States’ Rights and International Trade

Over the past decade-and-a-half, international trade agreements have been steadily chipping away at states’ rights. As international trade agreements continue to expand their reach beyond the normal trade purviews of tariffs and quotas, this ongoing erosion of state sovereignty threatens to accelerate. A new process for developing trade policies must be enacted in order to ensure that citizens have a meaningful voice in trade negotiations, that states’ right to regulate is protected and that the checks-and-balances inherent in the nation’s federal system are upheld.

Encroachment Upon States’ Rights within Trade Agreements
The most common areas of encroachment upon state sovereignty within international trade agreements are trade pact provisions that impact the following:

Public Procurement: Many international trade agreements, such as CAFTA, severely limit states’ ability to set procurement policies designed to aid in local economic development or to help achieve other worthwhile goals. State and municipal procurement provisions jeopardized by these agreements include: prevailing wage requirements, “buy local” preferences, labeling requirements, recycled content preferences, alternative energy/fuel preferences, “sweatfree” standards, “best value” healthcare requirements and a wide range of other human rights standards.

Services: Many international trade agreements, particularly the WTO’s General Agreement on Trade in Services (GATS), limit states’ ability to make decisions regarding the subsidization and regulation of services such as public education, student financial aid, health care, transportation, gambling, land use, natural resource conservation, libraries, public works and more.

Extra-Judicial Challenges: Many international trade agreements, starting with NAFTA, allow foreign investors to directly challenge the laws and regulations of states and municipalities. These “regulatory takings” cases are decided in special trade tribunals that fall outside the jurisdiction of the U.S. court system; American companies doing business in the U.S. do not have access to these tribunals. These cases threaten state environmental protections, land use restrictions, public health standards, food safety regulations and similar policies—even if the regulations in question are applied equally to foreign and domestic companies.

How Policymaking Procedures Can Affect States’ Rights
The federal government’s Fast Track trade promotion authority mechanism for establishing international trade agreements exempts trade policies from the scrutiny of ordinary Congressional committee review, amendment and debate procedures. As such, states’ ability to remedy grievances with individual trade agreement proposals is significantly limited by Fast Track.

The current Congressional grant of Fast Track expires in July 2007, thus creating an appropriate opportunity for Congress to consider the creation of trade policymaking procedures that better incorporate state-federal consultation and cooperation. At a minimum, Congress should re-write its trade policymaking rules to include an explicit mechanism for ensuring the prior informed consent of state legislatures before states are bound to the non-tariff terms of any trade agreement that affects state regulatory authority.

Oregon’s Strong Tradition of Defending States’ Rights in Trade
In 2001, during the last Congressional debate on trade policymaking procedures, the seventy-first Legislative Assembly of the State of Oregon passed Senate Joint Memorial #2-2 outlining many of the concerns expressed in this factsheet and calling on Congress to investigate the impact of trade policies on state and local regulatory authority. In 2005, the Oregon Attorney General joined 28 others around the nation in calling on the United States Trade Representative (USTR) to “maintain the principle that the federal government may request, but not require, states to alter their regulatory regimes in areas over which the states hold constitutional authority.” Neither of these calls was sufficiently answered.

In 2004 and 2006, Governor Kulongoski wrote to the USTR explicitly requesting that Oregon be excluded from the procurement and service provisions of future trade agreements. As important as this action was in protecting the state’s sovereignty, it remains to be seen to what extent the USTR will honor these requests and whether future governors will extend them. More so, the positive steps taken by the governor still cannot completely protect the state from the potential extra-judicial challenges to state law enabled by international trade agreements; only an act of Congress can offer such protection.

Oregon State Representative Brad Witt (D-Clatskanie) introduced House Joint Memorial 18 before the seventy-fourth Oregon Legislative Assembly. HJM 18 urges Congress to replace Fast Track trade promotion authority with a more democratic and inclusive trade policymaking process that ensures the prior informed consent ofthe state legislature before Oregon isbound to the terms of any trade agreement that affects state regulatory authority.

For More Information
Full textof House Joint Memorial 18
ORFTC testimony in support of House Joint Memorial 18

For more information, please contact Arthur Stamoulis at the Oregon Fair Trade Campaign at (503) 736-9777 or