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Reciprocal Tariff Act: Difference between revisions
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President [[Franklin D. Roosevelt]] signed the Reciprocal Trade Agreements Act (RTAA) into law in 1934. It gave the president power to negotiate bilateral, [[Trade pact|reciprocal trade agreement]]s with other countries and enabled Roosevelt to liberalize [[Foreign trade of the United States|American trade policy]] around the globe. It is widely credited with ushering in the era of liberal [[trade policy]] that persisted throughout the 20th century.<ref name="Hiscox">{{cite journal|last=Hiscox|first=Michael J.|title=The Magic Bullet? The RTAA, Institutional Reform, and Trade Liberalization|journal=International Organization|date=Autumn 1999|volume=53|issue=4|pages=669–698|doi=10.1162/002081899551039|url=https://web.stanford.edu/class/polisci243b/readings/v0002090.pdf|citeseerx=10.1.1.464.2534|s2cid=155043044 }}</ref> | President [[Franklin D. Roosevelt]] signed the Reciprocal Trade Agreements Act (RTAA) into law in 1934. It gave the president power to negotiate bilateral, [[Trade pact|reciprocal trade agreement]]s with other countries and enabled Roosevelt to liberalize [[Foreign trade of the United States|American trade policy]] around the globe. It is widely credited with ushering in the era of liberal [[trade policy]] that persisted throughout the 20th century.<ref name="Hiscox">{{cite journal|last=Hiscox|first=Michael J.|title=The Magic Bullet? The RTAA, Institutional Reform, and Trade Liberalization|journal=International Organization|date=Autumn 1999|volume=53|issue=4|pages=669–698|doi=10.1162/002081899551039|url=https://web.stanford.edu/class/polisci243b/readings/v0002090.pdf|citeseerx=10.1.1.464.2534|s2cid=155043044 }}</ref> | ||
[[Tariffs]] in the United States were at historically high levels from the | [[Tariffs]] in the United States were at historically high levels from the American Civil War to the 1920s. In response to the [[Great Depression]], [[United States Congress|Congress]] accelerated its protectionist policies, culminating in the [[Smoot–Hawley Tariff Act|Smoot–Hawley Act of 1930]], a smorgasbord of high tariffs across many American industries. At the same time, European countries enacted protectionist policies. | ||
The RTAA marked a sharp departure from the era of [[protectionism]] in the United States. American duties on foreign products declined from an average of 46% in 1934 to 12% by 1962.<ref name="Bailey">{{cite journal|last=Bailey|first=Michael A.|author2=Goldstein, Weingast |title=The Institutional Roots of American Trade Policy|journal=World Politics|date=April 1997|volume=49|issue=3|pages=309–338|doi=10.1353/wp.1997.0007|s2cid=154711958 }}</ref> | The RTAA marked a sharp departure from the era of [[protectionism]] in the United States. American duties on foreign products declined from an average of 46% in 1934 to 12% by 1962.<ref name="Bailey">{{cite journal|last=Bailey|first=Michael A.|author2=Goldstein, Weingast |title=The Institutional Roots of American Trade Policy|journal=World Politics|date=April 1997|volume=49|issue=3|pages=309–338|doi=10.1353/wp.1997.0007|s2cid=154711958 }}</ref> | ||
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=== Differences between RTAA and other trade agreements === | === Differences between RTAA and other trade agreements === | ||
Before the RTAA, if Congress wanted to establish a lower tariff for particular [[imports]], it would act unilaterally and tackle the foreign country's tariff rate as fixed. Congress would choose a tariff rate that was either a little higher or lower than the median preferred tariff, depending upon the composition of the Congress. Generally, a [[Republican Party (United States)|Republican]]-controlled Congress would prefer higher tariffs, and a | Before the RTAA, if Congress wanted to establish a lower tariff for particular [[imports]], it would act unilaterally and tackle the foreign country's tariff rate as fixed. Congress would choose a tariff rate that was either a little higher or lower than the median preferred tariff, depending upon the composition of the Congress. Generally, a [[Republican Party (United States)|Republican]]-controlled Congress would prefer higher tariffs, and a Democratic-controlled Congress would prefer lower tariffs. Thus, tariffs were chosen based on US [[domestic politics]]. Individual members of Congress were under great pressure from industry [[lobbyists]] to raise tariffs to protect it from the negative effects of foreign imports.<ref name="Bailey"/> | ||
