Legal Information is a Business Necessity Comparative Low Series THE DIVISION OF COMMERCIAL LAWS MAKE REMITTANCES TO U. S. DEPARTMENT OF COMMERCE HARRY L. HOPKINS, SecrOLEN Comparative Low Series BUSINESS BARRIERS IN INTERSTATE COMMERCE1 By Assistant Director Nathaniel H. Engle, Only by constructive interest in this vital subject of remedying rade barriers which exist, or may exist, between States, is there hope that we may be able to stem the tide which, in the words of a recent commentator, "is Balkanizing the U. S. A." The President has taken note of this eroding tide of State legisation in these words: The last few years have seen the rise of virtual tariff barriers along State lines damaging restrictions that have hindered the free flow of commerce among the several States. Business, agriculture, and labor have all suffered because of State and regional discriminatory measures adopted in the vain hope of protecting local products from the hazards of economic fluctuations.a Secretary Hopkins feels keenly about the need for checking the rising trend of State trade barriers. It is a pleasure for me to be able to tell you that Mr. Hopkins stands four-square with you in your efforts to meet this problem. You can count upon the Department of Commerce to play its appropriate role in any sound program that is evolved to answer this question. The Secretary of State, after pointing out that "the removal of the excessive artificial barriers to a freer flow of trade and commerce (between nations) "is the only effective means of lifting and maintaining standards of living and the general happiness, peace and welfare of peoples and nations", added, "The welfare of our own people can be circumscribed not only by international trade barriers but by barriers erected by our several States which go to make up our union of quasi-independent sovereign States. The lifting of international trade barriers cannot, therefore, have its full force and effect if similar barriers are erected within our own country whether for the protection of industry within the State or for other reasons not consonant with the welfare of our people as a whole."3 From an address delivered to the Interstate Trade Barrier Conference of the Colorado State Chamber of Commerce, June 10, 1939. The author acknowledges his indebtedness to Dr. John H. Cover and Dr. Wilford L. White, of the Marketing Research Division, and Harold DeCourcy, of the Commercial Laws Division of the Bureau of Foreign and Domestic Commerce, for assistance in preparing this address. Letter to The Honorable Robert L. Cochran, President, The Council of State Governments. April 1, 1939. 3Extract from informal remarks of Secretary Cordell Hull before the Business Advisory Council, January 27, 1939. The Secretary of Agriculture has pointed cut that, "However worthy the purpose of most of these laws and regulations, in many cases, they have been so drawn and administered as to cause large and unnecessary economic losses to the whole community." The Department of Justice, the Federal Trade Commission, the WPA, and other Federal agencies have been keenly aware of the encroachments on interstate commerce of these State barriers to business. In the Department of Commerce we have followed closely the conferences which have been held by the Council of State Governments, one in Washington in January, and another in Chicago in April. While we have no single unit in the Department which devotes its full attention to this problem, we do have a number of divisions which are vitally concerned with it. Our Division of Commercial Laws has been giving close attention to the legal aspects of business barriers in interstate commerce. In our Marketing Research Division we have been compelled to take cognizance of these laws because of their effect upon domestic business activities. Our Trade Agreements Unit, which cooperates with the State Department and other Federal agencies in working out our international reciprocal trade agreements, has been made aware by the passage of certain laws that State trade barriers even go so far as to interfere with foreign trade. EXTENT OF BUSINESS BARRIERS I do not know how many laws there are on the statute books of the various States, or how many regulations there are which are restrictive of that freedom of interchange of commodities and services which is so basically essential to economic progress and a rising standard of living. One writer states that there are upwards of one thousand State laws which would have to be repealed to permit complete freedom of trade between the States. I do not propose to enumerate all of them as I assume that you are familiar with the type of legislation which is classified as trade barriers. I will, however, cite a few examples. Most of these laws and regulations fall under various groupings, such as licenses, taxes, quarantine