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The institutional foundations of hegemony: explaining the Reciprocal Trade Agreements Act of 1934

Published online by Cambridge University Press:  22 May 2009

Stephan Haggard
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In 1930, Congress approved the highly restrictive Smoot–Hawley tariff, the textbook case of pressure group politics run amok. Four years later, Congress passed the Reciprocal Trade Agreements Act (RTAA), surrendering much of its tariff-making authority to a policy process in which internationalists had increasing influence. While the United States had used reciprocity to expand exports before, the stick of discriminatory treatment took precedence over the carrot of liberalizing concessions. With the transfer of tariff-making authority to the executive, the United States could make credible commitments and thus exploit its market power to liberalize international trade. Despite later modifications, the RTAA set the fundamental institutional framework for trade politics.

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Research Article
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International Organization , Volume 42 , Issue 1 , Winter 1988 , pp. 91 - 119
Copyright
Copyright © The IO Foundation 1988

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References

I am greatly indebted to Jeff Frieden, Barbara Geddes, Judith Goldstein, Joanne Gowa, Joe Grieco, Cynthia Hody, John Ikenberry, Peter Katzenstein, David Lake, Mark Levy, Michael Mastanduno, Helen Milner, Andy Moravcsik, Timothy McKeown, Doug Nelson, John Odell, Mark Peterson, Beth Simmons, Sven Steinmo, Ray Vernon, and two anonymous reviewers for their advice and assistance.

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28. Ferguson, , “From Normalcy to New Deal”Google Scholar; Wilson, , American Business, chap. 3.Google Scholar

29. See two telegrams, D. S. Ingelhart (President, W. R. Grace and Co.) to FDR, 8 June 1933, OF 61, FDR Library. The first, signed by thirty-nine large manufacturers, supported the negotiation of reciprocal trade agreements, citing growing bilateralism and systems of imperial preference as the principal reason. The second telegram reports a poll of “upwards of 150 important manufacturers” and found almost unanimous support for the reciprocal trade program. Two days later, however, FDR announced that he was not seeking trade legislation!

30. On the “internationalist” outlook, see Frieden, , “Sectoral Conflict,” this volume.Google Scholar

31. On the problem of the fragmentation of trade policy, see “The Urgent Necessity of Working Out an Adequate and Co-ordinated Method for Dealing with Commercial Policy,” Memo for the President, enclosed in Hull to FDR, 27 October 1933, OF 614 A; Executive Committee Report.

32. On the changes in the processes that governed trade in the 1930s, see Snyder, Richard, “Commercial Policy as Reflected in Treaties from 1931 to 1939,” American Economic Review 30 (12 1940)Google Scholar; Jones, Joseph M. Jr., Tariff Retaliation: Repercussions of the Smoot-Hawley Bill (Philadelphia: University of Pennsylvania Press, 1934)CrossRefGoogle Scholar; Gordon, Margaret, Barriers to World Trade: A Study of Recent Commercial Policy (New York: MacMillan, 1941)Google Scholar. The Tariff Commission began investigating reciprocal negotiations in early 1933 at the request of Congress. United States Tariff Commission, Tarijff Bargaining Under Most-Favored-Nation Treaties, Report to the United States Senate (Tariff Commission Report 62, 2d Series, GPO, 1934).

33. Examples of a structuralist view are Kindleberger, Charles P., The World in Depression, 1929–39 (Berkeley: University of California Press, 1973)Google Scholar; Krasner, Stephen, “State Power and the Structure of International Trade,” World Politics 28 (04 1976)CrossRefGoogle Scholar; and Lake's, David sophisticated synthesis in “Beneath the Commerce of Nations: A Theory of International Economic Structures,” International Studies Quarterly 28 (06 1984)CrossRefGoogle Scholar. Lake defines structural position in terms of both relative size and relative productivity—the first variable explaining the capacity to act as leader, the second the interest in doing so. Yet Frieden has pointed out that while relative productivity was higher than that of any other advanced industrial state in 1929, U.s. share of world trade was only 13.9%. Yet in 1960, the highpoint of American hegemony, U.S. share of world trade was 15.3%. Frieden, , “The Internationalization of American Banking and the Transformation of American Foreign Policy, 1890–1940,” paper delivered to the annual meeting of the American Political Science Association,Washington, D.C.,1–3 September 1984Google Scholar. In addition, between 1929 and 1938, U.S. share of world trade went down, while its relative productivity remained constant.

