About Reciprocal Trade Agreement

The RTAA, updated intermittently until 1961, is a multilateral trade negotiation in GATT[16] and negotiations with new Member States. [17] Between 1934 and 1945, the United States signed 32 reciprocal trade agreements with 27 countries. [4] In addition, the conclusion of the General Agreement on Tariffs and Trade was carried out by the Authority under the LCRT. Reciprocity was an important principle of trade agreements negotiated under the RTAA, as it prompted Congress to lower tariffs. As more and more foreign countries signed bilateral tariff reduction agreements with the United States, exporters were more incentivized to influence Congress for even lower tariffs in many industries. [3] As U.S. tariffs fell dramatically, global markets were also increasingly liberalized. World trade has grown rapidly. The RTAA was a U.S. law, but provided the first widely used system of guidelines for bilateral trade agreements. The United States and European nations began to avoid a “man for himself” policy that pursued domestic trade goals at the expense of other nations. Instead, countries began to realize the benefits of trade cooperation. Due to the Great Depression, tariffs reached all-time highs.

Members of Congress often entered into informal counterpart agreements in which they voted for other members` preferential rates in order to gain support for their own. No one has considered the overall burden on U.S. consumers or exporters. This practice is commonly referred to as logrolling. Roosevelt and key members of his administration were determined to put an end to this practice. [19] An additional benefit of reducing Congress` trade policy review was to create a level playing field for U.S. companies to participate in foreign trade and competition. An article in several newspapers at the time took the idealistic view: “The tariffs of the past 50 years were enacted primarily as a concession of special privileges to selected and privileged industries, especially to industries that provide campaign funds and political support to the individuals and parties that promulgate them.

The customs law, which is now coming into force, was promulgated not to earn money for the beneficiaries, but to balance the economy” [7]. Still, it is likely that the RTAA was not free from corporate lobbying, producing winners and losers, as trade policy always does. The RTAA was regularly renewed by Congress until it was replaced in 1962 by the Trade Expansion Act, which President John F. Kennedy sought to give it more power to negotiate reciprocal trade agreements with the European Common Market. The Common Market was created in 1957 to remove all barriers to trade in six key Western European countries: France, West Germany, Italy, Belgium, the Netherlands and Luxembourg. Their economic strength, growing pressure on America`s balance of payments, and the threat of a communist aid and trade offensive prompted Congress to pass the Trade Expansion Act. or flat rate, basis for all products, in exchange for similar discounts by other countries. To solve the tariff problems caused by the European Common Market, the president was allowed to reduce tariffs on industrial products by more than 50% or eliminate them altogether if the United States and the Common Market together accounted for 80% or more of the value of world exports. During World War II, the State Department and other government agencies worked on plans to rebuild global trade and payments. They discovered significant gaps in the trade agreement agenda and concluded that they could make better progress through simultaneous multilateral negotiations. After the war, President Harry S.

Truman`s RTAA allows the United States to join twenty-three different countries that have conducted bilateral tariff negotiations on a product basis, with each country negotiating its concessions for each imported product with the main supplier of that product. The various bilateral bases were combined in the General Agreement on Tariffs and Trade (GATT) signed in Geneva on 30 October 1947. Democrats voted for trade liberalization much more often than Republicans, but were not uniform in their preferences. Democrats skeptical of tariff reductions during the Depression included Rep. Henry Rainey (D-IL) and members of Roosevelt`s own administration: Rexford Tugwell, Raymond Moley, and Adolf Berle. However, the administration decided to use a Democratic-controlled Congress and presidency to push through the RTAA. In 1936 and 1940, the Republican Party ran on a platform to repeal the tariff reductions obtained under the RTAA. However, when they took over Congress in 1946, they did not act to lift tariffs.

In the years following the adoption of the RTAA in 1934, the economies of Europe and East Asia had been decimated by the violence of World War II, leaving behind a huge global production vacuum filled by American exporters. [2] During the war, the United States had its highest positive account balance in its history. Republican preferences for tariffs began to change as exporters in their home districts began to benefit from increased international trade. In the 1950s, there was no statistically significant difference between Republicans and Democrats in tariff policy, a change that has existed ever since. [3] The RTAA`s innovative approach freed Roosevelt and Congress to break this trend of tariff increases. It has linked U.S. tariff reductions to reciprocal tariff reductions with international partners. It also allowed Congress to approve tariffs by simple majority, as opposed to the two-thirds majority required for other treaties.

In addition, the President had the power to negotiate the terms. The three trade policy innovations have created the political will and feasibility of a more liberal trade policy. [3] 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]. As more and more U.S. industries began to benefit from tariff cuts, some of them began to influence Congress for lower tariffs. .