From Protection To Liberalized Trade

Historically, however, the United States has from time to time experienced a strong impulse toward economic protectionism -- the practice of using tariffs or quotas to limit imports of foreign goods in the interest of protecting native industry.

At the beginning of the republic, statesman Alexander Hamilton advocated a protective tariff as a way to encourage American industrial development. By and large his advice was adopted. Throughout the 1800s, domestic political considerations, including the desire to expand exports of such important commodities as cotton, determined U.S. trade policy.

U.S. protectionism peaked in 1930 with the enactment of the Smoot-Hawley Act, a tariff law which intensified the effects of the Great Depression. Smoot-Hawley sharply increased U.S. tariffs and quickly met with foreign retaliation. The act contributed to the world economic crisis.

The U.S. approach to trade policy since 1934 has been a direct outgrowth of this experience, and following World War II, the United States endorsed trade liberalization. Many U.S. leaders argued that the domestic stability and continuing loyalty of U.S. allies would depend on economic recovery. U.S. aid was important to this recovery, but these nations needed export markets -- particularly the huge U.S. market -- in order to regain economic independence and achieve economic growth.

Secretary of State Cordell Hull understood this connection long before World War II. He wrote in support of the Trade Agreements Act of 1934, which provided the basic legislative mandate to cut U.S. tariffs:

"Nations cannot produce on a level to sustain their people and well-being unless they have reasonable opportunities to trade with one another. The principles underlying the Trade Agreements Program are therefore an indispensable cornerstone for the edifice of peace."

The Reciprocal Trade Agreements Act of 1934 gave the president the authority to negotiate trade agreements with individual countries, and greatly reduced duties on their exports to the United States in return for similar concessions on U.S. exports to their countries.

U.S. support for liberalizing trade was instrumental in creation of the General Agreement on Tariffs and Trade (GATT), an international code of tariff and trade rules that was signed by 23 countries in 1947 and represented over 90 countries by the end of the 1980s. In addition to setting codes of conduct for international trade, GATT has sponsored several rounds of multilateral trade negotiations, and the United States participated actively in each of them, often taking a leadership role.