|Mr. PAUL. Thank you, Mr.
Chairman. First I would like to get unanimous
consent to submit an opening statement in the record.
Chairman HYDE. Without
[The prepared statement of
Mr. Paul follows:]
PREPARED STATEMENT OF THE
HONORABLE RON PAUL, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TEXAS
Mr. Chairman, a number of
people in this body and elsewhere have been urging rapid
consideration of so called fast track trade authority for
the President. I would like to address this issue
today. The motivation behind pushing for this
authority is the desire that the President negotiate further
Because these agreements,
together with this so-called fast track authority, are two
key pillars of our current unconstitutional trade policy, it
is critically important that they be examined together.
Indeed, I believe fast track authority is simply the most
egregious and unnecessary example of how we currently
conduct our trade policies.
As I hope to lay out here,
fast track and international trade agreements, far from
being the repudiation of nearly a century of wrong-headed
thinking on trade, are merely an extension of the
interventionist policies exemplified by the Smoot-Hawley
bill that precipitated the great depression. While the
idea of placing codicils regarding environmental and labor
concerns into our international trade agreements stands as
the most blatant evidence that supporters of the current
policy are eager to engage in interventionism, my point is
that the entire trade regime is in fact designed to promote
government interference in economic matters.
As our own economy weakens,
under some of the same pressures that helped to create the
great depression, i.e. an economy under the weight of
monetary inflation and excess taxation resulting from years
of foreign interventions, it is particularly timely that we
now consider the true free trade policy our country must
enact as a means to rescue our economy from the grip of what
seems to be an imminent downturn.
CONSTITUTIONAL AUTHORITY TO
In Article 1 Section 8,
the founding fathers crafted language granting Congress the
authority, to regulate trade. Their intention becomes
evident by considering the history and context in which this
delgation of authority is made. The first paragraph of
this section of the constitution is essentially the sum and
substance of the grants of authority contained in this
section, and the paragraphs which follow amount to specific
enumerations thereof. The key to this section is that
the colonists sought to rest with Congress the power to
obligate and pay expenditures on behalf of the nation for
those few specific powers granted to the central government,
including those necessary for engaging in war for the
purpose of defending this country. Moreover, the
founders wanted to remove from the states the ability to
regulate commerce. This move to pre-empt states was
not done in hopes that Congress would gain new regulatory
powers for the purpose of economic intervention.
Rather, it was one of the few instances in which the
founders wanted to stop the states from acting. The
power to regulate foreign commerce was given to Congress not
so that it would exercise such power, but rather so that the
states could not exercise it.
But the power was not
entrusted to Congress simply as a means to preempt the
states, it was also placed there out of a natural affinity
between this power and two other key Article 1, section 8
powers with which Congress was entrusted. Namely, the
revenue power and the war making power.
If Congress was to be able to
declare war might it not also regulate commerce with a
nation with whom we were engaging in armed struggle?
It is only natural to suggest that we might, for example,
wish to restrict the sale of munitions to a nation with
which we were engaged in hostilities. This is another
reason why Congress was granted this power, because it was
ancillary to the war making power, granted also to Congress,
indeed in the very same section of the constitution.
As an aside, I'll note that
John Randolph vociferously asserted during the hostilities
leading up to the war of 1812, that this power conveyed no
right whatsoever to engage in outright embargoes, even in
the instance of hostilities. As Randolph pointed out,
embargoes amount to a destruction of commerce, not mere
regulation. Unfortunately, embargoes have joined
international trade agreements and fast track authority as
other pillars of our wrongheaded and unconstitutional trade
Would our nation's founders
have been so ignorant, so short-sighted to have granted the
U.S. federal government the same power to cut off trade as
the British had held? To answer that question in the
affirmative is to suggest that the people, upon whose
consent our government rests, fought a war to wrest a noose
from the British King and Parliament only to give that same
noose to a Congress and President who were no more than
former British subjects residing in North America.
Such a claim is thus prima facie absurd. This becomes
even more evident in light of the charge in our
Declaration of Independence accusing the British of
"Cutting off our trade with all parts of the
Finally, the power to
regulate foreign commerce was granted to Congress as an
ancillary power to the revenue function. Tariffs have
two impacts, one of regulating foreign commerce and a second
of raising revenues for the government. Anyone who
does not believe our founders recognized these purposes, and
their distinct-but-connected nature, need only read John
Dickinson's revolutionary era writings, Letters >From
A Pennsylvania Farmer. Indeed, his second
Letter serves as a great explanation of the difference
between revenue tariffs and regulatory tariffs.
