STATE OF WISCONSIN
DEPARTMENT OF JUSTICE
J.B. VAN HOLLEN
Kevin M. St. John
Deputy Attorney General
114 East, State Capitol
P.O. Box 7857
Madison, WI 53707-7857
DateDecember 19, 2014 OAG—11—14 ReStartChairman
Assembly Committee on Organization
Post Office Box 8952
Madison, WI 53708
BodyStart¶1. In your capacity as Chairman of the Assembly Committee on Organization, you ask whether Wis. Stat. § 710.02(1), limiting the acreage in Wisconsin land that may be acquired, owned, or held by nonresident aliens and foreign corporations, applies to Members of the General Agreement on Trade in Services (GATS), an international agreement of which the United States of America is a Member. You point out that the GATS directs its Members to accord to the services and service suppliers of all other Member nations “treatment no less favourable than it accords to its own like services and service suppliers.” GATS art. XVII:1. You also note that Wis. Stat. § 710.02(2)(b) exempts “[c]itizens, foreign governments or subjects of a foreign government whose rights to hold larger quantities of land are secured by treaty” from the acreage limitation. ¶2. I conclude that Wis. Stat. § 710.02(1) is generally inapplicable to GATS Members, their services, or their service suppliers to the extent they seek to acquire, own, or hold land for enumerated service-related uses. First, the aim of the GATS is to remove barriers to international trade in services, while the aim of the statute is to prevent large-scale ownership of land by nonresident aliens for agricultural and forestry purposes. The statute achieves this goal by prohibiting nonresident alien ownership of more than 640 acres of land for agricultural or forestry use. Meanwhile, separate provisions in the statute allow nonresident alien land ownership, with no acreage limitation, for most service-based (non-agricultural and non-forestry) purposes. Thus, as long as the nonresident alien will use Wisconsin land for a permissible service-based purpose (and not agriculture or forestry), the statutory acreage limitation does not apply. Second, even if the statute’s acreage limitation did apply, GATS Members and their service suppliers are exempted from the acreage limitation by the statute’s treaty exception with respect to the acquisition, ownership, or holding of land for purposes enumerated in the GATS. ¶3. Wisconsin Stat. § 710.02(1) prohibits nonresident aliens from “acquir[ing], own[ing] or hold[ing] any interest . . . in more than 640 acres of land in this state.” The earliest version of the law was enacted in 1887. See Wis. Stat.
§ 2200a (1889); 1887 Wis. Laws ch. 479. The 1887 enactment was one of the many “alien land laws” that swept the country “at that time stemming from what was regarded as undesirable results from nonresident alien ownership of large tracts of land.” Lehndorff Geneva, Inc. v. Warren, 74 Wis. 2d 369, 386, 246 N.W.2d 815 (1976). The statute was an instrument of agricultural protectionism, born in
“a period of agricultural discontent in which legislatures feared ‘the large scale engrossment of farm land by absentees,’ with resentment directed against both aliens and corporations.” Id. at 386 n. 32 (citation omitted). Eventually, this concern for agricultural land use extended to forestry uses as well. See 1983 Wis. Act 335, § 1; Wis. Stat. § 710.02(3).
¶4. There are exceptions to the acreage limitation. Since 1953, nonresident alien “[r]ailroad or pipeline corporations” have been allowed to acquire land in Wisconsin without limitation. Wis. Stat. § 710.02(2)(c). ¶5. In 1983, two more exceptions were adopted. First, nonresident alien entities may now freely acquire land for these purposes: “exploration mining lease
. . . and land used for mining and associated activities”; “[l]eases for exploration or production of oil, gas, coal, shale and related hydrocarbons, including by-products of the production, and land used in connection with the exploration or production”; and specified manufacturing and mercantile activities. Wis. Stat. § 710.02(2)(d)-(g). The manufacturing and mercantile categories, referenced in subsections (e) and (f), are extremely broad, embracing almost every conceivable business activity. Activities relating to agriculture and forestry are expressly not included in the manufacturing and mercantile exemptions. Thus, with these categorical exemptions, the statute now allows nonresident alien ownership of more than
640 acres of land for most non-agricultural and non-forestry purposes.
¶6. The second exception added by the 1983 Act eliminates the acreage limitation for: “Citizens, foreign governments or subjects of a foreign government whose rights to hold larger quantities of land are secured by treaty.” Wis. Stat.
§ 710.02(2)(b). There is no legislative history explaining the reason for the treaty exception, but the Act expresses the legislature’s desire to remove barriers to foreign investment while continuing to limit the right to use more than 640 acres of land for agricultural or forestry to resident landowners:
Legislative declaration. The legislature recognizes the need to modify this state’s restrictions on land ownership by nonresident alien and foreign business corporations and entities, so as to remove barriers to foreign investment in energy, mining, manufacturing and mercantile activities. Although this act removes acreage limits on land ownership by such persons for certain purposes, it is the legislature’s intent that these liberalized provisions and exceptions be strictly construed, so as to continue to limit alien ownership of land used for agricultural or forestry purposes to not more than 640 acres. The legislature further declares that the exception granted to manufacturing activities shall not be construed to allow agricultural or forestry operations to be undertaken for purposes of supplying raw materials to such manufacturing activities.
