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The Institutional Roots of American Trade Policy: Politics, Coalitions, and International Trade
Published online by Cambridge University Press: 13 June 2011
Abstract
The 1934 Reciprocal Trade Agreements Act (RTAA) changed the structure of the making of U.S. trade policy and made possible a dramatic reduction in tariffs. The authors demonstrate that the key institutional innovation in the RTAA was its mandate to lower tariffs through reciprocal agreements with foreign nations. The expansion of exports under the RTAA enhanced political support for increasingly lower U.S. tariffs. Evidence that export interests were positively associated with congressional votes for free trade supports this view.
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- Copyright © Trustees of Princeton University 1997
References
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13 Reciprocity in trade legislation had a long history before the RTAA. The first explicitly reciprocal treaty was with the German Zollverein in 1844. (It was rejected by the Senate.) Many of the previous measures on trade contained provisions for reciprocal agreements, but none was nearly as broad as the RTAA. See Goldstein (fn. 9), 93; and O'Halloran, Sharyn, Politics, Process, and American Trade Policy (Ann Arbor: University of Michigan Press, 1994)CrossRefGoogle Scholar.
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25 See, for example, Hull (fn. 16), 357; Bauer, Pool, and Dexter (fn. 1). The argument of the paper holds even if we were to assume the floor median could set the agenda.
26 The level of foreign tariffs at the start of the game is assumed to be the level of tariffs the foreign government sets if there is no agreement with the U.S. As long as Congress sets tariffs unilaterally, the foreign country is assumed to choose this level of tariffs.
27 The situation is more complicated if there is divided government. These results are deemphasized, since major tariff legislation occurred under unified rule. The equilibria are easily established, however. If the status quo is Q j a nd an election puts a Republican president and Democratic Congress in power, the Democrats will propose nothing and the status quo will remain Q7. However, if the status quo is Q7 and a Democratic president and Republican Congress win, the Republicans will propose an increase in rates. Because an increase to Q+ would be vetoed by the Democratic president, the Republicans will only propose an increase to the maximum point in the preferred set over Q7 held by the veto player to the left of the median. The veto player to the left of the median is the member the Republicans will need in order to pass a two-thirds override of a presidential veto. Similar reasoning establishes the remaining possibilities. On divided government and tariff policy, see Lohmann, Susanne and O'Halloran, Sharyn, “Divided Government and U.S. Trade Policy: Theory and Evidence,” International Organization 48 (Autumn 1994)CrossRefGoogle Scholar.
28 We concentrate on the implications of unified government, as most tariff changes occurred under unified government. The effects of divided government can be determined in this framework, however. There is also no change if the Democrats retain control of Congress but a Republican wins the presidency. The foreign government would not negotiate a U.S. tariff increase, as the president might wish, because it prefers the status quo to such an agreement. Congressional agenda setters would also desire no change. If Republicans win Congress and Democrats retain the presidency, there is also no change, as the president can veto any efforts by Republicans to increase tariffs and not be overturned. A sufficient condition for this is that D is equal to, or to the right of, the thirty-third percentile member. In 1934 this was an accurate depiction of the situation. Democrats controlled about two-thirds of the seats in Congress. The median Democrat was therefore roughly at the thirty-third percentile. Given that T* was chosen by Democrats when they could have chosen a higher level, we know that they will not prefer a tariff increase to T*. They would therefore not support any effort to overturn a presidential veto of legislation raising tariffs.
29 Here it is assumed that the foreign country raises tariffs back to their unilateral tariff level if the U.S. nullifies the RTAA agreements and raises tariffs
30 Schnietz (fn. 3) has made a similar claim, that the RTAA increased the durability of liberal trade policies. She uses a one-dimensional model to argue that holding the median constant, the RTAA mitigates protectionist potential. That is, when Republicans take over after Democrats, a relatively liberal Republican president will raise tariffs to co-opt the extremist Republican Congress. We make a much stronger claim. Holding the median constant, the RTAA eliminates protectionist potential under general conditions. In addition, in our model the RTAA's low tariffs are robust to a whole class of preference changes. Also, note that, in Schnietz's argument, the RTAA will lead to more protection than if there were no RTAA when a Republican president and Democratic Congress win; a Republican president in this situation would be able to use his authority to preempt more extreme Democratic cuts in tariffs.
31 Weingast, Shepsle, and Johnsen (fn. 23).
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33 Tasca (fn. 19).
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41 American trade politics has historically shown strong regional variation. We also ran estimations that included regional dummy variables in our equations. The result was consistent with the previous analysis; but there were interesting differences across regions. Among the Republicans in 1953, an increase of two standard deviations in exports led to a 13 percent increase in the chance that representatives from the Northeast will vote for trade liberalization, an 18 percent increase for those from the Midwest, and a huge, 51 percent hike for those from the West. For Democrats in 1953, the comparable numbers were 2 percent Northeast; 10 percent Midwest; 31 percent West; 8 percent South; 5 percent Border (no South or Border results are reported for Republicans given the scarcity in the number of representatives). In 1962 the increase in probability of a free-trade vote with a two-standard deviation rise in exports was for Republicans: 8 percent Northeast; 25 percent Midwest; and 18 percent West. For Democrats in 1962, the vote effects were 2 percent Northeast; 2 percent Midwest; 5 percent West; 11 percent South, and 6 percent Border.
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