Editor’s note: Richard Nadler, a veteran
advocate of a wide range of conservative causes and former
publisher of K.C. Jones, died suddenly at his home
Saturday. We mourn his passing but publish with pride his final
submission.
It is a rage among certain thinkers, Right and Left, to denigrate
trade agreements as an assault on our nation’s sovereignty. Such
arguments are doubly dangerous: they distort important economic
discussions; and in so doing, trivialize the dangers of
international agreements that might actually diminish our
sovereignty.
Partisan dyspepsia over foreign trade dates back to the
administration of George Washington. The Treaty of Amity,
Commerce and Navigation with Great Britain, negotiated by
John Jay in 1794, drew howls of protest from supporters of the
nascent Democratic-Republican Party. Its leaders faulted the
establishment of a transnational commission, appointed in part by
the President, in part by the King of England, to resolve
outstanding disputes regarding property claims and commercial
rights.
Defending the Treaty under the pen-name “Camillus,” Alexander
Hamilton observed that sovereignty, far from being impugned, was
the principle that underlay the establishment of such tribunals:
To the objection that the article erects a tribunal unknown to
the Constitution… the answer is simple and conclusive… Nations
acknowledging no common judge on earth, when they are willing
to submit the questions between them to judicial decisions,
must of necessity constitute a special tribunal for the
purpose.
Were such commissions to overstep their boundaries in a ruling,
Hamilton noted, “The United States may, though at their peril,
refuse compliance.” He defined the “peril” thus: the other party
might, in retaliation, withdraw from any or all of its
obligations under the agreement.
Some Jeffersonians rejected this defense. When one raw Tennessean
entered Congress in 1796, the House was crafting a panegyric to
the nation’s retiring hero-President. Incensed at George
Washington’s concessions to Great Britain in the Jay Treaty,
Andrew Jackson voted against the tribute!
Turnabout is fair play. The idée fixe of the American
commercial diplomacy during the first six presidencies was the
restoration of our trade with the British West Indies. That
trade, the major market for our agricultural and naval exports,
had been drastically curtailed by Great Britain following the
Revolutionary War. Under the skilled diplomacy of President
Andrew Jackson’s Secretary of State, Martin Van Buren, the trade
was fully restored in 1830. The terms included the establishment
of bi-national panels to adjudicate outstanding claims.
Whig Party partisans promptly accused Jackson and Van Buren of
degrading national sovereignty.
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.
Finally, constitutional Sturm und Drang over trade
deflects conservatives’ attention from actual threats to our
sovereignty. Ambassador John Bolton and Deputy Assistant Attorney
General John Yoo recently argued that pending international
conventions go beyond the rules of international trade and
finance embodied in Breton Woods, GATT and NAFTA. Agreements like
the Law of the Sea Treaty compromise the ability of the United
States to gather and protect military intelligence. Agreements
like the United Nations Convention on the Rights of the Child
attempt, however toothlessly, to undermine the individual rights
guaranteed to Americans under our Constitution.
Patriots from Alexander Hamilton to Ed Meese have clearly
articulated both the importance of international agreements, and
the subordination of such agreements to the instrument under
which they are created. International panels, lawfully
instituted, play an important role in our freedom of commerce.
But when international arbitrators assume the posture of
independent lawmakers, the Congress and the president should
exercise what the Constitution guarantees: U.S. sovereignty.
