The

NEWRULESEXPLORING COMMUNITY, MOBILITY, SCALE AND TRADE • WINTER 2000 Local Retailers Hit the Web

Paving Our Electronic Dirt Roads

Keeping the Minors Home

Footloose and Label-Free The

[ contents ] NEWRULESEXPLORING COMMUNITY, MOBILITY, SCALE AND TRAD

Editor in Chief Features David Morris New Rules Staff 4 Local Retailers Hit the Web Nicholas Hanlon, Brian Levy, Stacy Mitchell, David Morris, Elizabeth Noll, In the flurry over the runaway growth of electronic commerce, Simona Fuma Shapiro one fact is rarely addressed: e-commerce is attracting consumer dollars that used to go to local stores. Now independent busi- Art Direction nesses are collaborating to bring online profits back to Main Holle Brian Street. By Stacy Mitchell

ILSR President 9 Paving Our Electronic Dirt Roads Neil Seldman Although the Telecommunications Act reduced local authority, there are still many steps a community can take to ensure its cit- E-mail Addresses izens have an accessible, affordable information infrastructure. Individual e-mail addresses for The New Rules By Miles Fidelman staff: [first name’s initial plus last name]@ilsr.org.

13 Keeping the Minors Home The New Rules (ISSN 1521-9917) is published Home teams are pulled up by their roots as owners cash in on quarterly by the Institute for Local Self-Reliance, stadium deals: it happened to the majors and now it’s happening 1313 5th Street SE, Minneapolis, MN 55414; tele- to minor league sports teams. Buying the team is one way to phone: 612-379-3815; fax: 612-379-3920; website: keep them at hometown’s home plate. By Daniel Kraker www.newrules.org. Washington, DC, office: 2425 18th Street NW, Washington, DC 20009; tele- phone: 202-232-4108; fax: 202-332-0463; website: 16 This Isn’t Your Father’s Free Trade www.ilsr.org. Send all subscription requests to the It wasn’t tariffs that brought 50,000 protestors to Seattle’s streets Minneapolis office: 1 year $35; $25 nonprofit in November. It was concern over issues like living standards, organizations, governmental agencies, libraries, social justice, environmental protection and political freedom. students; $45 foreign (U.S. funds drawn on U.S. Free trade, as administered by the WTO, is no longer about bank). For subscriptions of more than a year, how much tax to slap on an import. By David Morris multiple subscriptions, bulk copy sales, or for rights and permissions, contact Elizabeth Noll. 18 Footloose and Label-Free Labeling laws allow vendors to sell apples without telling con- The New Rules is printed with vegetable-based sumers whether they’re from Washington or Australia. inks containing no less than 20 percent vegetable Congress is looking at several bills that would require stricter oil on processed chlorine-free recycled paper labeling of produce and meat. By Simona Fuma Shapiro containing 50 percent post-consumer waste fiber. This publication is printed in the United States by Sexton Printing, a certified environmentally Departments responsible Great Printer. 1 JN 7 1 editor’s note Policies of place should be a priority in the November 2000 Cover Illustration election campaign. Ken Avidor/Avidor Studios

2place rules FCC okays microradio. West Virginia sues Wampler. San Francisco bans ATMs, banks sue. Boulder proposes local owner- ship preference. Dairy compact revived. [ editor’s note ]

The Place of Place in the 21st Century

he election campaign is in full product was made unless they wanted gear. From now until November, to favor domestic and local producers?: Tcandidates will bombard us a tendency viewed as downright sub- with zillions of words about taxes versive in a world governed by and deficits, military spending the World Trade Organization. and health care. These are all Globalization pervades all important issues, to be sure. areas of the economy. But no candidate or party Charles Dolan’s Cablevision has yet to address what owns the New York may be the key issue: Knicks and Rangers, as what is the place of place well as Madison Square in the 21st century? Garden. Rupert Murdoch’s When President vast communications and Clinton told us in 1997 entertainment empire that he wanted to “build a owns the Los Angeles bridge to the 21st century” Dodgers. Their relation- he was metaphorically ship to the place their telling us he was going to teams inhabit is tenuous. rely on old ideas to fashion Most readers of this magazine policies for the new millennium. live in cities where major league Do we really need more bridges? sports owners have threatened to The idea that mobility is our highest leave if residents didn’t cough up the good, and the distance from producer dough for a new stadium/arena/ to consumer an important measure of ballpark. At the major league level success, is outmoded and increasingly the sports owners, with the acquies- destructive. cence of Congress, have established This journal takes issue with that The idea that mobility is our rules that give communities only two single-minded focus. It discusses poli- choices: pay up or see their teams tics and policy from the ground up. highest good, and the distance depart. But as Daniel Kraker notes, An information economy is inher- the minor leagues are an entirely ently global in reach. But can infor- from producer to consumer an different ball game. When minor mation technologies be harnessed to league owners demand subsidies strengthen geographic communities? important measure of success, greater than the market value of the Stacy Mitchell, author of ILSR’s well- team, a growing number of commu- received book, The Home Town is outmoded and increasingly nities are saying, “Why not own it Advantage: How to Defend Your main ourselves?” Wouldn’t we prefer to Street Against Chain Stores...And Why destructive. root for a truly rooted home team? It Matters, addresses that question in This is the year we debate policy. her hopeful analysis of the new .com Or should. Who knows? If enough of ventures of the small business com- cities—and states—of the authority to us ask these kinds of questions, munity. “Buy via the web, if you act on behalf of their citizens in this maybe our candidates will be forced must, but buy from your local store,” arena. to tell us where they stand on the is their motto. Sometimes the contempt that important issue of place. What policies Miles Fidelman, president of the policymakers feel for place verges on would they propose if community Center for Civic Networking, persua- the absurd. Simona Fuma Shapiro really mattered? sively argues that cities must and can discusses one such area: country-of- As always, we welcome your feed- play a key role in designing a telecom- origin labeling. Free traders like Bill back and your support. munications system that serves the Clinton criticize such labeling as —David Morris public interest. Yet Congress and the protectionist. After all, why on earth courts are increasingly stripping would someone need to know where a

Winter 2000 THE NEW RULES 1 [ place rules ]

FCC Carves a Space for West Virginia Uses Consumer Law to Grassroots Radio Prosecute Packers

One year after FCC Chair William Kennard intro- In an effort to mitigate the struggles of small poultry duced a tentative plan to legalize low power FM stations farmers, states have begun searching for ways to curb (see “Fighting Corporate Power with Low Power,” the power of large poultry processors to which the The New Rules, Summer 1999), the FCC has finally farmers are contracted and to which they grow authorized microradio. After the ruling Kennard increasingly indebted. Last year West Virginia proclaimed, “Today...we have thrown open the doors Attorney General Darrell V. McGraw challenged the of opportunity to the smaller, community-oriented state poultry industry by filing suit against Wampler broadcaster.” foods and its parent company. Using an old law in a The FCC’s action could create as many as 1,000 new way, the suit charges Wampler with “unfair nonprofit grassroots radio stations. The decision was methods of competition” and “deceptive acts or likely influenced by a flood of supportive letters sent practices” under the state’s Consumer Credit and to the FCC over the past year, what Mass Media Protection Act. The state alleges that the company Bureau Chief Roy Stewart said was the greatest “kind forecast false earnings projections and distributed of support...from ordinary people” that he has seen in poor quality chicks to its contracted poultry growers, his 30 years with the FCC. causing them to lose money. Groups like the National Lawyer’s Guild Upon word of the suit, Wampler immediately Committee for Democratic Communications had petitioned to move the lawsuit to federal court, where expressed concern that the initial rulemaking would the case would presumably come before the USDA’s have allowed ownership of microradio stations by Grain Inspection, Packers and Stockyards Admin- large commercial broadcasters. The FCC’s final istration. The department has rarely enforced the decision addressed this concern by mandating that Packers and Stockyards Act and has never ruled low power stations be strictly nonprofit. Stations can’t against large poultry processors. In late August 1999, sell advertising, although they can seek NPR-style the U.S. District Court sent the case back to West underwriting. Virginia, stating “the state courts of West Virginia Only stations under 100W will be permitted, easing should first pass upon whether this unique theory of concerns that the ruling would only make room for a recovery is a legally viable one.” Further appeals from handful of large stations. To make room for the new Wampler are expected. micro-stations the FCC eliminated the long-standing For more information call Judy Morrison at the third adjacent channel protection, meaning that now National Contract Poultry Growers Association, microradio stations can operate on a frequency three 1-800-259-8100, or look up the website http:// channels away from an existing station. www.web-span.com/pga/. The FCC also placed initial ownership restrictions —BL on low power radio, allowing an ownership entity only one station for the first two years and mandating San Francisco Outlaws ATM Surcharges; that that entity be headquartered within ten miles of Federal Court Intervenes the station. Those restrictions are lifted after two years, allowing for nonlocal ownership and for one On November 2, San Francisco voters enacted a ban entity to own up to ten stations nationwide. However, on ATM surcharges by a 2-1 margin. The city became local owners are given preference if more than one the second in the nation to outlaw the fees, following group is vying for a single license within a community, a similar ordinance adopted in Santa Monica in and no party with ties to a media outlet—radio, news- October. Now dozens of cities and states are considering papers, cable, etc.—can own a microradio station. their own legislation. While the FCC’s decision makes barely a dent in Surcharges not only gouge consumers, who spent the increasingly corporatized and conglomeratized $2.1 billion at cash machines in 1998, but they are anti- mass media market, it nonetheless reserves a space on competitive and threaten small banks and credit the airwaves for media that is community-based and unions. By imposing surcharges on noncustomers, the that truly serves the public interest. large banks that own a majority of the ATMs induce —DK customers of smaller financial institutions to move their account to a large bank in order to avoid the fees. ➞

