US-BUSINESS: Local Sanctions Threat Against Indonesian Dealings

By Farhan Haq Reprint | | Print |

NEW YORK, May 2 1997 (IPS) - The state of Massachusetts, leader of a successful campaign to impose sanctions against U.S. firms dealing with Burma, now is taking aim at companies that do business with Indonesia.

The state administration is reviewing “selective purchasing” legislation designed to ban state agencies from purchasing goods and services provided by such companies. The legislation should be be revised by a state senate committee early in May, and approved in the coming months, says State Senator Marc Pacheco, one of co-sponsors of the bill.

The bill is designed to launch a wave of actions against Indonesia by other jurisdictions similar to those which have helped force about two dozen U.S. companies to withdraw from Burma. Bowing to the sanctions movement against Burma, President Bill Clinton last week announced a ban on all new U.S. investment in that country.

The state of Rhode Island and the city of Madison, Wisconsin, also are considering selective purchasing laws to press businesses investing in Indonesia, says John Miller, spokesman for the East Timor Action Network, a US-based group which supports East Timor’s independence.

The Indonesia sanctions movement has grown in strength backed by public opposition to Jakarta’s poor human rights record, and its brutal 1975 invasion of East Timor that resulted in the deaths of an estimated 200,000 Timorese.

The movement has just begun, and has yet to scare away American companies dealing with Indonesia, Miller says. “It’s not like Burma, where nearly every corporation that is targeted pulls out,” but the fledgling movement “has definitely made Indonesia and the U.S. business community a little nervous.”

Francisco Lopes da Cruz, Indonesia’s ambassador-at-large on East Timor, however maintains that punitive measures like sanctions will not advance the cause of human rights for the Timorese or Indonesians.

“I think we have to use a more cooperative approach instead of confrontation,” he says.

U.S. businesses are even more worried, particularly following the example of the growth of the Burma sanctions campaign. The National Association of Manufacturers, in a recent statement, attacked the concept of unilateral sanctions against Burma for doing “nothing to advance human rights,” while the National Foreign Trade Council called the new federal sanctions “a failure of American foreign policy.”

Wider sanctions against Indonesia – far more integrated into the U.S. marketplace than smaller, and relatively isolated Burma – could become an even larger concern. By the end of 1995, U.S. exports to Indonesia totalled four billion dollars, while imports of Indonesian goods totalled 3.2 billion dollars. Total U.S. investment in Indonesia is estimated to be as high as 7.1 billion dollars.

Several business groups, including the United States-ASEAN Business Council and the US-Indonesia Chamber of Commerce, turned out during recent hearings in Massachusetts to complain that any sanctions legislation could hurt the local economy and job growth in the state.

A related concern comes from governments and businesses in Europe and Japan who contend that state-level and local sanctions undermine federal government’s ability to make trade policy. The European Union has criticised the Burma selective purchasing laws as a potential violation of a World Trade Organisation (WTO) agreement that forbids Massachusetts, and 37 of 50 U.S. states, from discriminating against foreign companies bidding for public contracts for political reasons.

The drafters of the Indonesia legislation have taken the Burma example into account, however, and are “looking at the language, to the extent that it is in conflict with treaties that have been signed,” Pacheco says.

Because the WTO agreement may apply only to public contracts that exceed 500,000 dollars, the drafters may devise sanctions that would only affect contracts below that level, Pacheco says. In that way, Massachusetts would still have fairly strong penalties against companies which do business with Jakarta, while complying with WTO requirements.

That approach could also address other governments’ complaints that state-level sanctions could replace U.S. foreign policy with dozens of state- and local-level foreign policies.

“We believe there are rights within the states to invest resources where the state chooses to do so,” Pacheco argues. If legislation is crafted to take into account federal treaty agreements, there should be no dispute between state and federal policy, he says.

That may not satisfy businesses which are eager for the Clinton administration to act against state-level sanctions by challenging them in court.

While Clinton aides have threatened to go to court over the issue, most analysts believe the administration will be unlikely to do so over Indonesia. The ongoing controversy over Indonesian financing of Clinton’s 1996 re-election campaign virtually ensures that the president will not want to appear soft on Jakarta.

“If President Clinton sued Massachusetts over its Indonesia sanctions bill, his political opponents might allege that he was doing so because Indonesian interests had helped fund his re- election campaign,” one U.S. official told a journalist last week.