Wednesday, May 21, 2008
John J. Garman (Faulkner University, Thomas Goode Jones School of Law) has published The New War Between the States: A Look at the Incentives to Recruit Foreign Automakers to the South, DaimlerChrysler Corp. v. Cuno, and the European Union's Prohibition Against State Aid, 24 T.M. Cooley L. Rev. 313 (2007). Here is the Introduction:
Already Reeling, Detroit Flails in Latest Effort to Reinvent Itself, screamed the headline from The New York Times. While the two largest American automakers continue to close plants, lay off workers, and struggle to stay out of bankruptcy, foreign automakers continue to expand production, build new plants, and hire more workers in the Southern United States. Southern states have been engaged in a new civil war against the North -- not fought with bullets and spilt blood, but with tax incentives and corporate welfare, the allure of which is so powerful that foreign automakers cannot resist the pull southward. While the incentives may be good for the states' economies by creating jobs, the incentives violate the Dormant Commerce Clause and the principles of free movement of capital. As a matter of public policy, the United States should follow the European Union (EU) model, which provides that such incentives violate “state aid” prohibitions. First, this Article discusses the United States Supreme Court case of DaimlerChrysler Corp. v. Cuno, where the Court declined to rule on the legality of economic-development incentives. Second, this Article addresses the EU's prohibition against similar incentives, known as "state aid" in EU parlance. Finally, this Article explores the incentives being provided in the South in order to recruit foreign automakers.