Today marks the 80th anniversary of the Reciprocal Trade Agreements Act (RTAA), a new approach to trade policy adopted by the New Deal Congress and signed into law by President Franklin D. Roosevelt. The RTAA was the first time Congress and a president had worked together to enact trade bargaining power to pass new trade agreements that would boost exports and support new job creation. Through the RTAA, Congress established the framework for international trade negotiations and authorized the president to exercise U.S. leadership in the international trading system. Although Congress gave the State Department primary responsibility for negotiating with other nations, it tasked the Committee on Collective Bargaining and other government agencies with participating in the development of a list of concessions that could be made to or demanded of foreign countries in return. Any trade deal should include the principle of “unconditional most-favoured-nation treatment” and allow import tariffs to be reduced by up to 50% of the Smoot-Hawley level. Under the leadership of the United States and the United Kingdom, international cooperation flourished and concrete institutions were created. During the talks that began at the Bretton Woods Conference in 1944, the International Monetary Fund was established. In 1949, the first international trade body, the General Agreement on Tariffs and Trade (GATT), was established. In 1994, GATT was replaced by the World Trade Organization (WTO), which continues to monitor international trade agreements. [20] [21] From 23 member countries initially, the GATT has grown to 128 countries, representing about four-fifths of total world trade. In eight extended negotiating sessions or rounds, GATT member states further reduced tariffs, established anti-dumping rules and contributed to a recovery in international trade.
When President Franklin Delano Roosevelt took office in March 1933, he immediately became interested in the domestic economic situation created by the Great Depression. Convinced that the recovery would come from measures at home rather than abroad, he assured Congress of the adoption of a series of radical domestic economic reforms that would be known as the First New Deal. His doubts about the ability of foreign economic policy to contribute to domestic recovery were reflected in his approach to the London Economic Conference. In June 1933, representatives of 66 countries met in London to try to find a way out of the depression through cooperation in areas such as the removal of trade barriers and the stabilization of exchange rates. Countries that remained on the gold standard, such as France, tried to convince countries that had left the gold standard, especially the United Kingdom (in September 1931) and the United States (in April 1933), to stabilize the nominal values of their currencies. The chances of success were already slim when Roosevelt on July 3 dismissed such an agreement as a “purely artificial and temporary experiment,” claiming that a “healthy internal economic situation” was more important to a country`s prosperity than the external value of its currency. The conference ended less than a month later with little to show for their efforts. The first reason for the RTAA was to help America emerge from the Great Depression, which had drastically reduced the volume of international trade.
In its message to Congress advocating for the bill, FDR pointed out that “the nation`s exports in 1933 represented only 52% of the volume of 1929 and 32% of the value of 1929” [3]. Regarding the impact of the RTAA, the Office of the U.S. Trade Representative argues that “increased international trade stimulated the growth-boosting aspects of the National Programs of the New Deal, and the successful adoption of the RTAA led to the conclusion of 19 new trade agreements between 1934 and 1939, strong growth in U.S. exports, and the recovery of the U.S. economy” [9]. This optimistic view was challenged by at least one researcher who concluded that while the RTAA brought some benefits, other policies and business behaviors limited its effectiveness at the time [8]. Between 1934 and 1947, the United States concluded separate trade agreements with twenty-nine other countries. The Customs Commission noted that when it used tariff-based imports as a basis for comparison in 1939, U.S. tariffs were reduced from an average of 48% to an average of 25% over the thirteen-year period. Approval of the RtAA was granted for three years from the date of entry into force (12 June 1934) of the RTAA. [5] The authorization was extended until 1937 [6], 1940 [7], 1943 [8], 1945 [9]. President Franklin D.
Roosevelt signed the Reciprocal Trade Agreements Act (RTAA) in 1934. It gave the president the power to negotiate bilateral and reciprocal trade agreements with other countries and allowed Roosevelt to liberalize U.S. trade policy around the world. He is widely credited with ushering in the era of liberal trade policy that lasted throughout the 20th century. [2] The second major foreign trade policy initiative of 1934 was the Reciprocal Trade Agreements Act (RRPA). In March 1934, Roosevelt proclaimed “that a full and sustainable domestic recovery depends in part on reviving and strengthening international trade,” and asked Congress for the power to negotiate trade agreements with other countries on the basis of reciprocal tariff reductions. The RTAA was enacted on June 12, 1934 and represented a fundamental change in U.S. trade policy.
The Constitution gives Congress the right to regulate foreign trade and set tariffs. Under the RTAA, Congress granted the president the right — temporarily, subject to a three-year extension — to reduce or increase U.S. tariffs up to 50 percent of the 1930 Smoot-Hawley tariff level in exchange for tariff concessions from other countries. Such tariff reductions would come into effect through executive agreements and not through treaties requiring Senate approval. The US tariff reductions negotiated under the RTAA would also be extended to all third countries to which the US has granted most-favoured-nation status. Democrats voted for trade liberalization much more often than Republicans, but were not uniform in their preferences. Democrats skeptical of lowering tariffs during the Depression included Rep. Henry Rainey (D-IL) and members of Roosevelt`s own administration: Rexford Tugwell, Raymond Moley, and Adolf Berle. .