The idea of a “process” level of the international system separate from the structural level is articulated in Keohane, Robert O. and Nyc, Joseph, Power and Interdependence (Boston: Little, Brown, 1977).Google Scholar

34. House of Representatives, Reciprocal Trade Agreements. Hearings before the Committee on Ways and Means, 73d Congress, 2d session, pp. 5–6.

35. Ruggie, John, “International Regimes, Transactions and Change: Embedded Liberalism in the Post-war Economic Order,” International Organization (Spring 1982)CrossRefGoogle Scholar. See also Goldstein, Judith, “The Political Economy of Trade: the Institutions of Protection,” American Political Science Review 80 (03 1986), pp. 161–84.CrossRefGoogle Scholar

36. Pastor, , U.S. Foreign Economic Policy, pp. 84–93.Google Scholar

37. Schlesinger, Arthur M., The Coming of the New Deal, p. 260Google Scholar; see also Oye, Ken, “The Sterling-Dollar-Franc Triangle: Monetary Diplomacy 1929–1937,” World Politics 38 (10 1985).CrossRefGoogle Scholar

38. See Kelly, William B. Jr., “Antecedents of Present Commercial Policy, 1922–1934,” in Kelly, , ed., Studies in United Stares Commercial Policy (Chapel Hill, N.C.: University of North Carolina Press, 1963).Google Scholar

39. Wilson, , American Business, pp. 67–71Google Scholar. For a commissioner's view of the problems of the flexible provision, see John Lee, Coulter, “The Tariff Commission and the Flexible Clause,” Proceedings of the American Academy of Political Science 15 (06 1933).Google Scholar

40. In choosing Raskob to chair the National Committee, Smith wished “to let the businessmen of this country know that one of the great industrial leaders of modem times had confidence in the Democratic Party and its platform.” Cited in Mathew, and Hannah, Josephson, Al Smith: Hero of the Cities (Boston: Houghton Mifflin, 1969), p. 371Google Scholar. Smith's views are included in his acceptance address, Albany, 22 August 1928 and his Louisville speech, 13 October 1928, Campaign Addresses of Gov. Alfred E. Smith (Washington, D.C.: Democratic National Committee, 1929), pp. 7, 165–67.Google Scholar

41. See Cordell, Hull, Memoirs, vol. 1, pp. 142, 146Google Scholar; Rosen, , From Depression to New Deal, chap. 2.Google Scholar

42. The most careful analysis of Hull's thinking on the issue is Allen, William R., “The International Trade Philosophy of Cordell Hull, 1907–1933,” American Economic Review 63 (03 1953).Google Scholar

43. Hull, , Memoirs, vol. 1, p. 352.Google Scholar

44. He continued, “How unorthodox this was at the time may be judged by the amount of bitterness with which we were called nationalists by older economists.” Raymond, Moley, After Seven Years (Lincoln: University of Nebraska Press, 1971), p. 23.Google Scholar

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46. As Tugwell, argued, “We were convinced that in order to work Out our problems of recovery and reform we would have to be insulated from European interference.”Google ScholarRexford, Tugwell, The Brains Trust (New York: Viking, 1968), p. 475Google Scholar; Rexford Tugwell, Diary, vol. 5, “June 1933 to March 1934,” pp. 9–14Google Scholar; Tugwell Papers, FDR Library, Hyde Park, N.Y.

