, likely would withstand constitutional challenge.

Neither the decision in Crosby nor a sensible extension of it to protect the practical and constitutional interests in a coherent national foreign policy denies to advocates of human rights and democracy and their champions in local and state governments the means to pursue their agendas. It merely tells them to seek to affect national law and policy (which they succeeded in doing to a considerable degree and with the participation of Massachusetts’s congressional representatives in the form of the federal Burma Law) or to affect non-governmental choices in an increasingly globalized marketplace through such means as consumer boycotts, institutional investors’ policies or shareholders’ resolutions (which, by most accounts, played a much larger role than did state government procurement laws in bringing pressure to bear on white-ruled South Africa, the target of the previous major wave of state and local sanctions laws).