Ron Paul's Texas Straight Talk - A weekly Column


Congress Grovels for the WTO

Although it was scarcely reported in the press, an extraordinary event took place in Washington earlier this month.  Pascal Lamy, The European Union trade czar, visited with influential members of Congress for the express purpose of determining whether a new tax bill is being crafted to his satisfaction.  If Mr. Lamy- a member of the French Socialist Party- is unsatisfied with the changes made to our tax code, he threatens to unleash a European trade war against U.S. imports.  In effect he is a foreign bureaucrat acting as a shadow legislator by intervening in our lawmaking process.

This unseemly saga stems from our participation in the World Trade Organization.  Since America first joined the WTO in 1994, Europe has objected to how we tax American companies on their overseas earnings.  The EU took its dispute to the WTO grievance board, which voted in favor of the Europeans.  After all, it’s not fair for high-tax Europe to compete with relatively low tax America; the only solution is to force the U.S. to tax its companies more.  The WTO ruling was clear: Congress must change American tax rules to comply with “international law.”

Sadly, Congress chose to comply.  We scrambled to change our corporate tax laws in 2001, but failed to appease the Europeans. They again complained to the WTO, which again sided with the EU.  So we’re back to the drawing board, working overtime to change our domestic laws to satisfy the WTO and the Europeans. 

This outrageous affront to our national sovereignty was of course predictable when we joined the WTO.  During congressional debates we were assured that entry into the organization posed no threat whatsoever to our sovereignty.  Consider this rosy description by one well-known “libertarian” think thank:  The WTO’s dispute settlement mechanism helps nations resolve trade disputes without resorting to costly trade wars. The system relies on voluntary compliance and does not compromise national sovereignty.” 

But this was nonsense. A Congressional Research Service report was quite clear about the consequences of our membership: “As a member of the WTO, the United States does commit to act in accordance with the rules of the multi-lateral body.  It is legally obligated to insure that national laws do not conflict with WTO rules.”  With the Europeans and the WTO now telling us our laws are illegal and must be changed, it’s hard to imagine a more blatant loss of American sovereignty.

The WTO has given us the worst of both worlds: We’ve sacrificed national sovereignty by changing our domestic laws at the behest of an international body, yet we still face trade wars.  If anything, the WTO makes trade relations worse by providing our foreign competitors with a collective means to attack U.S. trade interests.

As economist Murray Rothbard explained, true free trade does not require treaties or agreements between governments.  On the contrary, true free trade occurs in the absence of government intervention in the free flow of goods across borders.  Organizations like the WTO and NAFTA represent government-managed trade schemes, not free trade.  Government-managed trade is inherently political, meaning politicians and bureaucrats determine who wins and loses in the marketplace.  We should not allow globalist trade schemes to masquerade as free trade.

One critical point must not be ignored.  The Constitution grants Congress, and Congress alone, the authority to regulate trade and craft tax laws.  Congress cannot cede that authority to the WTO or any other international body, nor can the President legally sign any treaty that purports to do so.  Our Founders never intended for America to become entangled in global trade schemes, and they certainly never intended to have our domestic laws overridden by international bureaucrats.  Quasi-governmental organizations like the WTO are simply incompatible with American national sovereignty.