2 THE NEW RULES Winter 2000 Large banks contend surcharges are necessary to Council member Spense Havlick said the proposal cover their costs, but these banks already receive has generated more citizen comment than any issue another fee on each transaction conducted by noncus- during his 18 years on the council. As of December, tomers. This fee is paid by the customer’s bank to the the city had logged more than 200 emails and calls, bank that owns the ATM. The fee is determined by with support for the Community Vitality Act running the network and is set at a level designed to cover the 20-to-1 ahead of the opposition. cost of the ATM and provide a profit. Surcharges are a —SM second, and unnecessary, fee for the same transaction. Wells Fargo and Bank of America promptly sued Santa Cruz Scrutinizes Large-Scale Stores the city and, on November 15, a federal district court issued a temporary injunction against the bans in both Santa Cruz, California has mandated that new stores San Francisco and Santa Monica. The banks contend over 16,000 square feet undergo a review and seek a that federal law preempts local authority over ATMs. special permit. Designed to enhance the diversity of Attorneys for both cities believe they will ultimately retail businesses, the ordinance requires a new store to prevail in court. They point to the national Electronic demonstrate that it adds a new type of business; con- Funds Transfer Act, which expressly allows states to tributes to an appropriate balance of local, regional enact ATM regulations that provide greater consumer and national stores; contributes to a mix of small, protection than afforded by federal law. medium, and large stores; and contributes to a balance For more information on ATM surcharges, of traditional and nontraditional businesses. including relevant laws and court cases, legal briefs, The ordinance states that locally owned stores and the latest news, visit the Finance section of the “more effectively diversify the...business mix than New Rules web site (www.newrules.org). national-based chain businesses.” The law therefore —SM presumes that local stores automatically meet the criteria, while national chains must make their case to Boulder Considers Community Vitality Act the community. Enacted on a 6-1 vote in late October, the law took In November, the Boulder Independent Business effect in November, but will last only 90 days. The Alliance (BIBA) introduced the Community Vitality short lifespan was intended to give the city further Act, a set of proposals aimed at supporting locally time to study the issue. owned businesses and protecting the unique character —SM of the city. The city council has already moved forward on Northeast Dairy Compact Survives two of the four proposals, asking the city attorney to draft them into formal legislation for a future vote. Proving itself a cat with nine lives, the Northeast One requires that the city give preference to locally Interstate Dairy Compact was revived by Congress in owned businesses for city purchases and contracts. November (see “Got (Local) Milk?,” The New Rules, The other requires that city-owned property only be Fall 1999). Despite opposition from the Midwest, the leased to locally owned businesses. compact was granted a two-year extension. In related The remaining two proposals are undergoing news, a federal appeals court upheld the compact in additional study. One would ban new formula busi- December, following a legal challenge from a New nesses. The other would require that retail stores in York trade association. excess of 12,000 square feet that are planned for the By setting a minimum price for milk above the city’s shopping mall area submit to a special review federal pricing system, the compact has channeled process, allowing for careful scrutiny of the store’s over $75 million to dairy farmers in the last three economic and community impact. years, many of whom are small independent producers. “Absentee-owned formula shops are eager to Many Midwest farmers, facing increased competition capitalize on the prosperity of the area, but our long- from giant corporate dairies in the West, oppose price term economic stability is endangered when we lose supports for Northeast milk that could limit Midwest community-rooted businesses,” said Jeff Milchen, exports into the region. But five mid-Atlantic states director of BIBA, a two-year-old coalition of more want to join the compact and 14 southern states have than 150 local businesses. petitioned Congress to allow them to form their own. —SM [!]

Winter 2000 THE NEW RULES 3 Local Retailers Hit the Web In the flurry over the runaway growth of electronic commerce, one fact is rarely addressed: e-commerce is attracting consumer dollars that used to go to local stores. Now independent businesses are collaborating to bring online profits back to Main Street. By Stacy Mitchell

or a time it seemed the internet might prove to be other pubic services. In cyberspace, they do neither. a great equalizer for small, locally owned “The proper metaphor for e-commerce is that of colo- Fbusinesses. With relatively little investment and a nialism,” argues Andy Ross, owner of Cody’s Books in bit of technological know-how, these businesses could Berkeley. “E-commerce exploits local markets by launch themselves on the web with as much sophisti- taking resources out of the community without cation and global reach as their big competitors. The returning anything in kind.” national chain stores that have wreaked havoc on Can electronic commerce mature in a way that Main Street would find themselves at a disadvantage, benefits community and values local over global? weighed down by massive investments in physical Several important developments are now underway infrastructure and unable to compete against smaller, that make localizing web commerce a very real possi- more nimble rivals. bility. Independent merchants in a number of sectors In truth, small businesses are currently a mere are pooling their resources to erect sophisticated footnote in the battle for electronic market share. e-commerce sites that funnel online spending to back Forrester Research estimates small and mid-sized to local businesses. Despite common perceptions to businesses account for less than 9 percent of the the contrary, independent businesses are finding that $20 billion consumers spent online in 1999 (up from local presence and community roots can be assets on $1 billion in 1997). Rather it is a battle between the the world wide web. Perhaps indicative of things to giants of the new age—internet-only companies like come, at least one town is building its own community Amazon.com and eToys—and the giants of the old portal to include a town square and local shopping order, like Barnes & Noble and Toys R Us. district. As harmful as absentee-owned stores are to local economies, they pose an even greater threat on the Scale Matters web. At the very least, physical stores employ local workers and pay sales taxes to support schools and Popular myth aside, scale matters in cyberspace. While any business can construct a slick, brochure- style website, the cost of developing and staffing a Stacy Mitchell is a researcher with The New Rules Project of fully functional electronic storefront—with a large the Institute for Local Self-Reliance, and the author of The database of items, inventory tracking, a shopping cart Home Town Advantage: How to Defend Your Main Street and secure credit card transactions—can be well over Against Chain Stores . . . and Why It Matters. $1 million, plus substantial annual operating costs.

4 THE NEW RULES Winter 2000 Driving traffic to the site poses an even bigger About 200 bookstores are already selling online challenge. The leading electronic retailer, Amazon.com, through an e-commerce network provided by spent $133 million on advertising in 1998 and about BookSite.com. The company was founded by Dick twice as much in 1999. Backed by a frenzy of Wall Harte, owner of Rutherford’s Book Shoppe in Street speculation, web companies are spending 70 to Delaware, Ohio. Harte was selling books online by 80 percent of total revenue on advertising. Established early 1995. In 1996, he decided to rework the technol- chains have simply added their URL to already fat ogy and make it available to other stores. The first marketing budgets. bookseller signed on in 1997. To participate, book- Independent merchants alone are no match for stores pay a $350 start-up fee and $160 per month. Resources this level of investment. But the trade associations, Bookstores ship their own orders or pay for a drop- Hundreds of book- cooperatives and alliances that have helped them ship service. The database includes about 500,000 stores, hardware survive chain store expansion are now turning their titles. Bookstores can customize the database, adding stores and other inde- attention to the web. or deleting titles and adjusting prices. pendent retailers are Do It Best, a cooperative owned by 4,400 hardware A few bookstores have also developed their own now selling goods stores, launched an e-commerce site in July, beating e-commerce sites. For a listing of online booksellers, online. To date, how- the giants of the industry by a long shot. As of this visit www.publink.net. ever, there is no com- writing, Home Depot and Lowe’s offer only a few Other local retailers collaborating on the web prehensive index of items online. DoItBest.com includes more than 70,000 include pharmacies and florists. Cornerdrugstore.com, locally owned stores items, twice as many as a “big box” store and more an initiative of the National Community Pharmacists on the web. The best than four times the number found at a typical Association and a multimillion dollar equity fund way to find out if your independent. The cost of developing the site was called West Broadway Interactive, will soon allow hometown businesses borne by the coop as a whole. To participate, stores consumers to purchase drugs locally online. are selling online— pay $200 for the creation of their own website and $15 FloraShops.com promises the same for flowers. A or plan to be—is to per month in maintenance fees. joint effort of the industry and several technology ask them. Consumers find the site functions much like the companies, FloraShops.com will be the consumer arm major web retail sites, with a notable difference: their of Floraplex.com, an existing commerce site that links neighborhood store’s name is displayed along the top local stores with growers and distributors. of each page. The banner name is activated by linking to the site from a local dealer’s website or by entering a zip code at the beginning of the visit. With the banner activated, a percentage of the sale goes to the local store. If there is no participating local store, then the sale is credited to the cooperative, which, like all coops, returns profits to its members. Ace Hardware stores are also selling online through OurHouse.com. The cooperative owns one- quarter of the site and several private investors own the rest. Launched December 2, 1999, the site offers 22,000 items, as well as home installation and other services provided by local dealers. Participating mer- chants receive a commission when customers link from the store’s home page or use an in-store computer kiosk. All products are supplied and shipped by the cooperative. Geography Matters Independent booksellers plan to launch their own Despite the rhetoric of globalization and the “death of electronic commerce venture this year. Constructed distance” promised by the web, real-world geography by the American Booksellers Association, a trade matters in cyberspace. group representing the nation’s 3,500 local bookstores, Nearly 60 percent of online shoppers prefer to BookSense.com will have a searchable database of shop at businesses that have a store in their community. more than 1 million titles, including many with jacket Part of the reason has to do with trust in the quality of art, author biographies, reviews and other information. the goods and the security of their credit card infor- The site is part of a broader cooperative marketing mation. Shopping at stores with both a physical and effort under the Book Sense brand. To participate, web presence also gives the best of both worlds. bookstores pay a $500 set-up fee, plus a monthly fee of Consumers can return products bought online to the $200 and 4.5 percent of online sales. Orders are store, take advantage of personal assistance and other shipped to the customer by a book wholesaler. services unavailable at internet-only companies, or ➞