47. The following draws on Hicks, John D., Republican Ascendency, 1921–1933 (New York: Harper & Row, 1960), pp. 195–202Google Scholar; Fite, Gilbert C., George N. Peek and the Fight for Farm Parity (Norman, Okla.: University of Oklahoma Press, 1954)Google Scholar; Rosen, , From Depresion to New Deal, pp. 188–89Google Scholar. FDR's first mention of the tariff issue in the campaign was in a speech before the New York Grange; Roosevelt, , Public Papers and Addresses, vol. 1, pp. 155–57.Google Scholar

48. As Rosen, argues, “their conflict with Hull … was rooted in the requirement for a self-contained economy and an artificial internal price structure.”Google ScholarFrom Depression to New Deal, p. 180ff. For Wallace's, views, see his New Frontiers (New York: Harcourt Brace, 1934)Google Scholar, and the critique by Taylor, Alonzo E., The New Deal and Foreign Trade (New York: MacMillan, 1935)Google Scholar. For an analysis of state intervention in agriculture, see Theda, Skocpol and Kenneth, Finegold, “State Capacity and Economic Intervention in the Early New Deal,” Political Science Quarterly 97 (Summer 1982).Google Scholar

49. Tugwell saw the fight as one between the brains trust and certain Westerners, including Senators Walsh and Pittman, against Hull, traditional Democrats, and “others in Wall Street who sold foreign securities to American investors … and wanted to speculate as they liked and therefore objected to national economic fences.” The Brains Trust, p. 476.

50. Moley, , After Seven Years, p. 47.Google Scholar

51. The speech was drafted by protectionist Senators Pittman and Walsh. Hull's representative, Charles Taussig, was pushed to the side. Ibid., p. 50; Tugwell, , The Brains Trust, pp. 478–90.Google Scholar

52. Roosevelt, , Public Papers and Addresses, vol. 1, pp. 766, 767.Google Scholar

53. This idea had already been put forward in the Collier trade bill of 1932, which contained many innovations in trade policy, but was vetoed by Hoover. Roosevelt, , Public Papers and Addresses, vol. 1, p. 769.Google Scholar

54. Moley, , After Seven Years, p. 51Google Scholar; Roosevelt, , Public Papers and Addresses, vol. 1, p. 853.Google Scholar

55. Rosen traces Norman Davis's effort to push a multilateral view in “Intranationalism vs. Internationalism,” p. 285.

56. The best overview of the London economic conference is Kindelberger, , World in Depression, chap. 9Google Scholar. The most thorough discussion of the commercial aspects of the conference are in Kottman, Richard N., Reciprocity and the North Atlantic Triangle, 1932–1938 (Ithaca, N.Y.: Cornell University Press, 1968), chap. 2Google Scholar. For the views of the principles, see Feis, Herbert, Characters in Crisis 1933 (Boston: Little, Brown, 1966) chaps. 14–20Google Scholar; Moley, Raymond, The First New Deal (New York: Harcourt Brace, 1966), chaps. 33–38Google Scholar; and Hull, , MemoirsGoogle Scholar, vol. 1, chaps. 18 and 19. Norman Davis raised hopes through successful negotiation of a limited tariff truce in May, but the many reservations expressed by its adherents called the value of the agreement into question.

57. Hull, , Memoirs, vol. 1, p. 250Google Scholar. For the draft bill see Record Group 59, 611.0031/428, National Archives.

58. Roosevelt, , Press Conferences, 31 05 1933, vol. 1, pp. 324–25.Google Scholar

59. See Frank, Freidel, Launching the New Deal, pp. 439–40, 450Google Scholar; Feis, , Characters in Crisis 1933, p. 174Google Scholar; Hull, , Memoirs, vol. 1, p. 251Google Scholar; Moley, , The First New Deal, pp. 420–22.Google Scholar

60. Hull, , Memoirs, vol. 1, p. 252.Google Scholar

61. Ibid.

62. Feis calls Hull's laments on the fate of the conference “histrionic.” Feis, , Characters in Crisis 1933, p. 175.Google Scholar

63. Leuchtenberg, William E., Franklin D. Roosevelt, p. 64.Google Scholar

64. State's relations with Henry Wallace and the AAA were less strained, but in agriculture the principle problem was promoting exports. Section 15(e) of the AAA empowered the president to levy an equal compensating tax on agricultural goods, subject to processing taxes. On the turf fights, see Steward, Dick, Trade and Hemisphere, the Good Neighbor Policy and Reciprocal Trade (Columbia: University of Missouri Press, 1975), pp. 15–16.Google Scholar

