Remaking U.S. Trade Policy: From Protectionism to Globalization

Chapter Three. Selective Protectionism, 1934–74

Chapter Three Selective Protectionism, 1934–74 The United States was not always a champion of free trade principles. Rather, throughout the nineteenth and the early twentieth centuries the U.S. government faithfully adhered to the demands of its protectionist farmers and manufacturers and kept tariffs systematically high. By the mid 1940s, however, protectionism has become an exception to policies determined by liberal principles. Consequently, a steady liberalization of trade practices occurred in the post–World War II era, with tariffs on imported goods reduced from a high of 52.8 percent in 1930 to 9.9 percent in 1967. Postwar liberalism in the United States is often explained as an outcome of new economic opportunities, which led U.S. industries to change their position in favor of free trade. For this argument to hold, however, those interested in exploring foreign markets also had to have the political influence to make this change happen—tariffs and other protectionist measures had to be renegotiated to allow U.S. business access into Europe and elsewhere . Yet, while internationally competitive manufacturing industries and banks supported trade liberalization, many other businesses remained stout protectionists. Protectionist industries, moreover, maintained their influence in Congress, which had the constitutional monopoly over trade policymaking. Consequently, Congress remained loyal to its previous protectionist stance. Thus the question arises, what permitted the policy change from protectionism to internationalism? In this chapter I argue that the ability of internationalists to transform U.S. trade position and policies first required a shift in the site of authority away from Congress, and to the administration. Internationalist business and their supporters in the administration could not make Congress change its protectionist position, but they did manage, largely thanks to the trauma of the Great Depression, to weaken Congress’s monopoly over trade issues. In the Reciprocal Trade Agreements Act (RTAA) of 1934, Congress delegated the authority to reduce tariffs to the executive branch. The administration could then engage in bilateral and, after 1947, multilateral, trade agreements, which led to a dramatic reduction in tariffs. At the same time, Congress maintained its authority over trade issues other than tariffs, and used this authority to provide protection from the administration’s liberalization to “special cases.” Trading partners of the United States did not particularly like this arrangement, but the international setting in which trade agreements and rules were negotiated—the General Agreement on Tariffs and Trade (GATT)—did not provide many effective opportunities to challenge U.S. policies. In short, rather than being based on a national consensus about the benefits of free trade, liberal policies resulted from an institutional shift that enabled internationalists to impose their liberal preferences . In what follows I trace the history of U.S. trade policy formation from the nineteenth century till the end of the postwar era to identify the origins of the new institutional regime and describe its effects. The chapter begins with a brief history of U.S. trade laws from 1816 to the infamous SmootHawley Tariff of 1930. I argue that protectionist industries have been consistently successful in imposing their will not only due to their superior economic and organizational resources but also because the resources available to them “fit” (Skocpol 1992, 54–57) the opportunities provided by Congress’s political logic and procedures—protectionist industries could relatively easily mobilize a large number of constituencies from a great number of congressional districts. The chapter then traces the radical shift from the protectionist Smoot-Hawley Tariff of 1930 to the liberal RTAA only four years later. I show how the economic retaliation that followed the Smoot-Hawley Tariff and that allegedly contributed to the difficulties to recover from the Great Depression was used by the State Department to convince Congress to delegate tariff-setting authority to the administration. In the 1940s, Congress refused to ratify the creation of an International Trade Selective Protectionism 41 Organization (ITO), but the administration bypassed Congress by signing the General Agreement on Tariffs and Trade. I then describe in detail the substantive outcomes of the new institutional arrangements introduced in the RTAA and GATT. I show that the new hierarchical distribution of authority that characterized the new regime, which I call “selective protectionism ,” narrowed the authority of Congress and thereby weakened the political influence of protectionists, who did not have a similar influence over the executive. The act also substantively increased the influence of state...