Tariff Policy - Trade independence



Economic survival lay at the heart of America's earliest diplomatic initiatives, and thus the tariff, as an element of commercial policy, played a major role in the efforts of the Founders to build the nation and protect it from external aggressors. The country's founding coincided with the era of mercantilism, in which trade was subject to oftentimes irrational discrimination from abroad that threatened to choke off America's lifeblood. The new nation depended on exports and imports, so the Founders pushed for fair and equal access to markets overseas out of economic desperation as well as the desire for political independence. They were, in essence, trade liberalizers out of necessity (although they also promulgated a vision of a world of open and equitable commerce). Tariff policy was placed in the hands of Congress, not only to ensure an equitable system of taxation but as a means of uniting the disparate regions of the former thirteen colonies into a large and viable free-trade area with power to promote American foreign policy aims. The Constitution established a uniform, enforceable system of import duties (along with shipping rules and foreign treaties) that regulated the economies of the states into a national whole. This combination of a common external tariff with free trade among the states prevented each state from engaging in separate economic diplomacy with Europe. The country spoke with one voice in negotiations. Access to this tariff-free area was a card to be played in negotiations with the Europeans and, in particular, Great Britain.

Tariff policy, therefore, helped to build the economic infrastructure of the new nation while America engaged in great power diplomacy. The United States designed its customs policy with protection in mind; thus tariffs and protectionism became synonymous from the opening of the first Congress in 1789. Officials imposed duties mainly for revenue purposes but also to coax foreign nations to ease restrictions on U.S. shipping and trade. Thomas Jefferson, James Madison, and other foes of Britain had earlier proposed a schedule of additional duties on goods imported from those nations, namely England, that had no commercial treaty with the United States. Fearing retaliation, President George Washington sought a diplomatic solution with Britain, which made concessions and thereby confirmed to Jefferson that tariff policy could ensure America would not be pushed around by the Europeans.

The Tariff of 1789 represented America's first tariff legislation, designed by Alexander Hamilton primarily to raise revenue by setting up the bureaucratic machinery for administering duties. But it also attempted to undercut European commercial monopolies and expand over-seas markets by insisting on equal treatment for nations that accorded U.S. goods the same nondiscriminatory access. As matters stood, nations without commercial treaties with the United States (Britain) stood on an equal footing with treaty powers (France). Federalists sought to stave off Jeffersonian trade retaliation policies that might jeopardize American security.

The effort at gaining reciprocal lowering of foreign restrictions in return for decreased U.S. protectionism did not work well during the succeeding wartime period in Europe; the United States found the threat of higher tariffs useless in protecting its neutral shipping from seizure on the seas. The nation was just too reliant on tariff revenue. To be sure, as the War of 1812 loomed, the Jefferson administration cut off trade with the British and French but, recognizing U.S. dependence on customs duties, left commerce open with the rest of the world.



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