Resident Commissioner Pablo José Hernandez has been working to revive the idea of an “enhanced commonwealth” as a status option for Puerto Rico.
As El Nuevo Dia columnist Jose Delgado recently observed, “The main proposals that the Resident Commissioner in Washington, Pablo José Hernández, has presented for a future attempt to improve the current territorial status are based on concepts that have been ignored by Congress for decades and that his grandfather, Rafael Hernández Colón, unsuccessfully defended.” One example is a deal with Japan that the resident commissioner’s grandfather tried to broker in the 1980s.
Can Puerto Rico make trade deals with other nations?
One of the features in most descriptions of “enhanced commonwealth” is the proposal that Puerto Rico should be able to make trade deals with other nations, with separate sovereignty, apart from the United States. Former Governor Rafael Hernández Colón, who was a leader of Puerto Rico’s Popular Democratic Party (PDP), which is unaffiliated with the U.S. Democratic Party and also referred to as the pro-Commonwealth party, repeatedly called for this prerogative.
Yet whenever faced with an opportunity to do so, the federal government has insisted at every turn that Puerto Rico, as a territory of the United States, cannot negotiate foreign tax and trade deals on its own behalf.
A deal with Japan?
In 1986, then-Governor Hernandez Colon proposed a tax-sparing scheme between Puerto Rico and Japan. The beginning of the story may have been a cooperation agreement the governor signed with Mitsubishi Bank Ltd. and the Nikko Securities Company in December 1985, following a meeting between the governor and the U.S. Ambassador to Japan. The New York Times described it as a deal to share information.
In January, former Reagan chief of staff Michael Deaver, who had just left the White House and was working with Puerto Rico’s government in a private capacity, met with officials in Tokyo to discuss the idea that Japanese investors in Puerto Rico could avoid Japanese taxes, much as U.S. companies used Section 936 to avoid U.S. taxes. He did this, again according to the Times, “without the knowledge of either the State Department or the White House.”
Confused, the U.S. Ambassador tried to determine whether Deaver actually somehow still represented then-President Ronald Reagan. Did the president support the plan coming from the Governor of Puerto Rico?
Secretary of State George P. Shultz sent a cable to the ambassador, saying that Puerto Rico “does not have the authority on its own to negotiate or enter into international agreements.” Only the Federal Government has the authority to negotiate international agreements on behalf of the states or of Puerto Rico.
”In addition,” the cable said, ”the U.S. opposes the principle of tax sparing and does not enter into tax sparing agreements with any country.”
After the cable was sent, the territorial government quickly reached out to the White House for consent to the plan and Puerto Rican officials responded that they were under the impression that they had been working hand in hand with the federal government, not acting on their own. The White House pointed out the problems with the timeline. Deaver no longer worked for the U.S. government.
A scandal
Deaver’s involvement was one of the issues that led to his investigation for “misconduct” including conflict of interest violations and influence peddling. The State Department was asked during the investigation to hand over all the cables between Schultz and the U.S. Embassy in Japan.
Deaver was eventually indicted for perjury and given several years’ probation.
Round II: Belize?
In 2003, then-Governor Sila María Calderón Serra, a former chief of staff to Governor Rafael Hernández Colón, attempted again to sign bilateral agreements with an independent nation, this time in the Caribbean. Secretary of State Colin Powell interceded, however, instructing Belize and putting all other foreign governments on notice that Puerto Rico lacked the authority to conduct its own international affairs and inviting the Puerto Rican government to further discuss this issue with his office directly – an invitation that was never accepted.
In a memorandum to the Belize Embassy, Secretary Powell forcefully explained: “The Department is aware that Puerto Rican government officials have approached a number of countries . . . seeking treatment normally only accorded to a sovereign state. . . .The department reiterates that the U.S. federal government is responsible for Puerto Rico’s foreign affairs.”
History repeats itself?
“In his message of last July 25th – on the occasion of the 73rd anniversary of the Constitution of Puerto Rico and the 127th anniversary of the U.S. invasion,” El Nuevo Dia reported, “Commissioner Hernández revived proposals aimed at challenging the validity of Federal laws and establishing trade and tax agreements consistent with U.S. foreign policy, as part of an agenda he would promote after the end of the term of the [PROMESA] Oversight Board.”
Perhaps cognizant of the history, Commissioner Hernández is reportedly aware that any Puerto Rican trade and tax agreements would have to be “consistent with U.S. foreign policy.” According to at least two former Secretaries of State, this would mean recognizing that Puerto Rico does not have the power “accorded to a sovereign state,” and that “Puerto Rico to does not have the authority on its own to negotiate or enter into international agreements.” In the words of Secretary Powell, ” the U.S. federal government is responsible for Puerto Rico’s foreign affairs” as long as Puerto Rico remains a U.S. territory.
