British Decline and American Opportunism, 1897–1912
In the years 1897–1912, the United States maintained high tariff protection at home and expanded its strategy of bilateral bargaining, first adopted in the McKinley Act of 1890, to new regions of the globe. In the Dingley Act of 1897, the United States offered reciprocal reductions in duties to the countries of continental Europe and threatened penalty duties against Latin American nation-states unless they granted concessions on items of special interest to the United States. Reflecting new confidence in its ability to compete in international markets, the United States adopted an open door or nondiscriminatory trade strategy in the Payne-Aldrich Act of 1909, which granted lower duties to all countries that did not unduly discriminate against American goods. In both tariff acts, the United States eschewed liberal free-trade principles and actively sought to exploit the trade strategies of other countries to obtain its preferred outcome of protection at home and free trade abroad.
American trade strategy was influenced during this period by the international economic structure of declining British hegemony and, more specifically, by its own increasing relative labor productivity. Although declining rapidly, Great Britain remained a hegemonic leader and continued to pursue a passive, nonretaliatory trade strategy throughout this second phase. The United States could at least in part still free ride on Britain and maintain the policies of high protection and export expansion which had, for similar reasons, proven so successful between 1887 and 1897.
In perhaps the most important manifestation of Britain’s decline, the United States surpassed the United Kingdom in relative labor productivity in approximately 1897. This important change within the international economic structure broadened America’s export horizons and correspondingly stimulated its desire for greater access to foreign markets. Enjoying the virtuous cycle discussed in Chapter 1, American manufacturers became increasingly competitive in international markets and began to seek their fortunes not only in the export markets of Latin America but also in Asia and, more important, continental Europe. At the same time, and perhaps because of the American “export invasion,” many European countries increased their tariff barriers and began to discriminate against products from the United States. Threatened with losing these valuable outlets for the results of its ever more productive economy, the United States embraced an active trade strategy of bilateral tariff bargaining, turning first to reciprocity and later to maximum-minimum tariff schedules to breach the European tariff walls being erected against it.
In brief, American trade strategy between 1897 and 1912 was driven by the continued opportunity of free riding on Britain’s hegemonic leadership and the desire to reap the benefits of its steadily increasing relative labor productivity in the face of the closure of foreign markets. The United States sought to achieve both aims through a greater reliance on bilateralism reinforced by the coercive power of high tariffs.
The International Economic Structure, 1897–1912
Though still a hegemonic leader, the United Kingdom declined rapidly within the international economic structure during the period 1897–1912. Between 1890 and 1900, largely coinciding with the first phase discussed in Chapter 3, Britain’s proportion of world trade declined only from 18.5 to 17.5 percent. From the turn of the century until 1913, one year after the close of this second phase, the United Kingdom’s share of world trade plummeted from 17.5 to 14.1 percent. More important, the United States surpassed the United Kingdom in relative productivity in approximately 1897, creating an important change within the international economic structure.
During this period of decline, protectionism resurfaced as an important political force in British politics for the first time since 1846.1 Initiated in 1896 and led by Colonial Secretary Joseph Chamberlain, Britain’s imperial preference movement had emerged as a small but potent political force by 1903. In 1906 the movement had grown strong enough to split the Conservative party, costing the Tories the election that year. With the Liberal victory and the disarray in the Conservative ranks, the advocates of imperial preference clearly remained a minority despite their growing strength. Britain’s commitment to free trade appeared secure, albeit slightly weaker than before, and the United States continued to premise its trade policy on this commitment.
As in the first phase discussed in Chapter 3, the continued openness of the British market created the opportunity for the United States, as a single opportunist, to free ride within the international economy. Although it could not do so with quite the impunity as before, the United States could nonetheless maintain protection at home, thereby securing the benefits of its optimal tariff and subsidizing its increasing returns industries, and expand exports to Latin America, Asia, and other British trading preserves with little or no fear of retaliation from the hegemonic leader.
The most serious constraint on the United States during this period was its new position as the most productive nation-state within the international economy and, partially related to this situation, the growth of protectionism and discrimination in continental Europe. Enjoying both high and rapidly expanding relative labor productivity, the United States entered into a virtuous cycle of expanded exports and growth, greater economies of scale and trade surpluses, expanded exports and growth, and so on. As its exports became increasingly competitive in world markets, America’s interests in export expansion grew as well.
In addition, the United States’s rising relative labor productivity stimulated a shift in the composition of exports away from agriculture and other primary products and toward more capital-intensive manufactures. As a result, Anglo-American trade, traditionally based on the complementarity between the resource-rich United States and industrial Britain, though still important, became less central. The British market alone could no longer satisfy American needs, a conclusion reflected in trade patterns. In 1888 the United States shipped 52 percent of its exports to the United Kingdom. By 1897 Britain’s share of American exports had fallen to 46 percent, and by 1912, at the end of this second phase, to a mere 26 percent.2
As its relative labor productivity increased, America’s export horizons expanded far beyond Britain and Latin America to include Asia and continental Europe. Of the two, Europe—and particularly Germany and France—was more troubling to American policy makers. Abandoning free trade in 1879, Germany subsequently negotiated bilateral tariff treaties with Austria-Hungary in 1891, Italy, Belgium, and Switzerland in 1892, Russia in 1894, Japan in 1896, and Spain in 1899. Each so-called “Caprivi treaty,” named for Bismarck’s successor as chancellor, lowered duties on a wide variety of products and generalized these concessions to all nation-states with which Germany possessed unconditional most-favored-nation (MFN) treaties.3 Because the United States adhered to only the conditional MFN principle, these concessions were not automatically extended to American products.4
France followed Germany in the direction of discriminatory trade practices and increased protection in the Meline Tariff of 1892. Significantly raising tariff levels in France, the act also instituted minimum and maximum schedules, the latter to be applied to all countries that discriminated against or placed high duties upon French products. Most European countries secured the preferred rates of the French minimum schedule; only Portugal joined the United States on the higher, maximum schedule. In addition, the minimum schedule was eventually extended in whole or in part to Colombia, San Domingo, Ecuador, Mexico, Paraguay, Uruguay, Venezuela, Egypt, and Japan—all countries with which the United States desired increased commercial relations. Canada and Argentina, whose agricultural products competed with American exports in the French market, also received the minimum schedule.5
As these bilateral agreements were negotiated and implemented by Germany and France in the mid-1890s, American exporters began to face significant discrimination against their goods in continental markets.6 Indeed, this was their intended effect. With its rapidly rising relative labor productivity, the United States captured market after market during the 1890s and engendered the enmity of jealous European producers. As the United States surpassed Britain, Europe grew increasingly apprehensive of the American ‘‘export invasion of Europe,” an infelicitous term used by many Americans with predictable effects abroad. Reacting to this invasion, Count Agenor Goluchowski, minister of foreign affairs in Austria-Hungary, called for a concerted commercial policy in Europe to meet the challenge from the United States:
The destructive competition with transoceanic countries [i.e., the United States] … requires prompt and thorough counteracting measures if vital interests of the peoples of Europe are not to be gravely compromised. They must fight shoulder to shoulder against the common danger, and must arm themselves for the struggle with all the means at their disposal… . The European nations must close their ranks in order successfully to defend their existence.7
As a German publicist wrote in 1902, “No question regarding commercial matters was more often discussed in the old world, especially after … 1898 [that is, the Spanish-American War], than that of American competition,” which resembled a “spectre” or “invasion.”8
Reconciling the competing constraints and opportunities of the international economic structure—and specifically, the desires to free ride on Great Britain, expand exports to Latin America and other developing regions, and maintain access to continental markets in the face of European closure—was the central political problem for America’s trade strategists during this period. One possible option, suggested by several American free traders and strongly advocated by the Europeans, would have been for the United States to lower its tariff and adopt the unconditional MFN principle, thereby automatically sharing in the lower duties negotiated among the European powers. Both lower tariffs and unconditional MFN were necessary for this first option to succeed. The United States would have had to reverse its past adherence to the conditional MFN principle and renegotiate its existing trade agreements if it were to share in the benefits of unconditional MFN. In any renegotiations, however, considerable pressure would have been placed on the United States to reduce its overall tariff rates. France, for instance, explicitly linked the issues in its tariff legislation, which specified that its maximum schedule applied to countries that either discriminated against or imposed high duties on French products. Through this linkage, the desire of the United States to protect its domestic economy and impose whatever optimal tariffs it possessed came into direct conflict with the goal of expanding exports to the Continent and elsewhere. In this first possible strategy, pursuing one objective hindered the other.
