June 2, 2009


The Sovereignty Canard (Richard Nadler, 6.1.09, American Spectator)

Contemporary sovereignty objections to trade agreements are garbed in three forms: That they unconstitutionally avoid the Treaty Clause of the Constitution; that they unconstitutionally delegate Congressional powers to the Executive; and that they enable other nations to impose taxes on American citizens through transnational organizations. Phyllis Schafly, President of the Eagle Forum, has been particularly aggressive in asserting all three of these theories.

Most U.S. trade agreements are congressional-executive agreements. These are not treaties under U.S. law. But they are constitutional, and have been held so in an unbroken series of federal court decisions. The case law extends from 1892, when the McKinley Tariff Act was reviewed (Field v. Clark), through Coalition for Fair Lumber Exports v. U.S. (2006), in which challenges to NAFTA were dismissed.

The rulings have found the constitutional basis for these congressional-executive trade agreements not in the Treaty Clause, but in the commerce powers of Congress, and the foreign policy powers of the Executive -- powers that converge in the regulation of international trade.

The delegation of discretionary commercial powers by Congress to the executive within such agreements has its own long and venerable history. Most of that history has favored protectionists. In the decades surrounding 1900, Congress allowed the President unilateral power to raise tariffs upon an executive finding that other nations had taken actions hostile to American products.

Congressional-executive trade agreements are passed as American law, and they can be revoked the same way. In "Why Trade Promotion Authority Is Constitutional," Edwin Meese III and Todd Gaziano wrote:

Future trade deals would not be unconstitutional, nor would they undermine U.S. sovereignty, if they contained an agreement to submit some disputes to an international tribunal for an initial determination… A ruling by an international tribunal that calls a U.S. law into question would have no domestic effect unless Congress changes the law to comply with the ruling… The fact remains that no international tribunal can overturn any American law. Moreover, Congress may override an entire agreement at any time by a simple statute. Nations may also withdraw from international agreements by executive action alone.

But what of taxes imposed by international bodies? The transnational panels that adjudicate trade disputes under NAFTA and the WTO cannot impose taxes -- period. These panels have no power of enforcement apart from the governmental powers of the agreeing nations. Moreover, the "penalties" announced by trade panels authorize nothing beyond an action by the prevailing nation that it might have taken unilaterally, at any time, for any reason.

For example: Nation A brings an action against Nation B, alleging that Nation B's new agricultural law introduces an exceptional subsidy to unprocessed corn exports. After listening to evidence provided by both nations, the panel decides that Nation B's new subsidy exceeds the baseline in the trade agreement. It determines that the Nation B's new subsidy costs domestic corn producers in Nation A annual sales of $30 million.

The panel rules: Nation A can now impose $30 million in tariffs against products of nation B, to compensate for its loss.

But in fact, Nation A could have imposed a retaliatory tariff of $30 million -- or more -- on day one of the dispute. It is a sovereign nation, with absolute control over its ports of entry. No "tax" has been imposed on nation B. Substantively, the panel has delayed a trade war between sovereign powers that want to trade, encouraging them to negotiate their disagreement in advance of a "final ruling."

Theorists like Phyllis Schlafly and Pat Buchanan wish to protect American workers and American industry from foreign competition. By stigmatizing trade agreements as unconstitutional, or as damaging to American sovereignty, they avoid a series of embarrassing questions regarding their position. For instance: one half of American imports are used not by consumers, but by fabricators, who maintain the competitive position of American products abroad by their freedom to purchase the world's most cost-effective inputs. How will import restrictions help them?

Exports support six million American employees, including 20 percent of the total U.S. manufacturing workforce. Forty percent of American manufacturing jobs in computers and electronics are export related, as are 30 percent in machinery fabrication. How will trade wars help these workers, these businesses?

Capital insourcing -- direct investment of foreign-based corporations on American soil, such as the Asian auto plants in our South -- account for 5 million American jobs. How will attempts to restrict capital flows affect this workforce?

Stated simply: How can Schlafly, Buchanan, et al. protect American workers or American capitalists from competition in internationally traded goods and services?

A commitment to protect when one will not is treachery; an offer to protect when one cannot is foolery. Americans should concentrate on policies that will make our labor more productive and our capital more competitive, rather than upon futile attempts to protect both.

It's not that trade agreements don't amount to our giving up some of our sovereignty, just that what we get in exchange is worthwhile.

Posted by Orrin Judd at June 2, 2009 8:42 AM
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