The Institutional Foundation of U.S. Trade Policy: Revisiting Explanations for the 1934 Reciprocal Trade Agreements Act

Journal of Policy History

Volumn 12, Issue 4, 2000, Pages 417-444

  Schnietz, Karen E ^a  

^a RICE UNIVERSITY   (United States)

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EID: 85011513708     PISSN: 08980306     EISSN: 15284190     Source Type: Journal    
DOI: 10.1353/jph.2000.0032     Document Type: Article

References (70)

1. The RTAA gave the President authority to alter tariff duties up to 50 percent of rates set under the 1930 Smoot-Hawley Tariff Act (United States Statutes at Large, 73d Congress, Sess. II, CH. 474: 943-46). It was renewed thirteen times between 1934 and 1962. The 1962 Trade Act altered the mechanism of the delegation so that it more closely resembled fast-track negotiating authority (officially adopted in 1974) in which Congress grants the authority for a President to commence negotiation of a trade agreement, and then Congress takes a simple yea/nay vote when the negotiation is concluded. In November 1997, Congress denied President Bill Clinton fast-track negotiating authority—the first time this authority has been denied to a President requesting it since Roosevelt. Karen Schnietz and Timothy Nieman, “Politics Matter: The 1997 Derailment of Fast-Track Trade Authority,” Business and Politics 1 (1999): 233-51.
2. Congressional Record 78 (Washington, D.C. 73d Cong. 2d sess. 1934): 5614. New York Times, 1 March 1934, 1.
3. Other explanations are not addressed in this article. First, the “deflection” thesis maintains that Congress wanted to divert protectionist pressure from itself because interest-group lobbying had become intolerable. Raymond Bauer, Ithiel de Sola Pool, and Lewis Dexter, American Business and Public Policy: The Politics of Foreign Trade (New York, 1963)
4. I. M. Destler, American Trade Politics: System Under Stress (New York, 1986); and
5. Douglas Nelson, “Domestic Political Preconditions of U.S. Trade Policy,” Journal of Public Policy 9 (1986): 83-108. However, Republicans, as the party of high tariffs, were exposed to the greatest political pressure in this area, but they were not the party that proposed or supported the delegation. Moreover, this explanation implies that Congress should delegate all but the most trivial policy obligations, which it clearly has not. Second, the “ideological” explanation maintains that Secretary of State Hull influenced political institutions and the political elite with his trade liberalism.
6. Judith Goldstein, “The Impact of Ideas on Trade Policy: The Origins of U.S. Agricultural and Manufacturing Policies,” International Organization 43 (1989): 31-72.
7. However, Hull's freetrade bias was at least partially shaped by his experience as a Democratic congressman, and many legislators shared it. Relatedly, the “Hull did it” explanation focuses on Hull's pivotal role in persuading Roosevelt to submit the RTAA to Congress. Michael Butler, Cautious Visionary: Cordell Hull and Trade Reform, 1933-1937 (Kent, Ohio, 1998)
8. Wayne Cole, Roosevelt and the Isolationists, 1932-45 (Nebraska, 1983)
9. Alfred Eckes, Opening America's Market: U.S. Foreign Trade Policy Since 1776 (Chapel Hill, 1995)
10. Irwin Gellman, Secret Affairs: Franklin Roosevelt, Cordell Hull, and Sumner Welles (Baltimore, 1995)
11. William Leuchtenburg, Franklin D. Roosevelt and the New Deal, 1932-40 (New York, 1963)
12. Dexter Perkins, The New Age of Roosevelt, 1932- 45 (Chicago, 1958); and
13. Arthur Schlesinger Jr. The Coming of the New Deal (Boston, 1957). Although Hull exercised critical influence on Roosevelt, this thesis fails to describe why congressional Democrats supported such a large delegation of policymaking authority to the President.
14. Under the 1828 Tariff of Abominations, the average tariff rate on dutiable goods rose to 61.7 percent. U.S. Census Bureau, Historical Statistics of the United States 78 (Washington, D.C. 73d Cong. 2d sess. 1934), 888.
15. See the following challenges to the prevailing wisdom that the Smoot-Hawley Tariff was the highest U.S. tariff ever: Alfred Eckes, “Revisiting Smoot- Hawley,” Journal of Policy History 7 (1995): 295-310, and
16. Marc Hayford and Carl Pasurka Jr. “Effective Rates of Protection and the Fordney-McCumber and Smoot-Hawley Tariff Acts,” Applied Economics 23 (1991): 1385-92.
17. League of Nations, World Economic Survey (1932-1933), and