The RTAA's novel approach freed Roosevelt and Congress to break that trend of tariff increases. It tied US tariff reductions to reciprocal tariff reductions with international partners. It also allowed Congress to approve the tariffs with a [[Majority|simple majority]], as opposed to the [[two-thirds majority]] necessary for other treaties. Also, the President had the authority to negotiate the terms. The three innovations in trade policy created the political will and feasibility to enact a more liberal trade policy.<ref name="Bailey"/> | The RTAA's novel approach freed Roosevelt and Congress to break that trend of tariff increases. It tied US tariff reductions to reciprocal tariff reductions with international partners. It also allowed Congress to approve the tariffs with a [[Majority|simple majority]], as opposed to the [[two-thirds majority]] necessary for other treaties. Also, the President had the authority to negotiate the terms. The three innovations in trade policy created the political will and feasibility to enact a more liberal trade policy.<ref name="Bailey"/> | ||
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Led by the United States and the United Kingdom, international co-operation flourished, and concrete institutions were created. In talks begun at the [[Bretton Woods Conference]] of 1944, the [[International Monetary Fund]] was created. By 1949, the first international board governing trade, the [[General Agreement on Tariffs and Trade]] (GATT), had been established. In 1994, the GATT was replaced by the [[World Trade Organization]] (WTO), which still oversees international trade agreements.<ref name="Oatley">{{cite book|last=Oatley|first=Thomas|title=International Political Economy|year=2010|pages=71–113}}</ref><ref>{{cite journal|last=Ruggie|first=John Gerard|title=International regimes, transactions, and change: embedded liberalism in the postwar economic order|journal=International Organization|date=Spring 1982|volume=36|issue=2|series=2|pages=379–415|doi=10.1017/s0020818300018993|doi-access=free}}</ref> | Led by the United States and the United Kingdom, international co-operation flourished, and concrete institutions were created. In talks begun at the [[Bretton Woods Conference]] of 1944, the [[International Monetary Fund]] was created. By 1949, the first international board governing trade, the [[General Agreement on Tariffs and Trade]] (GATT), had been established. In 1994, the GATT was replaced by the [[World Trade Organization]] (WTO), which still oversees international trade agreements.<ref name="Oatley">{{cite book|last=Oatley|first=Thomas|title=International Political Economy|year=2010|pages=71–113}}</ref><ref>{{cite journal|last=Ruggie|first=John Gerard|title=International regimes, transactions, and change: embedded liberalism in the postwar economic order|journal=International Organization|date=Spring 1982|volume=36|issue=2|series=2|pages=379–415|doi=10.1017/s0020818300018993|doi-access=free}}</ref> | ||
The [[US Department of State]] also found good use of the expansion of free trade after World War II. Many in the State Department saw multilateral trade agreements as a way to engage the world in accordance with the [[Marshall Plan]] and the [[Monroe Doctrine]]. US trade policy became an integral part of [[US foreign policy]]. That pursuit of free trade as [[diplomacy]] intensified during the [[Cold War]], as the US competed with the | The [[US Department of State]] also found good use of the expansion of free trade after World War II. Many in the State Department saw multilateral trade agreements as a way to engage the world in accordance with the [[Marshall Plan]] and the [[Monroe Doctrine]]. US trade policy became an integral part of [[US foreign policy]]. That pursuit of free trade as [[diplomacy]] intensified during the [[Cold War]], as the US competed with the Soviet Union for relationships around the globe.<ref name="Oatley"/> | ||
== Notes == | == Notes == | ||