Tariff Policy - Gatt and the cold war



Early in World War II, Anglo-American planners addressed tariffs, especially the British imperial system of discrimination and America's high duty rates. They agreed to negotiate down such protection and include as many nations as possible in the exercise of tariff liberalization. The planners thus launched bargaining talks in the first round of the General Agreement on Tariffs and Trade (GATT) in 1947 between twenty-three nations, and simultaneously formulated a blueprint for a trade organization, replete with rules and principles to guide future commercial policies on tariffs as well as related issues such as cartels, employment, and development. The organization itself never came into existence because of a lack of political will power in the United States (it would finally be born under the guise of the World Trade Organization, or WTO, in 1995), but tariff negotiating rounds of GATT continued into the 1990s, until the WTO absorbed GATT.

The first Geneva Round of GATT bogged down over imperial preferences, but the State Department placed greater importance on British economic problems than British intransigence in the negotiations. Maintaining free world unity took precedence over reducing foreign tariffs, which might undermine foreign recovery efforts and thus play into Soviet hands. This was an era in which aid proved more effective than trade in addressing the economic crises facing western Europe. Once the Marshall Plan period ended in the early 1950s, however, GATT rounds gradually lowered tariffs to the point that, by the early 1970s, industrial tariffs fell to minimal levels. Tariffs dropped about 80 percent under the RTAA, providing a boon to foreigners and many U.S. exporters, although the American merchandise trade surplus dwindled away by the early 1970s. By that time, nontariff forms of protection emerged as issues, and so it was difficult to separate tariffs from other barriers.

Postwar U.S. tariff policy also succeeded in molding an anticommunist alliance of solvent nations, bound together by integrated economies. Although protectionism reared up periodically during the half century after World War II, the battle over tariffs shifted to arguments over how much tariff slashing would boost America's Cold War allies. The State Department encouraged U.S. imports oftentimes more strenuously than exports. This was particularly the case during the early Cold War, in light of Japanese and western European recovery needs, but that approach persisted for decades. Repeatedly, the Eisenhower administration turned back protests from domestic producers for import restrictions on items ranging from clothespins to lemons. The Kennedy, Johnson, and Nixon administrations preferred side agreements, or special tariff hikes designed to help certain politically powerful interest groups in Congress, as they maintained an overall strategy of liberal trade for the accomplishment of foreign policy goals. Richard Nixon and Congress, however, restored the old emphasis on reciprocity abroad by adding retaliatory authority into trade legislation, although under subsequent presidents this amounted mostly to muscle flexing with lax enforcement against foreign discrimination. And by this time, tariffs were little involved; when protectionism against automobile imports became a cause célèbre in the 1980s, for example, the backlash from Congress and administrations came in the form of quotas and other nontariff restraints.

Trade liberalization succeeded in its diplomatic objectives: strengthening the alliance, integrating western Europe into a dynamic bloc of nations, attaching Japan to the U.S. side, and luring Third World countries into the free world fold. So successful was the RTAA that it had a large part in fueling growth in the West to the point that the Soviet Union and its satellites tried to compete but bankrupted themselves in the process, thereby ending the Cold War.

At home, by the 1970s and into the next decade there were renewed calls for tariff barriers. The ascendance of Japan in particular sparked protectionism. The advent of the WTO, with its supranational powers over global commerce, and the revolution of globalization spurred a loose coalition of protective-minded groups, among them labor, environmentalists, and populist politicians, to crusade at the turn of the new century for barriers, including tariffs, that would enhance national livelihoods. For example, labor sought restrictions on the ability of corporations to shift production overseas, as well as safeguards for fellow overseas workers. Environmentalists sought to impose U.S. protections for the environment on other nations. One notable case was in the type of nets used by foreign (Mexican) fishing interests; their nets were not dolphin-safe, while U.S. nets were. Populists opposed America's joining international organizations that supposedly undermined U.S. national sovereignty, which was part of the neo–Fortress America mentality, linked, for example, to Patrick Buchanan's crusade against immigration from Mexico.

The days of the high protective tariff had long passed, but it remained to be seen, after Cold War strictures had ended and America was released from its obligation to provide foreigners with profits at U.S. expense, whether reciprocity and protection for domestic producers would flourish anew. Yet clearly, more than two centuries of history pointed to the possibility of tariff and trade policy accounting for domestic needs, as it increasingly met diplomatic imperatives along the way.



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