A federal judge in the United States has ruled that a state law which penalises companies trading with Burma is unconstitutional.

The judge Joseph L.

Taurosaid that the two year old law in the state of Massachusetts infringes on the power of the federal government to regulate foreign affairs.

The legislation bars firms which do business with Burma from bidding for state contracts in Massachusetts.

Correspondents say American industrialists want to stem a growing trend among local authorities to punish companies trading with countries with a poor human rights record and that this could be an important test case. brought by a trade group -- the National Foreign Trade CouncilThe World Trade Organisation is also investigating the issue.

It has set up a disputes panel to investigate complaints by the European Union and Japan on the grounds that the law contravenes WTO rules on free trade.