RECIPROCAL TRADE AGREEMENTS

Spurred by the wave of isolationism and protectionism that swept America in the aftermath of World War I, the United States initiated a series of tariffs in the 1920s that by the end of the decade had brought U.S. import duties to their highest point in American history. The great symbol of this movement towards ever increasing protectionism was the Hawley-Smoot tariff, which was passed in 1930 over the objections of many economists who argued at the time that higher U.S. tariffs would do nothing to alleviate the crisis of the Great Depression, but would in fact impede progress toward a general economic recovery. One individual who spoke out vociferously against high tariff policies was Cordell Hull, who both as a congressman and a senator had consistently opposed the high tariff rates imposed by the Republican congresses during these years.

Given this record, it would come as no surprise that one of Hull's highest priorities after his appointment as U.S. secretary of state in 1933 was to embark upon a program of trade liberalization. In principle, Roosevelt shared Hull's belief in internationalism, and almost immediately after assuming office, Hull instructed his advisors to draw up legislation aimed at granting the president the authority to negotiate trade agreements. It was Hull's hope that this legislation would be passed in time for him to use it as a bargaining chip at the 1933 London Economic Conference, where he intended to negotiate a multilateral reduction in tariff rates. But there were others within the Roosevelt administration who rejected Hull's ideas, including such influential New Dealers as Raymond Moley and George Peek, both of whom argued strongly in favor of protectionism and the need to raise domestic price levels prior to the initiation of any effort to lower trade barriers. Much to Hull's disappointment, Roosevelt came down on the side of the protectionists in the early months of the New Deal and refused to allow Hull to submit his legislation to Congress. This in turn negated any possibility that the secretary would be able to negotiate multilateral tariff reductions at the London Conference, and Hull returned from England in the summer of 1933 a deeply frustrated man.

Convinced by his bitter experience in London that a multilateral approach to freer trade was no longer feasible, Hull now sought legislation that would establish a system of bilateral agreements through which the United States would seek reciprocal reductions in the duties imposed on specific commodities with other interested governments. These reductions would then be generalized by the application of the most-favored-nation principle, with the result that the reduction accorded to a commodity from one country would then be accorded to the same commodity when imported from other countries.

Hull called his new legislation the Reciprocal Trade Agreements Act. Well aware of the lingering resistance to tariff reduction that remained in Congress, Hull insisted that the power to make these agreements must rest with the president alone, without the necessity of submitting them to the Senate for approval. The amount of reduction authorized was based on the 1930 Hawley-Smoot tariff. Under the act, the president would be granted the power to decrease or increase existing rates by as much as 50 percent in return for reciprocal trade concessions granted by the other country.

By the spring of 1934, Roosevelt was more inclined to look with favor on trade liberalization and on March 2 the president announced his support for Hull's legislation. In urging its passage Roosevelt stressed that the powers it granted the executive were necessary because other countries (most notably Great Britain) were using reciprocal agreements to expand their trade at the expense of the United States. To back up his claim, Roosevelt cited the tremendous drop in U.S. exports, which in 1932 alone had fallen to a mere 52 percent of the 1929 volume. Roosevelt also indicated that he regarded the legislation as part of his emergency economic program particularly because a "full and permanent domestic recovery" would not be possible without the revival of international trade.

After the addition of two amendments, the first of which called for hearings of interested parties before a trade agreement could be negotiated, and a second that limited the term of the legislation to three years, the Reciprocal Trade Agreements Act was signed into law on June 12, 1934. Following the passage of the act (and a brief bureaucratic struggle in which George Peek lost out to Hull over who would take the lead on trade policy within the administration), Roosevelt and Hull established the needed governmental apparatus to run the program, including the Committee for Reciprocity Information, which would hear the public representations required by the Senate amendment, and the Committee on Trade Agreements, which was formed to administer the act. Representatives from the departments of State, Commerce, and Agriculture, as well as representatives from the National Recovery Administration, the Tariff Commission, and the newly created Office of the Special Advisor on Foreign Trade, were included on both these committees. Assistant Secretary of State Francis Sayre became head of the Committee on Trade Agreements, while at Hull's urging, Roosevelt appointed Henry Grady as the secretary's special advisor on trade. Following the establishment of the machinery to run the program, the Committee on Trade Agreements soon began to survey the foreign trade field to determine which countries offered the best prospects for negotiations. Under its aegis, a number of country subcommittees were formed to study the trade patterns with a specific nation to ascertain which exports or imports might receive lower duties and the effects that such reductions might have in the domestic market.

Under Hull's guidance, the United States managed to negotiate twenty-two reciprocal trade agreements by the end of 1940. Included in these were agreements with Cuba, Brazil, Belgium, Sweden, Columbia, Canada, the Netherlands, France, Costa Rica, and the United Kingdom. Of these, the two most consequential were the agreements with Canada, signed in 1936, and the United Kingdom, signed in 1938. The latter two were important not only because of the significant volume of trade involved, but also because they were regarded as indicative of growing solidarity among the Atlantic powers in the troubled years leading up to World War II. Hull, like many of his contemporaries, regarded economic nationalism as one of the root causes of war and remained convinced that one way to reduce the likelihood of conflict was to reduce trade barriers. Unfortunately, Hull's efforts at liberalizing world trade had little impact on the dictators, but his belief in the necessity for freer trade gained credence during the war with the result that the United States emerged from the conflict firmly committed to an internationalist foreign economic policy.

RECIPROCAL TRADE AGREEMENTS

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