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Reciprocal Trade Agreement History Definition

The Reciprocal Tariff Act (adopted on 12 June 1934, Chapter 474, 48 Stat. 943, 19 U.C No. 1351) provided for the negotiation of customs agreements between the United States and various nations, including Latin American countries. [1] The law served as an institutional reform to allow the president to negotiate with foreign nations a reduction in tariffs in exchange for a reciprocal reduction in U.S. tariffs. This has led to a reduction in tariffs. Between 1934 and 1945, the United States signed 32 reciprocal trade agreements with 27 countries. [4] In addition, the conclusion of the General Agreement on Tariffs and Trade was taken by the Authority under the RTAA. 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. 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] 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. Between 1934 and 1939, the Roosevelt administration entered into trade agreements with 19 countries under the Reciprocal Trade Agreements Act: Belgium, Brazil, Canada, Colombia, Costa Rica, Cuba, Czechoslovakia, Ecuador, El Salvador, Finland, France, Guatemala, Haiti, Honduras, the Netherlands, Nicaragua, Sweden, Switzerland and the United Kingdom.

After 1945, the customs negotiation procedure established under the RTAA programme formed the model of the General Agreement on Tariffs and Trade (GATT), the agreement signed in 1947 by 23 countries, which formed the framework for multilateral trade liberalization after the Second World War. RTAA`s innovative approach freed Roosevelt and Congress from breaking this trend of tariff increases. It has linked U.S. tariff reductions to reciprocal tariff reductions with international partners. It also allowed Congress to approve tariffs by a simple majority, unlike the two-thirds majority needed for other contracts. In addition, the President had the power to negotiate the terms. The three innovations in trade policy have created the political will and feasibility of a more liberal trade policy. [3] The U.S. State Department also found good use of free trade expansion after World War II.