JUSTICE BLACKMUN delivered the opinion of the Court.

[1] The issue in this case is whether, consistent with the Commerce Clause, U. S. Const., Art. I, § 8, cl. 3, the State of South Dakota, in a time of shortage, may confine the sale of the cement it produces solely to its residents.

I

[2] In 1919, South Dakota undertook plans to build a cement plant. The project, a product of the State’s then prevailing Progressive political movement, was initiated in response to recent regional cement shortages that “interfered with and delayed both public and private enterprises,” and that were “threatening the people of this state.” In 1920, the South Dakota Cement Commission anticipated “[t]hat there would be a ready market for the entire output of the plant within the state.” The plant, however, located at Rapid City, soon produced more cement than South Dakotans could use. Over the years, buyers in no less than nine nearby States purchased cement from the State’s plant. Between 1970 and 1977, some 40% of the plant’s output went outside the State.

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[3] Reeves is a ready-mix concrete distributor organized under Wyoming law and with facilities in Buffalo, Gillette, and Sheridan, Wyo. From the beginning of its operations in 1958, and until 1978, Reeves purchased about 95% of its cement from the South Dakota plant. In 1977, its purchases were $1,172,000. In turn, Reeves has supplied three northwestern Wyoming counties with more than half their ready-mix concrete needs. For 20 years the relationship between Reeves and the South Dakota cement plant was amicable, uninterrupted, and mutually profitable.

[4] As the 1978 construction season approached, difficulties at the plant slowed production. Meanwhile, a booming construction industry spurred demand for cement both regionally and nationally. The plant found itself unable to meet all orders. Faced with the same type of “serious cement shortage” that inspired the plant’s construction, the Commission “reaffirmed its policy of supplying all South Dakota customers first and to honor all contract commitments, with the remaining volume allocated on a first come, first served basis.”

[5] Reeves, which had no pre-existing long-term supply contract, was hit hard and quickly by this development. On June 30, 1978, the plant informed Reeves that it could not continue to fill Reeves’ orders, and on July 5, it turned away a Reeves truck. Unable to find another supplier, Reeves was forced to cut production by 76% in mid-July.

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[6] The basic distinction . . . between States as market participants and States as market regulators makes good sense and sound law. [T]he Commerce Clause responds principally to state taxes and regulatory measures impeding free private trade in the national marketplace. There is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market.

[7] Restraint in this area is also counseled by considerations of state sovereignty, the role of each State “`as guardian and trustee for its people,'” and “the long recognized right of trader or manufacturer, engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal.” Moreover, state proprietary activities may be, and often are, burdened with the same restrictions imposed on private market participants. Evenhandedness suggests that, when acting as proprietors, States should similarly share existing freedoms from federal constraints, including the inherent limits of the Commerce Clause. Finally, as this case illustrates, the competing considerations in cases involving state proprietary action often will be subtle, complex, politically charged, and difficult to assess under traditional Commerce Clause analysis. Given these factors, Alexandria Scrap wisely recognizes that, as a rule, the adjustment of interests in this context is a task better suited for Congress than this Court.

III

[8] South Dakota, as a seller of cement, unquestionably fits the “market participant” label more comfortably than a State acting to subsidize local scrap processors.

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[9] [P]etitioner protests that South Dakota’s preference for its residents responds solely to the “non-governmental objectiv[e]” of protectionism. Therefore, petitioner argues, the policy is per se invalid. See Philadelphia v. New Jersey (1978).

[10] We find the label “protectionism” of little help in this context. The State’s refusal to sell to buyers other than South Dakotans is “protectionist” only in the sense that it limits benefits generated by a state program to those who fund the state treasury and whom the State was created to serve. Petitioner’s argument apparently also would characterize as “protectionist” rules restricting to state residents the enjoyment of state educational institutions, energy generated by a state-run plant, police and fire protection, and agricultural improvement and business development programs. Such policies, while perhaps “protectionist” in a loose sense, reflect the essential and patently unobjectionable purpose of state government—to serve the citizens of the State.

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[11] In its last argument, petitioner urges that, had South Dakota not acted, free market forces would have generated an appropriate level of supply at free market prices for all buyers in the region. Having replaced free market forces, South Dakota should be forced to replicate how the free market would have operated under prevailing conditions.

[12] This argument appears to us to be simplistic and speculative. The very reason South Dakota built its plant was because the free market had failed adequately to supply the region with cement. There is no indication, and no way to know, that private industry would have moved into petitioner’s market area, and would have ensured a supply of cement to petitioner either prior to or during the 1978 construction season. Indeed, it is quite possible that petitioner would never have existed—far less operated successfully for 20 years—had it not been for South Dakota cement.

C

[13] We conclude, then, that the arguments for invalidating South Dakota’s resident-preference program are weak at best. Whatever residual force inheres in them is more than offset by countervailing considerations of policy and fairness. Reversal would discourage similar state projects, even though this project demonstrably has served the needs of state residents and has helped the entire region for more than a half century. Reversal also would rob South Dakota of the intended benefit of its foresight, risk, and industry. Under these circumstances, there is no reason to depart from the general rule of Alexandria Scrap.

