The "New Protectionism" and the American Common Market

Article excerpt

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 Article, 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 a 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 nondiscriminatory 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protections for the American common market and should therefore be rethought by the Court or legislatively superseded by Congress.

INTRODUCTION

I.   THE DORMANT COMMERCE CLAUSE, UNITED HAULERS, AND
     DAVIS
     A. The Pre-United Haulers Dormant Commerce Clause: A
        Doctrinal Summary
     B. United Haulers
     C. Davis

II.  ANTIDISCRIMINATION AND THE NEW PUBLIC-ENTITIES
     EXCEPTION
     A. The Court's Proffered Justifications
     B. Evaluating the Proffered Rationales
        1. The Likelihood of Nonprotectionist Motivation.
        2. Traditional Governmental Functions
        3. Virtual Representation
        4. Public vs. Private Protectionism
        5. Municipal Bond Market Exceptionalism

III. THE PUBLIC-ENTITIES EXCEPTION AND THE BIRTH OF THE
     NEW PROTECTIONISM
     A. Municipal Garbage Processing and Bond Favoritism
     B. Public Protectionism
     C. Quasi Public-Private Protectionism
     D. Whither the Dormant Commerce Clause?

IV.  THE NEW PROTECTIONISM AND THE MARKET-PARTICIPANT
     EXCEPTION
     A. Summary of the Market-Participant Exception
     B. Davis's Market-Participant Revisionism
     C. The Implications of an Expanded Market-Participant
        Exception

V.   THE TWILIGHT OF PIKE BALANCING
     A. Davis on Balancing
     B. The End of Balancing? Four Readings of Davis
     C. Against Premature Abandonment of Balancing

CONCLUSION

INTRODUCTION

For close to two centuries, the United States Supreme Court has actively sought to protect interstate trade from undue disruption by state or local governments. Pursuant to the so-called "dormant Commerce Clause," the Court has reviewed state and local legislation to ensure that local measures do not unreasonably disrupt the American common market. (1) Although the Court has deployed different doctrinal formulas over the years to distinguish between legitimate state commercial regulations and illegitimate measures that unduly interfere with interstate trade, (2) one constant has been a strict prohibition on protectionist measures that seek to insulate in-state economic activity from out-of-state competition. Beginning as early as the middle of the nineteenth century, the Court actively rooted out and invalidated state laws that sought to discourage the sale of out-of-state goods or services so as to favor local economic interests. (3) Since then, numerous "discriminatory" measures have been struck down by the Court. (4) Indeed, as others have noted, this antipathy to local protectionism has been a hallmark of the Court's Commerce Clause jurisprudence. …

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