Wary states resist free-trade deals

The Bush administration is facing increasing resistance as it tries to persuade state governments to open up their contracts to foreign competition in free-trade deals.

State officials are concerned the deals, with a growing list of countries, will erode their sovereignty and ability to set wage, environmental, "Buy American" and other standards in taxpayer-funded contracts.

"We have procurement laws and environment laws that spell out how things must be done, including how much workers must be paid. All of these things could be overturned or ignored in a trade agreement," said Maryland Delegate Pauline H. Menes, a Democrat representing parts of Anne Arundel and Prince George's counties.

Mrs. Menes and state Sen. Paul G. Pinsky, Prince George's Democrat, introduced separate bills to limit the governor's ability to sign on to any free-trade agreement, and to require that work on state contracts be performed inside the United States.

The bill curtailing the governor's powers has passed both houses, and Mrs. Menes said she expects approval on the second bill as soon as today.

Both are likely to be vetoed by Gov. Robert L. Ehrlich Jr., a Republican. It is not clear whether the legislation has enough support in the House and the Senate to override a veto.

Mr. Ehrlich last week had not taken a position on the bills. He was one of the 21 governors to open some state contracts in the Central American Free Trade Agreement (CAFTA), the pact with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic that is awaiting congressional approval. Several agencies would be open to competition on procurement contracts worth at least $477,000 and construction contracts worth $6.7 million. In return, Maryland companies could bid on some local-level contracts in the six countries.

Mr. Ehrlich is not responding to a January letter from the U.S. Trade Representative's Office on proposed agreements with Panama, Colombia, Ecuador and Peru until Mrs. Menes and Mr. Pinsky's legislation is approved or defeated, a state spokeswoman said.

Robert B. Zoellick, who was U.S. trade representative until February, in January wrote the 50 governors explaining that opening state contracts to competition from the four Latin American countries would ensure reciprocal access to "subfederal" contracts with the new free-trade partners.

"In particular, I wanted you to be aware that a new U.S. government policy will provide increased market-access opportunities to your state suppliers and workers if your state chooses to cover some of its procurement," Mr. Zoellick wrote.

Arkansas, Florida, Mississippi, Texas and Utah said yes, the trade office said.

"The benefits of free trade cannot be limited to increases in the flow of goods and merchandise through ports and seaports of the Americas. For it to be truly successful, free trade needs to have an impact on people's everyday lives," Florida Gov. Jeb Bush, a Republican, wrote in agreeing to open state procurement to competition.

It took about a year to gain 21 letters of support on CAFTA, and the White House trade office isn't concerned with the limited response on other agreements.

Still, most states never signed on to CAFTA.

"While we are confident you will work in all of our interests, it seems inappropriate at this point to make such a commitment, and we decline to do so," Virginia Administration Secretary Sandra Bowen wrote in response to a 2003 letter from the Office of the U.S. Trade Representative regarding CAFTA and Morocco and Australia trade deals. The state has not responded to subsequent communications, but the earlier decision not to participate stands, said Kevin Hall, a state spokesman.

Virginia learned how international trade agreements can affect local projects. A Canadian company involved in Northern Virginia's Mixing Bowl road-construction project unsuccessfully sued the federal government on the grounds that "Buy American" rules violated the 1994 North American Free Trade Agreement.

Reflecting concerns over such sovereignty issues, outsourcing and jobs, seven states last year backed away from CAFTA commitments.

"This will enable Kansas to better control our options as we look to grow our economy," Kansas Gov. Kathleen Sebelius, a Democrat, wrote in May.

The withdrawal also reflected pressure from state legislators who are becoming more aware of international trade's effect on local laws, as well as political and legal precedents set in a fast-growing number of pacts.

"I think that the concern has been heightened in the last year and a half; there's no doubt about it," said Utah state Rep. Sheryl L. Allen, a Republican who serves as chairwoman of the economic development and trade committee at the National Conference of State Legislatures.

"We want to make sure states' rights are protected," she said.