The Founders and Free Trade: The Foreign Commerce Power and America’s National Interest



Carson Holloway | The Heritage Foundation

The Dangers of Regulating Trade

Economists have rightly warned about the dangers involved in giving the government an authority to regulate foreign trade. These dangers include cronyism and rent-seeking—the attempt on the part of special interests to enrich themselves at the expense of the public. Seeing the existence of such an authority, some groups will organize with a view to getting it exercised for their own narrow benefit. They may seek protection for their own industry, for example, simply because the protection excludes or impedes foreign competition and thus keeps them in business, charging the prices they want to charge for the goods they want to provide.

The Founders were aware of these dangers and sought means to counteract them. In the first place, Alexander Hamilton insisted in his Report on Manufactures that any regulations of trade must be examined on the basis of a “national view”—and not merely in relation to any regional or partial considerations. This meant, on the one hand, that the power should not be exercised except when it was truly in the nation’s interest to do so, that is, when it promoted American security and independence. It also meant, on the other hand, that Americans should not complain, or condemn as mere rent-seeking, policies that promoted American commerce just because they benefitted some Americans more directly than they benefitted others.

It is an unavoidable fact of life that all governmental policies, even those most necessary to the common good, benefit some more directly than others. Thus Hamilton admonished his fellow Americans not to consider these questions in terms of “solicitudes and apprehensions which result in local discriminations,” but instead to weigh such policies in light of “the intimate connection of interest which subsists between all the parts of a society united under the same government.” “It is a truth as important as it is agreeable,” he contended, “that everything tending to establish substantial and permanent order in the affairs of a country, to increase the total mass of industry and opulence, is ultimately beneficial to every part of it.”

Hamilton’s admonition to think nationally, however, could not of itself solve the problem. After all, nothing is more common than for human beings to invoke the national interest, and even national security, as a spurious justification for policies that they really seek only for their own private benefit. The Founders knew this, and they sought to ameliorate the problem, if not to solve it outright, by designing the kind of government and the kind of republic that would be less likely to fall victim to such narrowly self-serving policies. They believed that institutions like separation of powers, as well as the creation of an extended republic with a multiplicity of interests, would make it much more difficult to assemble political majorities that would devise national policies for the sake of advancing mere factional interests.

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The paper was originally posted here.