Winter 2000 THE NEW RULES 5 browse at one venue works well for hard-to-find niche products, like and purchase at the hand-crafted stained glass or maple syrup from other. Maine. But for books, CDs, hardware and other prod- Internet companies, ucts sold everywhere, emphasizing community roots furthermore, are not can give homegrown retailers an edge in the local inherently more effi- market. cient than physical Although the most visited websites in a given area stores. They do elimi- are national—Yahoo!, Netscape, AOL—sites that nate certain costs, provide local content consistently rank in the top notably store labor twenty. Newspapers are good example. The web has and overhead, but enabled people to read news from around the world, they incur higher costs but people most often visit the site of their local news- elsewhere: shipping, paper. Sites that profile local events, like CitySearch website development, or DigitalCity, are very popular, as are community advertising and a networks, like Boulder’s bcn.boulder.co.us or Seattle’s kind of cyberspace scn.org. rent: the cost of occu- If you want to know what the national bestsellers pying well-traveled are this week, a number of websites, including corners of the web Amazon.com and Barnes & Noble, will tell you. But if like Yahoo. According you want to know which books are recommended by to Mary Beth Grover, the staff of your local bookstore, there’s only one place to writing for Forbes go. Here you might find books of regional significance magazine, consumers featured prominently, information on community do pay less online, but the cost difference can be attrib- events and readings to be held at the store, essays by uted entirely to the lack of sales taxes. This special the store’s owner on the threat e-commerce poses to advantage in effect subsidizes web retailers to the detri- the community, local news and more. Corporate ment of local stores (see “Is Tax Freedom Fair?,” page 7). retailers have a uniform national presence but they A number of web retailers have also underesti- cannot match the rich community content provided mated the difficulty of shipping, frustrating by homegrown retailers. customers with delays and incorrect orders. Retailer- BookSense.com and BookSite.com make the most owned cooperatives already have this infrastructure of this competitive advantage. These ventures differ in place. Ace Hardware, for instance, has been express substantially from the hardware, pharmacy and florist shipping items from its warehouses to individual websites in one critical respect. While hardware stores for many years. Shipping to end-users required customers must leave their local store’s home page to few changes. shop the e-commerce site, customers may order books And while web retailers must build brand identity directly from their local bookstore’s website. Under through high-cost advertising, established retailers both programs, the shared “back end” functions—the can promote their website to their existing customer database, transaction mechanism, etc.—operate base through low-cost in-store promotions. There’s behind the scenes. The interface is generated entirely plenty of opportunity to build a market on the web; 6 by the local store, allowing booksellers to capitalize on out of 10 Americans have yet to purchase anything their individuality, knowledge of the local market and online. Many will opt to make their first electronic community roots. purchase through a trusted local merchant. Retailers can also leverage their web presence to Community Matters increase sales at the physical store. Do It Best includes a coupon with each electronic order redeemable only In addition to websites that provide e-commerce at the local store. capabilities to local businesses in one sector, there are sites that cater to businesses in one community. Place Matters Increasingly, web retailers like Amazon.com are offering consumers one-stop shopping for a variety of Being a unique, homegrown business could prove an goods. Virtual town squares could replicate this advantage when competing for local market share. convenience by linking a number of local stores. Many small businesses make the mistake of trying to Many geographically defined sites are launched reach a global audience on the web, often obscuring by private companies. Internet Tradeline, Inc., for their local roots in their website design. This strategy example, partners with local media companies to

6 THE NEW RULES Winter 2000 create sites that offer local news, information and Residents will be able to pay parking tickets, check shopping. At CapeCodOnline.com, visitors can read their child’s report card and shop at local stores. The The Cape Cod Times, check movie listings and shop nonprofit venture has partnered with several technol- at local stores. To participate, merchants pay a $100- ogy companies to build the site. Electronic storefronts $200 monthly fee plus 5-8 percent of any sales gener- will be established and operated at no up-front cost to ated on the site. local businesses, with a 4 percent charge on each sale. Cities might also build their own community- In addition, e-Tropolis Evanston will help connect based websites. A new initiative in Evanston, Illinois low-income households and train local residents for is the brainchild of a broad coalition, including the high-tech jobs. Resources local economic development corporation, the city, Perhaps the Evanston project marks a new wave To view the Supreme Northwestern University, the school districts, local of internet development, in which communities shape Court decisions, the businesses, nonprofit groups and the Chamber of the web in ways that support local trade and enhance Internet Tax Freedom Commerce. E-Tropolis Evanston promises to create civic and cultural life. While the current trend in elec- Act and the proposed an electronic town square with all the elements of the tronic commerce has favored remote sellers over local Consumer and Main community present: business, government, arts, stores, with a potentially devastating impact on com- Street Protection Act, media and nonprofit organizations. munities, the web is anything but static. It is by nature visit the electronic While part of the site will exist on the web, much of both dynamic and decentralized, factors that could commerce section of it will exist as a password-protected intranet available ultimately make it a more effective tool for small busi- the New Rules web only to residents. The cost of the project will be covered nesses than recent history would suggest. By cooper- site at by selling high-speed DSL internet service to local ating within sectors or with other businesses in the www.newrules.org. residents and businesses. Subscribers to the service will community, local merchants can overcome the cost and automatically have the e-Tropolis site appear whenever technological challenges posed by electronic commerce. Advisory Commission they log on. The site will thus serve as a portal to both Knowledge of the local market and community roots on Electronic the community and the world wide web. may prove to be assets on the web as well. [!] Commerce 3401 N. Fairfax Drive Arlington, VA 22201; telephone: 703-993-8049; Is Tax Freedom Fair? website: www.ecommerce Federal policy has largely exempted web retailers authorizing states to impose sales tax collection on commission.org from collecting state and local sales taxes, giving remote businesses. remote businesses a 6 to 8 percent price advantage Congress instead moved in the opposite direc- e-Fairness Coalition over local stores. Supporters of the subsidy argue tion. The 1998 Internet Tax Freedom Act con- website: that the internet needs nurturing, but electronic firmed that web sales are to be treated like mail www.e-fairness.org commerce has grown explosively and can hardly be order sales: without a physical presence in a state, defined as a struggling industry. retailers are not required to collect state and local Multistate Tax It is a curious policy: the government is subsidiz- taxes. The Act imposed a three-year moratorium Commission ing the growth of distant companies that contribute on any new taxes on electronic transactions and cre- 444 N. Capitol St. NW, little to the civic, cultural or economic vitality of the ated a commission to study the issue. The Advisory Ste 425 communities where they do business. This growth Commission on Electronic Commerce is due to Washington, DC comes at the expense of locally owned stores, which report to Congress in April, but the board’s compo- 20001; are fighting an uphill battle to remain price com- sition—more than one-third high-tech companies telephone: petitive while supporting schools, police and other and no traditional retailers—means a recommen- 202-624-8699; public services. dation in favor of sales taxes is highly unlikely. website: www.mtc.gov The tax advantage for remote businesses arises It is not just internet-only retailers that are tak- from a 1967 Supreme Court ruling (National Bellas ing advantage of tax-free electronic sales. Although Hess Inc. v. Department of Revenue of Illinois) that the Supreme Court has clearly stated that compa- concluded that states cannot compel out-of-state nies must collect taxes when they have a physical mail order firms to collect sales taxes. To do so presence in a state, some chains, like Barnes & would amount to an unconstitutional interference Noble and Borders Books, do not. These retailers with interstate commerce. In 1992, the Court insist their web sites and retail stores are operated affirmed its conclusion (in Quill v. North Dakota), by separate companies—a fact that would probably but added that Congress could enact legislation surprise most consumers, who assume they are ➞

Winter 2000 THE NEW RULES 7 Is Tax Freedom Fair? continued from page 7 shopping at different versions of the same operation. whether taxes apply. Changes to tax codes could be No state has challenged this practice as an illegal submitted only during a certain window each year. evasion of sales taxes. The zero burden plan allows for far greater Restoring a fair sales tax system presents both a flexibility in local tax policy than previous propos- logistical and a political problem. Collecting sales als. On the table little more than a year ago was a taxes nationwide is no small task. Retailers must plan to equalize state sales tax rates (effectively Resources comply with 7,600 separate tax jurisdictions. Each eliminating local sales tax) and standardize product National Governors not only sets its own rate, but chooses what goods exemptions. A national sales tax has also been floated, Association are taxable. Certain purchasers, such as nonprofit which not only enforces a uniform rate, but makes 444 N. Capitol St. organizations, may be exempt. The rules change state and local governments dependent on federal Washington, DC regularly and errors can result in audits or legal officials to return the revenue. 20001; action brought by any of Scott Mackey, chief telephone: the 7,600 agencies. economist with the 202-624-5300; Furthermore, while The government is subsidizing the growth of National Conference of website: the location of a cash State Legislatures, says www.nga.org/Internet/ register transaction is distant companies that contribute little to the zero burden plan equality.asp easy to determine, the preserves the two key location of an internet the civic, cultural or economic vitality of the elements of state and Northern California transaction is another local sovereignty over Independent matter. If a resident of communities where they do business. tax policy: what to tax Booksellers Minnesota takes a trip to and at what rate. “It Association’s Maine, and while there provides a uniform Internet Tax purchases a item online from a California-based system on the administrative side, but not on the Committee contacts: retailer, who ships the goods from a warehouse in policy side.” Andy Ross Illinois, four states (and perhaps four cities) could For now, the states will pursue the zero burden Cody’s Books claim the right to tax the sale. proposal as a voluntary pilot project. They plan to 2454 Telegraph Ave For these reasons, opponents of taxing online iron out the kinks while tackling the more difficult Berkeley, CA 94704; transactions insist local sales tax is a dinosaur ill-fit challenge of arriving at a political solution. website: for the electronic age. But state and local govern- To make the system mandatory, the states must www.codysbooks.com/ ments are not so easily swayed. Not only is the sales appeal to either the Supreme Court or Congress. If andy_words/warning. tax their single biggest source of revenue, bringing one or more states were to enact laws requiring html in $189 billion in 1998, it is the only source they fully online retailers to collect sales taxes, a subsequent and control. State income taxes, by contrast, are heavily lawsuit could force the Supreme Court to reconsid- Bill Petrocelli constrained by federal income tax rules. er the issue. With the administrative burden lifted Book Passage In November 1999, the National Governors from out-of-state businesses, the states may prevail. 51 Tamal Vista Blvd Association announced a plan to resolve the logistical Otherwise, Congress must enact legislation man- Corte Madera, CA difficulties of collecting sales taxes. Known as the dating tax collection nationally, or, in the case of a 94925; “third party” or “zero burden” solution, the plan few states, establishing a compact similar to the website: has garnered endorsements from five government Northeast Dairy Compact. (See “Got (Local) www.bookpassage. associations, including the U.S. Conference of Milk?,” The New Rules, Fall 1999). com/battle/ Mayors and the National Conference of State Most federal lawmakers, however, seem bent on salestax.htm Legislatures. It calls for certified third party giving web retailers a free ride, at least temporarily. vendors to supply retailers with software capable of They are at odds with their constituents: a recent matching the zip code on a customer’s shipping survey found that 65 percent of Americans favor address with the appropriate tax. The tax would be imposing the same taxes on all sales regardless of collected by the third party at the time of the trans- the medium. But the position of national policy- action and remitted to the relevant governments. makers is hardly surprising given that it’s not their Retailers would be absolved of both the burden and revenue at stake. What’s more, Silicon Valley, flush liability of collecting taxes. with Wall Street cash, has proved a fertile fund- To make the system work, some simplification raising stop for both parties as they gear up for the is required. Governments and retailers must agree presidential election. [!] on a standard set of product codes for determining