A second option, which resolved this conflict and promised success on both fronts, was a bilateral bargaining tariff backed by high duties. Not only would the desire for domestic protection be satisfied, but selective reductions in these high duties or threats of even higher retaliatory duties could be used as effective levers to pry concessions out of other countries on items of interest to the United States. High but negotiable tariffs, in other words, maximized the United States’s international bargaining power but still allowed it to maintain protection.
A strategy of bilateral bargaining would clearly engender international conflict. And lower tariffs combined with unconditional MFN might have been more effective at reducing trade barriers in the system as a whole, as achieved under British hegemony in the mid-nineteenth and American hegemony in the mid-twentieth centuries. At this time, however, the United States ignored such systemwide concerns, desiring instead to exploit the strategies of others so as to obtain its preferred outcome of protection at home and free trade abroad. Promising success, this second strategy was strongly advocated by state officials within the foreign policy executive.
The years 1897–1912 were a period of rapid change in the foreign relations of the United States. Politically, the United States emerged as a middle-sized global power, claiming victory in the Spanish-American War, participating in the joint use of military force by the major European powers in China during the Boxer Rebellion, constructing a deepwater navy, “taking” the Panama Canal, and attending its first meeting of the great European powers in the Algeciras Conference of 1906. America’s trade interests expanded as well. The Philippines, America’s newly won colony, opened up Asia to Yankee traders. And the United States also began its export invasion of Europe.
As in the first phase discussed in Chapter 3, the United States maintained high protection and pursued an active, bilateral trade strategy. In the Dingley Act of 1897, the United States returned to reciprocity as an instrument of export expansion. Twelve years later, the United States adopted the slightly more liberal Payne-Aldrich Act with its activist maximum-minimum tariff schedules.
What distinguishes this second phase from the first, however, is the shift in the geographic focus of American activism. Between 1887 and 1897, American trade strategy was designed to expand exports to Latin America, largely at Britain’s expense. After 1897, the United States maintained this earlier interest but increasingly focused its attention on preserving and expanding its more important markets in Europe, and particularly in France and Germany.
The Dingley Tariff
In its substantive provisions, the Dingley Act of 1897 bears important similarities to the McKinley Act of 1890, embracing both protection and reciprocity. This is hardly surprising given the opprobrium directed at the Wilson-Gorman Tariff, a result of its association with the third slump of the Great Depression of 1873–96, and the election of William McKinley, author of the 1890 bill and the champion of protection, as president in 1896. Yet, though it clung to the successful policies of the first phase, the Dingley Act also reflected the new concern of the United States with expansion into European markets.
Soon after McKinley’s election, the Republican members of the House Ways and Means Committee, under the direction of Nelson Dingley of Maine, began preparing a new tariff bill. Congress met in special session, called by the president immediately after his inauguration, to revise the tariff. The Dingley bill was passed by the House in record time but stalled in the Senate, where the Finance Committee, under the chairmanship of Nelson Aldrich, submitted a bill with rates substantially below those in the previous McKinley Tariff. The Senate rebelled against these lower rates, however, and subsequently rewrote the bill on the floor of the chamber.
The Dingley Act, as agreed upon by the conference committee and signed into law on July 24, 1897, raised the tariff on dutiable imports from 41.2 percent in the Wilson-Gorman Act to 47.6 percent, only 0.8 percent below the rate of the McKinley Tariff (see Tables 3.1 and 4.1). The free list was reduced to 45.1 percent, below the level of both the 1890 and 1894 acts. Finally, the Dingley Act raised the level of duty on all imports from 20.5 to 26.2 percent, 2.5 percent higher than the McKinley Tariff. Although certain Republican leaders, including Aldrich, publicly questioned for the first time the need for such high duties, the party’s substantive commitment to protectionism nonetheless remained intact.
In the Dingley Act, reciprocity was also broadened, deepened, and fashioned into a potentially powerful instrument of trade policy. Reciprocity, perceived as the only popular element of the ill-received McKinley Act of 1890, was certain to be a part of the new tariff.9 Furthermore, the president, who strongly opposed the concept when it was presented by Blaine earlier in the decade, had now emerged as its strongest supporter. The final bill contained two sections on reciprocity, each passed by a different house of Congress and combined by the conference committee. In shaping their respective provisions, both houses concurred that reciprocity should be extended so as to help preserve and expand America’s access to markets in Europe; the only question was how this goal could best be accomplished.
Section three of the bill, the reciprocity provision which originated in the House, authorized the president to suspend the duty on argols (crude tartar as deposited in wine casks), brandies, champagne, still wines, paintings, and statuary if the exporting country entered into an equivalent and reciprocal commercial treaty. This inducement was aimed at the continental European powers, and France in particular. Section three further authorized the president to impose penalty duties on coffee, tea, tonka beans, and vanilla beans if the exporting country failed to grant reciprocal and equivalent concessions to the United States in view of the free introduction of these products. Except for tea, which was a principal export of China and Japan, the other products were exported solely by the Latin American countries. The duty on sugar, the free admission of which had been central to the reciprocity provision of 1890, could no longer be manipulated in an active trade strategy; under the system of bounties granted between 1890 and 1894 and the tariff of 1894, sugar growing had emerged as a politically important tariff-dependent industry in the United States.10
Except for the negotiating authority on brandies, champagne, still wines, coffee, and tea, the bargaining leverage given to the president by this section was weak. This was, indeed, the principal criticism of section three. As Representative Winfield S. Kerr (R.-Ohio) argued in introducing a more extensive but unsuccessful reciprocity amendment, “The defect in this bill is that it does not offer enough to get what we want and must have.”11
This criticism was repeated in the Senate. In noting why the Senate Finance Committee struck out the lower house’s reciprocity section, Aldrich stated that “it seemed to [us] that the provisions of the House bill in this regard would not prove effective.” The committee, he went on, would try to draft a more efficacious provision.12 Senator William B. Allison, chairing the Finance Committee because of Aldrich’s prolonged illness, finally introduced a reciprocity provision on June 10, nearly two months after the Senate debate had begun. Section four, as it would eventually be numbered, empowered the president to enter into commercial treaties of no more than five years’ duration with any country if negotiated within two years after the passage of the bill. The president, moreover, was authorized to lower duties by 20 percent on any good or eliminate the tariff entirely on any item that was the natural product of a foreign country and not of the United States. Tempering this sweeping authority, section four stipulated that any reciprocity treaty negotiated under this provision would require not only the constitutionally mandated Senate ratification but the approval of Congress as well.
