Note to Activists: This letter is for your local and state legislators to sign. When they sign the
letter, please send a copy to Ruth Caplan, Alliance for Democracy, Washington DC Office, 3407
34th Place NW, Washington DC 20016. We will keep the letter updated by listing those who
have signed on this site.
LETTER FOR LOCAL AND STATE OFFICIALS ON TRADE AND INVESTMENT AGREEMENTS
Dear President Bush:
We are writing as state and local elected officials to express our serious concerns about the
potential impact of existing international trade agreements and those under negotiation by your
Administration. We believe provisions in these agreements may conflict with the lawmaking
authority of state legislatures and city and local government bodies. We are particularly
concerned about potential impacts on state and local procurement of goods and services,
promotion of local development, provision of public services, and regulation to promote public
welfare and environmental protection.
Our concerns are of great urgency given the ongoing negotiation of the Free Trade Area of the
Americas (FTAA), the proposed Central America Free Trade Area (CAFTA), numerous bilateral
trade agreements underway, and the expansion of the WTO's General Agreement on Trade in
Services (GATS). We are also concerned about the possibility that formal WTO negotiations on
investment and government procurement could be launched after the Fourth WTO Ministerial in
It is our position that traditional state and local government authority should not be
compromised in any bilateral, regional or global trade agreement. Further, we wish to bring to
your attention our specific concerns related to negotiations on services, government
procurement and investment.
SERVICES. We are concerned that GATS and proposed FTAA rules modeled on GATS could undercut
the traditional authority of state and local governments. The rules could impact our authority to
provide and/or regulate land use, transportation, alcoholic beverages sales, education, health
care, insurance, sewerage, solid waste, and potentially, water and energy.
GATS rules on "domestic regulation" set a standard that local regulation of services must not be
"more burdensome than necessary" to trade, as opposed to the traditional standard that
regulation must merely have a rational basis for protecting the public interest. This has a
chilling effect on our ability to regulate. In addition, rules on "market access" forbid many
traditional strategies for protecting the public interest such as certificates of need for
hospitals. Even the location of pipelines, the size of landfills, and certain zoning regulations
could be challenged.
Further we wish to note that the GATS language which exempts "services supplied in the
exercise of government authority" does little to reassure us. In almost all instances local or
state governments are not the sole supplier of a particular type of service. Yet this is a
condition for the exemption. Therefore we conclude that most local and state services are not
exempted by this language. The only real protection is to carve out state and local government
from GATS and the services chapter of other agreements.
Finally, we object to proposals that these agreements include transparency language requiring
all levels of government to publish proposed rules, solicit comments from interested parties in
all countries which are part of the agreement, and take such comments into consideration in
adopting any final rule. This represents an unfunded mandate that would place a major burden on
state and local government.
INVESTMENT. The potential extension of NAFTA Chapter 11 investment provisions to the U.S.
Chile agreement and the FTAA is also deeply troubling. By using Chapter 11 authority, foreign
investors have challenged core functions of state and local government, including regulatory
power to protect groundwater (California), the power of civil juries to use punitive damages to
deter corporate fraud (Mississippi), the right of states to claim sovereign immunity
(Massachusetts), and state compliance with "buy-America" requirements for spending federal
highway funds (Virginia).
Many of these challenges have been brought on the grounds that foreign investors must be
compensated when regulation entirely within the scope of traditional governmental authority
negatively affects their business interests. Under the vague and overly broad language in the
substantive provisions of Chapter 11, actions against the United States could result in outcomes
that would not be possible if the challenges were brought in domestic courts, thereby granting to
foreign investors greater rights than those available to U.S. investors.
We are concerned that such foreign investor claims may create fiscal pressure on the federal
government to preempt or push for changes in state or local law. Such fiscal pressure on the
federal government is illustrated by the $970 million Methanex claim challenging California's
decision to phase out a gasoline additive (MTBE). Altogether, the first four claims against the
U.S. based on state actions exceed $1.8 billion.
For these reasons, we concur with the National Conference of State Legislatures that trade
agreements must not grant foreign investors greater rights than those available in our legal
system and that these agreements must be clearly and effectively crafted to accomplish that aim.
We also call your attention to concerns raised by the National League of Cities, the National
Association of Counties, and the National Association of Attorneys General.
GOVERNMENT PROCUREMENT. Negotiations regarding government procurement could further
restrict state and local government's authority in regulating their purchase of goods and
services. In particular, we are concerned that current proposals could further endanger our
ability to use procurement to promote legitimate public policy goals including economic
development, support for veteran and minority-owned businesses, and responsible practices
with regard to the environment and human rights. Trade agreements should not mandate that we
only consider price and performance.
The right to utilize procurement as a tool for advancing the interests and values of our
constituents has long been protected under the U.S. Constitution. It is our position that trade
agreement provisions need to respect, not undermine, this important public policy tool and
should not be applied to state and local governments without their prior legislative approval.
We look forward to your support in assuring that these essential state and local governmental
authorities are protected and to working with your administration to achieve this goal.
cc. Senate Majority Leader Thomas Daschle
Speaker of the House J. Dennis Hastert
Senator Max Baucus, Chair, Senate Finance Committee
Representative Bill Thomas, Chair, Committee on Ways and Means