8 THE NEW RULES Winter 2000 Paving Our Electronic Dirt Roads: A Call to Action

Although the Telecommunications Act reduced local authority, there are still many steps a community can take to ensure its citizens have an accessible, affordable information infrastructure. By Miles Fidelman

elecommunications infrastructure is becoming as mbps.) Transferring a large file, such as a photograph, important to our communities as streets, electric takes several minutes via modem but only a few Twires and waterworks. Phone jacks and video seconds via ethernet. The impact is severe on a jacks are as common as electrical outlets. When these freelance graphic artist who must transfer many networks are down, our businesses, schools, hospitals images a day, or on a doctor trying to read X-rays and government agencies are paralyzed. stored on the local hospital’s computers. Our challenge now is to extend this infrastructure It’s time to pave our electronic dirt roads. Rural to the nation’s smallest organizations. Currently there clinics should be linked to regional medical centers. is a striking disparity between the typical corporate Telecommuters, freelancers and home-based network and what is available to small businesses and businesses should have access to high-speed networks. residences, especially via the internet. In today’s world of deregulation and devolution, The typical home or small-business personal much of the responsibility for this change will fall on computer (PC) dials up the internet through a the shoulders of local governments. Unfortunately, modem, operating at 56 kbps (56 thousand bits per telecommunications industry giants are trying to second). The typical corporate PC connects through a thwart local authority in one-on-one negotiations (e.g. LAN (local area network), commonly an “ethernet” cable franchises), in the courts, in regulatory arenas operating at 10 mbps (10 million bits per second)— and in legislatures. In addition, a variety of Federal almost 200 times faster than a home PC. (Many busi- Communications Commission (FCC) and court nesses are upgrading to 100 mbps and even 1000 rulings threaten to restrict local authority nationwide. Some states have even passed legislation narrowing local governments’ options. In Massachusetts, for instance, the state administration has repeatedly Miles Fidelman is president of the nonprofit Center for Civic attempted to preempt local authority over both antenna Networking (CCN) and directs the Center’s Municipal Tele- siting and cable franchising. In Texas, municipalities communications Strategy Program (www.munitelecom.org). are forbidden to provide telecommunications services He edits the Journal of Municipal Telecommunications and by state law—a prohibition that, so far, has been authored Telecommunications Strategies for Local upheld by the FCC and in the courts. Other similar Government. He can be reached by email at mfidelman@ restrictions have been struck down by the courts, but civicnet.org. the matter is far from resolved. ➞

Winter 2000 THE NEW RULES 9 Deregulation: A Change in Approach, long-distance call, over a noisy phone line, simply to Not Goals or Roles pick up email from America OnLine. Even in Newton, available “high speed” services are 100 to Government has always been an important player in 1,000 times slower than services commonly available telecommunications. Government contracts gave in corporate settings. birth to much of our communications infrastructure, New services will take time to deploy and will be from the Pony Express to early telegraph cables. The deployed unevenly. Even prosperous communities internet is a product of the Department of Defense must worry about “redlining”—whether or not all and the National Science Foundation. parts of the community are seeing new services and Today’s telephone network—where every phone what mix of services are offered by the carriers. The can reach every other—is largely the result of govern- investment decisions carriers make today will result ment action. Prior to 1913, thousands of independent in infrastructure that will not be upgraded again for telephone companies refused to connect with each other, another 8-15 years. A well-planned system includes and AT&T refused to connect independents to its long excess capacity, which will allow additional services to distance network. Antitrust investigations of AT&T be added later at low cost. Unfortunately many ultimately led to the creation of the “Bell System,” which systems are being built without such capacity. unified the nation’s telephone network as a regulated The Telecommunications Act largely assumes the monopoly. marketplace will provide adequate telecommunica- Now AT&T is trying to re-establish its old tions infrastructure for local communities, but history monopoly—this time without regulation. AT&T has suggests this outcome is unlikely. Telecommuni- already purchased TCI, formerly the nation’s largest cations development may ultimately mirror the history cable operator, and is in the process of acquiring of electrification: more lucrative markets will be MediaOne. If the acquisition proceeds, AT&T will served by investor-owned utilities, while less attrac- control over 50 percent of the cable television market- tive markets will be served by a mix of municipally place. To date, the only challenges to this acquisition owned utilities and user-owned cooperatives. have been by local franchising authorities (notably the city of Portland, Oregon) and various public interest Municipal Utilities Taking the Lead groups. The FCC has largely supported consolidation of the industry giant it formerly regulated. Many of the country’s 2000 municipal electric utilities The more recent wave of deregulation, which are moving aggressively into telecommunications and crested with the Telecommunications Act of 1996, did the country’s 900 cooperatives are likely to follow. The not change public policy goals, which remain to tiny town of Harlan, Iowa (pop. 5230), has perhaps “make available, so far as possible, to all the people of the most advanced telecommunications infrastructure the United States...a rapid, efficient, Nation-wide, of any community in the nation. Harlan’s electricity is and world-wide wire and radio communication provided by a municipal utility, which also provides service with adequate facilities at reasonable charges.” gas and water. Harlan Municipal Utilities also In fact, the act expands on this goal in the areas of provides cable television, residential and commercial affordability, availability of new technology and ser- cable modem service (at a choice of 1.54 mbps or 10 vices, nondiscrimination and service for the disabled. mbps). Telephone service is provided by Farmers What has changed is the approach to achieving Mutual Cooperative Telephone Company, which also telecommunications goals. Under the Telecommu- provides telephone and cable TV to the surrounding nications Act, the FCC and state public utility com- county. Jointly, the two organizations operate a 155 missions have become more referees than regulators. mbps metropolitan area network serving institutional and corporate users—telecommunications services that If You Build It,They Will Come . . . are hard to find even in the largest of communities. Communities with municipal electric utilities are But Will They Build It? in the best position to develop advanced telecommu- In Newton, Massachusetts (a high-income Boston nications infrastructure. Entering the market is an suburb), consumers can chose cable service from two inexpensive and low-risk step for municipal or coop- competitors (MediaOne and RCN), both of which erative utilities that already have a network paid for also offer high-speed internet access and provide local by savings on electric operations; billing systems and telephone service in competition with the incumbent customer service in place; a staff to provide around- telephone company (Bell Atlantic). By contrast, the-clock maintenance and repair; and existing residents of many rural communities must make a customers in every home and office in town. Residents

