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

In the 1934 Reciprocal Trade Agreements Act ("RTAA"), Congress delegated its constitutionally granted power to set tariffs to the President. Trade agreements negotiated under the RTAA required no ex post congressional approval. Instead, the broad authority conferred upon the President was subject to congressional renewal every three years. Tariff reductions also were no longer made unilaterally via omnibus tariff legislation, but rather bilaterally via trade agreements and in exchange for comparable tariff reductions from foreign trading partners. ¹ The RTAA dramatically altered the governance structure that had controlled U.S. trade policymaking for over a century, laying a new institutional foundation that made U.S. postwar participation in, and leadership of, global trade liberalization and expansion possible. Indeed, the RTAA is arguably the most important piece of trade legislation of this century. It also is an unusual case of congressional delegation of policymaking authority to the President. Representative Hamilton Fish (R-N.Y.) called the RTAA "a betrayal of our representative form of government [that] amounts to an open admission by Congress that . . . it is now incompetent and unfit to legislate properly, intelligently and in the public interest." The press described the RTAA as a "radical departure in commercial policy." ² What accounts for this extraordinary delegation, especially by a legislative body better known for guarding its power than for giving it away?

This article pursues two goals. First, it challenges the two most influential explanations for the RTAA. The congressionally-centered "lesson hypothesis" claims legislators learned from the disastrous consequences of the 1930 Smoot-Hawley Tariff Act that they were incapable of passing nationally-beneficial tariff legislation and delegated tariff-setting authority to the President. Voting data are presented to demonstrate that legislators did not vote in a manner consistent with this hypothesis. The second explanation, the Presidentally-centered "crisis" theory, claims the RTAA was part of Franklin Roosevelt's response to the Great Depression, expected to expand export markets for U.S. products, and that Congress agreed to the delegation because of the economic crisis created by the Depression and Roosevelt's strong political leadership. An examination of the historic record demonstrates that the crisis explanation is only partially correct. The second main goal of this article is to expand upon an underemphasized portion of the explanation for the delegation. Legislators supported the RTAA not only in the hope it would ameliorate the economic crisis or because Roosevelt and his Secretary of State, Cordell Hull, asked them to, but also because Democrats expected the RTAA to better protect their preferred low tariff policy from reversal by future Republican congressional majorities than the system of omnibus tariff-setting had. Indeed, Democrats hoped the RTAA would institutionalize low tariffs, as the evidence presented here illustrates. This article describes the three main structural features of the RTAA that were expected to contribute most significantly to trade liberalization, after reviewing existing explanations for the RTAA.

Revisiting the "Lesson" and "Crisis" Hypotheses

Numerous explanations for the RTAA have been advanced, but two have been particularly influential. ³ First, the lesson hypothesis focuses on legislators' learning from what have long been widely accepted as the consequences of the 1930 Smoot-Hawley Tariff Act, one of the most infamous examples of congressional logrolling. Under it, the average tariff rate on dutiable imports rose to 59 percent, one of the highest U.S. tariffs ever. ⁴ The tariff took a year and a half to usher through the Republican-controlled Congress and contained specific tariff schedules for more than twenty thousand items. The Smoot-Hawley Tariff was further attacked for initiating a wave of retaliatory tariffs against the United States. ⁵ From 1929 to 1933, U.S. exports fell from $488 million to $120 million; imports fell from $368 million to $96 million; and world trade fell from $35 billion to $12...