To strengthen section four, the Senate raised the rates of duty contained in the Dingley Act as “bargaining chips” to be used in future negotiations. Although there is considerable debate over how extensive this process was, John Ball Osborne, joint secretary to the Reciprocity Commission appointed by McKinley to implement the reciprocity provision of the act, later stated, “When the rates of duty enumerated in the [act] … were being formulated, it was clearly understood … that each and every rate was subject to reduction to the extent of one-fifth under the operation of the reciprocity section. The rates were consequently made one-fifth higher than would otherwise have been justified.” Although Aldrich and other protectionists denied that all rates were increased for this reason, they did agree that duties on certain articles, particularly sugar, were made higher than they would have been without the reciprocity provision.13
Although its substantive provisions did not explicitly single out the continental powers, section four was clearly intended to penetrate the growing tariff walls and discriminatory trade practices of France and Germany. Senator William E. Chandler (R.-N.H.), a party leader, argued that “I am in favor of improving and strengthening our commercial relations by specific arrangement with other nations, not only with the nations of the Western Hemisphere, but with the nations of Europe.” Likewise, Senator Allison turned his attention to Europe: “Europe is today full of maximum and minimum treaties affecting trade relations favorable to those countries with each other.” This reciprocity provision, he stated, “is in the same line and for the same purpose.”14 American tariff policy was never made in an international vacuum; policy makers and even legislators were always cognizant of events and policies in other countries. As noted in Chapter 3, for example, the Democrats were certainly aware of German trade policy; yet in 1894 they chose to ignore the strongly worded threat of retaliation if the United States abrogated the reciprocity treaty or imposed countervailing duties on German sugar exports. What is distinctive about the Ding-ley Act is that for the first time since at least the Civil War the policies of the continental European powers were not only noted but actually incorporated into the legislation. In the Dingley Act, the United States attempted for the first time to fashion a concrete response to trade developments in Europe and expand its access to continental markets.
Despite the promise and intent of the reciprocity provisions in the Dingley Act, American negotiators were more constrained by congressional restrictions on executive authority than in 1890. The second part of section three, which authorized the president to impose penalty duties on coffee, tea, tonka beans, and vanilla beans if the exporting country imposed duties on American products that were reciprocally unequal and unreasonable, was used only once to secure favorable trading arrangements for the United States in Latin America. After five years of negotiations, Brazil finally agreed on April 16, 1904, to reduce its tariff by 20 percent on wheat flour, manufactures of rubber, watches and clocks, inks and colors, and condensed milk when exported from its northern neighbor. The United States, in turn, agreed not to penalize Brazilian coffee exports. These concessions by Brazil were withdrawn the following year in the wake of considerable domestic protest, only to be granted once again in 1906 along with additional concessions on typewriters, refrigerators, pianos, scales, and windmills. Without the bargaining leverage provided by free sugar, no other agreements with the Latin American trading partners of the United States could be profitably negotiated.15
Under the first part of section three, John A. Kasson, appointed special reciprocity commissioner by President McKinley, negotiated four European reciprocity or “argol” agreements, as they came to be known. In an agreement signed with France on May 28, 1898, the United States granted to that country all the concessions authorized by the act, except that on champagne, and secured in return the French minimum rates on sausages and lard and a guarantee that previous concessions granted to the United States would be maintained. Kasson also secured for the United States the right to withdraw the concessions on still wines should France impose new duties on American products which the president judged to be unreasonable. As a result, France dropped proposed increases on cottonseed oil and petroleum products.16 In an agreement reached on July 13, 1900, Germany granted to the United States the minimum rates recently conceded to the other continental European powers in return for concessions by the United States identical to those granted France. The United States also negotiated reciprocity agreements of lesser importance with Portugal in 1899 and Italy in 1900. These section three agreements largely accomplished their minimum objective: they penetrated the rising walls of tariff protection and discriminatory trade practices in Europe which applied to the United States. As the case of France makes clear, however, they did not eliminate these discriminations.
In the early years of the twentieth century, the continental European powers continued their drift toward increased protection and discrimination. The immediate cause of this drift was Germany’s attempt to arm itself for the renegotiation of its bilateral tariff treaties due to expire in 1903. In the tariff bill passed in December 1902, Germany both raised its overall level of duties and increased the number of categories in the tariff.17 Under the new legislation, the maximum schedule was to be the general tariff; any concessions granted were to be the minimum schedule and would be generalized only to those nation-states with which Germany possessed an unconditional MFN treaty. Germany’s trading partners also prepared for the new round of negotiations by raising their tariff levels. Negotiations commenced in June 1904 and ended in January 1905. The new tariff went into effect on March 1, 1906.
In reaction to these developments in Europe, the United States negotiated a second series of argol agreements between 1906 and 1909. In these agreements, the United States extended its earlier concessions on argols, brandies, still wines, paintings, and statuary and agreed to apply the lower duty provided for on champagne in return for nearly all of the minimum schedules in Germany and Spain and selected concessions in France, Portugal, Great Britain (with reference to her colonies), Italy, and the Netherlands.18 At the end of this round of negotiations, all of the negotiating authority provided for in section three was depleted. Any further negotiations under this provision would have required an additional grant of congressional authority.
Although hailed as an important departure in American tariff policy, section four of the Dingley Act—empowering the president to negotiate tariff reductions of up to 20 percent on any product in exchange for comparable concessions—was ultimately unsuccessful. Of the seven treaties negotiated under its auspices, not one was ever considered by the full Senate or House. The treaty with France was the first to be negotiated, substantively the most important, and perceived as the “test case” for the others. Negotiations were initiated by a French proposal that the United States grant their country the full reduction of 20 percent authorized in the bill on the entire range of its goods imported into the United States in return for the application of France’s minimum tariff on all American goods. Special Reciprocity Commissioner Kasson seriously considered this proposal, but it was rejected. In the final treaty signed on July 24, 1899, France extended to the United States the minimum rates on all but 19 of the 654 articles enumerated in its tariff. Of the 19 items, only boots and shoes and machine tools were of importance.19 All of these concessions had already been granted to France’s most-favored nations. The United States, in return, agreed to reduce duties on 126 articles by 5 to 20 percent. Most important, Kasson refused to consider reductions in the woolen schedule, which was of prime importance to France. None of the reductions granted to France had been given to any other country at that time. Soon after the conclusion of negotiations with France, Kasson also signed reciprocity treaties with the United Kingdom for Barbados, British Guiana, Turks and Caicos islands, Jamaica, Trinidad, and Bermuda; with Denmark for St. Croix; and with Nicaragua, Ecuador, the Dominican Republic, and Argentina.
The treaty with France, and specifically Kasson’s failure to secure the entire minimum schedule, elicited considerable controversy within the United States, particularly among the boot and shoe manufacturers of Massachusetts. Kasson defended his actions, arguing that his critics did “not take into account that [the treaty] required the consent of France. If the United States could have included them, it would have been done ... I endeavored to the best of my ability to get [boots and shoes] in, but they absolutely refused to allow them, as obstinately as we, on our part, refused concessions on woolen goods and some other articles they wanted.”20 Although the several treaties were strongly supported by the president, a majority in Congress, and many producer groups, the specifically disaffected groups who felt either damaged or ignored by the French treaty combined with others who feared any real or apparent change in America’s commitment to protection to prevent the passage of the treaty. Despite strenuous efforts by McKinley to dislodge the French treaty and others from the Senate Finance Committee, he had not succeeded at the time of his death. Lacking McKinley’s base of support within the party, Theodore Roosevelt was forced to rely on Aldrich and other conservative senators who opposed the section four reciprocity treaties. Without the president’s active support, the treaties died a quiet death. Disheartened, Kasson resigned on March 9, 1901. No additional treaties were negotiated.21
The Payne-Aldrich Tariff
With average rates of duty slightly below those of the Wilson-Gorman Act of 1894, the Payne-Aldrich Act of 1909 was the most liberal tariff passed since the Civil War. Like the Dingley Act, the Payne-Aldrich Tariff was directed at breaching and eliminating the discriminatory tariff walls of continental Europe. It recognized the inadequacies of reciprocity, however, and instituted more active maximum-minimum tariff schedules and embraced the liberal rule of nondiscrimination—or the “open door”—in international trade. Despite these reforms and its slightly more liberal design, however, the bill remained solidly protectionist.
