Reciprocal Trade Agreements Act Definition

RECIPROCAL TRADE AGREEMENTS. In June 1934, President Franklin D. Roosevelt`s Foreign Minister persuaded Congress to pass the Reciprocal Trade Agreements Act (RTAA) to increase U.S. exports at a time when the global depression had reduced international trade and many countries were increasing import tariffs. This amendment to the Smoot-Hawley Customs Act of 1930 gave the President the power to enter into external trade agreements with other nations on the basis of a reciprocal reduction of functions. This meant abandoning the historic approach of making Congress import tariffs, usually at a high protectionist level. Today is the 80th anniversary of the Reciprocal Trade Agreements Act (RTAA), a new approach to trade policy adopted by the New Deal Congress and signed by President Franklin D. Roosevelt. RTAA was the first time that Congress and a president worked together to give trade bargaining powers, to help pass new trade agreements that would increase exports and encourage job creation. Through the RTAA, Congress defined the framework for international trade negotiations and authorized the President to play a U.S. leadership role in the international trading system. Reciprocity was an important principle of trade agreements negotiated under the RTAA, as it encouraged Congress to reduce tariffs.

As more and more foreign countries have entered into bilateral tariff reduction agreements with the United States, exporters have been more encouraged to promote Congress in favour of even lower tariffs in many sectors. [3] Eighty years later, the tradition of the Mutual Trade Agreements Act continues in the form of the modern Trade Promotion Authority (TPA). Like President Roosevelt, President Obama has made trade policy a central part of his economic strategy to create jobs, stimulate growth and strengthen the middle class. In 2013, U.S. exports reached a record $2.3 trillion, an increase that accounts for one-third of total U.S. economic growth. In addition, each additional $1 billion in exports supported approximately 5,600 jobs in the United States, which cost an average of 13-18% more than non-export-related jobs. The Trade Promotion Authority is necessary to build on these achievements and extend U.S.

economic leadership to the 21st century. When U.S. tariffs fell dramatically, global markets were also increasingly liberalized. Global trade has undergone a rapid transformation. The RTAA was a U.S. law, but it provided the first widely used system of guidelines for bilateral trade agreements. The United States and European nations began to avoid beggar neighborhood policies that pursued national trade objectives at the expense of other nations. Instead, countries have begun to realize the benefits of trade cooperation. Due to the Great Depression, tariffs reached historic heights.

Members of Congress have generally entered into informal quid-pro-quo agreements, in which they voted in favour of other members` preferential tariffs in order to gain the support of their members. No one took into account the overall toll for U.S. consumers or exporters. This practice is commonly referred to as logrolling. Roosevelt and key members of his government made sure to put an end to the practice. [19] Democrats voted much more in favor of trade liberalization than Republicans, but were not consistent in their preferences.

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