Reciprocal Trade Agreements Of 1934

The RTAA marked a sharp abandonment of the era of protectionism in the United States. U.S. tariffs on foreign products rose from an average of 46% in 1934 to 12% in 1962. [3] 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] The second major external initiative of 1934 was the Reciprocal Trade Agreements Act (RTAA). In March 1934, Roosevelt asked Congress for the power to negotiate trade agreements based on reciprocal tariff reductions with other countries, „that the full and sustainable recovery on the national territory depends in part on revitalized and strengthened international trade.” The RTAA came into force on June 12, 1934 and was a fundamental change in U.S. trade policy. The Constitution gives Congress the right to regulate international trade and set tariffs.

Under the RTAA, Congress granted the President the right – temporarily, subject to a three-year extension – to reduce or increase U.S. tariffs by up to 50% of the levels set by the Smoot Hawley tariff in 1930 in exchange for tariff concessions from other countries. Such tariff reductions would come into effect through executive agreements rather than contracts requiring Senate approval. The U.S. ZOLL reductions negotiated under the RTAA would also be extended to all third countries to which the United States has granted the status of most favoured nation. Under the leadership of the United States and the United Kingdom, international cooperation has flourished and concrete institutions have been created. The discussions that began at the Bretton Woods Conference of 1944 were the International Monetary Fund. The first international trade agreement, the General Agreement on Tariffs and Trade (GATT), was established in 1949.