The purpose behind placing
the war-making and tax-writing powers in the House was based
on the founders' understanding that the House would be the
body closest to the people. Recall that originally our
constitution called for the direct election of the House
alone. The House was thus the closest representative
of the people, and this is reflected in its title, House of
Representatives. For it was understood that the people
ultimately delegated all the authority that each of the
branches of government receieved, and thus they alone could
rearrange that delegation. The delegation of trade
authority to Congress, and Congress alone, was the natural
outcome of the delegation to Congress of war-making and
tax-writing powers, because trade policy is inextricably
linked with these functions.
In fact, the reason
Randolph fought against the aforementioned embargo is that
he saw clearly, as have many others, that trade
hostitilities often lead directly to war.
Unfortunately, the War of 1812 proved Randolph's vision to
be accurate. So, if protectionism was not a goal of
the founders, why did they give certain powers to Congress
when it comes to tariffs and trade regulation?
THE PROPER PURPOSE OF TARIFFS
IN THE UNITED STATES
American colonists had felt
the real impact of mercantilist policies enacted by England.
In constructing a new republic they were well aware how
tariff and regulatory policies stood as pillars of British
mercantilism. Our Declaration of Independence
cites a "cutting off of trade" as a prime reason
for breaking away from Britain. Still, our founding
fathers constitutionally authorized the placement of a
tariff on foreign goods. But again, hearkening back to
Dickinson, they understood that the tariff served, in this
instance, the purpose of raising revenue, not of intervening
in foreign markets or protecting domestic manufacturers from
The American tariff was
authorized, not with a blank check but rather for a specific
purpose, that purpose being to raise sufficient revenues for
the running of a constitutionally limited federal
government. The raising of a tariff for
protectionist purposes, as in the case of Smoot-Hawley, is a
prime example of a policy our founders would have detested.
The advocates of protectionism like to portray tariffs as
"taxes on foreign goods" but goods do not pay
taxes, people do. As the writings of Mr. Dickinson
further make evident, the founders realized tariffs are
taxes primarily upon consumers rather than producers.
Tariffs are a tax on the American people. It was this
realization that helped fuel the call for the secession of
these colonies from the mother country. By placing
tariffs on American consumers, the British Parliament was
engaging in taxation without representation.
If we truly understood these
principles this House would vote today to unilaterally lower
tariffs. In fact, as long as we have any kind of
national income, payroll, or sales tax we ought to lower our
tariffs to zero. We should undertake this policy
because tariffs negatively impact the standard of living of
every American. Far from promoting the general
welfare, tariffs diminish it.
There is no reason to enact
international trade agreements as a means to lower our
tariffs. This is a ruse. The reason we engage in
these international agreements is "to open up foreign
markets," and frankly, there is no constitutional
authorization whatsoever for our federal government to open
foreign markets. Our government is supposed to set
policy for our nation alone. We are not to impact the
trade policies of other countries through agreements, but
rather by the moral and economic persuasion that would come
from showing to the world the benefits of freedom and
increased living standards that flow naturally from a
lower-tariff/free trade policy.
But we have constructed a
regime of trade agreements, and the accompanying policy of
subsidies (yet another pillar of our current
unconstitutional policy) as a means to "open foreign
markets." Big business and special interests
prefer this policy because they get the subsidies and
preferential treatment in these agreements. Again, our
government has authority and responsibility to unilaterally
open our market, it does not have the authority to open
Similarly, we should consider
the impact that these free trade agreements have upon our
sovereignty. These agreements have the effect of
delegating to foreign trade negotiatiors a role in shaping
U.S. policy. This is the sort of dangerous consequence
we end up with when Congress neglects the proper duties the
people have delegated to us.
To those who are naive enough
to believe that free trade agreements are in fact intended
to reduce our tariffs in this country, I can say only that
even if this were true we would be faced with the problem of
advancing unconstitutional trade agreements as a means to
rectify unconstitutional protectionist policies. I
recall the admonition of the great advocate of open markets
and free trade, Ludwig von Mises, who pointed out that one
of the worst problems created by government intervention is
the fact that it begets further intervention.
