Tariff

:For other senses of this word, see tariff (disambiguation).

Low Tariff Policy, 1913 to Present

Woodrow Wilson made a drastic lowering of rates a major

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priority for his presidency. The 1913 Underwood Tariff cut

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rates, but the coming of world war in 1914 radically revised

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trade patterns, and made tariffs much less important. When

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the Republicans regained power after the war they restored

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the usual high rates. The Great Depression was worldwide,

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and international trade shrank drastically. The crisis

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baffled the GOP, and it unwisely tried its magic one last

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time in the Smoot-Hawley Tariff Act of 1930. This time it

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backfired, as Britain, Germany, France and other industrial

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countries retaliated with their own tariffs and special

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bilateral trade deals. American imports and exports both

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went into a tailspin. Franklin Roosevelt and the New

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Dealers made promises about lowering tariffs on a reciprocal

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country-by-country basis (which they did), hoping this would

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expand foreign trade (which it did not.) Frustrated, they

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gave much more attention to domestic remedies for the

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depression; by 1936 the tariff issue had faded from

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politics, and the revenue it raised was small. In World War

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Two both tariffs and reciprocity were insignificant compared

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to trade channeled through Lend Lease. After the war the

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U.S. promoted the General Agreement on Tariffs and Trade

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GATT established in 1947, to minimize tariffs and other restrictions, and

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to liberalize trade among all capitalist countries. In 1995

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GATT became the World Trade Organization WTO; with the

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collapse of Communism its open markets/low tariff ideology

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became dominant worldwide in the 1990s.

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American industry and labor prospered after World War Two,

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but hard times set in after 1970. For the first time there

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was stiff competition from low-cost producers around the

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globe. Many rust belt industries faded or collapsed,

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especially the manufacture of steel, TV sets, shoes, toys,

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textiles and clothing. Volkswagon and Honda threatened the

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giant automobile industry. In the late 1970s Detroit and the

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auto workers union combined to fight for protection. They

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obtained not high tariffs, but import quotas. Quotas were

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two-country diplomatic agreements that had the same

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protective effect as high tariffs, but did not invite

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retaliation from third countries. By limiting the number of

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Japanese automobiles that could be imported, for example,

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quotas forced consumers to buy American cars, and allowed

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both the American and the Japanese car companies to raise

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prices and keep wages and profits high.

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The GOP under Ronald Reagan and George Bush abandoned

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the protective ideology, and came out against quotas and in

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favor of the GATT/WTO policy of minimal economic

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barriers to global trade. Free trade with Canada came about as a result of the Canada-U.S. Free Trade Agreement of 1987, which led in 1994 to The North American Free Trade Agreement NAFTA. It was based on George H. W. Bush's plan to enlarge the scope of the market for American firms to include Canada and Mexico. President Clinton, with strong Republican support, pushed NAFTA through Congress over the vehement objection of

Related Topics:
Canada-U.S. Free Trade Agreement - NAFTA

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labor unions. Likewise in 2000 he worked with Republicans to

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give China entry into WTO and "most favored nation" trading

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status (i.e. low tariffs). NAFTA and WTO advocates promoted

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an optimistic vision of the future, with prosperity to be

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based on intellectuals skills and managerial know-how more

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than on routine hand labor. They promised that free trade

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meant lower prices for consumers. It also meant lower wages

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and fewer jobs in older industries that could no longer

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compete. Opposition to liberalized trade came increasingly

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from labor unions, but their shrinking size and diminished

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political clout repeatedly left them on the losing side.

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