The Dingley Act, generally associated with a period of rising prosperity, remained in force longer than any other tariff in American history. Because of the aftereffects of three tariff revisions in eight years, no policy maker voiced much enthusiasm for undertaking another costly reform. Yet, as the first decade of the twentieth century progressed, America’s industrial structure continued to evolve and the rates of the Dingley Act became increasingly anachronistic. The short but severe depression or “Roosevelt Panic” of 1907 also severed the link between high protection and prosperity. By the end of his second term, Roosevelt concluded that the time for tariff reform was ripe. Believing the goodwill that typically followed a presidential election necessary for successful revision, however, Roosevelt refused to take up this contentious issue. Rather, he encouraged his hand-picked successor, William Howard Taft, to lead the fight.
In the 1908 presidential campaign, both parties supported tariff reform. The Democratic platform stated, “We favor immediate revision of the tariff by the reduction of import duties.” The Republican platform, on the other hand, put forth a new and somewhat ambiguous approach to protection. “In all tariff legislation,” it declared, “the true principle of protection is best maintained by the imposition of such duties as will equal the difference between the cost of production at home and abroad, together with a reasonable profit for American industries.”22 Though possessing the virtue of apparent moderation (that is, promising no more than equal costs of production and a reasonable profit), carried to its logical conclusion this true principle of protection would eliminate the basis for all international trade.23 Nonetheless, this platform plank indicated to many, including Taft, that the tariff would actually be lowered if it were implemented, suggesting that current rates of duty were often perceived as more than sufficient to equalize the differences in the costs of production and yielding more than a reasonable profit.
In his Inaugural Address, Taft called for a special session of Congress to implement the Republican tariff reform program. After reiterating the true principle of protection, Taft asked for a general reduction in the tariff: “It is thought that there has been such a change in conditions since the enactment of the Dingley Act, drafted on a similarly protective principle, that the measure of the tariff above stated will permit the reduction of rates in certain schedules and will require the advancement of few, if any.”24
On March 17, two days after the special session of Congress began, Sereno E. Payne (R.-N.Y.) chairman of the House Ways and Means Committee and a moderate protectionist, introduced a modest downward revision of the tariff. The House quickly passed the bill with few changes. The more protectionist Senate, as it had done several times before, rewrote important sections of the bill by adding a total of 847 amendments—nearly all of which raised the level of protection found in the House bill.
Despite the numerous changes introduced by the Senate, the Payne-Aldrich Act did succeed in lowering the level of protection, but not by as much as originally expected or hoped. The tariff level on dutiable imports was reduced from 47.6 to 41.0 percent (see Table 4.1). Likewise, the free list was expanded from 45.1 to 51.3 percent and the rate of duty on all imports was lowered from 26.2 to 20.0 percent. These were the lowest duties since the Civil War, but they were only marginally lower than those found in the Wilson-Gorman Act of 1894.
Complementing these lower rates, the Republican platform also favored the open door, or the principle of nondiscrimination in international trade (with the exception of colonial reciprocity). Instead of adopting the unconditional MFN principle, however, the Payne-Aldrich Act relied on continued bilateralism through maximum-minimum tariff schedules. There was no doubt from the beginning of the debate that the Payne-Aldrich Act would contain such a provision. Incorporated into the bill by both the House and Senate committees, the maximum-minimum schedules were, as Aldrich noted, widely believed to be the most important part of the 1909 act. Indeed, Payne devoted much of his opening speech in the House to this provision. Even the Democratic minority members of the Ways and Means Committee supported the concept of maximum-minimum schedules, although they argued that the minimum schedule proposed by the Republicans should be the maximum schedule of the bill.25
With the exhaustion of the bargaining authority delegated to the president in section three of the Dingley Act and the failure of the section four treaties to gain congressional approval, the maximum-minimum schedules were proposed as a more effective lever to open foreign and particularly European markets to American goods while maintaining the essential structure of protection at home. The final version of the bill stated that the maximum schedule, set 25 percent ad valorem higher than the minimum schedule, was to be the general tariff and take effect on March 31, 1910, unless the president with the aid of the Tariff Board created by the bill were to certify that the exporting country did not unduly discriminate against American goods. The provision was designed to remove Congress—which had proven to be an impediment in the past—from the decision-making process; tie the hands of the president, thereby forcing him to implement the desired action; and ease the diplomatic controversy which might erupt by providing an inducement for not discriminating against American products rather than a penalty for such discrimination.26
In a rhetorical question, Aldrich clearly set forth the objectives of the provision:
What are the conditions which have led up to this legislation, and what is attempted to be reached by it? Germany and France, and other countries, acting entirely within the legitimate sphere of their own jurisdictions, have enacted maximum and minimum tariffs … [which] discriminate unfairly against the United States… . We merely propose to put it in the power of our administration to say to a foreign government, “You must either permit the products of the United States to enter your country upon reasonable terms, without unjust discriminations and without preferential duties, or you will pay, when you send your products to the United States, the higher rate of duty.”27
The reciprocity provision of the Dingley Act, as applied to Europe, did not seek special advantages for American producers, but the United States did not dismiss the option of pursuing such advantages in the future or in Latin America at that time. In the maximum-minimum provision of the Payne-Aldrich Act, however, the United States overturned its earlier conception of reciprocity and embraced the liberal principle of nondiscrimination in trade, to which it had given only sporadic support in the past.28 In arguing for the maximum-minimum provision, Representative Edgar Crumpacker (R.-Ind.), a member of the Ways and Means Committee, stated:
Our foreign commercial and industrial policy ought to be that of the open door. We only ask equal consideration at the hands of foreign countries, and that we should insist upon. I have little respect for reciprocity in its narrow sense—in the sense that it is a system of international dickers under which one line of products may secure special advantages in foreign markets in consideration of a grant of special advantages to a particular line of products in return… . The broad reciprocity of treating all competitors and all producers alike is the principle that this country ought to encourage as the permanent commercial policy of the civilized world.29
By accepting the open-door principle, the United States displayed its newly found confidence in its ability to compete in international markets. Because of its position as the most productive nation-state within the international economy, the United States no longer needed to rely on the special favors or unilateral advantages that reciprocity often yielded in order to expand exports abroad. In this second phase, the United States gradually recognized that all it needed to reign supreme in export competition was a “fair field and no favor.”30
President Taft signed the Payne-Aldrich Act into law on August 5, 1909, and immediately charged the State Department and Tariff Board with investigating tariff laws abroad and their effects upon American exports. He also commenced negotiations with foreign countries. In exchange for the application of the minimum schedule, Germany agreed to grant the United States its full minimum schedule. Portugal and Austria-Hungary made similar agreements. In return for the minimum schedule, France tripled the number of American products receiving its minimum tariff. Altogether, the United States successfully negotiated twenty-three agreements. By April 1, 1910, President Taft was able to certify that the United States faced no “undue” discriminations from any country and that the goods of every country would receive the benefits of the minimum schedule.
The maximum-minimum schedules of the Payne-Aldrich Act were generally regarded as a success. By securing all of Germany’s minimum tariff and a great extension of American goods on France’s minimum schedule, the Taft administration breached the continental European tariff walls. Yet, as the case of France again demonstrates, Taft did not succeed in removing all discriminatory trade barriers abroad.