18. Joseph Jones, Tariff Retaliation Repercussions of the Hawley-Smoot Bill (Philadelphia, 1934).
19. Douglas Irwin estimates that a quarter of the 40 percent decline in imports following the Smoot-Hawley Tariff can be attributed to the combination of the Smoot-Hawley Tariff rates and deflation. “The Smoot-Hawley Tariff: A Quantitative Assessment,” Review of Economics and Statistics 80 (1998): 326-34.
20. Allan Meltzer, “Monetary and Other Explanations of the Start of the Great Depression,” Journal of Monetary Economics 2 (1976): 455-71.
21. However, there is disagreement over the “true” economic consequences of the Smoot-Hawley Tariff. See Rudiger Dornbusch and Stanley Fisher, “The Open Economy: Implications for Monetary and Fiscal Policy,” in The American Business Cycle: Continuity and Change, ed. Robert Gordon (Chicago, 1986), and
22. Barry Eichengreen, “The Political Economy of the Smoot-Hawley Tariff,” in Research in Economic History, vol. 12, ed. Roger Ransom (Connecticut, 1989): 1-43.
23. E. E. Schattschneider, Politics, Pressures, and the Tariff (Englewood Cliffs, N.J. 1963).
24. Robert Baldwin, The Political Economy of U.S. Import Policy (Cambridge, Mass. 1985)
25. Grace Beckett, The Reciprocal Trade Agreements Program (New York, 1941)
26. Judith Goldstein and Stefanie Lenway, “Interests or Institutions: An Inquiry into Congressional-ITC Relations,” International Studies Quarterly 33 (1989): 303-27
27. Helen Milner and B. Peter Rosendorff, “Trade Negotiations, Information, and Domestic Politics: The Role of Domestic Groups, Economics and Politics 8 (1996): 145-89
28. Robert Pastor, Congress and the Politics of U.S. Foreign Economic Policy, 1929-1976 (Berkeley and Los Angeles, 1980)
29. Nivola Pietro, “Trade Policy: Refereeing the Playing Field,” in A Question of Balance: The President, the Congress, and Foreign Policy, ed. Thomas Mann (Washington, D.C. 1990); and
30. James Sundquist, The Decline and Resurgence of Congress (Washington, D.C. 1981).
31. On the intense partisanship of tariff politics, see Charles Calhoun, “Political Economy in the Gilded Age: The Republican Party's Industrial Policy,” Journal of Policy History 8 (1996): 291-309
32. David Epstein and Sharyn O’Halloran, “The Partisan Paradox and the U.S. Tariff, 1877-1934,” International Organization 50 (1996): 301-24; and
33. Douglas Irwin, Against the Tide: An Intellectual History of Free Trade (Princeton, 1996).
34. Robert Baldwin, “The Changing Nature of U.S. Trade Policy since WWII,” in Structure and Evolution of Recent U.S. Trade Policy, ed. Robert Baldwin and Anne Krueger (Chicago, 1984)
35. John Cuddington and Ronald McKinnon, “Free Trade versus Protectionism: A Perspective,” in Tariffs, Quotas, and Trade: The Politics of Protectionism (San Francisco, 1979)
36. Richard Gardner, Sterling Dollar Diplomacy, 3d ed. (New York, 1980)
37. Stephan Haggard, “The Institutional Foundations of Hegemony: Explaining the Reciprocal Trade Agreements Act of 1934,” International Organization 42 (1988): 91-119; and
38. Stefanie Lenway, The Politics of U.S. International Trade: Protection, Expansion, and Escape (Boston, 1985).
39. Richard Cooper, “Trade Policy as Foreign Policy,” in U.S. Trade Policies in a Changing World Economy, ed. Robert Stern (Cambridge, Mass. 1987) and
40. Stephen Krasner, “State Power and the Structure of International Trade,” World Politics 28 (1976): 317-47.
41. Thomas Zeiler, Free Trade, Free World: America and the Advent of GATT (Chapel Hill, 1999).
42. Undated article, “Toward a Democratic Tariff Policy,” Today (independent national weekly published in New York by Vincent Astor), in the Herbert Feis Papers, Library of Congress, Manuscript Division, container 21 (with documents primarily from 1934). Hereafter Feis Papers.
43. Hull did not serve in the 67th Congress, having been narrowly defeated by his Republican opponent in the 1920 election. Hull served on the Pensions and Civil Service Reform Committees during his first two terms as congressman, but thereafter served only on Ways and Means, indicating how salient tariff issues were to him. As Hull noted in his Memoirs (New York, 1948): 89
44. “I [have] devoted my life to a close study of tariffs, revenue, finance and economics.” See also William Allen, “The International Trade Philosophy of Cordell Hull, 1907-1933,” American Economic Review 43 (1953): 107.
45. For accounts of the 1913 federal income tax and the 1916 Tariff Commission, see Hull, Memoirs (1948)
