This work is distributed as a Discussion Paper by the

STANFORD INSTITUTE FOR ECONOMIC POLICY RESEARCH

SIEPR Discussion Paper No. 07-01

U.S. Trade Policy and the Pacific Rim, from Fordney- McCumber to the Trade Expansion Act of 1962:

A Political-Economic Analysis

By Lei (Sandy) Ye

Stanford University

August 2007

Stanford Institute for Economic Policy Research Stanford University Stanford, CA 94305

(650) 725-1874 The Stanford Institute for Economic Policy Research at Stanford University supports research bearing on economic and public policy issues. The SIEPR Discussion Paper Series reports on research and policy analysis conducted by researchers affiliated with the Institute. Working papers in this series reflect the views of the authors and not necessarily those of the Stanford Institute for Economic Policy Research or Stanford University.

U.S. Trade Policy and the Pacific Rim, from Fordney-McCumber to the Trade Expansion Act of 1962:

A Political-Economic Analysis

Lei (Sandy) Ye Stanford University

August 2007

Abstract

From 1922 to 1962, United States trade policies changed dramatically, marked in the beginning by the heightening of protectionism and then the mobilization toward trade liberalization. The effect of these policies on the Pacific Rim, however, has been little studied. This paper investigates the extent to which U.S. trade policies during this period impacted the Pacific Rim economies differently from the rest of the world. Empirical analysis demonstrates that U.S. trade with the Pacific Rim had consistently higher tariff barriers than U.S. trade with the rest of the world. This paper then analyzes the reasons behind this phenomenon from both a political economy and a historical perspective. On both fronts, the Pacific Rim was at a disadvantage, and its higher barrier to trade with the U.S. was by no means historically accidental.

I would like to thank Professor Gavin Wright for his enormous help on this project.

1

Table of Contents

I. INTRODUCTION........................................................................................................ 2

II. TRENDS IN U.S. IMPORT FLOW FROM THE PACIFIC RIM ........................ 8

III. EMPIRICAL INVESTIGATION OF DIFFERENCES IN TARIFF RATES BETWEEN THE PACIFIC RIM AND THE REST OF THE WORLD................... 18

IV. POLITICAL ECONOMY OF TRADE LEGISLATION: EVIDENCE FROM CONGRESSIONAL ROLL-CALL VOTES ................................................................ 34

V. A HISTORICAL INTERPRETATION OF U.S.-PACIFIC RIM TRADE BARRIERS...................................................................................................................... 72

VI. CONCLUSION........................................................................................................ 86

REFERENCES................................................................................................................ 90

APPENDIX A: CLASSIFICATION OF CATEGORIES USED TO CALCULATE TARIFF RATES ............................................................................................................. 96

APPENDIX B: DATA SOURCES FOR STATE PRODUCTION RANKING ...... 100

APPENDIX C: DATA SOURCES FOR REGRESSION VARIABLES ................ 102

2

I. Introduction In modern international economics theory, the free flow of goods and services is

widely regarded as fundamental to a nation’s healthy economic development and long-

term prosperity. Trade barriers not only generate welfare-reducing economic effects, but

can also undermine international political stability. However, for much of the history of

the United States, free trade was a largely neglected concept in policy-making. The great

legislator Henry Clay characterized free trade as detrimental: “Free trade? Free trade! The

call for free trade is as unavailing as the cry of a spoiled child, in its nurse's arms, for the

moon, or the stars that glitter in the firmament of heaven. It never has existed; it never

will exist” (Clay 1854, p. 23). Such sentiment had resounding echoes in the chambers of

Congress throughout the nineteenth century and into the twentieth.

Before the twentieth century, protectionist measures such as tariffs were seen as

crucial in developing the nation’s manufacturing sector. As early as 1792, Alexander

Hamilton made a case for this in his famous “Report on Manufactures.” However, the

“infant industry” argument for protectionism became obsolete in the twentieth century

when the U.S. became a leading industrial power. On economics grounds, a cutback on

tariffs seemed timely, and levels did actually fall between 1912 and 1922. However,

politics made this period short-lived, and instead trade barriers rose to all-time highs in

the 1920s and 30s. Alarmed by a sharp downward spiral in world trade, the U.S. finally

took major steps to pursue trade liberalization in 1934 through the use of bilateral trade

agreements. In 1947, the General Agreement on Tariffs and Trade (GATT) established a

multilateral framework for trade negotiations, and since then U.S. trade policy has

continued to evolve toward lower trade barriers.

