Forty-eight Balkan States?
[Reprinted from The Freeman, January, 1940]
One of the primary benefits expected from the union of the thirteen
colonies was the abolition of interstate tariffs. The constitution
provides that "the Congress shall have the power ... to regulate
commerce with foreign nations and among the several States and with
the Indian tribes," And that "No State shall, without the
consent of Congress, lay any duties on exports or imports, except what
may be absolutely necessary for its inspection laws."
The danger of State protectionism had been pretty well demonstrated
in the colonies. Free trade among the States, i. e., unrestricted
exchange of goods throughout the country, has been responsible in a
large measure for the prosperity of American agriculture and industry.
In the light of this historical fact it would seem that Americans
should be eager to guard our interstate free exchange of goods; and
yet such exchange has been in recent years greatly hampered by
restrictions which go far beyond 'those "absolutely necessary for
The statuate books of many States are already heavily burdened with
legislation restricting interstate commerce. Indeed, the menace of
such legislation has become so obvious that the Federal Government saw
fit to make a detailed study of the situation with respect to food
products. The results of this study set forth in a recent publication
of. the Department of Agriculture, "Barriers to Internal Trade in
Farm Products," reveal an alarming fact, namely, that the United
States has been drifting, perhaps by almost perceptible degrees,
toward "Balkanization," the breaking up of a large area of
free trade into small politically self-contained units excercising the
right of internal economic control in order to wage virtual economic
warfare among themselves. No less an authority than Henry A. Wallace,
Secretary of Agriculture, comes to this same conclusion. In a vigorous
foreword to this report issued by his department, the Secretary
declares, that "the following pages describe a situation which is
becoming of critical importance to every economic group in the United
Today we cannot say that we have free trade between the States."
Some of the legitimate purposes of restrictive legislation have been
to provide the consumer with sanitary, unadulterated food, properly
labeled and graded, to prevent dishonest business practices, arid to
restrict the spread of plant pests and diseases. Recent marketing
legislation, however, has at times resulted in keeping certain markets
for local farmers, has stressed the "buy local products"
theme, has made it impossible for some producers to enter a certain
market and has even been frankly retaliatory, putting reciprocal
restrictions on products of other States.
Milk inspection, ostensibly for guarding the public health, has
resulted in much economic restriction. One State limits the inspection
it will make of out-of-state milk, or may charge a fee for such,
inspection, and in this way has succeeded in keeping importation of
milk to a minimum and in forcing relatively high prices for the
benefit of its own producers. The City of New York inspects the farm
source of its milk and cream and since 1926 has definitely limited
this inspection area. The net result has been to bar western cream and
to raise cream prices in New York City. Many milk inspection laws have
raised standards 'so high that the resultant health benefits are of
doubtful value. Such ridiculous requirements as that a milk
distributor must have a processing plant within the city limits or
that milk cannot be sold if brought from a greater distance than fifty
miles have tended to isolate local farmers from competition and to
Really restrictive legislation against the sale of margarine has been
in existence for about ten years. A revealing fact is that all such
legislation is strongly sponsored by dairy interests. Seventeen States
re quire license fees from margarine manufacturers, ranging from $1 to
$1,000 annually. The latter fee is the requirement in Wisconsin, where
$500 is also assessed against wholesalers of margarine. About half the
States have excise taxes on margarine, ranging from 5 cents to 15
cents per pound. The results of such taxes have been largely
restriction of the sale of the product, no great amount of revenue'
having been collected by any State except Iowa and Pennsylvania.
In the liquor field, sales taxes are a favorite means for the control
of "imported1' alcoholic drinks, while "domestic"
products are favored. Retaliatory legislation is quite common, as for
instance, in Missouri where alcoholic liquors from any State that has
discriminatory liquor legislation of any kind are completely barred.