65. New York Times, 25 October and 5 November 1933.

66. New York Times, 5 November 1933. The NRA could also initiate its own investigations. Herbert Feis argues that the trade provisions were used only to prevent codes from toppling, although the United States did place import quotas on liquor, lumber, tobacco, potatoes, cotton, and sugar. Feis, , Characters in Crisis 1933, p. 262Google Scholar; Steward, , Trade and Hemisphere, p. 15ff.Google Scholar

67. This paragraph draws on Kindleberger, , World in Depression, chap. 9Google Scholar; Oye, , “The Sterling-Dollar-Franc Triangle”Google Scholar; Wicker, Elmus, “Roosevelt's 1933 Monetary Experiment,” The Journal of American History 57 (03 1971)CrossRefGoogle Scholar; Moore, James R., “Sources of New Deal Economic Policy: The International Dimension,” Journal of American History 61 (12 1974)CrossRefGoogle Scholar; Nicholas, Jeanette, “Roosevelt's Monetary Diplomacy in 1933.” American Historical Review 56 (01 1951).Google Scholar

68. House of Representatives, Hearings, pp. 65–66Google Scholar. Feis also recognized the importance of devaluation for trade policy in his Characters in Crisis 1933, p. 264.

69. William Phillips Diary, 8 December 1933, Houghton Library, Harvard University.

70. Feis, , Characters in Crisis, p. 262.Google Scholar

71. Sayre, , The Way Forward, p. 56Google Scholar; Hull, , Memoirs, vol. 1, p. 354.Google Scholar

72. Feis, , Characters in Crisis 1933, p. 264.Google Scholar

73. It was widely recognized that the negotiation of reciprocal agreements would require lifting protection from some industries. See Executive Committee Report, supplement 1, which offers a detailed classification scheme; Tariff Commission, “Draft Statement on Reducible Tariff Rates,” 13 February 1934, OF 60; and Willard Thorp's observations on the thinking in the Department of Commerce in Katie, Louchheim, ed., The Making of the New Deal: The Insiders Speak (Cambridge: Harvard University Press, 1983), pp. 275–76.Google Scholar

74. Senate Finance Committee, Hearings, p. 5.Google Scholar

75. Public Papers and Addresses, vol. 3, pp. 113–16.

76. I am thankful to David Lake for this point. See Kelly, , “Antecedents.”Google Scholar

77. Hull, , Memoirs, vol. 1, p. 356.Google Scholar

78. On the growth of executive power over the tariff, see John Day, Larkin, The President's Control of the Tariff (Cambridge: Harvard University Press, 1936).Google Scholar

79. “Minority Views,” in Congressional Record, 27 March 1934, pp. 5532–33Google Scholar; Vandenburg, , Congressional Record, 18 05 1934, pp. 9081–82Google Scholar. For an overview of the constitutional issues see Sayre, , The Way Forward, chap. 7.Google Scholar

80. Congressional Record, 25 May 1934, p. 9567.Google Scholar

81. This balance is the main theme of Pastor, U.S. Foreign Economic Policy.

82. Kelly, , “Antecedents,” p. 81Google Scholar; Pastor, , U.S. Foreign Economic Policy, pp. 179–85Google Scholar. On the renewals of 1937 and 1940, see Steven Robert, Brenner, “Economic Interests and the Trade Agreements Program, 1937–1940.”Google Scholar

83. For the administration's objections to public hearings, see Senate Finance Committee, Hearings, pp. 15, 29, 80–81, 130.Google Scholar

84. See Phillips Diary, 11 December 1933.

85. Peek's views also reflected more immediately the interests of the food and textile industries. Steward, , Trade and Hemisphere, p. 32.Google Scholar

86. A 70-page draft of Peek's plan for a Foreign Trade Board is enclosed with Peek to FDR, 16 July 1935. See also FDR to Peek, 17 July 1935, both in President's Secretary's File 73, FDR Library; Phillips Diary, 2 January 1934.

87. On the Peek–Hull controversy, see George, Fite, George N. Peek, chaps. 16–17Google Scholar; Steward, , Trade and Hemisphere, chap. 2Google Scholar; Peek, George N. and Crowther, Samuel, Why Quit Our Own? (New York: Van Nostrand, 1936)Google Scholar. The correspondence between Peek, FDR, and Hull, and Peek's objections are set out in “Report of the Special Adviser on Foreign Trade,” enclosed with Peek to FDR, 31 December 1934; OF 614A, cited hereafter as Report of the Special Adviser, and in a series of six articles in the Saturday Evening Post, 16 May–20 June 1936.

