Acton Commentary

Open Borders Please the Palate


It’s now official—New York’s borders are open. Italians, Germans, French, South Eastern Australians, Portuguese and even Californians, may come to New York free from unnecessary obstacles and burdensome financial penalties. One can even use the Internet to contact them and invite one, or all, into your home. Wasn’t this always the case? Isn’t such freedom of movement celebrated in the national icon of Ellis Island—the celebrated port of entry for generations of people new to America? Well yes, unless you happened to be an out of state Port, Merlot, Chianti, Cabernet Sauvignon, or Shiraz purchased over the Internet. From Napa Valley to the Rhone River, the great cry of freedom has been heard!

In a November 12 decision, Judge Richard Berman of the United States District Court for the Southern District of New York issued a ruling declaring New York state’s laws barring interstate direct shipment of wine into the state was unconstitutional. Judge Berman’s ruling indicated in clear terms that the state of New York could not discriminate against out-of-state wineries who want to ship to in-state customers. New York state wineries were under no such restrictions in their business with out-of-state customers.

Specifically, Judge Berman’s ruling took issue with the trade protectionism embodied in New York’s Alcohol Beverage Control Law (ABC Law). He stated, “Defendants contend (unconvincingly) that New York’s ABC Law ‘erects no barrier to the flow of goods and imposes no burden on interstate commerce…The evidence here demonstrates, upon summary judgment, that the exceptions to the ABC Law provide an impermissible economic benefit and (protection) to only in-state interests—but also that there are nondiscriminatory alternatives available. Indeed, the defendants explicitly concede the exceptions were intended to be protectionist.”

While this minor legal victory may seem trivial in the grand scheme of things, it is both a real and symbolic victory for free trade, expanded commerce, and for justice. Now vintners may compete for the business of New York consumers on a level playing field. Protectionism in any form, whether it is wine, wood, or steel, is economically counterproductive for business and consumers alike. For businesses, protectionism attempts to establish and incentivize monopolies, favoring one business to the exclusion of another. Legislation that bestows special favors on businesses via protectionist policies undermines the rule of law and creates an injustice by treating competing parties in an unequal fashion. Such protectionist policies attempt to bestow market share, rather than allow producers to earn it by providing superior products. Consumers bear the costs of protectionist economic policies in the form of increased prices and restricted choices. While not all wines are created equal, it will now be up to consumers in New York to decide which, where, and from whom they will purchase their wine.

The other important policy implication for this decision is that it is a victory for the ever-widening world of Internet commerce. As many governors and regulatory agencies around the country are drawing up plans to regulate Internet commerce, this decision sends a forceful signal that protectionist polices are difficult to justify to contemporary consumers. Internet shopping is increasingly popular among consumers due to the wider range of choices available and the resulting lower costs that increased competition provides. The expanded commerce Internet sales provide for vintners and consumers will be a boon, not a bane, to the winemaking industry and discerning connoisseurs everywhere.

The battle to open the borders to out-of-state grapes has been hard fought. While this decision is far from a blanket amnesty for all undocumented vintages, it seems to be step in the right direction. Judge Berman’s decision to strike down such restrictive anti-trade policies has created an open border policy that is truly pleasing to the palate.