Chapter XXXII.
Power of Congress to Regulate Commerce. Commerce with Foreign Nations.
§1. Next in the list of powers is "the power to regulate commerce with foreign nations, and among the several states, and with the Indian tribes." The need of no power under the confederation was more deeply felt than the power to regulate foreign trade. It was the want of this power, as we have seen, which was the more immediate cause of calling the convention that framed the constitution. (Chap. XXVII: §7-11.) The necessity of this power arose mainly from the policy of Great Britain, by which she had secured to herself undue advantages in her foreign commerce, especially in her trade with this country.
§2. During the war of the revolution, the direct trade with Great Britain was interrupted. But when peace was restored, our markets were again open to British goods and vessels, while upon American produce and American vessels entering British ports, heavy duties were levied. To enable some young readers more clearly to understand the objects and the unequal operation of the policy of the British government, the subject may need some further illustration.
§3. One object was, to secure a market at home for the products of agricultural labor. How this is done by taxing foreign products, will appear from the following example: Suppose the market value of a bushel of wheat in Great Britain to be one dollar a bushel, and the cost of raising the article here and carrying it to that market to be the same. If now a duty of 40 cents a bushel is laid upon wheat from abroad, the English consumer, instead of buying it with this duty added, will buy of the English producer. But more wheat is produced here than there is a market for; and the American farmer must find a market abroad. But in order to sell it in the English market, he must pay 40 cents on every bushel to the British government; or, which is the same thing in effect, he must sell it for 40 cents a bushel less than its value to the British purchaser, who pays the duty to that government.
§4. Now, as much less American wheat will be sent to Great Britain than if it were free from duty, a better market is secured to the English farmer. Besides this, of the value of every bushel which Great Britain may please to admit, or which the people of other countries maybe obliged to sell to her, 40 per cent, is paid into her treasury. Thus by one operation, are two benefits secured, namely, the reward of agricultural labor at home, and the raising of revenue. So by the duties imposed upon foreign vessels entering her ports, the national revenue was to some extent increased, and great advantages were secured to her citizens engaged in the carrying trade.
§5. The people of this country being nearly all employed in agriculture, and consequently dependent upon foreign markets for the sale of the surplus products of their labor, they were obliged to submit to the payment of these duties. And not possessing at that time the means of manufacturing to any considerable extent for themselves, goods in large quantities came in from Great Britain, for which they must pay in produce heavily burdened with duties, or with money obtained for the produce subject to these heavy duties.
§6. To remove the inequality in the trade between the two countries, it was thought necessary to retaliate upon Great Britain by subjecting her goods and vessels coming into our ports to the payment of duties similar to those imposed on our produce and vessels in her ports. But the power to lay duties was with the states; and, as we have seen, the states could not agree upon any effectual system; for, in order to make any system effectual, the duties must be uniform throughout the United States.
§7. It was intended, in regulating trade, to render our own country less dependent upon foreign nations for manufactured goods, by encouraging domestic or home manufactures by duties on goods imported. Duties laid for this purpose are called protective duties, being designed to protect our manufacturers against loss from the competition of foreigners. The nature and operation of a protective duty may be thus illustrated:
§8. Suppose foreign broadcloth of a certain quality is sold in this country for $2.50 a yard, and cloth of the same quality manufactured here can not be afforded for less than $3 a yard. There would now be no encouragement to any one to engage in the manufacture of such cloth; because in order to sell it, he must reduce the price to that of the foreign article, which would subject him to a loss of fifty cents a yard. Let now a duty of $1 a yard be laid upon the foreign cloth, and the price would be $3.50, and preference would be given to the domestic article, unless the importer should reduce the price of his foreign cloth to $3; in which case, it is to be presumed, about an equal quantity of each would be consumed, and the duty of $1 a yard on the foreign cloth would go into the United States' treasury.
§9. The same objects may, to some extent, be effected by the first mentioned power, "to lay taxes, duties," &c. In laying duties for revenue, that is, raising money to pay the debts and other expenses of the government, congress may lay the duties upon those kinds of goods which it wishes to protect; and thus indirectly both encourage domestic industry and regulate commerce. From this it appears that the three objects mentioned may be accomplished under the grant of either one of the two general powers, to lay duties, and to regulate commerce.
§10. Why, then, it may be asked, were both these powers inserted in the constitution? The first expressly authorizes the laying of duties only to raise money for paying debts and government expenses; and protection and the regulation of commerce can only be effected indirectly. Hence, if our arrangements with foreign nations should be such as to render it unnecessary to lay duties to regulate commerce, or encourage domestic industry, money could not be raised without the express power to lay taxes, duties, &c. And such might be the state of things, that rates of duties sufficient for revenue would be insufficient for the purposes of protection and regulating trade. Therefore, both powers are properly granted to congress.
§11. Again, it may be asked, if foreign goods without duty can be had at lower prices than domestic, why is it not better for us to buy them than to force the manufacture and sale of our own at higher prices? and, if there is no other way of raising money, why not do it by direct taxation? Suppose, for example, as in a preceding section, (§8,) the price of foreign cloth to be $2.50 a yard, for which the farmer has to pay in wheat, or in cash received for it. But as the wheat has to be shipped to a foreign market, the merchant who takes it in exchange for the cloth, or the cash purchaser, deducts from the foreign market price the cost of transportation and the foreign duty, which, together, let us suppose to be fifty cents a bushel, or one-half of the foreign market price. A yard of cloth would then cost five bushels of wheat.
§12. Let us now suppose a domestic article at $3 a yard to take the place of the foreign. A large portion of the laborers formerly employed in agriculture, are now engaged in building factories and in manufacturing. These, instead of being producers, have become only consumers of the wheat of the farmers, who now have a market at home, thus saving the duties and the cost of transportation. As there are now fewer producers, the price of wheat would probably be not less than $1 a bushel. Therefore a yard of domestic cloth would cost only three bushels of wheat, instead of five paid for the foreign cloth. And as there would be a corresponding rise in the price of labor, more cloth at $3 a yard could be bought for the avails of a day's labor than formerly.
§13. The protection of domestic industry received the early attention of congress. The second law passed by the first congress under the constitution, authorized "duties to be laid on goods, wares, and merchandises imported;" and among the objects of the law expressed in a preamble one was "the encouragement and protection of domestic manufactures." For a long time, however, little was done in the way of protection. The principal nations of Europe, England included, became involved in war. A large portion of their laboring population having been called from agricultural pursuits into the armies, a foreign demand was created for American produce; and we were enabled to supply ourselves at less disadvantage with foreign manufactures.
§14. But after peace had been restored in Europe, and people had returned to their usual employments, the foreign demand for our breadstuffs nearly ceased; and large quantities of foreign goods were again imported, for which our people were unable to pay. Congress now found it necessary to exercise, to a greater extent, its power to regulate trade, by discouraging importations, and encouraging domestic manufactures, and, in 1816, commenced an effective system of protection. Laws have from time to time been passed to favor manufactures from cotton, wool, iron, and other materials; and manufacturing is now carried on extensively in this country. By thus drawing a large portion of the people into manufacturing and mechanical employments, a market has been created at home for more grain, meat, and other agricultural products, than is required to supply all foreign demand.
§15. The laws relating to foreign commerce prescribe the manner of collecting the revenue. There is in every port of entry a collector of customs, who superintends the collection of duties. When a vessel arrives it is submitted, with the cargo and all papers and invoices, to the inspection of the proper officers; and the goods subject to duty are weighed and measured, and the duties estimated according to law.