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Ever since the days of Jefferson and Jackson, Democrats had favored a policy of free trade. During the 1932 campaign Roosevelt frequently denounced the Smoot-Hawley tariff, and upon becoming president he tapped as secretary of state Cordell Hull, a Tennessee senator who had based much of his political career on fighting against trade barriers. Nevertheless, Roosevelt moved slowly on trade, fearing (as Hoover did) that an influx of inexpensive goods from abroad would impede economic recovery.
Finally, at Hull’s insistence, the president unveiled in early 1934 a major trade proposal – the Reciprocal Trade Agreement Act. Like most of the legislation proposed by Roosevelt during his first term, it passed quickly, but it dramatically altered the way the U.S. government concluded trade deals with other countries. The RTAA empowered the president to negotiate commercial treaties that could reduce tariffs by up to 50 percent from their prevailing rates (which were, at the time, those set by Smoot-Hawley) without consulting Congress. Practically overnight, much of the legislative branch’s authority to determine trade policy was transferred to the executive – where it remains to this day.
There is no doubt that U.S. foreign trade increased in the years that followed. By 1941 the total value of both the country’s imports and exports had doubled. While some of this no doubt was the result of the general recovery of the global economy in the late 1930s, at least some of the credit must go to the ability of the executive to negotiate bilateral trade deals independently of Congress.
LC-USZC4-4244Source: “Message to Congress Requesting Authority Regarding Foreign Trade,” March 2, 1934. Online by Gerhard Peters and John T. Woolley, The American Presidency Project. http://www.presidency.ucsb.edu/ws/?pid=14817.
I am requesting the Congress to authorize the Executive to enter into executive commercial agreements with foreign Nations; and in pursuance thereof, within carefully guarded limits, to modify existing duties and import restrictions in such a way as will benefit American agriculture and industry. This action seems opportune and necessary at this time for several reasons.
First, world trade has declined with startling rapidity. Measured in terms of the volume of goods in 1933, it has been reduced to approximately 70 percent of its 1929 volume; measured in terms of dollars, it has fallen to 35 percent. The drop in the foreign trade of the United States has been even sharper. Our exports in 1933 were but 52 percent of the 1929 volume, and 32 percent of the 1929 value.
This has meant idle hands, still machines, ships tied to their docks, despairing farm households, and hungry industrial families. It has made infinitely more difficult the planning for economic readjustment in which the Government is now engaged.
You and I know that the world does not stand still; that trade movements and relations once interrupted can with the utmost difficulty be restored; that even in tranquil and prosperous times there is a constant shifting of trade channels.
How much greater, how much more violent is the shifting in these times of change and of stress is clear from the record of current history. Every Nation must at all times be in a position quickly to adjust its taxes and tariffs to meet sudden changes and avoid severe fluctuations in both its exports and its imports.
You and I know, too, that it is important that the country possess within its borders a necessary diversity and balance to maintain a rounded national life, that it must sustain activities vital to national defense and that such interests cannot be sacrificed for passing advantage. Equally clear is the fact that a full and permanent domestic recovery depends in part upon a revived and strengthened international trade and that American exports cannot be permanently increased without a corresponding increase in imports.
Second, other Governments are to an ever-increasing extent winning their share of international trade by negotiated reciprocal trade agreements. If American agricultural and industrial interests are to retain their deserved place in this trade, the American Government must be in a position to bargain for that place with other Governments by rapid and decisive negotiation based upon a carefully considered program, and to grant with discernment corresponding opportunities in the American market for foreign products supplementary to our own.
If the American Government is not in a position to make fair offers for fair opportunities, its trade will be superseded. If it is not in a position at a given moment rapidly to alter the terms on which it is willing to deal with other countries, it cannot adequately protect its trade against discriminations and against bargains injurious to its interests. Furthermore a promise to which prompt effect cannot be given is not an inducement which can pass current at par in commercial negotiations.
For this reason, any smaller degree of authority in the hands of the Executive would be ineffective. The executive branches of virtually all other important trading countries already possess some such power.
I would emphasize that quick results are not to be expected. The successful building up of trade without injury to American producers depends upon a cautious and gradual evolution of plans.
The disposition of other countries to grant an improved place to American products should be carefully sounded and considered; upon the attitude of each must somewhat depend our future course of action. With countries which are unwilling to abandon purely restrictive national programs, or to make concessions toward the reestablishment of international trade, no headway will be possible.
The exercise of the authority which I propose must be carefully weighed in the light of the latest information so as to give assurance that no sound and important American interest will be injuriously disturbed. The adjustment of our foreign trade relations must rest on the premise of undertaking to benefit and not to injure such interests. In a time of difficulty and unemployment such as this, the highest consideration of the position of the different branches of American production is required.
From the policy of reciprocal negotiation which is in prospect, I hope in time that definite gains will result to American agriculture and industry.
Important branches of our agriculture, such as cotton, tobacco, hog products, rice, cereal and fruit-raising, and those branches of American industry whose mass production methods have led the world, will find expanded opportunities and productive capacity in foreign markets, and will thereby be spared in part, at least, the heartbreaking readjustments that must be necessary if the shrinkage of American foreign commerce remains permanent.
A resumption of international trade cannot but improve the general situation of other countries, and thus increase their purchasing power. Let us well remember that this in turn spells increased opportunity for American sales.
Legislation such as this is an essential step in the program of national economic recovery which the Congress has elaborated during the past year. It is part of an emergency program necessitated by the economic crisis through which we are passing. It should provide that the trade agreements shall be terminable within a period not to exceed three years; a shorter period probably would not suffice for putting the program into effect. In its execution, the Executive must, of course, pay due heed to the requirements of other branches of our recovery program, such as the National Industrial Recovery Act.
I hope for early action. The many immediate situations in the field of international trade that today await our attention can thus be met effectively and with the least possible delay.