The 'New Protectionism' and the American Common Market

Abstract:     
For nearly two centuries, the U.S. Constitution through the dormant Commerce Clause has protected the American common market from protectionist commercial state regulations and taxes. During the past two terms, however, the U.S. Supreme Court created a new exception to the dormant Commerce Clause for protectionist state and local taxes and regulations that favor public rather than private entities. In this articke, we describe this “New Protectionism” and argue that the Court’s embrace of it is profoundly misguided. As we document, there is no material difference, economically or constitutionally, between public protectionism and private protectionism. As illustrated by the variety of ways in which government and private enterprise interact, there is no coherent distinction between public and private activities, and ensuing efforts to draw such as line will only serve to embroil the courts in tasks for which it is ill-suited. Worse, this new exception only encourages state and local governments to engage in protectionism in a variety of contexts, such as education and local economic development, in which the dangers to national economic union are paramount. Coupled with the Court’s recently declared unwillingness to subject non-discriminatory regulations and taxes to minimal judicial scrutiny, this endorsement of public protectionism threatens to emasculate the constitutional protections for the American common market and should therefore be rethought by the Court or legislatively superceded by Congress.

Number of Pages in PDF File: 79

Keywords: Dormant Commerce Clause, Protectionism, Interstate Trade

JEL Classification: K1, K20

Accepted Paper Series