Free Trade and Federalism
The National Conference of State Legislatures (NCSL) supports expanding U.S. net exports through well-crafted international trade agreements that are consistent with traditional American values of constitutional federalism, and protect state legislative, judicial and regulatory authority.
NCSL supports federal legislation that promotes collaboration between the states and the federal government on trade policy. NCSL supports efforts to negotiate new trade or investment agreements and its implementing legislation that secure free and open access to overseas markets for American products. In negotiating new agreements, NCSL believes that federalism and state sovereignty protections must be included.
NCSL urges the Office of the United States Trade Representative (USTR) to collaborate with state legislatures as well as governors about trade policy that may affect state practices and policy on procurement, investment, services, and any action that would remove a foreign entity from state authority. USTR should not bind a state to an international procurement agreement without formal consent from the state legislature.
NCSL encourages USTR to utilize the “positive list” approach for making services, procurement, and investment commitments in trade agreements. Only state laws that are specifically committed should be covered in the agreement. Following appropriate consultations with USTR, the states must be able to set and adjust their commitments – a right the states have and which USTR has repeatedly recognized. USTR should therefore make clear to trade negotiating partners that U.S. states retain the ability to make adjustments to commitments regarding state-level services, procurement, and investment policies.
NCSL will not support Bilateral Investment Treaties (BITs) or Free Trade Agreements (FTAs) with investment chapters that provide greater substantive or procedural rights to foreign companies than U.S. companies enjoy under the U.S. Constitution. Specifically, NCSL will not support any BIT or FTA that provides for investor/state dispute resolution. NCSL firmly believes that when a state adopts a non-discriminatory law or regulation intended to serve a public purpose, it shall not constitute a violation of an investment agreement or treaty, even if the change in the legal environment thwarts the foreign investors’ previous expectations.
NCSL believes that BIT and FTA implementing legislation must include provisions that deny any private action in U.S. courts or before international dispute resolution panels to enforce international trade or investment agreements. Implementing legislation must also include provisions stating that neither the decisions of international dispute resolution panels nor international trade and investment agreements themselves are binding on the states as a matter of U.S. law.
NCSL supports the authorization and appropriation of resources to USTR, so they are equipped to fully collaborate with state legislatures, while representing their interests and the American public’s in trade negotiations and agreements.
NCSL encourages Congress to require the Government Accountability Office to develop state economic and sovereignty impact statements for international trade and investment agreements under negotiation.
NCSL urges the USTR to collaborate with state legislators as well as governors prior to the onset of trade negotiations about state procurement practices, investment, and services issues. NCSL supports federal efforts to provide Trade Adjustment Assistance (TAA) to affected workers.
NCSL supports federal efforts to assist in building the trade capacity and trade agreement compliance of developing countries, including funding infrastructure and rural development, and ensuring that laws and institutions related to labor and the environment are improved and strengthened.
NCSL believes that all international services agreements entered into by the United States must include provisions that preserve the right of federal, state, and local governments to provide and regulate services in the public interest on a non-discriminatory basis.
NCSL upholds the continued ability of the states to divest from any country, or firms conducting business in that country, if the country is proven to be supporting or engaging in terrorism or other serious criminal acts against the United States or its citizens, or proven to be engaging in serious human rights abuses, including genocide, slavery or human trafficking.
NCSL urges the federal government to provide authoritative information to U.S. investors, including state and local public pension plans, about foreign and domestic firms and their financial and investment activities in specific countries, such as those identified by the U.S. Department of State as State Sponsors of Terrorism.
World Trade Organization Negotiations
NCSL recognizes the benefits of international trade in creating jobs, raising living standards and stimulating growth in the United States. NCSL supports U.S. efforts to increase the transparency, accessibility, participation and accountability of the World Trade Organization (WTO). NCSL supports broadening participation in the WTO and addressing environmental and labor matters. NCSL also endorses the call within the WTO to further reduce trade barriers in manufactured products, agriculture and services.
NCSL will only support trade agreements that preserve state law and the authority of state legislatures.
Implementing legislation for trade and investment agreements must also be crafted to include protections for our constitutional system of federalism. Reservations must be made to trade and investment agreements to “grandfather” existing state laws that might otherwise be subject to challenge. NCSL opposes private rights of action in U.S. courts or international dispute resolution panels based on international trade or investment agreements.
General Agreement on Trade in Services
NCSL urges a renewed commitment to state-federal collaboration in financial, energy, environment, distribution and education related services. NCSL also urges the USTR to oppose further WTO constraints on domestic regulation of the service sector.
NCSL calls upon Congress to renew the notice to include state government notification and approval provisions for the General Agreement on Trade in Services (GATS) negotiations as well.
USTR must recognize that governors are not authorized to bind state governments unless legislatively permitted and NCSL strongly recommends that USTR, for all future procurements, include state legislatures. The federal government must cooperate with state legislatures to provide that decisions about state procurement practices or other matters governed by state laws under our federal system are not made without the consent of the legislature. Additionally, NCSL encourages USTR to strictly observe the states’ constitutional authority to set procurement policy to promote these public interests while negotiating any modifications to WTO’s Agreement on Government Procurement (GPA) or procurement chapters in free trade agreements.
NCSL urges USTR to collaborate regularly and meaningfully with state governments during any renegotiations of the GPA.
Export Promotion, Export Finance and Trade Agreements
The states and the federal government have a role in export promotion, particularly to help small- and medium-sized businesses who may find it difficult to obtain financing or insurance for their goods.
NCSL urges the federal government to improve its coordination and cooperation with state programs.
NCSL urges continued funding for federal export programs such as the U.S. Commercial Service (USCS) of the Department of Commerce, which would permit it to properly staff overseas posts. Funding for the Export-Import Bank's direct and guaranteed loan programs should also be maintained, and NCSL particularly supports a constant level of funding for the Bank's City/State Program.
NCSL supports the federal government’s efforts to work through multilateral negotiations to open markets that are currently closed to U.S. products and to reduce the use of trade-distorting subsidies.
NCSL supports increasing capacity at the Office of the USTR to work with state governments and ensure that our trading partners are adhering to the terms of our agreements.
NCSL strongly urges the federal government to support training for inspection professionals and the development of new technologies to secure the health and safety of imported foods and agricultural products.
Affirming and Strengthening the President’s Order on Safeguarding Federalism in Trade
NCSL requests that the President by executive order clarify that trade and investment agreements and bi-lateral investment treaties negotiated by the USTR should avoid conflicts with state governing authority, under the same terms as the executive order on preemption.
NCSL requests that the President establish, by executive order, a more effective federal-state consultation system that includes greater involvement and notification of state legislatures.