10 THE NEW RULES Winter 2000 are also served by this venture, as community-owned network linking public-sector sites. While I-nets are utilities are more likely to pay attention to all of a typically designed to serve only the public sector, the community’s needs, not just those with the highest legal definition allows communities to use these net- return on their investment. works for other purposes if the negotiated franchise does not include restrictive language. Aggressive Other Local Solutions negotiation for dark fiber and reserving the right to resell capacity could be an effective strategy for keeping Even for those communities without an electric utility infrastructure options open. to build on, the local government can be a powerful Resources force in the establishment of a telecommunications Maximize the Power of the Purse The Municipal infrastructure. The Telecommunications Act reduced Research & Services local authority and made it vulnerable to expensive Communities will benefit most when they can aggre- Corporation of legal challenges, but within these constraints there is a gate their purchasing power. Local government is in a Washington is a good deal local governments can do to bring the ben- position to facilitate this aggregation by combining source of many good efits of the information economy to all their citizens. purchases from all agencies, from public and private examples of local With public buildings all over town—schools, enterprises or/and by multiple units of local government. ordinances. libraries, public work depots, police and fire stations As the electric industry deregulates, a number of http://www.mrsc.org/ and administrative buildings—local government is states are granting municipalities the power to legal/telecomm/ often the largest telecommunications user in town. aggregate community-wide electricity purchases, and tcapage.htm Thus local government’s build/buy decisions, vendor an increasing number of local governments are selection and negotiating strategies influence the local exercising this option. A particularly interesting An example of a market. model is the Cape Light Compact, a regional agree- thorough and well put As landlords, local governments own facilities ment under which multiple cities and towns on Cape together ordinance is critical to providing telecommunications services: Cod are purchasing power on behalf of their residents the City of public right-of-ways, antenna towers, water towers and businesses. It is only a matter of time before Sacramento’s Trench where antennas can be placed and public safety facilities electric aggregation programs expand to incorporate Cut Ordinance. already zoned for antenna construction. telecommunications purchases. Available at Local governments oversee zoning and building A key decision for local government officials is http://www.sacto.org/ codes. They are responsible for seeing that telecom- whether they view government as a private entity and trench_cut.htm munications construction is safe, conforms to zoning use their buying leverage only on behalf of their inter- restrictions, does not detract from the community’s nal needs or whether they view government as a vehicle Palo Alto, California’s character and causes minimal public inconvenience. for maximizing the benefit to all of its citizens. When municipal utility is Finally, local government has the ultimate respon- cities or counties obtain a government-only I-net as offering both “dark sibility for a community’s infrastructure—it paves part of a cable franchise agreement, what is a good fiber” and is running a streets, operates waterworks and transit systems and deal for government will pull significant demand out trial of “fiber to the (in 2000 communities) it provides electricity. of the local market, reducing incentives for carriers to home.” Local governments should take advantage of offer service. “E-rate” discounts—subsidies for school http://www.city. opportunities to install city-owned conduit (e.g. during and libraries—may have the same result, because they palo-alto.ca.us/ water pipe replacement), or to obtain conduit space as create incentives for schools and libraries to act utilities compensation for right-of-way use. With conduit in independently from other users, thus reducing place, the cost of pulling cable becomes much lower, economies of scale and bargaining power. Information on making it easier for carriers to enter the local market municipal electric (including carriers targeting specialized users at a Minimize the Public Cost of Construction aggregation from limited number of locations, such as medical offices). Cape & Islands Self During cable franchise negotiation, local govern- Under the Telecommunications Act, communities Reliance Corp can be ments are entitled to ask for an “Institutional can no longer deny carriers the right to build, and found at Network” or “I-net” as part of a compensation must treat all carriers in “competitively neutral and http://www.reliance. package. An I-net is “a communication network non-discriminatory manner.” This means matters can org/CEF.htm. which is constructed or operated by the cable operator no longer be handled on an ad-hoc, case-by-case basis. and which is generally available only to subscribers Local governments must now codify the rules applying who are not residential subscribers.” Increasingly, to telecommunications construction in the form of communities are negotiating for “dark fiber” (fiber clearly defined ordinances and regulations. Officials optic cable without associated electronics) linking are well-advised to streamline procedures and to government buildings and using this fiber to build a address major construction impacts. ➞

Winter 2000 THE NEW RULES 11 For underground work, procedures should be mits. To better manage construction impacts, new designed to coordinate construction, rather than treat- franchises and cable ordinances should subject cable ing each street cut in a vacuum. Telecommunications operators to a full set of permitting requirements for work should be coordinated with other utility work all construction activities. and with planned road work. A large number of cable systems have been chang- Fees should at least recover all costs of managing ing ownership recently—a step that requires approval right-of-ways and other properties. Right-of-ways by the local franchising authority (local government). constitute a valuable asset, and fees could be used to This gives communities the opportunity to impose Resources generate new revenue. conditions for approval. Portland and Multnomah Other useful websites Local governments should establish clear zoning County, Oregon, for example, attached a “non- are the American and building codes for antennas. Wireless operators discriminatory, open access” requirement to the Public Power prefer to save cost by building a small number of tall offering of high-speed internet services via cable Association, at towers, but this approach leads to visual blight. television planned by AT&T and TCI. Such a http://www.appanet. Zoning and building codes can be designed to limit requirement, which has recently been upheld by a org, and the National the height of towers at the cost of more numerous but lower court, would allow customers to connect directly Association of less visible towers. via cable to their choice of internet service providers (as Telecommunications Codes should impose “colocation requirements”: internet subscribers do now via telephone lines) instead Officers and Advisors, in other words, a new tower should not be allowed of being required to go through AT&T’s affiliate at unless an applicant can demonstrate that its antennas “@Home” (paying the full @Home retail price), and http://www.natoa.org. can’t be placed on an existing tower. New towers paying again to reach their provider of choice. should be required to include space for colocation of Local governments should also consider enacting additional antennas. a “telecommunications” ordinance, specifying rules The Consumer Many local governments own antennas towers for carriers providing telephone and data communi- Federation of America that support police and fire radios. Leasing tower cations services. report on concentra- space can avoid proliferation of new towers and tion of ownership can generate revenue and in-kind services (e.g. cell service A Call to Action be found at provided in lieu of or in addition to lease fees). Water http://www. towers are another good location for antennas. A Chances are, telecommunications issues are already consumerfed.org/ carefully written zoning code can encourage carriers to on your community’s agenda in the form of franchise broadbandaccess.pdf. place their antennas on publicly owned towers or land. renewals, applications to transfer ownership of cable systems, applications for new franchises, applications Exercise Franchise Authority to lease right-of-ways, applications to build wireless Information on the towers or other requests. It is time for local govern- Portland, Oregon A community’s careful use of franchising powers can ments to update ordinances, negotiate franchises, transfer challenge is at encourage market entry by additional carriers. implement purchase aggregation programs, and pos- http://www.mhcrc.org/ Cable systems typically operate under a franchise sibly develop government-owned infrastructure. A CurrentIssues/ from local government, with requirements and small community might want to assign a full-time atttci_transfer.htm. procedures set by a mix of federal, state and local law. telecommunications officer or form a high-level task A franchise usually grants use of the community’s force, as well as band together with other municipalities right-of-ways in return for a franchise fee and in-kind to fight industry efforts to preempt local authority. services (e.g. a public access studio and channel), and A hundred years ago, lack of a rail stop imposes conditions regarding services, customer condemned many towns to a lingering death. Today, service and system performance. electronic “streets” are needed to link our communities In the past, communities typically had a single to the information superhighway. Local government’s franchisee and (re)negotiated the franchise every 10- action or inaction will determine which communities 15 years. Previous franchises were negotiated as spe- win and lose. Decisions you make today will haunt cial cases and enacted as local ordinances. In the your community for decades to come. [!] deregulated environment, communities must open their right-of-ways to all applicants and must apply a uniform set of rules. Portions of this article have appeared in Each local government should enact a “cable Telecommunications Strategies for Local Government – ordinance” stating the rules for applying for a A Practical Guide, available from the Center for Civic franchise or franchise renewal. Networking, and in IQ Service Report Vol. 30, No. 8, Typical franchises grant broad rights to build in from the International City/County Management right-of-ways, often without requiring building per- Association.

12 THE NEW RULES Winter 2000 Keeping the Minors Home

Home teams are pulled up by their roots as owners cash in on stadium deals: it happened to the majors and now it’s happening to minor league sports teams. Buying the team is one way to keep them at hometown’s home plate. By Daniel Kraker

n 1999 Thunder Bay, Ontario annually. In 1999 more than 39 lost its Whiskey Jacks to million people attended minor ISchaumburg, Illinois. The AAA league baseball games—almost double Vancouver Canadians became the attendance of ten years earlier. If Sacramento’s River Cats, and next this trend continues, by 2010 more year Lakewood, New Jersey will be people may be attending minor home turf for the Cape Fear Crocs, league games than major league currently from Fayetteville, North games. Carolina. To house these newfound fans, These moves hardly made a minor league stadiums are getting ripple in sports headlines: possibly bigger. Meanwhile, major league the only people who cared were parks are getting smaller. The minor those who woke up without a ball league Buffalo Bisons’ ballpark, for team. Partly that’s because the example, where attendance eclipsed minors don’t get a lot of press any- one million six years running in the way, and partly it’s because sell-out late ‘80s and early ‘90s, holds more sports owners are nothing new. than 20,000 people. By contrast, the The bait for all three moves was major league Cleveland Indians play the same: a pricey new stadium. Schaumburg’s spending in a new park that holds only 43,000, down from their $12 million, Lakewood $20 million, and Sacramento old stadium’s capacity of 80,000. $43 million to lure the teams away from their home- The increased popularity of the minor leagues has towns. led owners to pressure local governments to do what- As minor league baseball explodes in popularity, ever it takes to ensure that the club is not lured away it’s beginning to suffer from the same stadium black- by a teamless community vying for a baseball fran- mail that has plagued major league towns. Sixty chise of its own. But why bribe a team owner with a minor league teams have uprooted themselves from publicly financed new stadium that costs more than cities across the country in the last decade. Other the team itself is worth, simply to guarantee that the teams have been coaxed into staying only when local team will stick around for another ten or twenty years? governments paid for new stadiums that often cost There is a way out of this quandary: it’s called several times more than the team itself was worth. community ownership. Communities shouldn’t bribe More than 80 minor league stadiums have been built their teams to stay—they should buy them. in the last decade. The minor leagues do not have the talent of the Minor Obstacles, Many Models majors, but in every other way the differences between minor league and major league teams are The idea of community ownership has received a shrinking every year. Consider attendance, once respectful hearing in the Washington Post, USA Today disproportionately favoring the major leagues. About and the New York Times, but the roadblocks set up by 70 million fans attend major league baseball games the big leagues make public ownership unlikely. Among the obstacles are the astronomical cost of teams, the owner-initiated prohibition of public own- Daniel Kraker is a freelance writer who contributes regularly ership and the ability of all leagues to restrict the to The New Rules. number of franchises. ➞

