RTAA`s innovative approach freed Roosevelt and Congress from breaking 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 a simple majority, unlike the two-thirds majority needed for other contracts. In addition, the President had the power to negotiate the terms. The three innovations in trade policy have created the political will and feasibility of a more liberal trade policy. [3] 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. It is generally attributed that it sounded the era of liberal trade policy that continued during the 20th century. [2] As more and more U.S. industries began to benefit from tariff reductions, some of them began to campaign with Congress for lower tariffs.
Until RTAA, Congress had been mainly pressured by industries that wanted to create or increase tariffs to protect their industry. This change has also helped to maintain many of the benefits of trade liberalization. In short, the political incentive to increase tariffs has diminished and the political incentive to reduce tariffs has increased. [3] The Reciprocal Tariff Act (which came into force on June 12, 1934, Chapter 474, 48 Stat. 943, 19 U.S.C No. 1351) provided for the negotiation of customs agreements between the United States and various nations, including Latin American countries. [1] The law served as an institutional reform to allow the president to negotiate with foreign nations a reduction in tariffs in exchange for a reciprocal reduction in U.S. tariffs. This has led to a reduction in tariffs.
Due to the Great Depression, tariffs reached historic heights. Members of Congress have generally entered into informal quid-pro-quo agreements, in which they voted in favour of other members` preferential tariffs in order to gain the support of their members. No one took into account the overall toll for U.S. consumers or exporters. This practice is commonly referred to as logrolling. Roosevelt and key members of his government made sure to put an end to the practice. [19] The RTAA, which was temporarily updated until 1961, is a multilateral trade negotiation at GATT[16] and negotiations with new Member States. [17] From there, during the rounds and negotiations on the free trade area at the GATT (later the WTO), the President was granted the negotiating powers of non-tariff measures in the respective legislation, such as the Trade Act of 1974, but the power to reduce tariffs was generally similar to that of the RTAA. The U.S. State Department also found good use of free trade expansion after World War II.
Many in the Department of Foreign Affairs saw multilateral trade agreements as a means of integrating the world in accordance with the Marshall Plan and the Monroe Doctrine. U.S. trade policy has become an integral part of U.S. foreign policy. This search for free trade as diplomacy intensified during the Cold War, when the United States competed with the Soviet Union for relations around the world. [20] Reciprocity was an important principle of trade agreements negotiated under the RTAA, as it encouraged Congress to reduce tariffs.