[14] The judgment of the United States Court of Appeals is affirmed.

[15] It is so ordered.

JUSTICE POWELL, with whom MR. JUSTICE BRENNAN, MR. JUSTICE WHITE, and MR. JUSTICE STEVENS join, dissenting.

[1] The South Dakota Cement Commission has ordered that in times of shortage the state cement plant must turn away out-of-state customers until all orders from South Dakotans are filled. This policy represents precisely the kind of economic protectionism that the Commerce Clause was intended to prevent. The Court, however, finds no violation of the Commerce Clause, solely because the State produces the cement. I agree with the Court that the State of South Dakota may provide cement for its public needs without violating the Commerce Clause. But I cannot agree that South Dakota may withhold its cement from interstate commerce in order to benefit private citizens and business within the State.

[2] The need to ensure unrestricted trade among the States created a major impetus for the drafting of the Constitution. “The power over commerce . . . was one of the primary objects for which the people of America adopted their government. . . .”Gibbons v. Ogden (1824). Indeed, the Constitutional Convention was called after an earlier convention on trade and commercial problems proved inconclusive.

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[3] The application of the Commerce Clause to this case should turn on the nature of the governmental activity involved. If a public enterprise undertakes an “integral operatio[n] in areas of traditional governmental functions,” National League of Cities v. Usery, 426 U. S. (1976), the Commerce Clause is not directly relevant. If, however, the State enters the private market and operates a commercial enterprise for the advantage of its private citizens, it may not evade the constitutional policy against economic Balkanization.

[4] This distinction derives from the power of governments to supply their own needs, and from the purpose of the Commerce Clause itself, which is designed to protect “the natural functioning of the interstate market.” In procuring goods and services for the operation of government, a State may act without regard to the private marketplace and remove itself from the reach of the Commerce Clause. But when a State itself becomes a participant in the private market for other purposes, the Constitution forbids actions that would impede the flow of interstate commerce. These categories recognize no more than the “constitutional line between the State as government and the State as trader.” New York v. United States (1946).

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[5] The threshold issue is whether South Dakota has undertaken integral government operations in an area of traditional governmental functions, or whether it has participated in the marketplace as a private firm. If the latter characterization applies, we also must determine whether the State Commission’s marketing policy burdens the flow of interstate trade. This analysis highlights the differences between the state action here and that before the Court in Hughes v. Alexandria Scrap Corp.

A

[6] In Alexandria Scrap, a Virginia scrap processor challenged a Maryland program to pay bounties for every junk car registered in Maryland that was converted into scrap. The program imposed more onerous documentation standards on non-Maryland processors, thereby diverting Maryland “hulks” to in-state processors. The Virginia plaintiff argued that this diversion burdened interstate commerce.

[7] As the Court today notes, Alexandria Scrap determined that Maryland’s bounty program constituted direct state participation in the market for automobile hulks. Ante, at 435. But the critical question—the second step in the opinion’s analysis—was whether the bounty program constituted an impermissible burden on interstate commerce. Recognizing that the case did not fit neatly into conventional Commerce Clause theory, we found no burden on commerce.

[8] The Court first observed:

[9] “Maryland has not sought to prohibit the flow of hulks, or to regulate the conditions under which it may occur. Instead, it has entered into the market itself to bid up their price. There has been an impact upon the interstate flow of hulks only because . . . Maryland effectively has made it more lucrative for unlicensed suppliers to dispose of their hulks in Maryland . . . .”

[10] We further stated “that the novelty of this case is not its presentation of a new form of ‘burden’ upon commerce, but that appellee should characterize Maryland’s action as a burden which the Commerce Clause was intended to make suspect.” The opinion then emphasized that “no trade barrier of the type forbidden by the Commerce Clause, and involved in previous cases, impedes th[e] movement [of hulks] out of State.” Rather, the hulks “remain within Maryland in response to market forces, including that exerted by money from the State.” The Court concluded that the subsidies provided under the Maryland program erected no barriers to trade. Consequently, the Commerce Clause did not forbid the Maryland program.

B

[11] Unlike the market subsidies at issue in Alexandria Scrap, the marketing policy of the South Dakota Cement Commission has cut off interstate trade The State can raise such a bar when it enters the market to supply its own needs.

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[12] The State, however, has no parallel justification for favoring private, in-state customers over out-of-state customers. In response to political concerns that likely would be inconsequential to a private cement producer, South Dakota has shut off its cement sales to customers beyond its borders. That discrimination constitutes a direct barrier to trade “of the type forbidden by the Commerce Clause, and involved in previous cases. . . .” Alexandria Scrap, 426 U. S., at 810.

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[13] The creation of a free national economy was a major goal of the States when they resolved to unite under the Federal Constitution. The decision today cannot be reconciled with that purpose.