The only proper purpose for a
tariff in this Republic is the raising of revenue to fund
legitimate government functions. This being the case,
it is clear that whatever tariff rates other countries place
upon their citizens has no rightful role in determining our
tariffs. Tariffs can never then be the proper subject
of trade negotiations. We should reduce our tariffs
because it is good for our country-- the presence or absence
of international agreements plays no role in forming this
THE PRESIDENTIAL ROLE
Understanding the proper
Presidential role in regulating trade is important to
appreciating what our founders set out to do with regard to
restricting government powers with regard to international
commerce. The first key to understanding what role the
President should have in regulating trade is to read that
article of the constitution enumerating presidential powers.
Searching that article one will find no reference to foreign
commerce because the founders intended no role whatsoever
for the president in this area. Thus, the President
would simply have the power to sign or veto tariff
Some may suggest that the
treaty-making authority is the means by which the president
gains a legitimate power to negotiate trade agreements.
Even our courts do not recognize this. While
international courts recognize no difference between
treaties and trade agreements, our own courts have had to
recognize that our constitution grants Congress the
authority to regulate foreign trade. What our courts
have not recognized is the reason the founders placed the
trade regulating power with Congress and the treaty
authority with the President, is that this had the effect of
expressly prohibiting any treaty, or falsely named
"agreement," dealing with commerce from ever being
enacted. Because treaty and trade regulatory powers
were divided among branches of government, a
constitutionally limited government would be effectively
blocked from engaging in these activities. In short,
trade policy was to be crafted unilaterally, in the American
interest. American policy relative to the regulation
of commerce was not to be the subject of negotiations with
foreign governments. The international courts are
seldom right, but they recognize that trying to call a
treaty an "agreement" is a mere play on words.
Because of the way American
courts have ruled, agreements that the founders thought
should never be enacted have not only become possible, they
have become possible at a lower threshold even than those
treaties which were in fact specifically authorized.
By calling something an "agreement" the 2/3rds
vote required for passing treaties in the Senate has been
Obviously, there is then an
insurmountable dilemma for those who wish to centralize
trade policies in the hands of the President. The
argument left to those who advocate a role for the President
in the regulation of foreign trade, is that Congress is
delegating such authority. This too runs contrary to
the principles of a government designed to rest upon the
separation of powers. The separation of powers was
integral to the founding of our republic because the
founders perceived concentration and centralization of power
as the single greatest threat to individual liberty.
Thus a system of checks and balances was designed to avoid
this centralization and its concomitant threat to liberty.
Indeed, in his Notes on
Virginia, Thomas Jefferson points out that it is a
violation of the entire understanding of the system of
checks and balances to believe that one branch can ever
delegate its authority to another. All authority is in
fact expressly granted by the people and it is conditionally
granted. This is especially the case in grants to the
House of Representatives because of its
"closeness" to the people. In the Notes,
Jefferson states not only that a branch of government does
not lose its authority simply by failing to exercise it in
every instance, he further points out that if any branch
wishes to no longer exercise the granted authority then the
authority automatically reverts to the people. Thus,
only by way of a constitutional amendment can authority be
properly transferred from one branch of government to
Alas, with this House having
surrendered war-making and tax-writing power to the
executive, and with the courts having ratified these
surrenders as well as the introduction within the Senate of
money bills, it should be no surprise that we stand ready to
violate the constitutional principle of the separation of
powers with regard to the regulation of foreign commerce as
well. In fact, it seems as though we go out of our way
to spit on the constitution in this instance. Could
not the President negotiate these so-called agreements
and bring them to this House for consideration under a
closed rule? Would this not get him to the same
essential place as the granting of this fast track
authority? A closed rule would mean we could not amend
the agreement. So, in effect we have a means to
consider such an agreement without granting this authority.
Why then do we add this dubious unconstitutional fast track
authority? Now we get to the real heart of the issue.
We are told that, without
fast track authority, no foreign government would negotiate
with the President. So the reason we will pass fast
track authority is because foreign governments demand it.
