President Franklin D. Roosevelt proposed the Reciprocal Trade Agreements Act of 1934 as part of the New Deal policy to combat the Great Depression. The legislation was designed to stimulate foreign trade by authorizing the president to increase or decrease existing tariff rates up to 50 percent for nations that would reciprocate with similar terms for American products.
The Reciprocal Trade Agreements Act superseded the Hawley-Smoot Tariee Act of 1930, which had sharply raised tariff rates in the United States between 1930 and 1932. While the Hawley-Smoot act was in effect, some two dozen trading partners retaliated by increasing their tariffs, contributing to a precipitous reduction in U. S. exports. Though FDR criticized the Hawley-Smoot act in the 1932 presidential campaign, he said that international trade relations were secondary to the establishment of a solvent domestic economy. FDR’s emphasis on the domestic economy was reflected as well by his “bombshell message” that wrecked the London Economic Conference of 1933 by declaring that the United States would not participate in currency exchange rate stabilization. FDR also prevented Secretary of State Cordell Hull from submitting a reciprocal tariff agreements proposal to Congress. However, as the Great Depression wore on, FDR and his administration looked increasingly to international trade as a means of alleviating the economic problems in the United States.
Hull, an advocate of free trade, favored the idea of reciprocity in which the president would have the power to negotiate agreements with other nations to reduce tariffs without the interference of Congress. Support of Hull’s position by Secretary of Agriculture Henry A. Wallace and by Henry L. Stimson, secretary of state during the Hoover presidency, helped lead FDR to ask Congress for such power in March 1934. Republican congressmen and business interests opposed the bill, and were especially hostile to the most favored nation clause, which stated that the United States would negotiate tariffs with another nation at rates equal to those applied to any other nation with whom it traded. Opponents thought that the United States should not make any concessions unless certain privileges were received in return. Ultimately, the bill was passed in June despite these objections.
As a result of the Reciprocal Trade Agreements Act of 1934, Hull negotiated 18 reciprocity treaties in the next four years. The act, which remained in effect until amended in the Trade Expansion Act of 1962, helped prevent further drastic decline in the world economy, even though the most prominent and immediate economic effect was limited to Latin America. The long-term effects of lowering tariffs included expanded world trade in the post-WoRLD War II era and the General Agreement on Tariffs and Trade signed in 1947.
See also foreign policy.
Further reading: Robert Dallek, Franklin D. Roosevelt and American Foreign Policy, 1932-1945 (New York: Oxford University Press, 1979).
—Michael T. Walsh
World History