Winter 2000 THE NEW RULES 13 The National Football League formally prohibits community ownership; Major League Baseball does so informally. Congress would have to intervene to eliminate these legal impediments: an unlikely event. (The Green Bay Packers are the only community- owned team in major league pro sports: their owner- ship structure was grandfathered into the league in 1961. To view the NFL’s bylaw prohibiting com- Resources munity ownership, see the New Rules website at Two reports on com- www.newrules.org). munity ownership are In the minor leagues, however, the obstacles are available from ILSR: modest. The foundation’s bylaws explicitly try to distance “Don’t Bribe ‘Em. Buy Public ownership of minor league teams is not the team from baseball’s “old boys” ownership stigma ‘Em: A strategic prohibited, even when the team is a farm team of a by requiring half of the directors be women and that proposal on how New major league ball club. As a result, more than a dozen the Board’s ethnic backgrounds reflect the composi- Yorkers can create— minor league teams are owned by a county, a city, tion of the Memphis area. The team funnels all profits and control—a minor local citizen-shareholders or, in two cases, by a local back into the community. Community involvement, baseball league of nonprofit foundation. through structured youth programs such as their own” and “Roots, • Local government ownership. The AAA Toledo “Returning Baseball to the Inner City” (RBI) and Roots, Roots for the Mud Hens (famed favorite team of Corporal “Stripes,” which funds sports programs in the public Home Team: Klinger of M*A*S*H) are owned by Lucas County. schools, is an integral part of the team’s activities. Community-Owned The Harrisburg Senators are owned by Harrisburg, About 350 children participated in the RBI program Professional Sports.” Pennsylvania, which paid $6.5 million in 1995 to this past year, and Stripes reached about 1,000 youth, See our website, acquire the AA Senators, who were planning to in the process reviving baseball in eight neighbor- www.newrules.org, to move to a new taxpayer-financed ballpark in hoods and in 30 middle and junior high schools. order the reports and Massachusetts. It was a steep price to pay, as the pri- The single A Wisconsin Timber Rattlers are also to view legislation on vate owners had bought the team only six months nonprofit, but they raised capital in a more “capitalist” this issue, especially earlier for just $4.1 million, but the team was popu- way—by selling nontradable stock to local investors. The Give Fans a lar and the city had made the stadium the center of Chance Act. a redevelopment initiative. The Minors are a Bargain • Direct fan ownership. Two fan-owned teams play The Minnesota in upstate New York: the AAA Rochester Red Big league teams cost a lot. The Washington Redskins Legislature maintains Barons and Syracuse SkyChiefs. Both teams sold of the NFL recently sold for $800 million. The a website on financing stock to the community in the late 1950s when their Cleveland Indians were sold in November 1999 for pro sports facilities: major league affiliates reduced their amount of $320 million, the most ever paid for a professional www.leg.state.mn.us/ financial support. The Red Wings are owned by baseball team. No community could, or should, come lrl/issues/sports.htm 8,000 shareholders, most of whom own fewer than up with that kind of money in the face of more press- five shares. The team is technically a for-profit cor- ing public policy concerns. “The Green Bay poration, but the club has never paid a dividend and Compared to the majors, minor league ball clubs Packers: America’s will not do so for at least another 20 years as part of are dirt cheap. Minor league franchises range from Only Not-for-Profit, its lease agreement with Monroe County for its about $2.5 million for a class A team to around $10 Major-League Sports 10,600 seat stadium. The SkyChiefs have less than million for a AAA club—a bargain next to the price Franchise,” a policy 4,000 shareholders and have turned a profit every tag for major league teams: anywhere from $100 report published by the year since 1970. million to $650 million. Wisconsin Policy • Nonprofit enterprises. The Memphis Redbirds are Research Institute, the only professional team recognized by the IRS as Minors Can Expand 11516 N. Port a nonprofit, tax-exempt, charitable organization. Washington Rd. #103, Owner Dean Jernigan spent $8 million in 1997 to There are few major league teams and the leagues Mequon, Wisconsin bring the AAA Redbirds to town and then prompt- rarely expand. Twenty-four states do not play host to 53092; telephone: ly turned ownership over to a foundation made up any professional sports team, in any league. 262-241-0514. of 17 civic and business leaders, and agreed not to Minor league clubs, however, are plentiful. take a salary. “If the main identity of a city is tied to Numbering well over 200, they can be found in every a sports team, who are we going to entrust this to?” state, and continue to pop up in new markets as asks Jernigan. “Who can be responsible? It’s not an owners discover that if they can attract 3,000 to 6,000 individual, I assure you.” people to games, they can probably generate a profit.

14 THE NEW RULES Winter 2000 Between the 1996 and 1997 seasons overall gross New York, New York revenues of minor league teams climbed five New York City has made a significant investment in percent—mainly because of increasing attendance. minor league baseball, but it is alienating host neigh- Leagues affiliated with major league baseball can borhoods and driving costs up through shortsighted only expand when the majors do, but there can be as planning. It wants to build stadiums in Staten Island many independent teams as there are communities and Brooklyn for minor league teams owned by the willing to host them. The re-emergence of indepen- Yankees and the Mets. Mayor Rudolph Giuliani dent leagues has changed the supply-demand wants to build a temporary stadium at the Parade equation for minor league baseball. Unaffiliated Grounds in Brooklyn to house Brooklyn’s team until Resources leagues date back to 1906, but were extinct for decades the stadium on Coney Island is finished. As of the end Pro sports stadium before enjoying a revival in the early 1990s, beginning of 1999 the price tag for all three had reached nearly wars have inspired with the rebirth of the Northern League in 1993. The $120 million. several books: league initially fielded eight teams in the Upper All three ballparks, however, have run into Field of Schemes: Midwest and Canada, but in late 1998 merged with considerable opposition. In Brooklyn the temporary How the Great the independent Northeast League. The new park at the Parade Grounds has been held up by law- Stadium Swindle Northern League boasts 16 teams that drew a total of suits filed by ACORN and Brooklyn Borough Turns Public Money more than 2 million fans for the 1999 season. President Howard Golden and in late January the into Private Profit, by Officials in the established minor leagues initially Mayor announced that he was switching his efforts Joanna Cagan and scoffed at the independent leagues, claiming their for the temporary site to Queens. Meanwhile the Neil deMause (also rosters were filled with has-beens. Now big league Coney Island’s community board has voted over- see their website, clubs consistently scout the independent leagues for whelmingly to oppose the ballpark there. The city www.fieldofschemes. new talent. Since 1993 the Northern League has sold council finally approved the record-breaking $71 million com, which has week- 175 contracts to Major League; currently 58 former price tag for the Staten Island Yankees permanent ly news updates and Northern Leaguers play on big league clubs or their stadium, but only after a bruising debate. resources); Major farm teams. The Northern League, which as an Many are angry that the city is willing to spend League Losers: The independent league receives no funding from major enormous sums to attract short season class A teams, Real Cost of Sports league clubs, saw 12 of its 16 clubs report profits in who play only a 38-game season (half of what higher and Who’s Paying for 1999. caliber teams play), and are only one rung up from the It, by Mark S. Independent teams are more fan-friendly because bottom of the minor league organizational ladder. Rosentraub; and their viability depends on it. According to Miles For about one-third of the $120 million the city is Home Team: Wolff, Northern League founder, this is not the case currently planning to spend, it could create an Professional Sports with affiliated minor league teams. “The purpose of independent league of eight community-owned teams and the American farm-system baseball is not to win; it’s to develop players. and still have money left over to build or refurbish Metropolis, by Independent clubs are tailored to the city.” modest ballparks, in locations agreed on by the Michael N. Danielson. Fans seem to agree. The Northern League has surrounding communities. New York could choose Wild and Outside: been joined in the 1990s by the Western League, from the array of ownership models currently existing How a Renegade Atlantic League, Texas-Louisiana League and the or create new ones. Minor League Frontier League, which at ten franchises is the next The cross-town rivalries of the Giants and the Revived the Spirit of largest independent league. Its attendance topped Dodgers and the Yankees are the stuff of legends. Baseball in America’s 700,000 in 1999, and like the Northern League it has New Yorkers now have an opportunity to recreate Heartland, by Stefan succeeded in sending a number of its players on to the these classic rivalries. The city is large enough to sup- Fatsis, is about the Majors—117 since its inception in 1994. The Frontier port dozens of minor league clubs—and clearly there revival of The Northern League, Atlantic League and Western League all plan is a demand. The Brooklyn Bombers vs. the State League. See also “The to expand for the 2000 season. Thus in less than 10 Island Sliders, anyone? Green Bay Packer years these independent leagues will have added more A fan-owned New York City league would do Model: Community- than 50 new minor league franchises. much more than bring back professional baseball to Owned Teams,” a Community ownership has been an undeniable the neighborhoods of the city. It would demonstrate chapter in success, but it remains at the fringes of public to the nation that communities do not have to steal Cooperation Works! discourse. It would take a city like New York to one another’s teams to bring professional sports to by E.G. Nadeau and change the nature of the debate. town and root them there for generations to come. [!] David J. Thompson.

Winter 2000 THE NEW RULES 15 This Isn’t Your Father’s Free Trade

It wasn’t tariffs that brought 50,000 protestors to Seattle’s streets in November. It was concern over issues like living standards, social justice, environmental protection and political freedom. Free trade, as administered by the WTO, is no longer about how much tax to slap on an import. By David Morris

erfection of means and confusion of ends lines between domestic and foreign blurred. Free seems to characterize our age.” That insight traders talked of doing away with “non tariff trade “P of Albert Einstein’s half a century ago aptly barriers.” These were any ordinance, regulation or tax describes the current debate, or more precisely, non- that inhibited the movement of goods and services debate, about free trade. across borders. Free trade—a means—is now viewed as an end. This new way of thinking guided the U.S. Indeed, it has taken on the trappings of a full-fledged Canadian Free Trade Agreement (1988), the North religion: it is less an economic strategy than a moral American Free Trade Agreement (1994), and the dogma. changes in the General Agreement on Tariffs and This explains why most commentators disparaged Trade (GATT) that led to the creation of the World the 50,000 protestors who effectively shut down the Trade Organization (WTO) in 1996. recent World Trade Organization talks in Seattle. The rules have changed. Most pundits saw the protestors as antitrade. But the current debate about free trade is less about trade than The New Rules of Trade about the nature of sovereignty, the role of community and the reach of citizenship: a very different discus- In an earlier time, countries were allowed to impose sion than pre-1980s trade talks. the same standards on importers as they did on domestic producers. That is no longer true. From Free Trade to the End of Citizenship In 1980, to their horror, Europeans discovered that 2- and 3-year-old children were reaching puberty. From 1848 (the year Britain adopted a free trade They traced the problem to growth hormones used to policy) to 1980, free traders conceded the right of promote weight gain in cattle. Consumers in West countries to manage their own affairs. That included Germany, Italy, the Netherlands and Belgium defending small businesses and family farms, persuaded their governments to ban hormone enacting stringent environmental standards, banning additives. In 1988 the European Union imposed a foreign ownership of key resources, and requiring Europe-wide ban on European producers. In 1989 the outside investors to meet the needs of their host ban was extended to importers. communities. The free trade debate was about tariffs In 1998 the WTO ruled that Europe had no right and was largely unconnected to domestic debates to impose such rules on imported beef. Under the new about minimum wages, maximum hours, environ- trade rules, countries were no longer allowed to mental and health protection and social justice. implement health and safety standards that err on the After 1980, the term “free trade” began to acquire side of caution, even when in response to impressive a much more expansive meaning and the boundary citizen demand. In an earlier era countries had the right to take into account the way a good was made or the regime David Morris, vice president of the Institute for Local Self- that made it when regulating imports. This is true no Reliance and director of The New Rules Project of ILSR, did longer. twice daily commentaries in Seattle during the November 1999 The WTO specifically prohibits any government Ministerial Meeting. The commentaries are available at from discriminating against a product on the basis of www.ilsr.org. how it is made. A shirt is a shirt is a shirt, whether it