88. On the establishment of the Ex-Im banks, see Adams, Frederick C., Economic Diplomacy: the Export–Import Bank and American Foreign Policy 1934–1939 (Columbia: University of Missouri Press, 1976), chap. 3.Google Scholar

89. Hull, , Memoirs, vol. 1, p. 370.Google Scholar

90. Francis Bowes, Sayre, “Draft: Memorandum on Machinery for the Effectuating of a Foreign Trade Policy,” attached to Executive Committee ReportGoogle Scholar; Phillips Diary, 2 January, 27 February, 23 March, 1934.

91. See Mary Trackett, Reynolds, Interdepartmental Committees in the National Administration (New York: Columbia University Press, 1939), pp. 47–70Google Scholar; Sayre, , The Way Forward, chap. 8Google Scholar; Rexford Tugwell Diary, vol. 5, pp. 13–14; Steward, , Trade and Hemisphere, pp. 44–45.Google Scholar

92. The following passage draws on the Report of the Special Adviser.

93. See “Memorandum submitted by the Special Adviser … for consideration at its Meeting December 4 …,“ enclosed with the Report of the Special Adviser.

94. On the German deal, see Steward, , Trade and Hemisphere, pp. 52–53Google Scholar; Phillips Diary, 13 and 14 December 1934. For almost a year after that conflict, Roosevelt kept Peek around. Only after Peek had supplied the press with material critical of the reciprocal trade program, did Roosevelt finally lose his patience. FDR to Peek, 22 November 1935; Peek to FDR, 26 November 1935; FDR to Peek, 11 December 1935.

95. Sayre, , The Way Forward, p. 94.Google Scholar

96. Typical of the numerous letters protesting this arrangement is Congressman Edward Eicher to Hull, 17 August 1934, which encloses a letter from the Iowa Manufacturers Association and R. Walter Moore (State Department) to Eicher, 1 September 1934, Record Group 59, 611.0031/1013, National Archives. See also Robert Lund, chairman of the board, National Association of Manufacturers to FDR, 23 April 1935, RG 59, 611.0031/1650.

97. Brenner, , “Economic Interests,” p. 108ff.Google Scholar

98. Steiwer to FDR, 4 April 1935; FDR to Steiwer, 8 April 1935; OF 614A.

99. Six of the communications asked that particular concessions not be sought from the Belgians. See “Belgium: Committee for Reciprocity Information: Record of Correspondence, Oct. 19–Oct. 25, 1934,” RG 59, 611.0031/Committee for Reciprocity Information/75, National Archives.

100. Sayre, , The Way Forward, p. 96.Google Scholar

101. Kottman, , Reciprocity and the North Atlantic Triangle, p. 257.Google Scholar

102. Goldstein, , “The Political Economy of Trade.”Google Scholar

103. Kindleberger, Charles P., World in Depression, p. 292.Google Scholar

104. Krasner, , “State Power.”Google Scholar Contrast Lake, “Beneath the Commerce of Nations” and “The State and American Trade Policy in the Pre-hegemonic Era,” this volume.

105. Oye makes a similar argument in “The Sterling-Dollar-Franc Triangle.”

106. Pastor, , U.S. Foreign Economic PolicyGoogle Scholar; Gil, Winham, “Robert Strauss, the MTN and the Control of Faction,” Journal of World Trade Law 14 (09/10 1980)Google Scholar. Pastor virtually ignores the role of the private sector.

107. For example, Stephen, Krasner, Defending the National Interest (Princeton, N.J.: Princeton University Press, 1978).Google Scholar

108. Examples of recent work in American politics that gives weight to “state” actors would include the literature on agenda-setting; see John, Kingdon, Agendas, Alternatives and Public Policies (Boston: Little, Brown, 1984)Google Scholar; and on policy communities, Hugh, Heclo, “Issue Networks and the Executive Branch,” in Anthony, King, ed., The New American Political System (Washington, D.C.: American Enterprise Institute, 1978).Google Scholar