regulations, ports of entry, restrictions on movements of people, restriction on the practice of certain trades and professions, and restrictions on purchase, sale, transportation, and the use of commodities and services. Colorado, for example, imposes a tax of 3 cents per gallon on beer of 3.2 percent or less which does not apply to beer made in Colorado or shipped to other States. Beer importers must be Colorado residents or corporations authorized to do business within the State. Colorado re Twenty-four states impose taxes on oleomargarine. quires a license of $2,500 for each place of business manufacturing or wholesaling this product. There is no excise tax if the product contains cottonseed, peanut, corn, or soybean oils, oleo oil from cattle, oleo stock from cattle, neutral lard from hogs, or milk fat. Cartons and containers must be labeled with the word "Oleomargarine" in Gothic letters at least three-eighths inch high, with name and address of manufacturer in ink contrasting with the color of the package. Sellers must display a sign, "We serve Oleomargarine", in Gothic letters at least 2 inches high. Milk must be the flavoring agent of all oleomargarine sold. Two states even require that plates on which oleomargarine is served in hotels and restaurants must be marked indelibly with the word "Oleomargarine." A struggle has been precipitated by such restrictions between southern States and dairy States. Oleomargarine laws which threaten markets for cottonseed oil and other related products tend to force retaliation by States producing such oils against dairy products. I am informed that the Ohio legislature was contemplating a law restricting the purchase of coal for State institutions to Ohio coal. Immediately the West Virginia legislature passed a law giving the Governor power to institute reprisals against any State discriminating against its coal. At the same time, West Virginia coal operators started to cancel orders with Ohio machinery manufacturers for coalmining machinery and equipment. The machinery manufacturers carried the ball back to the Ohio State Legislature and the menacing legislation was killed. Seven States discriminate against out-of-State eggs by establishing grades which can only be met by local eggs. Fresh eggs are defined as eggs laid in the State, no matter how fresh other eggs may be. I have heard of an even more absurd regulation which I have been unable to verify. A State desired to protect local dairymen but realized that the outright exclusion of out-of-State milk would be unconstitutional. Therefore, it passed a law requiring all out-ofState milk to be colored purple. "Ports of entry" regulations are particularly restrictive of business and annoying to tourists. They call to mind some of the customs stations found on European borders which have long been so annoying to travelers. Oklahoma even requires a tax from car owners who have cigarettes, beer, or motor fuel. There are some 14 States which have these so-called ports-of-entry laws. While they are inconvenient to tourists, they work a hey hardship on truck and commercial vehicles and are thereby highly detrimental to interstate commerce. Trucks, in particular, face many obstacles to their business by these and other types of regulations. Because of the varying weight limits on trucks, the trucking business finds interstate hauling costly as well as annoying. Weight limits vary from 7,000 pounds in Texas to 120,000 pounds in Rhode Island. Connecticut, which joins Rhode Island on the west, has a limit of 40,000 pounds. Hence Connecticut truckers can qualify in Rhode Island, but Rhode Island truckers, even though well within the limits of their own State, may be excluded from Connecticut. A 5-ton truck in New York pays an $80 license. This truck may cross Connecticut and Massachusetts by reciprocal agreement, but is charged $60 extra to cross New Hampshire, and $125 more to enter Maine. One more example and I'll turn to other phases of this problem. I have been informed of a local restriction imposed by a city in Florida to the effect that no building could be done unless the building material were purchased from a local retailer. The ordinance was not widely known and worked severe hardship on a contractor who bid on a local job. He first secured prices from the lumberyard a short distance from the site of the proposed building. It was a wholesale yard so that when his bid was accepted and he discovered that he could not buy from that yard, he was deeply concerned, as retail prices would cause him to lose heavily on his bid. He tried another tact and ordered a car of lumber from a Georgia mill only to find that pressure was brought to bear on the mill and the car had to be sent back.4 4A number of these examples have been taken from Sales Management, May 15, 1939. Article by Philip Salisbury, Executive Editor. |