16 THE NEW RULES Winter 2000 is made from genetically engineered cotton or by Third, only governments (and in the case of prison labor. To date, no environmental, social, health NAFTA, corporations) can bring a case to the trade or food safety law that has been challenged at the panels. Citizen organizations and individuals and WTO has survived the attack. local governments cannot. Some 20 years ago, appalled by the brutal Fourth, this government can only overturn laws. It apartheid system in South Africa, citizens pressured cannot enact them. Thus, for example, when the half a dozen states and more than two dozen cities to Canadian government banned the use of a adopt purchasing and investment policies that prohib- manganese-based additive in gasoline, the U.S. Ethyl ited them from doing business with corporations that Corporation sued under NAFTA. The trade panel did business in South Africa. After he was freed, ruled that Canada lacked a compelling scientific basis Nelson Mandela acknowledged the value of these for the law. Thus Ethyl would be owed considerable efforts in accelerating the demise of apartheid. compensation for lost potential profits if Canada went In 1996, Massachusetts adopted a similar bill to ahead. Canada backed down. But if citizens of Canada one it adopted a decade before regarding South or the U.S. compiled overwhelming evidence that Africa, but this time aimed at the narco-military manganese additives should be removed from gasoline regime in Burma (now and their governments called Myanmar). A refused to act, they could dozen cities followed suit. In an earlier time, countries were allowed to not go to a trade panel to ask But under the WTO, that such a ban be enacted. Massachusetts will no impose the same standards on importers as Fifth, the WTO allows longer have the right to nations to enact laws that enact such policies. they did on domestic producers. That is no are weaker than a global Earlier free trade standard but not agreements focused on longer true. stronger. This is the manufacturing. Today opposite of how many they are slowly extend- U.S. federal laws operate. ing into all parts of societies. Indeed, the debate in For example, there is a federal minimum wage which Seattle was largely about whether and how to extend acts as a floor, not a ceiling. Individual states can set the GATT into services like education and health and their own minimum wages higher. Many environ- finance. mental laws operate in the same fashion. Originally GATT operated without an enforce- Sixth, the new planetary constitution includes no ment structure. The WTO, on the other hand, Bill of Rights. The U.S. Constitution could not have according to trade lawyer Lori Wallach of Public been ratified without such a section, which includes in Citizen’s Global Trade Watch, “has the strongest the First Amendment the right to petition govern- enforcement procedures of any international ment for redress of grievances. agreement now in force.” World traders now have a Seventh, the WTO offers no democratic process cop on the beat. for change. It can be amended, but only from within. The WTO is beginning to look like a new world government. Indeed, the U.S. has argued that when Revisiting the Empirical Evidence the WTO rules against a country, that country must amend its domestic laws. In Seattle, a petition signed by more than 1,200 non- But this is different from any kind of government governmental organizations in 85 countries was democratic societies are familiar with. First of all, it presented to the WTO, asking that it declare a mora- operates in secret. The judges that sit on the WTO torium on further actions and initiate a period of panels are appointed. They meet behind closed doors. reflection and evaluation. They hear no outside witnesses. Their proceedings We need to reconsider the value of the new free are not made public. trade rules. Economist Paul Krugman says it’s “a Second, WTO judges are not chosen because of hypothesis, not a truism” that a country’s economic their expertise in the subject they are ruling on, but fortunes are largely determined by its success on for their adherence to the tenets of free trade. A few world markets. “And as a practical empirical matter,” weeks before the Seattle meeting, a federal judge in he declares, “the hypothesis is flat wrong.” National that city ruled that President Clinton was violating living standards are overwhelmingly determined by U.S. laws by refusing to allow noncorporate represen- domestic factors. tatives to sit on the U.S. Trade Office’s advisory panels. continued on page 21...

Winter 2000 THE NEW RULES 17 Footloose and Label-Free

Labeling laws allow vendors to sell apples without telling consumers whether they’re from Washington or Australia, making it hard for those who prefer to buy local, regional or even national produce. Congress is looking at several bills that would require stricter labeling of produce and meat. By Simona Fuma Shapiro

ccording to a 1969 U.S. Defense Department In 1997 farm prices and incomes began to fall in report, an average food item in America traveled many sectors. Part of the drop was due to imports, A1300 miles from origin to plate. Thirty years which have grown in recent years with expanding later, that average item travels an estimated 2000 trade agreements. The U.S. imports about 16 billion miles. Hamburgers often consist of cattle remains pounds of fresh produce a year, an all-time peak made from several countries, ground together and stamped easier by the passage of NAFTA. Large meatpackers with a USDA label. Fresh produce originates in coun- rely on imports from Canada to keep livestock prices tries as far-flung as Chile, Holland and New Zealand. low in times of high demand. This increasingly global scale of food production and Several bills introduced in Congress this year distribution is raising concerns among American would require country-of-origin labeling of meats farmers and consumers about the safety of imported and produce. While the main lobbyists behind these food and the future of local farmers. bills have been ranchers and growers, their sponsors These concerns have led to the introduction of cite consumer preference as an important motivating country-of-origin labeling bills in Congress and at the factor. Surveys sponsored by the produce industry state level for meat and produce. between 1990 and 1998 show that between 74 and 84 Country-of-origin labeling has been mandated by percent of American consumers favor mandatory law for 70 years. Section 304 of the Tariff Act of 1930 country-of-origin labeling for fresh fruits and vegeta- requires that every imported item be conspicuously bles at the retail level. Most are even willing to pay a and indelibly marked in English to indicate its coun- little more for American-grown produce.1 try of origin to the “ultimate purchaser.” But the law But the concern over foreign meat and produce contains numerous loopholes and exceptions. goes beyond patriotism. Seventy percent of survey Clothing, appliances and canned and frozen respondents believe that U.S. produce is safer than goods are all labeled. But a product with many parts imported produce. The FDA reports that the last manufactured in more than one country need only decade has seen a significant increase in the be marked with the country of its last “substantial incidence of foodborne illness from fruits and transformation.” In 1994 Congress closed this loop- vegetables. Several well-publicized outbreaks hole for automobiles by passing the American involved foreign produce. In March 1996 con- Automobile Labeling Act, following a lobbying sumers in California and 19 other states suffered campaign by American autoworkers. The law severe diarrhea, vomiting and muscle aches attrib- requires that each automobile for sale in the U.S. uted to cyclospora-infested raspberries from bear a label disclosing where the car was assembled, Guatemala. In March 1997 over 200 Michigan the percentage of equipment that originated in the schoolchildren contracted hepatitis A as a result of U.S. and Canada, and the country of origin of the eating Mexican-grown frozen strawberries that had engine and transmission. been purchased for the school lunch program. Other exceptions to the Tariff Act remain, including There is also concern over the safety of some an exemption for loose natural products such as fruits European beef due to an outbreak (mainly in Great and vegetables and foreign meat that is packaged in Britain) of bovine spongiform encephalopathy, or the U.S. “mad cow disease.” Although imported food is subject to U.S. food safety standards both at the Simona Fuma Shapiro is a researcher with The New Rules border and overseas, there is a widespread percep- Project of the Institute for Local Self-Reliance. tion that these are not enforced.