I have often spoken of our arrogance in telling other
countries what to do, but in this instance clearly that
arrogance is being reciprocated. Does any foreign
government believe our President to be so incompetent that
he cannot get a favorable rule passed and a favorable bill
reported when his own party is in the majority in both
Houses of Congress?
The President has no rightful
constitutional role to play when it comes to foreign trade,
and this House has no rightful ability to grant him such a
role through any means other than constitutional amendment.
If foreign leaders do not like the constitution we have
adopted, I will certainly not ignore my constitutional oath
solely for the convenience of those who run foreign
governments. This document was enacted to protect the
liberty of individuals in this country, not to advance the
convenience of foreign nations or their leaders, or the
international corporations benefiting from managed trade
Our current policies are merely an extension of the kind of
interventionist policies of the last century or so.
They may differ in style, but not in substance. They
may differ in type, but not in principle. Smoot-Hawley
sought high tariffs and protectionism. It promoted
government interventionism and special interest politics.
Our current regime promotes fast track authority,
international trade agreements, economic embargoes, and
trade subsidies. Again, it promotes government
interventionism and special interest politics.
I do not wish to go back to
the ideas of our founding fathers, I wish to go forward with
them. Our current interventionist policy is the
product of going backwards. We have reverted to the
kind of interventionist policies the British foist upon this
land as a colony. The founders broke from that regime
because they had the forward-looking view of things.
They understood the benefits
of a free economy and open markets. They appreciated
how these policies increase the standard of living and thus
promote the general welfare. And, they knew all too
well the costs of mercantilism. As Russell Kirk has
written, had the constitution specifically authorized a 10%
tariff it would not likely have been adopted. We must
regain the vision of our founders. They constructed
for us a republic, but we have not kept it. We have
violated it, and we have allowed for centralization in our
war-making, trade-regulating and tax-writing policies.
By separating powers,
providing checks and balances and carefully delegating
powers, our founders left us a limited central government.
By separating the treaty and commerce regulating functions
and by disallowing the further delegation of authority
without the express consent of the people, they gave us a
system that would not permit for government interference in
the economy, would not allow international trade agreements
(or for that matter treaties), and thus would not grant to
foreign governments a say in American economic policy.
The system they created is as relevant and workable today as
Free trade and free markets
are accurately defined as engaging in commercial activities
without government intervention. Government intervention is
therefore the opposite of free trade. An international
trade agreement, or treaty, is the action of two or more
governments. Thus, no international trade agreement
can truly be called a "free trade agreement," the
term itself is oxymoronic. Moreover, in order to
engage in these agreements we have had to change our entire
system of government. We have had to give the
President powers in the area of trade although commerce is
not even mentioned at all in article II of the constitution.
We have had to call treaties agreements, even though
international courts do not recognize this ruse of a
distinction. What a tangled web we weave.
Mr. Chairman, in this
topsy-turvy world, down is up and up is down.
Government intervention is called "free" trade.
We call debt "capital," tax hikes are
"revenue enhancements," and war is called a
"police action." George Orwell knew exactly
where we were heading. Though we still have a choice.
We have the ability to reclaim our republic. We can
return to the vision of our founders because they left us a
clear path. As our entire economic house of cards
looks more and more shaky, a choice is now before us.
I will strongly oppose so-called fast track, or trade
negotiating authority because it perpetuates the sophisms of
this past century.
I don't know if I'll have
success. I expect not. I expect that fast track
will pass, new trade agreements will go into effect,
codicils about environmental and labor issues will be
enacted. If so, power will be further centralized, the
crime of our era, the costs to be more fully borne perhaps
by future generations. Unfortunately, we have become
technologically able enough to push into the future many of
the costs of our current interventions. However, as
always, the check will come due.
I do not support
interventions and I do not support high tariffs. I
believe in true free trade and think our constitution, as
crafted, provided for that trade. I believe we should
cut taxes, restore sound money, end the income tax and
restore our government to its constitutionally-limited role.
A low revenue tariff could be a small part of funding the
few constitutionally enumerated functions this government
has, and that is the ultimate solution. Until that
time I'd support a zero tariff and oppose all trade
barriers, I also call for the end of all trade subsidies and
embargoes. I welcome all those who will come to this
well in the weeks and months ahead, to spout the rhetoric of
free trade, to join with me in this endeavor.