America’s ability to negotiate over foreign trade discriminations was limited by the continued strength of the protectionists at home. Whereas in the Dingley Act the protectionists directly thwarted the executive’s use of reciprocity to expand American exports by excluding sugar from section three and blocking the ratification of the section four treaties, in 1909 the ability of the president to negotiate abroad was indirectly limited by the still high duties in the Payne-Aldrich Act. Taft and others, despite the downward trend of the 1909 bill, felt that the revision barely met Republican pledges of tariff reform and that the use of the maximum tariff, thereby increasing the rate of protection by 25 percent, would engender considerable domestic dissatisfaction.31 As a result, Taft made clear his disinclination to use the full bargaining leverage created by the provision in his 1909 Annual Message to Congress. Seeking to quell the anxieties of opponents who feared further increases in the tariff through the maximum-minimum provision, Taft stated:
The discretion granted to the Executive by the terms “unduly discriminatory” is wide. In order that the maximum duty shall be charged against the imports from a country, it is necessary that he shall find on the part of that country not only discriminations in its laws or the practice under them against… the United States, but that the discriminations found shall be undue; that is, without good and fair reason. I conceive that this power was reposed in the President with the hope that the maximum duties might never be applied in any case.32
Signaling the domestic constraints on his administration, Taft undermined his ability to negotiate effectively with other countries. Nevertheless, the Payne-Aldrich Act achieved greater success in dismantling discriminatory European trade restrictions than its immediate predecessor.
The Domestic Policy Process
McKinley, Reciprocity, and the Dingley Tariff
The principal debate over American trade strategy in 1897 and the years immediately following was not between Republicans and Democrats. The former controlled both houses of Congress and the presidency. Rather, it was between the president, who was more concerned with the changing interests of the United States within the international economic structure, and the Senate conservatives, who primarily emphasized party unity and constituent support—backing the president’s program only so far as it promoted this goal.
Between 1890, when he chaired the House Ways and Means Committee, and 1897, when he accepted the presidency, McKinley was transformed from an ardent protectionist who questioned the need for foreign markets into the nation’s strongest advocate of export expansion and reciprocity. Although reciprocity was one of the few popular provisions of the 1890 tariff, this conversion does not appear to have occurred simply for reasons of political expediency; the Senate conservatives with whom the president had been closely associated did not undergo a similar evolution in their thought, and McKinley now spoke so strongly on the issue that it is hard to question his sincerity. Rather, the president’s new position on export expansion appears to have resulted from two considerations. First, the greater international power and prestige enjoyed by the United States—especially after the Spanish-American War—encouraged McKinley and others to take a more active role in foreign affairs. Second, McKinley’s new position as president and leader of the foreign policy executive opened him to different institutional interests and constraints than he had confronted as a representative from Ohio.33
Like Cleveland and Blaine, McKinley became the spokesman for America’s national trade interest. Having made his congressional reputation as an expert on the tariff, McKinley was closely associated with the success or failure of this policy and deeply knowledgeable about its inner workings and details. McKinley’s role in foreign affairs was enhanced by the weakness and ill health of his secretary of state, John Sherman, a former Republican senator from Ohio who was appointed to the cabinet only to create a place in the Senate for Marcus Hanna, the president’s political associate and friend.34 Although Sherman had chaired the Senate Foreign Relations Committee for many years, personal rancor over the ensuing appointment scandal and a failing memory rendered him an ineffective secretary of state who played at best a marginal role in the administration.
McKinley cajoled legislators, consulted informally with key members of the legislature, kept abreast of developments within Congress, and intimated to the press that he did not favor any radical increase over the Wilson-Gorman rates. Yet he did not become directly involved in the congressional debates over the tariff as had his two predecessors. Rather, McKinley adopted a relatively low political profile while the tariff bill was under discussion.35 The president’s reticence may have derived from his confidence in congressional tariff-making procedures, which he had so recently led, or memories of irritation at Blaine’s attempts to influence the 1890 act.
McKinley was also confident he could rewrite the bill once it was passed by Congress. Assured that reciprocity would be adopted in the final bill, McKinley intended to use this provision to lower duties and reshape the final measure to his liking.36 Accordingly, once the bill was passed, McKinley took a more active role in formulating trade strategy. He appointed Kasson, a respected diplomat, as special reciprocity commissioner and encouraged him vigorously to pursue the new legislative provisions contained in sections three and four. Once the section four treaties were negotiated, McKinley submitted them to Congress with his strong support.
The treaties, however, languished in committee under the opposition of Senate conservatives, and particularly Aldrich, who controlled the powerful Finance Committee. For Aldrich, and other conservative legislators reciprocity was merely a political expedient to be used in the larger pursuit of party harmony and constituent politics. In the making of both the 1890 and 1897 tariff bills, the Senate leadership was threatened by defections from western “Silver” Republicans, whose votes were needed to pass any bill. Aldrich appears to have thrown his support behind Blaine’s reciprocity proposal in 1890 not because he was persuaded by the arguments but as a means of satisfying western interests, which were strongly in favor of reciprocity as a means of expanding the region’s agricultural exports. Aldrich used reciprocity in a similar but more complex manner in 1897. As a means of keeping potentially renegade western Republicans securely within the party fold, the 1896 Republican platform had declared in favor of bimetalism, and McKinley had promised to begin negotiations with the European powers, of which Great Britain was the most important, over international monetary reform. Soon after the election and in a move welcomed by conservative Republicans, France offered to exchange its support on bimetalism for favorable treatment in the forthcoming tariff deliberations. When France noted that it was far from satisfied with the House version of the Dingley bill, Aldrich responded with significantly lower duties in the draft bill submitted by the Senate Finance Committee. After losing control of the bill on the floor of the upper chamber, partly to the Silver Republicans, who preferred “free coinage” to any agreement on bi-metalism, Aldrich and his allies moved to reciprocity as embodied in section four as a means of mollifying France. Even with French support, which was by now only halfhearted, the United States was unable to persuade Great Britain on bimetalism, and negotiations were terminated. Soon after the passage of the Dingley Act, the Senate conservatives’ most important motivation for supporting reciprocity had evaporated.37
Although Aldrich continued to voice his support for the concept of reciprocity, he declared his firm opposition to all of the section four treaties, and particulary the treaty with France, stating that the so-called “Kasson treaties” were “jug-handled affairs in which very little was obtained by the United States for what was given away.”38 Several reasons have been advanced for the opposition of Aldrich and others to the treaties. After the failure of the bimetalism negotiations, Aldrich and his allies broke with the Silver Republicans and may have withdrawn their support on issues such as reciprocity, which were of concern to the westerners. Many in the United States, including Aldrich and the conservatives, were disillusioned with France because of its only modest support on bimetalism and its actions during the Spanish-American War. Most important, legislators were under strong pressure to oppose the treaties from societal groups whose interests would be damaged by one or more of the proposed agreements. Although a majority of producer groups favored reciprocity, the wool, tobacco, and sugar growers feared competition from the Caribbean island colonies covered by the treaties. In addition, many New England textile manufacturers feared competition from France, and the boot and shoe manufacturers were disappointed that their goods were excluded from the treaty. With the latter two groups making up Aldrich’s base of support in Rhode Island, the negatively affected manufacturers and agricultural interests were able to form an effective veto group over the treaties.39
Congressional opposition to the section four treaties directly threatened McKinley’s “greatest ambition,” which according to Margaret Leech, was to “round out his career by gaining American supremacy in world markets” and develop “commerce as an agency of international accord.”40 Following Blaine’s example of 1890, McKinley launched a nationwide speaking tour designed to break the treaties out of committee by building public awareness of America’s growing need for export markets and public support for reciprocity. The tour and McKinley’s speeches culminated at the Pan-American Exposition in Buffalo. McKinley’s final speech is worth quoting at length because it demonstrates the evolution in his thought since 1890, his awareness of the changed interests of the United States within the international economy, and his attempt to rally public opinion behind reciprocity.
