International Trade - Theory and Policy, 2010a

ought back to the United States and the Mexican governments for approval and passage into law. Over
sixty bilateral deals were negotiated under the RTAA, and it set in motion a process of trade liberalization
that would continue for decades to come.
The RTAA is significant for two reasons. First, it was one of the earliest times when the U.S. Congress
granted trade policymaking authority directly to the president. In later years, this practice continued with
congressional approval for presidential trade promotion authority (TPA; aka fast-track authority) that was
used to negotiate other trade liberalization agreements. Second, the RTAA served as a model for the
negotiating framework of the General Agreement on Tariffs and Trade (GATT). Under the GATT,
countries would also offer “concessions,” meaning tariff reductions on imports, in return for comparable
concessions from the other GATT members. The main difference is that the RTAA involved bilateral
concessions, whereas the GATT was negotiated in a multilateral environment. More on the GATT next.
KEY TAKEAWAYS
The Great Depression inspired a great wave of protectionism around the world beginning
with the Smoot-Hawley Tariff Act in the United States in 1930.
The Reciprocal Trade Agreements Act (RTAA) was the start of a wave of trade
liberalization.
The RTAA was important because it gave trade policymaking authority to the U.S.
president and because it served as a model for the GATT.
EXERCISE
1. Jeopardy Questions. As in the popular television game show, you are given an answer to a
question and you must respond with the question. For example, if the answer is “a tax on
imports,” then the correct question is “What is a tariff?”
1. The common name given to the U.S. Tariff Act of 1930.
2. The term used to describe the U.S. presidential authority to negotiate free trade
areas.
3. The name of the 1934 U.S. legislative act that authorized the U.S. president to
negotiate bilateral tariff reduction agreements.
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