3

This paper focuses on the period between 1922 and 1962, which saw the most

dramatic transformation of U.S. foreign trade policy. Most importantly, I examine the

effect of U.S. trade policies in this period on a particular region – the Pacific Rim. In this

paper, I define the Pacific Rim as the economies of East Asia, Southeast Asia, as well as

Oceania. Sharing borders with the largest ocean in the world, the Pacific Rim economies

were a diverse group of nations that, as a whole, had a long history of trade with the U.S.

After World War I, the Pacific Rim was already an important supplier of raw

materials to the United States. However, in contrast to the more developed economies of

Europe, it was still undergoing early stages of manufacturing development and

industrialization. Major U.S. import-competing goods such as textiles and wool played

important roles in Pacific Rim trade. The Pacific Rim’s exports of finished manufactures

faced heavy competition from U.S. domestic sectors. Does the unique economic position

of the Pacific Rim suggest that U.S. trade policy may have constructed higher trade

barriers with that region than with the rest of the world? If so, why was this the case?

These are the central questions that the paper seeks to address.

Many works have closely studied various aspects of U.S. trade policies during this

period. Frank Taussig (1931) wrote what is widely regarded as a classic on the history of

tariffs of the late nineteenth to early twentieth century. A strong free-trader, he studied

tariffs in terms of the nation’s progress or lack thereof toward free trade. Many works

have also studied the economics and politics of famous tariff bills. For example,

Callahan et al. (1994) and Eichengreen (1989) presented different viewpoints on the

political and economic factors explaining the votes on the Smoot-Hawley Act. Irwin and

Kroszner (1996) studied the role of log-rolling on the same bill. Hayford and Pasurka

4

(1991) calculated effective rates of protection and (1992) conducted empirical studies on

the tariff structure of both the Fordney-McCumber and Smoot-Hawley Act.

Other works also carefully studied the reciprocal trade agreements in the 1930s as

well as the GATT. Bailey et al. (1997) and Lusztig (2004) both analyzed institutional

changes in U.S. trade policy under the Reciprocal Trade Agreements Act (RTAA). Irwin

and Kroszner (1997) conducted empirical studies on the changing political interests

toward trade liberalization from 1934-1945. Bagwell and Staiger (1999) presented an

economic theory of the GATT, and Barton et al. (2006) wrote a book that focused on the

political and legal aspects of both the GATT and the World Trade Organization (WTO).

Lastly, some books are comprehensive studies of trade policies over a long

period. Goldstein (1993) focused on the ideology and political interests in American

trade policy from the antebellum years to the 1990s. Henry Tasca (1938) wrote a

comprehensive study of the reciprocal trade agreements. In addition, Kaplan and Ryley

(1994) and Kaplan (1996) wrote more general accounts of U.S. trade policy from 1890-

1922 and 1923-1995, respectively.

These works analyze trade policies from the perspective of the U.S. vis a vis the

rest of the world, with the latter often treated as a whole entity. They give no particular

emphasis on trading relations with particular regions, and when these relations are

discussed, the primary focus is almost always on Europe. Hardly anything is written

about Pacific trade. The Institute of Pacific Relations had published some studies on U.S.

trade with the Pacific Rim in the first half of the twentieth century, the most notable of

which was by Phillip Wright (1935). Such studies provided comprehensive information

regarding Pacific Rim’s trade with the U.S., but did not focus on the difference in Pacific

5

Rim tariff barriers with the rest of the world. Some might point out that U.S. tariff rates

as a broad principle applied equally to all countries and hence should have largely the

same impact on all regions. However, in tariff bargaining and negotiation, there was

large room for discretion over which sectors to focus on, implying that tariff reduction

among sectors could be highly uneven. Hence, the absence of explicit geographic

discrimination did not preclude the possibility of implicit regional differentiation, and this

leads back to our previous two central questions.

In this paper, I address these questions through a synthesized approach that

integrates ideas from economic history, international economics, and political science. In

the second section, I begin by showing preliminary evidence on the correlation between

tariff rates and import of selected goods in addition to the divergence in protection

between raw materials and manufactured goods from the Pacific Rim. With the initial

evidence in mind, I proceed to the third section and address whether the Pacific Rim

encountered higher barriers to trade. I present a new set of estimates of average ad

valorem tariff rates of imports from the Pacific Rim, and find that they were consistently

higher than that of U.S. imports from the rest of the world. I then interpret the reason

behind this finding through two channels: a political analysis of the voting pattern behind

various trade policies (section four) and a complementary analysis on the historical

circumstances (section five). The political analysis finds that Congressional support for

protection was stronger and more persistent among domestic sectors that competed

significantly with the Pacific Rim. The historical analysis shows that U.S. trade policy in

this period reflected foreign policy priorities that disadvantaged the Pacific Rim in trade

negotiations. At the same time, the Pacific Rim’s regional instability prevented the

6

possibility of regional economic cooperation and coordination, which could have

strengthened the region’s bargaining power in international trade.

