The Magic Bullet The RTAA, Institutional Reform, and Trade Liberalization

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The Magic Bullet? The RTAA, Institutional Reform,
and Trade Liberalization

• Written By Michael J. Hiscox
• Presented By Nate Smith and Meg Krause

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What is the RTAA?

• Reciprocal Trade Agreement Act(1934)
• Transferred Power of Trade Policy from Congress
  to the President.
• Gave the President the authority to lower tariffs
  in response to other nations lowering their
  tariffs on U.S. exports.
• Supposed to be the cause of the shift from
  protectionism to trade liberalization.

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Research Question

• Hiscoxs argument is that the RTAA did not
  actually cause a shift in U.S. trade policy
  making, but that outside factors allowed the RTAA
  to be sucessful.

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The RTAA as a solution to logrolling.

• Susanne Lohman and Sharyn OHalloran
• Smoot-Hawley Act of 1930 raised tariffs on 20,000
  goods.
• President is a supposed to internalize negative
  affects to consumers because he has a large,
  cross-district, national constituency.
• Congress could choose to give the president full
  delegation, partial delegation, or zero
  delegation every time the bill was up for
  extension. Lohman and OHalloran argued that
  full delegation would only be given if the
  presidents party had a majority in congress.
• However, in 1951 a democratic congress imposed
  constraints on a democratic president and then in
  1955 the democratic majority quickly gave a
  republican president a three year extension of
  authority.
• Furthermore, the idea that a president is less
  protectionist is less than accurate. In the 76
  years leading up to the RTAA, presidents had been
  historically protectionist in their campaigns,
  bills signed and bills vetoed.
• Finally, Smoot-Hawley was not passed by a
  resounding majority as would be expected if
  logrolling were an issue.

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The Partisan Reciprocity Theory

• Michael Bailey, Judith Goldstein, and Barry
  Weingast.
• All actors in policy making are assumed to prefer
  lower foreign tariffs. Therefore, by shifting
  authority over negotiating lower export tariffs
  to the president, attention was drawn from
  import-competing tariffs to export tariffs.
• However, import-competing industries did not
  simply fade out, instead they seemed to fight
  harder for protection, with some success.
• Also, the theory doesnt explain why republican
  leaders did not propose moderately high tariffs
  when negotiating.

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Hiscoxs Explanation

• Hiscox looks at the changes in voting patterns
  over the time following the RTAA and determines
  that the geographical make-up of industrial and
  agricultural industries across the U.S, and the
  increase of U.S. exports in response to World War
  II, caused policy makers to see the increase in
  GNP due to export goods.
• The export goods were industrial, mostly
  originating from the northeast and midwest where
  the republicans drew most of their constituency
  from.
• As a result, an obvious change in republican
  voting and protectionist views was seen.
• Meanwhile, many democrats were supported by the
  agricultural areas in the south and west.
• These industries became import competing and a
  division within the democratic party surrounding
  trade liberalization becomes obvious.
• It becomes clear that many republicans switched
  sides on the issue and trade liberating policies
  were passed more and more frequently.

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History

• United States protectionist until 1934
• RTAA passed in 1934 by Democrats beginning era of
  trade liberalization
• Expanding exports after WWII cause shift in
  Republican base
• RTAA renewed during 1950s and 60s because
  parties divided on trade policy

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Graphs
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Critiques

• Hiscox only evaluates this one policy in the
  United States. He could have evaluted similar
  policies in other countries.
• Hiscox also claims that WWII was the factor that
  shifted the Republican base and yet Republican
  representatives began voting for freer trade
  before the war.

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Conclusion

• This research reverses the conventional notion
  that a simple change to the rules of the game can
  have a profound impact on future policy.
• This research shows that liberalization might
  well be stymied or reversed by a different
  alignment of interests and party consticuencies
  in the future.
• This research is important because beyond
  explaining the past it shows us what to watch for
  in the future.