General Agreement on Trade in Services.
¶7. The history of the GATS begins with the General Agreement on Tariffs and Trade (GATT), a multilateral trade agreement created after World War II.
See 19 U.S.C. § 3501(1); China Liquor Distrib. Co. v. United States, 343 F.2d 1005, 1006 (C.C.P.A. 1964). The intent of the GATT was to liberalize international trade by reducing discriminatory and protectionist tariffs and eliminating other trade barriers. The GATT has been amended over the years through a series of multilateral trade negotiations known as “rounds.”
¶8. The Uruguay Round (1986-1994) established the World Trade Organization, the successor to the GATT. See 19 U.S.C. § 3501(8). It also produced the GATS, a multilateral agreement binding all WTO Members. See 19 U.S.C.
§ 3511(d)(14). As its name indicates, the GATS is specifically concerned with trade in services.
The scope of the GATS is enormous; it covers virtually all types of services in almost all major countries. . . . The only services that the GATS explicitly excludes are government-provided. The GATS categorizes all other services into twelve sectors: business; communication; construction and engineering; distribution; educational; environmental; financial; health related and social; tourism and travel related; recreational, cultural and sporting; transport; and other services not included elsewhere. The business services sector is divided into five sub-sectors: professional, computer, research and development, real estate, rental/leasing, and other business services.
Eve Ross, Comment, A Venerable Profession Enters the Global Economy: South Carolina Lawyers and the General Agreement on Trade in Services (GATS),
57 S.C. L. Rev. 969, 975-76 (2006) (footnotes omitted) (catalogue of services derived from World Trade Organization, Services Sectoral Classification List (1991)).
¶9. The GATS is a Congressional-Executive agreement. See Proclamation No. 6763, 60 Fed. Reg. 1007 (Dec. 23, 1994); Ross, 57 S. Car. L. Rev. at 975. Congressional-Executive agreements are “‘simply acts of Congress, ordinary legislation which enacts an international obligation by a majority vote of both the House and Senate, with the President’s signature.’” Id. (quoting David J. Bederman, International Law Frameworks 167 (2001)); accord Made in the USA Found. v. United States, 242 F.3d 1300, 1305 n.12 (11th Cir. 2001); Restatement (Third) of Foreign Relations Law of the United States § 303(2) & cmt. e. & notes 7-9 (1987) (hereinafter Restatement). Notably, Congressional-Executive agreements have become the preferred mode for trade agreements. See Made in the USA,
242 F.3d at 1305 n.12; Restatement § 303, note 9 (trade agreements “are now commonly effected by Congressional-Executive agreement, in recognition of the special role of the House of Representatives in the raising of revenue”).
¶10. Every GATS Member “uses a schedule of specific commitments to customize how the GATS will apply to them.” Ross, 57 S.C. L. Rev. at 978. Each individual “Schedule of Specific Commitments,” is “annexed to [the GATS] and . . . form[s] an integral part thereof.” GATS art. XX. In this Schedule, the Member lists the “service sectors” it has agreed to include in its GATS commitments. The United States’ Schedule includes business services, educational services, environmental services, financial services, health related and social services, tourism and travel related services, and transport services. The United States of America, Schedule of Specific Commitments at 15-73, Apr. 15, 1994 (hereinafter U.S. Schedule). Several of these service sectors are further subdivided into “subsectors.” See id. Among the business service subsectors are “Services Incidental to Agriculture, Hunting and Forestry (except provision of agriculture machinery with drivers and crew, harvesting and related services, services of farm labour contractors and aerial fire fighting).” Id. at 39. Services “incidental” to agriculture and forestry notwithstanding, the use of land for agriculture or forestry more generally does not constitute a “service” and does not appear in the U.S. Schedule of GATS-protected service sectors and subsectors.
¶11. The GATS requires “national treatment.” GATS art. XVII:1. “ ‘National treatment means that foreign nationals should be given the same treatment in each of the member countries as that country makes available to its own citizens.’ ”
ITC Ltd. v. Punchgini, Inc., 482 F.3d 135, 162 (2nd Cir. 2007) (citations omitted). The GATS allows each Member to maintain laws or “[m]easures” inconsistent with the national treatment mandate by explicitly acknowledging the inconsistency in its Schedule of Specific Commitments. GATS art. XX. These inconsistent laws or measures are listed as “Limitations on National Treatment” in the U.S. Schedule. The Schedule includes several federal and state laws restricting alien land ownership. See U.S. Schedule at 7-8. Although several limitations arising from Wisconsin law are included in the Schedule, Wis. Stat. § 710.02 is not one of them. See U.S. Schedule at 34, 56, 59-61, 65, 68.
¶12. A state law that is both inconsistent with the GATS and not included in the Schedule of Specific Commitments is not per se invalid. It can be declared invalid only “in an action brought by the United States for the purpose of declaring such [State law, or the application of such a State law] invalid.” 19 U.S.C.
§ 3512(b)(2)(A). In such a case, “the United States shall have the burden of proving that the law that is the subject of the action, or the application of that law, is inconsistent with the agreement in question.” Id. at § 3512(b)(2)(B)(ii). According to the General Counsel of the United States Trade Representative, the United States has never brought an action against a state under 19 U.S.C. § 3512(b)(2).