Interstate Relations: The Neglected Dimension of Federalism

By Joseph F. Zimmerman | Go to book overview

7
Interstate Economic Protectionism

The start of the Revolutionary War in 1776 coincided with a revolution in economic thought initiated by publication of Adam Smith Wealth of Nations which demonstrated that the mercantilistic practice of nations erecting trade barriers against goods produced in other nations hindered the growth of the wealth of a nation, whereas free trade among nations would produce specialization of production in nations with the greatest comparative cost advantage, thereby increasing the wealth of all nations. 1

The thirteen independent states, which acted as a coalition during the Revolutionary War, formed a confederation in 1781 when Maryland, the thirteenth state, ratified the Articles of Confederation and Perpetual Union. The newly created unicameral Congress, however, was granted few powers and lacked the power to regulate commerce among the states.

Trade barriers soon thereafter were erected by several states. In 1784, tariffs were imposed by the New England states and most of the Middle Atlantic states on imported goods. Massachusetts goods, for example, were subject to discriminatory duties in Connecticut, and Delaware goods were subject to similar duties in Pennsylvania. New York imposed clearance fees on coastal ships visiting its ports, and also imposed fees on boats carrying vegetables that were rowed across the Hudson River. Discriminatory duties almost immediately invited retaliation by other states in the form of imposition of similar duties. Chief Justice John Marshall of the U.S. Supreme Court in 1827 made reference to "the oppressed and degraded state of commerce, previous to the adoption of the constitution. . . ." 2

Alexander Hamilton in The Federalist No. 6 referred to "the rivalships and competitions of commerce between commercial nations" which led to wars between Greek city states, Rome and Carthage, and Great Britain and Spain. 3 Based upon this history of commercial rivalries leading to wars, Hamilton asked whether there was any evidence "which would seduce us into expectation of peace and cordiality between the members of the present confederacy, in a state of separation." 4 In the absence of the proposed U.S. Constitution, he maintained that each state

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