FDR signed the Reciprocal Trade Agreements Act (RTAA) 0n June 12, 1934. The text of the RTAA is at the end of this post.
The Constitution gives Congress the power to set tariffs, and to regulate commerce with foreign nations.
Prior to 1934, congressmen negotiated among themselves to accommodate the high-tariff interests of their import-competing business constitutents. Consumers, businesses dependent on imports, and businesses interested in export markets, tended to be relatively weakly represented.
The President could theoretically negotiate a reciprocal reduction in tariffs with another country, but any treaty like this would require Congressional approval. Congressional willingness to make all sorts of tweaks and changes undercut the President's credibility with potential negotiating partners.
The RTAA changed all this.
The RTAA allowed the President to negotiate agreements with foreign countries, and to implement them by raising or lowering tariff rates up to 50% by proclamation. After three years an agreement could be repudiated with six months notice. This carefully limited, delegated power, made the President a credible negotiating partner. Complicated agreements wouldn't be pulled apart by Congressmen and Senators. The objective of reducing foreign tariffs in exchange for U.S. tariff reductions created a constituency among U.S. exporters for domestic tariff reductions.
The RTAA was Cordell Hull's baby.
Hull, FDR's Secretary of State, believed in low tariffs, a natural stance for
a former Democratic congressman and Senator from a Southern agricultural state
(Tennessee).
He overcame an indifferent FDR, and the active opposition of a key FDR aide. He fought for and won Congressional approval of the Act. Once it passed, he fought hard bureaucratic battles to control its interpretation and implementation. He then used it (and subsequent renewals) to negotiate reciprocal tariff reduction agreements with 27 other countries, and reduce U.S. tariffs by about 44%, by 1945.
Over the years, the RTAA has been replaced by new trade legislation, and new ways of doing things. But these new ways bear a family resemblance to the RTAA. The history of post-war U.S. trade policy was shaped in good part by the ideas in the RTAA. The wealth to which that trade policy contributed may, in part, flow from Hull's vision.
The Trade Act of 2002, under which the U.S. is negotiating the Doha Round, still bears the imprint of the RTAA. As in 1934, Congress has framed trade liberalization in reciprocal rather than unilateral terms, has put the negotiating initiative (and the initiative in shaping the trade reform package) in the President's hands, has constrained its own scope for action, and has carefully limited the scope of the President's authority. The result is a credible U.S. negotiating posture, and a real prospect of reducing trade barriers.
For more on Cordell Hull and the RTAA see "Who was Cordell Hull?" Info on reductions by 1945 from Destler's American Trade Politics .
Notes for this post were accidentally posted earlier today. These have been deleted and replaced with this.
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[Public – No. 316 – 73D Congress]
[H.R. 8687]
AN ACT
To amend the Tariff Act of 1930.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Tariff Act of 1930 is amended by adding at the end of title III the following:
“Part III – Promotion of Foreign Trade
“Sec. 350. (a) For the purpose of expanding foreign markets for the products of the United States (as a means of assisting in the present emergency in restoring the American standard of living, in overcoming domestic unemployment and the present economic depression, in increasing the purchasing power of the American public, and in establishing and maintaining a better relationship among various branches of American agriculture, industry, mining, and commerce) by regulating the admission of foreign goods into the United States in accordance with the characteristics and needs of various branches of American production so that foreign markets will be made available to those branches of American production which require and are capable of developing such outlets by affording corresponding market opportunities for foreign products in the United States, the President, whenever he finds as a fact that any existing duties or other import restrictions of the United States or any foreign country are unduly burdening and restricting the foreign trade of the United States and that the purpose above declared will be promoted by the means hereinafter specified, is authorized from time to time –
“(1) To enter into foreign trade agreements with foreign governments or instrumentalities thereof; and
“(2) To proclaim such modifications of existing duties and other import restrictions, or such additional import restrictions, or such continuance, and for such minimum periods, of existing customs or excise treatment of any article covered by foreign trade agreements, as are required or appropriate to carry out any foreign trade agreement that the President has entered into hereunder. No proclamation shall be made increasing or decreasing by more than 50 per centum any existing rate of duty or transferring any article between the dutiable and free lists. The proclamined duties and other import restrictions shall apply to articles the growth, produce, or manufacture of all foreign countries. whether imported directly, or indirectly: Provided, That the President may suspend the application to articles the growth, produce, or manufacture of any country because of its discriminatory treatment of American commerce or because of other acts or policies which in his opinion tend to defeat the purposes set forth in this section; and the proclaimed duties and other import restrictions shall be in effect from and after such time as is specified in the proclamation. The President may at any time terminate any such proclamation in whole or in part.
