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NFTC Calls on Pennsylvania Legislators to Consider Negative Implications of Proposed Divestment Legislation
Date: 10/30/2007

Contends Bills Undermine U.S. Foreign Policy, Will Harm Businesses and Pensioners

Washington, DC The National Foreign Trade Council (NFTC), a Washington, DC-based association of some 300 companies engaged in international trade and investment, today urged Members of the Pennsylvania General Assembly to reconsider bills HB 1085, 1086 and 1087 which could require divestment from a broad array of companies with international operations. In opposition to the proposed legislation, the NFTC sent letters to state lawmakers asking them to consider the bills' potentially negative consequences, including that the measures undermine the federal government's ability to conduct foreign policy, and put state pensioners and U.S. companies at undue financial risk, while having no effect on the behavior of targeted governments."

"We're seeing a proliferation of these measures at the State level, many of which have no regard for the level or type of business surrounding these countries of concern," said NFTC President Bill Reinsch."This should be alarming for any businesses engaged in international commerce and for pensioners whose retirement funds could be affected."

"Statutes aimed at affecting foreign policy at the state and local levels as divestment seeks to do threaten to create a complex web of restrictions and regulations that interfere with the Constitutional rights given to the President to largely conduct foreign policy," wrote Reinsch in a letter to Pennsylvania legislators. "Foreign policy sanctions by states not only undermine the ability of the U.S. to speak with one voice, but also frustrate cooperation with U.S. trading partners who often see them as a violation of U.S. international commitments."

The NFTC pressed Pennsylvania lawmakers to take a closer look at ambiguous language included in the legislation, specifically the lack of well-defined criteria that would be used to identify companies targeted for divestment. "While this legislation purports to address business ties between companies and countries on the U.S. list of state sponsors of terrorism, the provisions are so broad and the legislation is so complicated as to affect hundreds of U.S. and foreign companies, including many whose supposed ties to these countries are variously tenuous, mischaracterized or legitimate under U.S. law," Reinsch wrote.

"Most troubling, the bills appear to require divestment of investments in any company that does any amount of indirect business with targeted countries, including in instances where companies have no direct ties or contact with the offending countries. The United States will no doubt face vigorous complaints from our trading partners if it were to come into effect," the letter reads.

The letter also argues that not only are there no clear indications for how pension fund trustees are supposed to divest, "there appears to be no transparent process for trustees to decide which companies to divest from." The letter contends that the bills' broad divestment provisions could cost pensioners millions of dollars in transaction costs and threaten to "eliminate entire stock classes from the pool of potential investments, narrowing State pension fund managers' choices and increasing the overall risk to the portfolio."

The NFTC also questioned how the state will target companies when no federal list exists, noting that even the U.S. Securities and Exchange Commission was forced to take down its own flawed list of companies.

For a full copy of the letter, please click here.

Advancing Global Commerce for Over 90 Years
The National Foreign Trade Council ( is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices in Washington and New York.