Statement of Congressman Ron Paul in 
Opposition to "Fast Track" (H.R. 3005)
Before the House International Relations Committee
June 21, 2001

      
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 objection.

[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 trade agreements.

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 REGULATE TRADE

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 policies.

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 World."

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 competition.

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 other markets.

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 economic axiom.

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 legislation.

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 circumvented.

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 another.

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 agreements.

CONCLUSION
                               
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 ever.

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.


 

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