WHAT ARE Reciprocal Statutes

Reciprocal statues refers to legislation promoting commerce that is enacted between two or more states. In other words, these statutes refer to laws granting certain privileges to citizens of one state on the basis of that state doing the same for the first state’s residents.

BREAKING DOWN Reciprocal Statutes

Reciprocal statutes can be enacted for a variety of economic reasons, such as to allow uniform regional banking or corporate taxation rules. This legislation is usually intended to streamline trade and business transactions.

An example of reciprocal statues could be two neighboring states permitting in-state tuition for students from each state, which would allow a greater number of students to consider the other state's educational opportunities. Another example of reciprocal statutes could be two adjoining states enacting identical laws on corporate taxation to keep companies from playing one state against the other. Reciprocal statutes can be enacted for noneconomic reasons as well, such as establishing uniform treatment of environmental protection or banking practices. The Reciprocal Enforcement of Support Act is another, broader example of reciprocal statues. The Reciprocal Enforcement Support Act concerns interstate cooperation in the collection of spousal and child support and has been adopted by a majority of the jurisdictions in the U.S.

Encouraging Commerce

Enacting reciprocal statues among states can promote commerce. Commerce is the conduct of trade among economic agents, such as the exchange of goods, services or something else of value between businesses or entities. From a broad perspective, nations are concerned with managing commerce in a way that enhances the well-being of citizens, by providing jobs and producing beneficial goods and services. For that reason reciprocal statues among states encouraging business growth and economic development can be mutually beneficial.

Commerce generally refers to economic activity on a broader, macroeconomic level. For example, the sale or purchase of a single item by a consumer is defined as a transaction, while commerce refers to all transactions related to the purchase and sale of that item in an economy. Most commerce is conducted internationally and represents the buying and selling of goods between nations, but can also refer to the buying and selling of goods among states.

When properly managed, commercial activity can enhance the standard of living. However, when commerce is allowed to run unregulated, large businesses can become too powerful and impose negative externalities on citizens for the benefit of the business owners. For that reason, many governments have established agencies responsible for managing commerce, such as the Department of Commerce in the United States.