The Purpose Of The Reciprocal Trade Agreement

Between 1934 and 1945, the United States signed 32 reciprocal trade agreements with 27 countries. [4] In addition, the conclusion of the General Agreement on Tariffs and Trade was taken by the Authority under the RTAA. The U.S. State Department also found good use of free trade expansion after World War II. Many in the Department of Foreign Affairs saw multilateral trade agreements as a means of integrating the world in accordance with the Marshall Plan and the Monroe Doctrine. U.S. trade policy has become an integral part of U.S. foreign policy. This search for free trade as diplomacy intensified during the Cold War, when the United States competed with the Soviet Union for relations around the world. [20] RTAA`s innovative approach freed Roosevelt and Congress from breaking this trend of tariff increases. It has linked U.S. tariff reductions to reciprocal tariff reductions with international partners.

It also allowed Congress to approve tariffs by a simple majority, unlike the two-thirds majority needed for other contracts. In addition, the President had the power to negotiate the terms. The three innovations in trade policy have created the political will and feasibility of a more liberal trade policy. [3] Since the initial accession to 23 countries, the GATT has grown to 128 countries, responsible for about four-fifths of world trade. In eight rounds of negotiations or “cycles”, GATT member states continued to reduce tariffs, establish anti-dumping rules and increase the level of international trade. The RTAA was regularly renewed by Congress until it was replaced in 1962 by the Trade Expansion Act, which President John F. Kennedy wanted to give it broader power to negotiate reciprocal trade agreements with the European Common Market. The Common Market was created in 1957 to remove all trade barriers in six major Western European countries: France, West Germany, Italy, Belgium, the Netherlands and Luxembourg. Their economic strength, increasing pressure on the U.S. balance of payments and the threat of a communist aid and trade offensive prompted Congress to pass the Trade Expansion Act.

While the United States had negotiated in the past on a point-by-point basis, the president could in the future decide to reduce tariffs for an industry or an extended base for all products. , in exchange for similar cuts from other countries. To address the tariff problems created by the common market, the President was allowed to reduce tariffs on industrial products by more than 50 per cent or to eliminate them altogether if the United States and the common market together accounted for 80% or more of the global value of exports. When U.S. tariffs fell dramatically, global markets were also increasingly liberalized. Global trade has undergone a rapid transformation. The RTAA was a U.S. law, but it provided the first widely used system of guidelines for bilateral trade agreements. The United States and European nations began to avoid beggar neighborhood policies that pursued national trade objectives at the expense of other nations.

Instead, countries have begun to realize the benefits of trade cooperation. As more and more U.S. industries began to benefit from tariff cuts, some of them began campaigning with Congress for lower tariffs. Until RTAA, Congress had been mainly pressured by industries that wanted to create or increase tariffs to protect their industry. This change has also helped to maintain many of the benefits of trade liberalization. In short, the political incentive to increase tariffs has diminished and the political incentive to reduce tariffs has increased. [3] Under the leadership of the United States and the United Kingdom, international cooperation flourished and concrete institutions were created.