E C O N O M I C R E P O R T O F T H E P R E S I D E N T

forces to play themselves out. In the interwar period, in contrast, policyactively promoted protectionism through high tariff and nontariff barriers.Indeed, rising protectionism in a number of countries—including the UnitedStates, through the Tariff Act of 1930 (Smoot-Hawley)—made the GreatDepression more severe. Despite efforts by the United States to begin reducingtariffs at home and abroad in 1934, through the Reciprocal Trade AgreementsAct, world tariffs remained high on average. Since mid-century, however,policy in the United States and elsewhere has worked actively to reduce tradebarriers that limit or distort the choices available to consumers and firms.Since the 1970s especially, governments have been reducing barriers to capitalflows as well. As discussed later, policy can also help in dealing with theinevitable tensions and disruptions of economic integration.The United States has played a leading role in liberalizing trade internationally,both by reducing its own tariffs and by encouraging others, througha variety of market-opening initiatives, to follow suit. The multilateral tradingsystem, consisting of the GATT at first, and more recently the WTO, isat the core of these efforts. Before the creation of the GATT in 1948, tradebarriers—in the United States and elsewhere—were more susceptible to arange of economic and political factors. Tariff rates, measured as the ratio ofduties to import values, rose noticeably in the United States during the interwarperiod, partly because of new legislation. But some of the increaseshown in Chart 6-5 reflects the effect of declining import prices in the early1930s: many tariffs were “specific,” in that they were imposed as a nominalChapter 6 | 211