Our industrial enterprises which have grown to such great proportions affect the homes and occupations of the people and welfare of the country. Our capacity to produce has developed so enormously and our products have so multiplied that the problem of more markets requires our urgent and immediate attention… .
A system which provides a mutual exchange of commodities is manifestly essential to the continued healthful growth of our export trade. We must not repose in fancied security that we can forever sell everything and buy little or nothing. If such a thing were possible, it would not be best for us or for those with whom we deal. We should take from our customers such of their products as we can use without harm to our industries and labor. Reciprocity is the natural outgrowth of our wonderful industrial development under the domestic policy now firmly established. What we produce beyond our domestic consumption must have a vent abroad. The excess must be relieved through a foreign outlet and we should sell everywhere we can, and buy wherever the buying will enlarge our sales and productions, and thereby make a greater demand for home labor.
The period of exclusiveness is past. The expansion of our trade and commerce is the pressing problem. Commercial wars are unprofitable. A policy of good will and friendly trade relations will prevent reprisals. Reciprocity treaties are in harmony with the spirit of the times; measures of retaliation are not. If, perchance, some of our tariffs are no longer needed, for revenue or to encourage and protect our industries at home, why should they not be employed to extend and promote our markets abroad?41
This was, however, McKinley’s last public speech. How effective it would have been in dislodging the treaties from committee is unclear; as the president’s second term began in 1901, the Senate conservatives clearly appeared on the defensive. Yet the course of American politics immediately underwent an important and unexpected shift. McKinley was shot the day after his reciprocity speech and died one week later, leaving the government in the hands of Theodore Roosevelt.
Despite his election as vice-president, Roosevelt was an “outsider” without a strong base of support in the national Republican party. An early free trader, Roosevelt had modified his heretical views on the tariff while governor of New York so as to gain wider acceptance within the Republican organization.42 Nonetheless, his views remained suspect. Already troubled by McKinley’s efforts in favor of reciprocity at Buffalo, the Senate conservatives were deeply worried that Roosevelt would hold true to his public promise to carry out his predecessor’s policies. Recognizing his need for congressional supporters, however, Roosevelt quickly approached Aldrich and his senatorial allies. Within a few weeks, a “Gentlemen’s Agreement” was made between the new president and the elder party statesmen, Aldrich, Allison, John Spooner of Wisconsin, and O. H. Platt of Connecticut, trading political support for the quiet death of reciprocity. In his first Annual Message to Congress, Roosevelt accordingly brought the pending reciprocity treaties to the legislature’s attention but did not ask for their passage. Despite the efforts of Secretary of State John Hay encouraging the president to support the treaties strongly, Roosevelt refused to raise the issue of the tariff—preferring to bequeath this question to his successor.
The success of McKinley’s strategy for export expansion was clearly hampered by the need for subsequent approval of the section four reciprocity agreements by Congress, where a small but powerful minority could block the program. McKinley may have erred by not pushing harder for greater bargaining leverage in section three and executive discretion in section four while the Dingley bill was still being written by Congress. Yet, as H. Wayne Morgan writes on this point, “Had McKinley pressured for more, he would likely have ended with less, for the majority of Congress were far behind him on reciprocity.”43
Roosevelt, Taft, and the Payne-Aldrich Act
The 1909 Tariff Act was passed in the absence of real executive leadership. Taft was reluctant to pursue and assume the presidency and, indeed, somewhat repulsed by the bargaining at the center of American politics. Naturally inclined to avoid conflict, Taft was a timid and politically inept president. He knew neither how to mobilize public opinion nor to manage relations with Congress, although when passionately driven he managed to do both passably well.44 But under normal conditions, Taft had a special knack for doing good badly. As Woodrow Wilson, Taft’s successor, stated in November 1910, “If I were to sum up all the criticisms that have been made of the gentleman who is now President of the United States, I could express them all in this: The American people are disappointed because he has not led them… . They clearly long for someone to put the pressure of the opinion of all the people of the United States upon Congress.”45
Although it cannot be ruled out, there is little evidence that Taft or his secretary of state, Philander C. Knox, who is widely recognized as having “lacked qualities of statesmanship,”46 either understood or was sensitive to the constraints and opportunities of the international economic structure. The president was supportive of lower duties and the maximum-minimum schedules, but the trade strategy revealed in the Payne-Al-drich Act did not originate in his administration. Rather, Taft’s trade strategy was set by Roosevelt and most forcefully advocated by members of the former president’s inner circle. Although Roosevelt himself refused to act on the tariff issue, he constructed the framework that would guide his less energetic successor.
After the turn of the century, the momentum behind tariff reform gradually increased because of pressure from the larger internationally oriented firms, some of which were already beginning to invest abroad, and exporters, who were generally unhappy with the high Dingley rates and the failure of the section four reciprocity treaties. Roosevelt equivocated on the tariff, suggesting in 1903 that revision might be possible if he were reelected but only if there was “some reasonable hope of bringing the party up to that position.” Indeed, as expected given the position of the United States within the international economic structure and Britain’s continuing hegemony, no strong desire existed to lower the tariff, even among Roosevelt and his closest advisers. Writing to Senator Henry Cabot Lodge from Africa while the Payne-Aldrich bill was under consideration, Roosevelt cogently summarized his position on the tariff: “Of course you are bound to have dissatisfaction with any Tariff Bill simply because, as far as I can see, there is no real ground for dissatisfaction, of a serious kind, with the present tariff; so that what we have to meet is not an actual need, but a mental condition among our people who believe there ought to be a change.”47
Pandering to this “mental condition,” the 1908 Republican platform nonetheless declared in favor of tariff reform, and Taft—lacking a deep commitment to the issue but possessing a strong sense of obligation—set himself to the task. While the bill was being prepared for the special session of Congress, Taft was persuaded by Speaker Joseph Cannon not to intervene in the House and Senate proceedings until the measure reached the conference committee. Later criticized for his quiescence, Taft was supported in this course at the time by Payne, Aldrich, and Roosevelt. Paolo E. Coletta concludes that, although he consulted often with Cannon and Aldrich, like McKinley “Taft felt that the branches of government were coordinated and that he should not intrude upon the workings of the law-making department.” Though agreeing not to interfere directly, Taft was fully ready to use his constitutionally designated veto power if necessary. In an interview with Robert LaFollette (R.-Wisc.), leader of the Senate insurgents who opposed the Payne-Aldrich bill, Taft threatened, “You and your associates in the Senate go ahead, criticize the bill, amend it, cut down the duties—go after it hard. I will keep track of your amendments. I will read every word of the speeches you make, and when they lay that bill down before me, unless it complies with the platform, I will veto it.”48 Despite this strongly worded warning, few expected Taft to follow through on his threat and veto a completed bill. The logrolling proceeded as usual.
When the bill reached the conference committee, the congressional leadership—as promised—asked for Taft’s suggestions. Originally expecting to have considerable influence at this stage, Taft was surprised to find himself facing a conference committee which Cannon had packed with protectionists. Nonetheless, Taft forcefully demanded the limited changes he could effect—particularly lower duties on lumber and gloves. After considerable resistance, the conference committee eventually conceded. Taft declared victory and signed the bill. But the victory, however sweet, was truly small.
The Payne-Aldrich Act was ill-received in the nation at large; many voters believed that the Republicans had failed to carry through their campaign promises. Rather than following the examples of Harrison, Blaine, and Cleveland by speaking out on the bill before it was passed, Taft undertook a nationwide speaking tour soon after its completion to build public support for the measure. Demonstrating again his remarkable lack of tact and timing, Taft declared in Winona, Wisconsin, the heartland of the LaFollette-led insurgency, that “this [Payne-Aldrich Act] is the best tariff bill that the Republican party has ever passed.”49 In the uproar that followed this statement, Taft later recognized that the “comparative would have been a better description than the superlative.”50 Nonetheless, Taft continued to defend the bill and went down to defeat on this issue and others in 1912.