“(b) Nothing in this section shall be construed to prevent the application, with respect to rates of duty established under this section pursuant to agreements with countries other than Cuba, of the provisions of the treaty of commercial reciprocity concluded between the United States and the Republic of Cuba on December 11, 1902, or to preclude giving effect to an exclusive agreement with Cuba concluded under this section, modifying the existing preferential customs treatment of any article the growth, produce, or manufacture of Cuba: Provided, That the duties payable on such an article shall in no case be increased or decreased by more than 50 per centum of the duties now payable thereon.
“(c) As used in this section, the term ‘duties and other import restrictions’ includes (1) rate and form of import duties and classification of articles, and (2) limitations, prohibitions, charges, and exactions other than duties, imposed on importation or imposed for the regulation of imports.”
Sec. 2. (a) Subparagraph (d) of paragraph 369, the last sentence of paragraph 1402, and the provisos to paragraphs 371, 401, 1650, 1687, and 1803 (1) of the Tariff Act of 1930 are repealed. The provisions of sections 336 and 516(b) of the Tariff Act of 1930 shall not apply to any article with respect to the importation of which into the United States a foreign trade agreement has been concluded pursuant to this Act, or to any provision of any such agreement. The third paragraph of section 311 of the Tariff Act of 1930 shall apply to any agreement concluded pursuant to this Act to the extent only that such agreement assures to the United States a rate of duty on wheat flour produced in the United States which is preferential in respect to the lowest rate of duty imposed by the country with which such agreement has been concluded on like flour produced in any other country; and upon the withdrawal of wheat flour from bonded manufacturing warehouses for exportation to the country with which such agreement has been concluded, there shall be levied, collected, and paid on the imported wheat used, a duty equal to the amount of such assured preference.
(b) Every foreign trade agreement concluded pursuant to this Act shall be subject to termination, upon due notice to the foreign government concerned, at the end of not more than three years from the date on which the agreement comes into force, and, if not then terminated, shall be subject to termination thereafter upon not more than six months’ notice.
(c) The authority of the President to enter into foreign trade agreements under section 1 of this Act shall terminate on the expiration of three years from the date of the enactment of this Act.
Sec. 3. Nothing in this Act shall be construed to give any authority to cancel or reduce, in any manner, any of the indebtedness of any foreign country to the United States.
Sec. 4. Before any foreign trade agreement is concluded with any foreign government or instrumentality thereof under the provisions of this Act, reasonable public notice of the intention to negotiate an agreement with such government or instrumentality shall be given in order that any interested person may have an opportunity to present his views to the President, or to such agency as the President may designate, under such rules and regulations as the President may prescribe; and before concluding such agreement the President shall seek information and advice with respect thereto from the United States Tariff Commission, the Departments of State, Agriculture, and Commerce and from such other sources as he may deem appropriate.
Approved, June 12, 1934, 9.15 p.m.
Transcribed from Udell, Gilman G. 1968. “Emergency Tariff Laws of 1921 and the Reciprocal Trade Agreement Act of 1934 with all Amendments." U.S. Government Printing Office. Washington. Pages 13-15. I'd like to thank Dan Cohen, Office of General Counsel, U.S. Department of Commerce, and Tom Meyer, Office of General Counsel, National Oceanic and Atmospheric Administration, for their help.
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