Trade Talk: Where In The Constitution?

The Commerce Clause, found in Article I, Section 8, Clause 3 of the United States Constitution, gives Congress the power to regulate commerce with foreign nations, among the states, and with Native American tribes. While the Constitution does not explicitly define commerce, courts have generally interpreted it broadly to include trade, exchange, and the economic and social intercourse between citizens of different states. This clause has been pivotal in shaping trade policies and addressing protectionist state laws that impede interstate commerce. The Supreme Court has played a significant role in interpreting the scope of the Commerce Clause, with landmark cases like Gibbons v. Ogden in 1824, NLRB v. Jones & Laughlin Steel Corp. in 1937, and United States v. Lopez in 1995, shaping the understanding of congressional power over trade and commerce.

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The Commerce Clause

The Constitution does not explicitly define "commerce", leading to debate over the extent of the powers granted to Congress by the Commerce Clause. Some argue that it refers simply to trade or exchange, while others claim that it describes broader commercial and social intercourse between citizens of different states. Courts have generally taken a broad interpretation of the Clause, holding that Congress can regulate intrastate activity if it is part of a larger interstate commercial scheme.

The power to regulate commerce

The Commerce Clause, outlined in Article I, Section 8, Clause 3 of the United States Constitution, grants Congress the power to "regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes".

This clause emerged as a response to the absence of federal commerce power under the Articles of Confederation, which had resulted in a nationwide economic downturn due to states enacting protectionist trade policies. The Commerce Clause aimed to prevent such discriminatory state legislation and empower Congress to negotiate credible trade agreements with foreign powers.

The interpretation of the term "commerce" has been debated, with some arguing it refers simply to trade or exchange, while others contend it describes broader commercial and social intercourse between citizens of different states. The Supreme Court has generally interpreted it broadly, including the sale, trade, exchange, and transportation of goods and people. Notably, it does not include the power to regulate economic activities that produce traded goods, such as manufacturing or agriculture.

The Commerce Clause has been used to regulate intrastate activities that substantially affect interstate commerce. This includes the regulation of local commerce that could become part of a continuous "current" of interstate commerce, as seen in the case of Swift and Company v. United States in 1905. The Supreme Court has also recognised broader grounds for its use, such as when an activity has a "substantial economic effect" on interstate commerce, as seen in NLRB v. Jones & Laughlin Steel Corp in 1937.

The clause has been pivotal in significant historical decisions, such as the abolition of the slave trade with other nations, effective on January 1, 1808, the earliest date permitted by the Constitution.

The power to abolish the slave trade

The Commerce Clause, outlined in Article I, Section 8, Clause 3 of the United States Constitution, grants Congress the power to "regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes". This clause has been interpreted to include the power to abolish the slave trade.

While the Constitution did not initially grant Congress the explicit authority to restrict the slave trade, it did provide them with foreign and interstate commerce powers, which were used as the legal basis for abolishing the trade. The Commerce Clause was central to this effort, as it allowed Congress to regulate commerce with foreign nations and among the states, including the trade in slaves.

The controversy over the Atlantic slave trade was a contentious issue during the drafting of the Constitution, with some delegates vehemently opposing the practice on moral grounds. However, concessions were made to gain the support of southern delegates for a strong central government. As a result, the Constitution included a 20-year ban on any restrictions on the Atlantic slave trade, which was later abolished through the Act Prohibiting Importation of Slaves in 1807. This Act prohibited the importation of slaves into the United States, with penalties for those who illegally imported slaves from abroad.

While the specific power to abolish the slave trade was not explicitly stated in the Constitution, the document's structure and the interpretation of the Commerce Clause provided the necessary legal framework. This allowed Congress to take decisive action and begin the process of eradicating the slave trade in the United States.

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The Dormant Commerce Clause

The primary focus of the Dormant Commerce Clause is to prevent state protectionism and prohibit state legislation that discriminates against or unduly burdens interstate or international commerce. In other words, states cannot discriminate against out-of-state actors or competition, nor can they favour in-state economic interests over out-of-state interests. For example, in Pike v. Bruce Church, Inc. (1970), the Supreme Court held that state laws burdening interstate commerce could be permissible if they pass a two-part test: regulating even-handedly to achieve a legitimate local public interest, and only incidentally affecting interstate commerce unless the benefits are clearly excessive compared to the burdens.

The interpretation and application of the Dormant Commerce Clause have evolved over time. In Gibbons v. Ogden (1824), the Supreme Court ruled that intrastate activity could be regulated under the Commerce Clause if it was part of a larger interstate commercial scheme. Later, in Swift and Company v. United States (1905), the Court affirmed its authority to regulate local commerce if it could become part of interstate commerce. However, during the Lochner era (1905-1937), the Court briefly narrowed its interpretation, experimenting with the idea that the Commerce Clause did not empower Congress to pass laws impeding business contracts.

The Supreme Court has consistently held that the Dormant Commerce Clause prohibits certain state taxation practices even without explicit federal legislation. For instance, in Comptroller of the Treasury of Maryland v. Wynne (2015), the Court ruled that Maryland's practice of double-taxing personal income earned inside and outside the state violated the Dormant Commerce Clause. Similarly, in National Pork Producers Council v. Ross (2023), the Court affirmed that California's Proposition 12, forbidding the sale of pork from pigs confined in a cruel manner, did not violate the Dormant Commerce Clause as it applied equally to in-state and out-of-state producers and did not unduly burden interstate commerce.

Despite its widespread use, the Dormant Commerce Clause has been criticised by some, such as Professor Martin Redish and Shane Nugent, who argue that it lacks a textual basis in the Constitution and undermines the federal balance. Nonetheless, it continues to be a significant aspect of American constitutional law, shaping the relationship between federal and state powers in regulating commerce.

The Eighteenth Amendment

By 1917, the proliferation of state prohibition laws and Congress's enactment of wartime restrictions on the production and sale of alcoholic beverages had set the stage for nationwide Prohibition. On December 18, 1917, Congress proposed the Eighteenth Amendment, and by January 29, 1919, Acting Secretary of State Frank L. Polk certified that the Amendment had been ratified. The Amendment included a one-year grace period before it came into effect, to allow for the necessary legislative changes to be made.

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