The maximum-minimum schedules of the Payne-Aldrich Tariff were a popular and important departure in American trade strategy. Although similar measures had been in use in Europe for over two decades, the precise origin of support for maximum-minimum schedules in the United States remains unknown. By the middle of the first decade of the twentieth century, however, two important and related sources of support clearly existed. The first group of supporters were the political and economic expansionists closely associated with President Roosevelt’s inner circle or “tennis cabinet.” Within this circle, Lodge—a member of the Senate Finance Committee in 1909—was strongly advocating maximum-minimum schedules to the president as early as June 1905.51 The second supporter was Elihu Root, then secretary of state and later—during the deliberations on the Payne-Aldrich bill—senator from New York. Upon completing a tour of South America in the fall of 1906, Root came out in support of maximum-minimum schedules in an address before the Trans-Mississippi Commercial Congress: “A single straight-out tariff was all very well in the world of single straight-out tariffs; but we have passed on, during the course of years, into a world for the most part of maximum and minimum tariffs, and with our single-rate tariff we are left with very little opportunity to reciprocate good treatment from other countries in their tariffs and very little opportunity to defend ourselves against bad treatment.”52
Although the vigor of Roosevelt’s support for the concept is unclear, the president was keenly aware that the momentum behind the maximum-minimum proposal came from within the executive branch. Writing to Lodge in August 1906, Roosevelt noted that Representative James Sherman (R.-N.Y.) objected to the maximum-minimum concept and that Cannon had been silent on the issue. As for the general population, Roosevelt wrote, “I do not believe that the voters as a whole know anything about the maximum and minimum. I do not think they have been educated up to it.”53
With support from Roosevelt and Root, the 1908 Republican National Convention, chaired by Lodge, included the proposal for maximum-minimum schedules in the call for tariff reform. As in the question of lower duties, Taft does not appear to have possessed strong views on the matter, but he supported the proposal as a continuation of the Roosevelt program to which he was pledged.
In the formulation of the Payne-Aldrich Tariff, the most important debate in Congress concerning the maximum-minimum schedules occurred not over the wisdom of the objectives behind the policy but over the most effective means of implementing it. The House version of the bill provided for a minimum schedule to be the general or common tariff and a maximum schedule, approximately 20 percent higher, to be levied against the goods of those countries found to discriminate against American exports. Concerned with diplomatic expediency and drawing upon his experience as secretary of state, Senator Root proposed the language finally adopted by the conference committee, which granted inducements for nondiscrimination rather than penalties for discrimination.
In the formulation of American trade strategy as revealed in the Payne-Aldrich Act, Taft and even more so Secretary of State Knox were “bit players” carrying through proposals decided upon in the Roosevelt administration. Had Taft exerted greater leverage over Congress early in the Payne-Aldrich debates, perhaps through the shrewd use of patronage, the tariff might have been lower. Still free riding on Great Britain and expecting bilateral negotiations to succeed, however, no one—Roosevelt and Root included—perceived a strong need to lower America’s high tariff barriers at this time.
Britain’s declining hegemony and America’s new position as the most productive nation-state within the international economic structure were more evident in the maximum-minimum proposal, in which American leaders attempted to fashion a more effective instrument to scale the tariff walls of Europe. Although Taft did not play a major role in passing this legislation, the momentum behind the policy was clearly but not exclusively focused within the foreign policy executive of the Roosevelt administration.
American trade strategy between 1897 and 1912 offers mixed support for interest-group and political-party explanations. Between 1889, one year before the McKinley Act, and 1899, two years after the Dingley Act, the proportion of American manufacturers either moderately or highly dependent upon exports more than doubled, expanding from 28.1 to 57.6 percent of all industry by value (see Table 2.1). Yet the average rates of duty in 1890 and 1897 were essentially the same, and the second bill may actually have been higher.
The internationalization of American industry continued over the first decade of the twentieth century, with the proportion of moderate and highly export-dependent manufacturers increasing to 63.6 percent of American industry in 1909. Although this evolution is in the correct direction to explain the greater liberalness of the Payne-Aldrich Act, such a slow and marginal shift seems insufficient to explain the differences between the 1897 and 1909 tariffs. Recognizing that nearly two-thirds of American industry was exporting at least some of its production, however, does explain why Taft was constrained from threatening to impose even higher duties upon imports in the maximum-minimum schedules.
To the extent that the McKinley, Dingley, and Payne-Aldrich acts all share a commitment to high protection, their Republican sponsorship appears important. Yet differences do exist between these acts, particularly regarding the varying provisions on export expansion and the comparative liberalness of the Payne-Aldrich Tariff, which cannot be explained by appeals to their common lineage. Most political-party explanations recognize, of course, that party platforms are written to reflect changing political environments, but nearly all treat this environment in an ad hoc manner, ultimately begging the question and rendering the explanation unsatisfactory.
Despite the shift in instruments from reciprocity to maximum-minimum schedules, American trade strategy in this second phase reflected a single underlying purpose: to preserve and expand exports, particularly to continental Europe, while causing the smallest disruption possible to the American system of protection. This amalgam of protection and export expansion bears an affinity to the first phase of American trade strategy discussed in Chapter 3. The passive, nonretaliatory trade strategy of Great Britain enabled the United States to continue its policy of domestic protection and export expansion first pursued between 1887 and 1897. Yet the more important constraint facing American trade strategists during this second phase was the expanding trade horizons of the United States coupled with the growing protectionism and discrimination of the continental European states. Seeking to ensure access for its exporters while taking advantage of Britain’s passivity, the United States responded to the Europeans through bilateral bargaining reinforced by the coercive power of high tariffs, using first reciprocity and later, as its confidence in its ability to compete internationally grew and the negotiating authority granted to the executive in the Dingley Act expired, maximum-minimum schedules. Rather than unilaterally lowering its own duties and adopting the unconditional MFN principle, the United States sought to use its high tariffs as a bilateral battering ram against the tariff walls of Europe. Adopted without regard for the stability and openness of the international economy as a whole, this strategy of high tariffs and bilateral bargaining was relatively successful in obtaining minimum tariff schedules in Germany and, to a lesser extent, France.
This strategy was made possible by the position of the United States as a single opportunist within an international economic structure of declining British hegemony and motivated by its own high and rapidly expanding relative labor productivity. The latter created the incentive to expand exports, and the former the opportunity to do so without significant alterations in the existing policy of protection.
The principal conflicts and debates over American trade strategy in this period occurred between Congress, which channeled manifest societal demands into the policy process, and the foreign policy executive. In 1897, McKinley, formerly an ardent protectionist, emerged as the most important advocate of reciprocity and export expansion. Although Taft’s role in the formulation of trade strategy and particularly the maximum-minimum schedules was less apparent and decisive, he nonetheless implemented a strategy developed primarily within Roosevelt’s foreign policy executive. In both cases, the executive championed policies designed to respond to the constraints and opportunities of the international economic structure but was hindered by legislative protectionism. Sugar was excluded from section three of the Dingley Act, and the section four treaties were never ratified by Congress. And the utility of the maximum-minimum schedules was limited by the still high duties of the Payne-Aldrich Act. Had McKinley and Taft demanded more in the legislative process, or had the former not been assassinated in 1901, the outcome might have been different. Yet, despite legislative constraints, in both instances the United States did succeed in at least partially breaching the tariff walls of Europe—its most important sys-temically derived objective.
