Moving From Protectionism to Liberalization

An examination of the 1930 Smoot-Hawley Tariff and the 1934 Reciprocal Trade Agreement Act

Introduction

While there have many fluctuations in the level of openness in the international economy, one period that stands out for its sharp turnaround is 1930-1934. In the span of four years, the United States went from imposing the Smoot-Hawley tariff, the most protective tariff in U.S. history, to signing the Reciprocal Trade Agreements Act, which “changed the way trade policy was determined and set the stage for American leadership in efforts to expand international trade.” (Bailey, Goldstein, and Weingast, 1997).

Section Two: Historical Views of Free Trade

Economists in support of free trade: Adam Smith, David Ricardo, Jean Baptiste Say, Frederic Bastiat, John Stuart Mill, Nicolaas Pierson, William Sumner

Economists in favor of protectionism: Alexander Hamilton, Daniel Raymond, Henry Carey, Adam Muller

Section Three: An Overview of the Smoot-Hawley Tariff

--Brief outline of years leading up to Smoot-Hawley and other important (and increasinly restrictive) tariffs: McKinley Tariff of 1890,

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Section Four: An Overview of the 1934 Reciprocal Trade Agreement

--Main Points:

    --President was authorized to enter into tariff agreements with other nations
    --President could proclaim an increase or a decrease in import dueties by no more than 50 percent
    --Proclaimed duties would apply to imports from all countries on an unconditional most favored nation (MFN) basis
    --United States could terminate any agreement after three years with six months' notice; otherwise it would stay in effect indefinitely 

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Section Five: Conclusion

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References