||October 30, 2000 - Texas
Straight Talk - A Weekly Column
U.S. Congress Bows to WTO
Our National Sovereignty is Violated
by Congressman Ron Paul
An extraordinary event
occurred this week in Washington during the final days of
the 106th Congress, an event that did not receive
comment in either the media or the halls of Congress, save
for my office. This event had been termed
"unthinkable" only a few months earlier. It
occurred despite clear constitutional prohibitions and at
the expense of our precious national sovereignty. For the
first time in the history of our country, Congress voted to
change our domestic laws because an international body told
us to do so. The World Trade Organization (WTO) has begun to
dictate American laws.
More specifically, Congress voted to change our tax laws
relating to Foreign Sales Corporations (FSCs), solely
because the WTO appellate panel deemed that our FSC tax
rules constituted a "subsidy" - the EU contingent
in the WTO had brought a complaint to the panel. Our FSC
rules simply allow U.S. corporations to exempt a small
portion of income earned abroad from taxes. No
"subsidy" is involved; no tax dollars are given to
FSCs. Moreover, most EU countries do not tax their
corporations on any income earned abroad. Still, the
appellate panel agreed with the EU and gave the U.S an October 1st deadline to change our tax laws.
I have opposed our membership in the WTO throughout my
tenure in Congress. I strongly support true free trade,
which occurs in the absence of government tariffs. The WTO,
however, represents the worst form of government-managed
More importantly, however, our involvement in the WTO
threatens national sovereignty. The Constitution clearly
vests the power to regulate trade solely with Congress, and
Congress cannot cede with mandates in areas such as
environmental protections, worker rights, and trade policy.
Congress either blindly or willfully chose to ignore this
very serious constitutional conflict when it voted in favor
of WTO membership. However, a Congressional Research Service
report was quite clear about the consequences of our
membership: "As a member of the WTO, the United States
does commit to act in accordance with the rules of the
multi-lateral body. It is legally obligated to insure
that national laws do not conflict with WTO rules,"
Earlier this year I sought to address this terrible threat
to our sovereignty by introducing a resolution withdrawing
us from the WTO. I explained my concerns in a brief to the
House Ways and Means trade subcommittee, pointing out the
unconstitutionality of our involvement. I warned that the
WTO could begin dictating our environmental, labor and tax
laws. These arguments were met with hostility and
condescension. Subcommittee members stated that we needed the
WTO to avoid "trade wars," and that the U.S.
Congress would never change our domestic laws to satisfy the
WTO. "Unthinkable" was how one member put it.
Judging by this week's vote, the "unthinkable" has
We should never change our national laws at the behest of
any international organization. Congress simply has ceded its
legislative authority to the WTO, and it is shameful that
this action likely will go unnoticed by the American people.
If we want to help American businesses, we should simply
stop taxing their foreign income. The FSC measure will not
appease the Europeans; the EU already has indicated that the
changes are unsatisfactory to them. We stand on the brink of
a retaliatory trade war with the EU, even though we were
told that the WTO was needed to avoid such conflicts. So the
WTO has given us the worst of all worlds.
Rest assured that the WTO assault on American sovereignty
will not end here. What will happen when the Europeans
object to another area of our tax laws? Will we change the
way we tax individuals also? Perhaps the Europeans will
object to our relatively liberal immigration laws, because
they resent losing their talented citizens to America.
Whatever the issue, the threat remains the same. Americans
who care about sovereignty have every reason to be outraged.