The United States has profited from the flow of investment capital around the turn of the century. Vast British investments have helped fund the railroads. The approach to trade is liberal; reciprocity with Canada is agreed upon in 1910, but suspended in 1911 due to Canadian politics. Interstate commerce within the U.S. requires rules as well: The Federal Trade Commission is set up in 1914.
Wartime brings a law against "trading with the enemy." At war's end, allies and new nations owe the U.S. $10 billion. Despite European devastation, President Coolidge is reluctant to forgive debts, asking, "They hired the money, didn't they?" Trade tariffs are moderate, but exports slip in 1920 when the wartime boom ends.
Domestic recession and a return to isolationist foreign policy help spur a rise in protectionist tariffs that will last more than a decade. U.S. exports fluctuate, and Canada grows to become the lead trading partner. But American investment overseas mushrooms as U.S. corporations grow and New York becomes a world financial capital.
President Roosevelt begins to take down the edifice of protectionism. The 1934 Trade Agreements Act allows the president to make bilateral agreements with "most favored" countries to reduce tariffs by 50 percent. The U.S. Export-Import Bank is established, as a vehicle to boost American agricultural and manufacturing exports. It offers loans to fund purchases from U.S. firms.
The U.S.-Japan trade treaty expires as war tensions mount. The Lend-Lease program finances arms shipments to the European Allies. During the war, U.S. exports rise significantly. At war's end, the U.S. leads the development of a new global economic regime. One factor underlying the creation of the World Bank and International Monetary Fund is the aim of promoting world trade.
The modern trade system is born in 1947 with the General Agreement on Tariffs and Trade (GATT), which the U.S. joins and supports from the outset. Successive laws give the president greater autonomy to lower, and in some cases raise, tariffs. By 1951, the average U.S. trade tariff is a relatively low 15 percent.
U.S. trade rises sharply in both directions, while still showing a surplus every year. The increasing bulk of both imports and exports is manufactured goods. The 1962 Trade Expansion Act gives the president greater authority to cut tariffs than ever before. It also provides for compensation and reconversion measures for industries adversely affected by trade liberalization.
The U.S. is a leader in the "Kennedy Round" of GATT trade negotiations, in which 50 major trading countries agree to substantial tariff reductions. As the period of prosperity ends, the free-trade orientation is challenged. From August to December 1971, a 10 percent surcharge is levied on imports. A massive USSR purchase of subsidized wheat has the effect of pushing up domestic prices.
After the 1973 dollar devaluation, the trade balance becomes positive again. A new round of GATT negotiations begins against a backdrop of global slowdown. The 1978 Trade Act continues the pattern of increasing the president's power to negotiate trade agreements. A multilateral pact in 1979 reduces the U.S. average industrial tariff to 5.7 percent.
In the early 1980s, the rise in the dollar's value makes U.S. exports less competitive, and the trade balance sinks. Nevertheless, the U.S. remains an activist for reduced trade barriers. A 1988 trade bill entrenches this policy; the same year, a free-trade pact is signed with Canada.
The Bush administration promotes a North America Free Trade Agreement (NAFTA) with Canada and Mexico. It is hotly debated, with strenuous objections from trade unions, environmentalists, and other activists. Once elected, Bill Clinton adds supplemental agreements on labor and the environment. He then bucks his party's opposition and, with Republican support, gets the agreement ratified.
With NAFTA in place, the U.S. seeks to advance trade talks worldwide. Seattle hosts the 1999 summit of the World Trade Organization (WTO), which replaces GATT. The meeting proves a flashpoint for a mobilized and increasingly influential anti-globalization movement. Against scenes of street violence, WTO delegates from rich and poor countries deadlock, and the meeting fails.
As the anti-globalization movement grows, trade talks become more complex. A 2000 summit calls for free trade throughout the Americas. The U.S. helps forge a compromise at the 2001 WTO global trade talks in Qatar. U.S. steel tariffs are an ongoing cause of contention with the EU, as are both sides' agricultural subsidies. The U.S. negotiates trade deals with Latin American and African countries.
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