Beggar thy neighbor policies require higher level coordination to escape. E.g. tax competition between states to attract large companies, which not only reduces public funds but also disadvantages smaller local companies, is hard to prevent without agreements between states, or policies at a superstate level.

Replace taxes with permission to pollute, or worker rights, or other regulations, if you don't see a problem with tax competition. The point is that competition in practice reduces the sovereignty of the population of smaller government units.