April 12, 2011 – Article I, Section 10, Clause 2 of the United States Constitution – Guest Essayist: Justin Butterfield, Constitutional Attorney, Liberty Institute
Article 1, Section 10, Clause 2
2: No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.
One of the primary difficulties in the establishment of the United States’ government was striking the right balance between states’ rights and the need for a national government that could present one face towards the rest of the world while maximizing the strengths of uniting the states. Under the Articles of Confederation, the first attempt at a government for the United States of America, power was so decentralized that each state almost operated as an independent nation. States were entering into their own treaties with foreign nations; states were coining their own money; and states were setting their own tariffs, both for goods from other nations and from other states. Article 1, Section 10, Clause 2 of the U.S. Constitution was a response to the economic and political disunity and inefficiency that existed because of each state’s ability to set its own tariffs under the Article of Confederation. These tariffs were damaging both economically and politically.
Economically, the protectionism of the states and the corresponding tariffs eliminated the trade advantages that would otherwise have come from the union of the states. In 1776, Adam Smith’s Wealth of Nations set forth the principles that would ultimately replace the economic policy of mercantilism with capitalism and free trade. Among these principles were that one should “never attempt to make at home what it will cost him more to make than to buy.” Associated with this principle is the idea that goods should be produced where it is most efficient to produce that type of good and traded for other goods that can more efficiently be produced elsewhere. Because of the diverse geographies and climates of the states, the union of the states within the United States of America should have resulted in great efficiency of trade, increasing the wealth of all of the states. Cotton, better produced in the southern states, could have been traded for manufactured goods produced in the northern states. Instead, under the Articles of Confederation, one state would set tariffs against another state so high that the benefits of trade were lost. Trade wars broke out between the states. New York imposed high tariffs on products from New Jersey and Connecticut, which responded in kind. States with major ports were also able to set high import and export duties, hurting neighboring states that did not have their own ports. This protectionism among the states fueled rivalries among the states and encouraged each state to be as self-sufficient as possible to avoid having to pay high tariffs to other states. These tariffs thus prevented both free trade and the benefits that Adam Smith’s Wealth of Nations predicted would be brought about by that trade.
In 1827, the Supreme Court, in Brown v. Maryland, looked back on the tariff wars between the states and the establishment of Article 1, Section 10 Clause 2 of the U.S. Constitution:
From the vast inequality between the different states of the confederacy, as to commercial advantages, few subjects were viewed with deeper interest, or excited more irritation, than the manner in which the several states exercised, or seemed disposed to exercise, the power of laying duties on imports. …
A duty on imports is a tax on the article, which is paid by the consumer. The great importing states would thus levy a tax on the non-importing states, which would not be less a tax because their interest would afford ample security against its ever being so heavy as to expel commerce from their ports.
This would necessarily produce countervailing measures on the part of those states whose situation was less favorable to importation. For this, among other reasons, the whole power of laying duties on imports was, with a single and slight exception, taken from the states.
The ability of states to set their own tariff levels also led to political problems for the United States as a whole. Although the Articles of Confederation sought to present the union of the states to the world as a unified whole, foreign nations could not trade with the United States as one nation because each state had its own tariffs. Additionally, because each state could set its own tariffs, foreign nations refused to negotiate trade agreements with the United States. The inability of the confederate government to regulate tariffs illustrated its fundamental weakness to the governments of other nations.
In the late eighteenth century, tariffs and economic protectionism were no less a major economic and political factor than they are today. With each state able to set its own tariffs, many of the benefits of being one nation were lost, and economic and political warfare and chaos ensued. Through Article 1, Section 10, Clause 2 of the U.S. Constitution, many of the economic issues facing the states under the Articles of Confederation were corrected.
Justin Butterfield, Esq. is a Constitutional attorney on staff with Liberty Institute. Justin graduated from Harvard Law School in 2007. He also holds a Bachelor of Science degree in Electrical Engineering from the University of Texas at El Paso where he graduated Summa Cum Laude.