National commerce depends on an efficient manufacturing and services sector and an active global marketplace; however, foreign governments often impose trade barriers that restrict U.S. companies’ efforts to enter these markets or maintain market presence.
Well-constructed regulations reduce cumulative regulatory costs, enabling businesses to invest in growth and hire additional workers without incurring extra regulatory fees. Conversely, poorly conceived rules increase government micromanagement and incur excessive expenses.
Imposts
Imposts, tariffs, taxes or levies as they’re sometimes known, help governments raise revenue while protecting domestic industries and regulating trading activity within a nation’s borders.
Trade has historically been an essential source of revenue for governments worldwide. Therefore, most nations have instituted complex systems of taxes and duties on products imported into or out of a nation’s borders to raise money for services and programs provided by their government. Duties vary depending on type of import/export transaction being performed as well as value of imported/exported item(s).
Imposts, or taxes, are necessary to create an even playing field when trading with foreign nations and protect domestic industries from unfair competition from cheaper imports. They also help prevent “dumping,” when countries export goods at prices below their production costs.
These duties help maintain the integrity of a nation’s ports, travel ways and military, all essential components of trade facilitation. Furthermore, these duties promote efficiency and innovation by giving businesses access to various intermediate and capital inputs; according to the St. Louis Fed’s findings: increased input supplies “can also increase production quantities and quality” such as medical supplies such as vaccines or PPE and industrial equipment.
Railroad Regulations
Small businesses and farmers protested when railroads charged excessive freight rates. Congress used its authority “to regulate Commerce with foreign Nations, and among the several States” to pass a law creating the Interstate Commerce Commission in 1887 – creating the first national industrial regulatory body. The ICC limited railroad rates to those which were “reasonable and just”, restricted price discrimination between long and short haul routes, prohibited pooling of resources among railroads – these and other laws greatly limited railroads’ ability to respond rapidly to changes in the marketplace.
Example: regulated railroads were prevented from adding new train cars for grain or coal without first seeking permission from the ICC. Railroads also ran into problems when seeking rate reductions for multi-car shipments or offering rate discounts by switching to lower cost diesel fuel; attempts at offering rate discounts through rate reductions for multi-car shipments or adding unit trains of hopper cars for heavy loads also met resistance from regulators.
The Biden Administration, with its narrow view of competition, is now considering regulating reciprocal switching agreements — where one railroad that has access to a shipper’s freight yard switches that traffic off to another railroad that does not. Such rate regulation would compromise our nation’s rail network and raise consumer goods costs; railroads invest billions each year in safety, service operations infrastructure in order to better meet customers’ needs.
The Commerce Clause
The Commerce Clause establishes Congress’s constitutional authority to oversee interstate commerce. This clause “grants Congress the power to regulate commerce with foreign nations, among states and Indian Tribes.” Furthermore, it functions both as an explicit grant of power as well as an implied prohibition against state laws or regulations which interfere with or discriminate against interstate commerce.
The Supreme Court has created rules to define which kinds of activities fall under this power, with “commerce among the States” serving as its umbrella category. Under this clause, Congress is granted exclusive control to regulate channels of interstate commerce such as roads, railroads, or air routes and their instrumentalities such as goods moving through these channels; combined with this power is its supremacy clause which supersedes any state statutes which conflict.
The Supreme Court has utilized the Commerce Clause to counterprotectionist state policies that give their residents and businesses an unfair competitive edge against businesses located elsewhere. Furthermore, the clause prohibits multiple taxation of similar transactions and requires uniform rules on issues like the apportionment of taxes. PLF files lawsuits to challenge this current interpretation of the Commerce Clause–particularly its “dormant” aspect–and restore its original public meaning.
Shays’ Rebellion
Shays’ Rebellion demonstrated the need for a strong federal government capable of balancing power, maintaining economic stability, and responding to social unrest. Furthermore, it revealed the necessity for fair economic policies that protect all citizens equally despite fluctuations in economic circumstances. Furthermore, it demonstrated why centralization is key to democracy – with federal authorities better capable of meeting citizen needs than local or state governments.
In 1786, Massachusetts passed an array of tariff and land ordinances widely considered unfair, prompting protesters to begin what became known as Shays’ Rebellion. After an uprising was put down by local militia forces in January of 1787, Shays fled Vermont where he would eventually be pardoned in 1788.
After Shays’ Rebellion, many towns that supported it sent representatives to the Constitutional Convention. These “Shaysite” delegates helped shape a Constitution which addressed some of the issues raised during Shays’ Rebellion, including some key constitutional clauses related to them. One historian points out, however, that Federalist analysis of Shays’ Rebellion often was biased by subjective feelings and polemics rather than objective analysis; such as repeatedly suggesting it was part of an elaborate plot by British agents to undo Revolution and destroy nationhood.