1For a discussion of the early tariff reform movement in Great Britain, see Alan Sykes, Tariff Reform in British Politics, 1903–1913 (Oxford: Clarendon, 1979); and Hon. George Peel, The Tariff Reformers (London: Methuen, 1913). British policy is discussed in more detail in Chapter 5, below.
2U.S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States, Colonial Times to 1970 (Washington, D.C.: U.S. Government Printing Office, 1975), Ser. U317–334, pp. 903–4.
3For a discussion of the origins and effects of these Caprivi treaties see Percy Ashley, Modem Tariff History: Germany—United States—France (New York: Dutton, 1920), pp. 60-go; see also U.S. Tariff Commission, Reciprocity and Commercial Treaties (Washington, D.C.: U.S. Government Printing Office, 1919), p. 204.
4In the unconditional form of the MFN, principal concessions granted to one country are automatically extended to all other countries with MFN status. Under the conditional form, however, concessions are extended only when third countries grant equal or equivalent concessions to what the second country originally made to obtain the benefit. For a concise history and discussion of America’s nearly unique interpretation of the MFN principle, see Wallace McClure, “A New American Commercial Policy: As Evidenced by Section 317 of the Tariff Act of 1922,” Columbia Studies in History, Economics, and Public Law 114(1924): 118–30 and 160–87.
5Ashley, Modern Tariff History, pp. 331–46.
6See, for instance, the argument of Albert J. Hopkins (R.-Ill.), Congressional Record, 55th Cong., 1st sess., 1897, p. 136.
7Quoted in Charles S. Campbell, Jr., Special Business Interests and the Open Door Policy (Hamden, Conn.: Archon, 1968), p. 6.
8Ibid., p. 5.
9See, in particular, Albert J. Hopkins’s speech on reciprocity, Congressional Record, 55th Cong., 1st sess., 1897, p. 133.
10Tom E. Terrill, The Tariff, Politics and American Foreign Policy, 1874–1901 (Westport, Conn.: Greenwood, 1973), p. 200.
11Congressional Record, 55th Cong., 1st sess., 1897, p. 254.
13U.S. Tariff Commission, Reciprocity and Commercial Treaties, pp. 202–3.
14Congressional Record, 55th Cong., 1st sess., 1897, p. 2236–37.
15U.S. Tariff Commission, Reciprocity and Commercial Treaties, pp. 285–86, 215.
16Ibid., pp. 205–6.
17See Ashley, Modem Tariff History, pp. 85–90 and 109–16. By increasing the number of categories in the tariff, Germany introduced greater specialization into its schedules so as to enable reductions to be made on some articles without reducing others. Tariff reductions, as a result, could be limited to specific countries in many cases, thus maintaining the form of the unconditional MFN principle but undermining its intent.
18U.S. Tariff Commission, Reciprocity and Commercial Treaties, p. 224.
19Ibid., pp. 216–17.
20Quoted in ibid., p. 217. See also Edward Younger, John A. Kasson: Politics and Diplomacy from Lincoln to McKinley (Iowa City: State Historical Society of Iowa, 1955), pp. 364–79.
21U.S. Tariff Commission, Reciprocity and Commercial Treaties, pp. 209–14.
22Quoted in Asher Isaacs, International Trade, Tariff and Commercial Politics (Chicago: Irwin, 1948), pp. 212, 211.
23Frank W. Taussig, The Tariff History of the United States, 8th ed. (New York: Putnam, 1931), p. 363.
24James D. Richardson, comp., A Compilation of the Messages and Papers of the Presidents, 1o vols. (New York: Bureau of National Literature, 1911), 10: 7749.
25Minority Report, reprinted in Congressional Record, 61st Cong., 1st sess., 1909, pp. 60–61.
26See Aldrich, in Congressional Record, 61st Cong., 1st sess., 1909, p. 285.
27Ibid., p. 4090.
28Before 1890, American trade policy was largely consistent with the open door. It was not, however, an explicit goal of this policy and it was violated in the reciprocity treaties between the United States and Canada (1854) and Hawaii (1875). The first explicit endorsement of the open-door principle by the United States occurred at the Berlin Conference on the Congo held in 1884. See Younger, Kasson, p. 332; and Charles S. Campbell, The Transformation of American Foreign Relations, 1865–1900 (New York: Harper & Row, 1976).
29Congressional Record, 61st Cong., 1st sess., 1909, p. 285.
30The one exception to this trend was Taft’s effort to obtain a reciprocity treaty with Canada. This was one of the central goals of the second half of his administration. An agreement was reached with Canada in January 1911. Significant concessions were made on both sides. After considerable effort, it was approved by the Senate on July 26, 1911, only to be rejected by Canada because of several indiscreet comments by Americans who believed the treaty was the first step toward annexing their northern neighbor. After expending his limited political capital, Taft was then undermined from abroad. See U.S. Tariff Commission, Reciprocity and Commercial Treaties, pp. 368–81; and U.S. Tariff Commission, Reciprocity with Canada: A Study of the Arrangement of 1911 (Washington, D.C.: U.S. Government Printing Office, 1920).
31Taussig, Tariff History, p. 405.
32Richardson, comp., Messages and Papers, 10: 7806.
33Margaret Leech, In The Days of McKinley (New York: Harper, 1959), pp. 141–42.
34Ibid., p. 99.
35On McKinley’s role in the passage of the Dingley bill, see Lewis L. Gould, The Presidency of William McKinley (Lawrence: Regents Press of Kansas, 1980), pp. 43–44.
37On the link between silver, France, and the Dingley Act see H. Wayne Morgan, William McKinley and His America (Syracuse: Syracuse University Press, 1963), pp. 278–79; and Gould, Presidency of McKinley, pp. 40–41.
38Nathaniel W. Stephenson, Nelson W. Aldrich: A Leader in American Politics (New York: Charles Scribner’s Sons, 1930), p. 178.
39On the politics of reciprocity, see Younger, Kasson, pp. 364–79; and U.S. Tariff Commission, Reciprocity and Commercial Treaties.
40Leech, In the Days of McKinley, pp. 141–42.
41“President McKinley’s Last Public Utterance to the People, Buffalo, New York, September 5, 1901,” in Richardson, comp., Messages and Papers, 9: 6620–21.
42See Richard Cleveland Baker, The Tariff under Roosevelt and Taft (Hastings, Neb.: Democrat Printing, 1941), pp. 12–76; and James Ford Rhodes, The McKinley and Roosevelt Administrations, 1897–1909 (New York: Macmillan, 1922), p. 220.
43Morgan, McKinley, p. 280.
44For Taft as a person and president, see Judith Icke Anderson, William Howard Taft: An Intimate History (New York: Norton, 1981), pp. 21–36. Taft’s more passionate approach to policy was demonstrated by his role in the passage of the Philippine Schedule of the Dingley Act and the Canadian reciprocity agreement.
45Paolo E. Coletta, The Presidency of William Howard Taft (Lawrence: University Press of Kansas, 1973), p. 56.
46Ibid., p. 183.
47Selections from the Correspondence of Theodore Roosevelt and Henry Cabot Lodge, 2 vols. (New York: Charles Scribner’s Sons, 1925), 2:7, 335.
48Coletta, Presidency of Taft, pp. 61, 63.
49Ibid., p. 73.
50Donald F. Anderson, William Howard Taft: A Conservative’s Conception of the Presidency (Ithaca: Cornell University Press, 1973), p. 208.
51Correspondence of Roosevelt and Lodge, 2:129.
52Philip C. Jessop, Elihu Root, 2 vols. (New York: Dodd, Mead, 1938), 2:215.
53Correspondence of Roosevelt and Lodge, 2:227.