18 THE NEW RULES Winter 2000 According to a Four states require report issued by the meat retailers to U.S. Center for clearly label imported Disease Control and meat with the coun- Prevention, the try of origin: Kansas, nature of foodborne North Dakota, South diseases is changing. Dakota and Wyoming. Thirty years ago an The Wyoming law outbreak would fol- was passed most Resources low a church supper, recently, in July 1999, For more on the policy family picnic or as state lawmakers issues surrounding wedding reception: grew impatient with country-of-origin it would be an acute federal progress on labeling of meats and and highly local the issue. produce, see “Fresh outbreak, typically traced to a food-handling error Several bills introduced in 1999 would require Produce: Potential in a small kitchen that occurred shortly before country-of-origin labeling for meat products. The Consequences of consumption. Imported Meat Labeling Act of 1999 (H.R. 222), Country of Origin Today diffuse and widespread outbreaks, involving introduced by Representative Helen Chenoweth (R- Labeling,” a report many counties, states and even nations, are more ID), would require both imported and U.S.-prepared published in April 1999 frequent. These follow a different pattern—the low- food products that contain foreign meat to identify by the General level contamination of a widely distributed commercial the country where the animal was raised before Accounting Office product. New pathogens, too, are implicated. slaughter. A similar but more prescriptive bill, the (GAO/RCED-99-112). Salmonella has increased steadily since World War II, Country of Origin Meat Labeling Act of 1999 (H.R. as have E. coli and Cyclospora cayetanensis. These 1144), was introduced by Representative Chenoweth Congressional pathogens can be attributed to “changes in the way two months later. Research Service food is produced and distributed,” according to the The Meat Labeling Act of 1999 (S. 242) by Senator reports on country-of- CDC report.2 It is no surprise that in this climate con- Tim Johnson (D-SD), and the Agricultural Safety origin labeling can be sumers are clamoring for more information about Net and Market Competitiveness Act of 1999 (S. 19) obtained at their food, including country-of-origin labels. by Senator Daschle (D-SD) would cover muscle cuts, www.cnie.org/nle/ ground and/or processed products from beef, lamb crsag.html Meat labeling bills and pork. The Daschle bill, along with S. 241 by Senator Johnson, and H.R. 1698 by Representative The USDA is responsible for ensuring the safety and Rick Hill (R-MT), would not permit imported prod- proper labeling of all meat and poultry products, ucts to carry a USDA quality grade seal. A bill by including imports, under the Federal Meat Inspection Senator Conrad Burns (R-MT) covers beef and lamb Act and the Poultry Products Inspection Act. but not pork. It also authorizes the USDA to permit Regulations issued under these laws require that the firms to affix an all-U.S. label to ground beef that is country of origin appear in English on all individual, made entirely from domestic beef. retail-ready packages of imported meat products (i.e. canned ham). Imported bulk products such as Produce labeling carcasses, carcass parts, or large containers of meat and poultry parts that will be further processed in the U.S. Customs Service rulings provide that when the U.S. must also be marked with their country of origin. fresh produce is taken out of its container and put into But once these nonretail items enter the country, an open bin or display rack, there is no obligation to the laws consider them domestic products. When they identify the items by the country of origin. (If they are further processed in a USDA-inspected meat were wrapped in cellophane or otherwise packaged plant, neither the new product nor its container they would require a label.) requires labeling. Even minimal processing, such as Three states—Florida, Maine and Texas—have cutting a larger piece of meat into smaller pieces, is enacted country-of-origin labeling laws for fresh pro- considered enough of a transformation to no longer duce. Florida requires all imported fresh produce to require country of origin markings. If a U.S. factory be labeled with country of origin. Maine requires grinds foreign beef into hamburger or mixes it with a country of origin labeling for fresh produce at the domestic product in a soup or stew, neither the factory retail level when it has been imported from countries nor the retailer is required to indicate that the final identified as having specific pesticide violations. Texas product contains foreign meat. requires country of origin labeling for fresh grape- ➞

Winter 2000 THE NEW RULES 19 fruit. According to the U.S. General Accounting monitoring for produce would cost $56 million annually Office, enforcement is carried out only in Florida, and has said that enforcement would be difficult. where inspectors check shipping boxes against display Clinton administration officials have expressed signs during semi-annual state health inspections. reservations about bills that single out imports Representative Mary Bono’s (R-CA) Produce because GATT trade rules require that imported and Consumers’ Right-to-Know Act (H.R. 1145) would domestic products be treated alike. They also fear that require retailers (except for food service establish- other countries could retaliate by requiring labels on ments) to inform consumers of the country of origin more U.S. products. of all domestic and imported fresh fruits and vegeta- bles, including loose items. Senator Graham (D-FL) is Proponents sponsoring the Imported Produce Labeling Act of 1999 (S. 860) requiring country-of-origin labeling of Proponents of the bills include ranchers associations all imported produce. as well as fruit and vegetable growers associations.3 The National Uniform Food Safety Labeling Act They argue that consumers have the right to know (H.R. 1346), introduced by Rep. Frank Pallone (D- where their food comes from, and they counter the NJ), would require country-of-origin labeling of industry’s claim regarding the high cost of labeling by domestic and imported fresh fruits and vegetables as pointing to the experience of Florida, the nation’s well as products derived thereof, such as juice, frozen fourth largest state, which has had a country-of-origin juice concentrate, fruit butter, preserves and jams, or labeling law for produce since 1979. The Florida canned or frozen fruits and vegetables. Department of Agriculture estimates the annual cost of the law to be less than $250,000 for the entire indus- Peanuts try. In addition, the Publix and Winn Dixie super- market chains have estimated that compliance with A bill to require country-of-origin labeling of peanuts the Florida law costs individual groceries less than $10 (H.R. 3263) has been introduced by Sanford Bishop per month. Compliance can be achieved simply by (D-GA) and Terry Everett (R-AL), Congressmen placing signs near produce bins or displaying the from heavy peanut-producing districts. Peanuts have items in their shipping cartons. been supported by a federal program that limits the Proponents also allege that it is unfair to exempt amount of peanuts eligible farms can sell for domestic fruits, vegetables and meats from some country-of- use, guaranteeing a high price within this quota. origin labeling requirements when almost all other Nevertheless, farmers have seen a 25 percent decline imported consumer products must have them. in cash receipts for their crop since 1992. Part of the Proponents argue that labeling laws do not violate drop is due to competition from imports. According GATT and NAFTA, which simply require that to a Congressional Research Service report, imports in labeling not seriously damage a product, nor reduce the 1997/1998 marketing year accounted for 7 percent its value materially nor increase its cost unreasonably. of domestic food use, compared to negligible amounts As for worries that trading partners would see prior to 1993/1994. country-of-origin labeling as adversely affecting their exports by raising costs, proponents note that of the 28 Opponents countries that account for most of the U.S. trade in produce, 13 have their own country-of-origin labeling Opponents of country-of-origin labeling fall into requirements for loose produce at the retail level. three categories—importers, retailers and free trade These include Japan, Australia, Canada and the EU. advocates. Importers view the bills as protectionist trade barriers intended to increase costs for importers Labeling and the Shortening of Food Lines and spread the perception that foreign products are not as safe. They note that several serious outbreaks of Most consumers in industrial societies have only a illness have been linked to U.S.-produced agricultural remote sense of where their food comes from. There commodities. is evidence that when given a choice, consumers seek Retailers argue that both industry compliance and to re-localize their food supply. In Europe, where government oversight costs would be extremely high. food scares dominate the headlines almost monthly, The average produce department carries more than 200 recent voluntary country-of-origin labeling for beef continuously changing items annually. Changing store has served to “renationalize food markets within the signs to ensure that produce is properly labeled would single European market,” according to Gabriel cost about two staff hours per week, according to a gro- Binetti, head of agricultural products for the French cery retailers association. The FDA has estimated that retail chain Carrefour.

20 THE NEW RULES Winter 2000 Country-of-origin labeling could be a first step Notes towards a more localized agricultural economy. Perhaps the principle behind country-of-origin 1. However, when asked to rate the importance of several types labeling should even be extended to state-of-origin of labeling information, households reported information on labeling. This belief has been supported by some of freshness as the most important, followed by information on the world’s largest retailers. “To most customers, it’s nutrition, storage and handling, and preparation tips. not an issue whether produce was grown out of the Information on country of origin was ranked fifth. country, it’s whether it’s grown in the county or state,” says Bruce Peterson, vice president of produce mer- 2. F. K. Kaferstein, Y. Motarjemi and D. W. Bettcher, chandising for Wal-Mart. “If I am selling Georgia “Foodborne Disease Control: A Transnational Challenge,” peaches in Georgia, I want customers to know that. Emerging Infectious Diseases, Vol. 3, No. 4, a publication of the The perception is that locally grown produce is fresher.” National Centers for Disease Control and Prevention in Perhaps shoppers do believe local produce is fresher. Atlanta, GA. Perhaps consumers feel safer when their food comes from small farms rather than feedlots, local dairies 3. Groups backing Congresswoman Bono’s bill include the rather than industrial plants, and farmers’ markets Western Growers Association, Florida Fruit and Vegetable rather than supermarkets. Perhaps the push towards Association, California Citrus Mutual, the National Peach country-of-origin labeling reflects a desire to support Council, National Onion Association, National Watermelon struggling U.S. farmers. Whatever the reason, it Council, Indian River Citrus League, the Grower-Shipper seems fair to consumers (and beneficial to farmers) to Vegetable Association, the Florida Tomato Exchange, the distinguish between oranges grown in Florida and American Farm Bureau Association, the Teamsters Union, the those flown into Florida from Chile. Grown in the USA, Made in the USA Foundation, and the However, when asked to rate the importance of U.S. Business and Industrial Foundation. several types of labeling information, households reported information on freshness as the most impor- tant, followed by information on nutrition, storage and handling, and preparation tips. Information on country of origin was ranked fifth. [!]

Free Trade continued from page 17 According to Harvard Economist Dana Rodrik, In the 10 years after Europe embraced its inter- “no widely accepted model attributes to postwar nal free trade treaty, unemployment doubled. trade liberalization more than a very tiny fraction of Growth rates fell. the increased prosperity of the advanced industrial Two years ago, Asia plunged into a deep reces- countries.” Paul Bairoch, an eminent Swiss econo- sion when foreign short term investment, which mist, is even more emphatic. “It is difficult to find had flowed in when nations jettisoned their controls another case where the facts so contradict a domi- on capital, flowed out at the first signs of economic nant theory than the one concerning the negative danger. impact of protectionism.” For many countries, economies grew fastest The empirical evidence is weak. The promised during the 1950s, 1960s and 1970s, when they benefits are trivial. A massive report issued by the operated in what we would call a highly protectionist World Bank and the OECD to encourage countries fashion. Since adopting the new free trade rules, to create the new trade rules predicted that doing so countries in Latin America and Africa have experi- would add about three-quarters of l percent to the enced economic stagnation or decline. In many estimated world GNP in 10 years: one-third of the countries, exports are up but living standards are normal annual growth percentage of a typical country. down. Three years after enactment of the NAFTA, The free trade debate is no longer just about Mexico’s trade with the U.S. went from a modest money: it’s about the benefits of local culture and deficit to a $14 billion surplus. Yet the Mexico community and the rights of citizens. Let’s hope economy imploded, living standards plunged, that the battle in Seattle finds its way into this year’s unemployment soared and a wave of drugs and political campaigns, so that the “religion” of free violence swept the country. trade can be examined more closely. [!]

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