46. Morton Keller, Regulating a New Economy: Public Policy and Economic Change in America, 1900-1933 (Cambridge, Mass. 1990)
47. Joseph Kenkel, Progressives and Protection: The Search for a Tariff Policy, 1866-1936 (Lanham, Md. 1983)
48. Karen Schnietz, “Democrats' 1916 Tariff Commission: Responding to Dumping Fears and Illustrating the Consumer Costs of Protectionism,” Business History Review 72 (1998): 1-46; and
49. Stephen Skowronek, Building a New American State: The Expansion of National Administrative Capacities, 1877-1920 (New York, 1982).
50. and Frank Freidel, Franklin D. Roosevelt: Launching the New Deal (Boston, 1973).
51. New York Times, 30 December 1933, 3. Few historians have sought to explain the cause of Roosevelt's transformation on the RTAA; indeed, in many accounts, the first attempt at passing the RTAA is more extensively discussed than the second, successful attempt. For instance, Kenneth Davis, FDR: The New Deal Years, 1933-37 (New York, 1986)
52. John Flynn, The Roosevelt Myth (New York, 1948)
53. Basil Rauch, A History of the New Deal, 1933-38 (New York, 1944); and
54. Schlesinger, The Coming of the New Deal.
55. Finance Hearings, 49–56.
56. Ways & Means Hearings, 4: 24–34.
57. There are four welfare effects associated with a tariff: (1) the transfer of consumer surplus to protected domestic producers in the form of higher prices; (2) the transfer of consumer and foreign producer surpluses to the government in the form of the tariff duty; (3) the consumer surplus lost through inefficient domestic production; and (4) the consumer loss associated with having less supply of the dutied product than would exist under free trade. Wolfgang Stolper and Paul Samuelson, “Protection and Real Wages,” Review of Economic Studies 9 (1941): 58.
58. Nelson, “Domestic Political Preconditions of U.S. Trade Policy”
59. Schattschneider, Politics, Pressures, and the Tariff
60. F. W. Taussig, The Tariff History of the United States (New York, 1931); and
61. U.S. Tariff Commission, The Tariff and Its History (Washington, D.C. 1934).
62. The difference in electoral constituencies for the President and members of Congress yields systematic differences in their policy preferences. James Burns, The Deadlock of Democracy (Englewood Cliffs, N.J. 1963)
63. Terry Moe, “Political Institutions: The Neglected Side of the Story,” Journal of Law, Economics and Organization 6 (1990): 213-53; and
64. Barry Weingast, Kenneth Shepsle, and Christopher Johnsen, “The Political Economy of Benefits and Costs: A Neoclassical Approach to Distributive Politics,” Journal of Political Economy 89 (1981): 642-64.
65. For a formal demonstration of how Presidentially-led tariff-setting resulted in lower tariffs, see Karen Schnietz, “To Delegate or Not to Delegate: Institutional Choices in the Regulation of Foreign Trade, 1916-1934,” Ph.D. dissertation (University of California Berkeley, 1994).
66. Today article, “Toward a Democratic Tariff Policy,” Feis Papers, container 21.
67. William Stone in Finance Hearings, 285 and 283. Similarly, see 6 March 1934 letter from J. Belger to Rep. R. Doughton (D-N.C.), Ways & Means Papers, container 185. For a formal articulation of how the RTAA eliminated logrolling, see Sharyn O’Halloran, Politics, Process, and American Trade Policy (Ann Arbor, 1994).
68. Empirical support has been offered for this analysis. Although legislators did not take into account the export dependence of their districts in votes on tariff-policy prior to the RTAA, they did do so after the RTAA. Michael Gilligan, Empowering Exporters: Reciprocity, Delegation, and Collective Action in American Trade Policy (Ann Arbor, 1997).
69. Similarly, districtlevel export-dependence, more than partisanship, affected voting behavior on several trade bills in 1953 and 1962. Michael Bailey, Barry Weingast, and Judy Goldstein, “The Institutional Roots of American Trade Policy: Politics, Coalitions and International Trade,” World Politics 49 (1998): 309-38.
70. In addition, empirical evidence has been offered to show that private interests understood how fundamentally the RTAA would alter trade policy outcomes; investors in firms heavily dependent on export sales in 1934 bid up the stock prices of those firms significantly following news of the RTAA's likely passage. Karen Schnietz, “Investor Response to Trade Regulatory Change: The 1934 Reciprocal Trade Agreements Act,” Working Paper, Rice University.