Restrictive legislation is quite common in the field of interstate
motor truck transportation and in the sale of gasoline. The State that
does little business but is a highway for interstate traffic is in a
difficult position. The claim is that "foreign" trucks wear
out its roads without paying toward their upkeep. Most legislation,
however, goes far beyond trying to remedy this situation. The
requirement that trucks take out additional licenses in one or more
States if often a hindrance to interstate traffic. Some States do not
make such a requirement if the truck does not engage in intrastate
business thus giving some "protection" to local enterprise.
Farmers have often protested against their own State's laws and have
even been known to pay the tax themselves in to order to get
out-of-state truckers to move their crops. Otter restrictions include
county registration of "foreign" trucks, insurance
requirements, posting of bonds, and increased fees for going more than
ten miles into a State.
Ports-of-entry, where a State requires incoming traffic to halt for
inspection, regulation and taxes, were set up in Kansas in 1934 and
the system has since been copied by eight other western States, Kansas
has 66 such ports, Oklahoma 58. When a truck passing such a "port"
has to fill out an elaborate form describing its toad and proposed
route and pay the assessed fees, a distinct deterrent to interstate
commerce has been established, It is significant that three railroad
presidents recently advocated a ports-of-entry system for New England.
Grain and cotton were the first farm products to be traded in large
volume and across long distances. Formerly the various States and
exchanges established their individual standards as to grading and
labeling, and growers were systematically defrauded by short-weighting
and undergrading. Since 1916, however, Federal standards have remedied
the situation for grain and cotton. In the case of fruits and
vegetables, private and local grades have now been abandoned but there
is still considerable friction resulting from lack of uniformity in
State and Federal laws. Great interference with trade is found in
Montana, where fruits and vegetables entering the State must be graded
according to Montana's laws, which are based on the Federal laws.
Incoming trucks are stopped and charged a fee for inspection even
though they may carry a Federal inspection certificate that the
produce is graded according to U. S. standards. California also, stops
trucks at the border for inspection. Producers often have to mark
their products according to several different State standards if they
plan to sell in more than one State. The requirement that goods be
marked with the name of the State of origin also creates a certain
hindrance to interstate trade if it encourages buying at home,
regardless of quality. Another trick is to prohibit the importation of
inferior grades of goods, while home-grown goods of the same grade can
Quarantine laws, whose legitimate purpose is to prevent the spread of
animal and plant diseases and pests, have often brought nothing but
red tape, annoyance, delay and expense. Laws against hoof and mouth
disease have been characterized as unnecessarily severe without
effecting any increased protection to the live stock interests.
Non-uniformity of State laws has been the chief cause of complaint,
sometimes resulting in complete stoppage of necessary shipments. New
York at one time required severe tests for Bangs disease in all cattle
brought into the State, although the disease was widespread in the
State at that time and the incoming cattle were not isolated after
arrival. The regulation reduced the movement of cattle from Wisconsin
to New York from 5% to 10%. Retaliatory legislation is quite common in
the field of quarantines.
State-financed advertising of farm products is of recent origin,
having been started by New York in 1934 with an appropriation of
$500,000 for advertising milk. To pay for this advertising a tax of
one cent per 100 pounds of milk sold was levied. Florida and Wisconsin
followed with advertising campaigns and seven other States took it up
in 1937. In most cases an excise tax is levied or funds are
appropriated from general taxation. Six of the States have cultivated
markets outside of their own States. Some of this advertising is
advantageous but where a State "advises, its citizens to buy
products of their own State only, it is in the nature of an import
duty and tends to raise prices.
And so, our forty-eight political units are gradually adopting
protectionist methods, in violation of the spirit of the Union, which,
if continued, must result in interstate economic warfare,, jealousies,
rivalries, and that trend toward isolationism which is the plague of
Europe. The cause for this tendency lies in the economic maladjustment
of our nation. In the attempt to solve the problem of poverty, the
States, like the nation as a whole, like all nations, resort to the
fallacy of self-sufficiency.