7

8

II. Trends in U.S. Import Flow from the Pacific Rim

In 1922, the Congress passed the Fordney-McCumber Act to help relieve an

agricultural depression.1 This legislation ended a prewar trend toward lower tariffs and

helped begin a serious retreat to protectionism. From 1920-23, both average tariff rates

on dutiable imports and on all imports more than doubled to 36.17% and 15.18%,

respectively (Hayford and Pasurka 1992, p. 31). Trade barriers continued to rise and

reached its peak when the infamous Smoot-Hawley Act was passed in 1930. By the

second half of that year, the average tariff rate on dutiable imports reached an all-time

high of 44.87% (Hayford and Pasurka 1992, p.32). Importation of goods from the Pacific

Rim was already quite low in the pre-Fordney-McCumber era. The protectionist

measures only further stifled possibilities for rising imports from the region.

In order to examine some initial evidence on the effect of these tariffs on the

Pacific Rim, I have assembled a dataset of annual imports of several major goods from

the Pacific Rim economies for 1900-1940. This time frame embodies the high tariff era

of 1922-1930 plus some years before and after for comparison. In this section, I present

the trend for cotton manufactures, raw silk, silk fabric, silk laces and embroideries, and

wool. The selected goods were major imports from the Pacific Rim, and were directly

competitive with the U.S. domestic textile and agricultural sectors. For each good, I

graph its inflation-adjusted import values from selected Pacific Rim countries that

primarily exported the good. On the same graph, the average ad valorem equivalent tariff

rate for the good is delineated on a secondary axis. Efforts have been made to account

for inflation by adjusting the value of imports based on an all-commodity wholesale price 1 Some measures to protect agriculture had already begun in 1921, when the Emergency Tariff Act was passed. However, the Emergency Act was largely designed to be a temporary measure that was to be only in effect for six months. Fordney-McCumber Act essentially was then enacted as a permanent measure.

9

index (series Cc84, Historical Statistics of the United States 2006), and hence all import

values are expressed in 1926 dollars. In the original data source for import values,

Foreign Commerce and Navigation of the United States, the exact scope of each good

varied among different years. As a result, I have also fine-tuned the data in order to make

the import values best reflect the same group of goods in each year.

Overall, the data show that the movement of tariff rates (if dutiable) on all these

goods followed the direction of overall U.S. trade barrier. The Underwood-Simmons Act

in 1913 helped temporarily bring down high tariff levels from the earlier era. This

relatively low-tariff period lasted for about eight years. In 1922, tariff rates of these

goods under the Fordney-McCumber Act jumped back to or surpassed those of pre-1913

levels, and along with that the import value of these goods also fell, especially among the

labor-intensive textile products. The Smoot-Hawley Act in 1930 brought these rates to

all time highs, and they started to subside, albeit slowly, later in the 1930s. With the

general trend in mind, we now examine each figure to analyze the depressive effects that

high tariffs imposed on imports from the Pacific Rim.

As Figure 1 shows, Chinese and Japanese imports of cotton manufactures steadily

rose from tens of thousands of dollars to nearly three to four million dollars from 1900 to

1922, but then declined for at least another decade. Similarly, silk products also showed

declining trends after 1922 (see Figures 3 and 4), the year in which tariff rates for silk

fabric jumped back to those of pre-WWI levels at slightly below 55%. Rates for silk

laces and embroideries were high to begin with (about 60%), but were further raised to a

virtually prohibitory level of almost 90%. The higher tariff rates for silk laces and

embroideries, which are more advanced manufactures than silk fabric, can be attributed

10

to China and Japan’s comparative advantage in extremely labor-intensive or hand-made

goods (Wright 1935). This trend is also consistent with Hayford and Pasurka’s finding

(1992) that both the Fordney-McCumber and Smoot-Hawley tariff rates are positively

and significantly correlated with labor intensity. Again, any increase in imports that the

two goods seemed to show in the pre-Fordney-McCumber era was phased out over the

few years after 1922. This included the extraordinarily rapid rise in import of Japanese

silk fabric during 1918-1920 and its equally rapid decline to pre-1918 levels in the four

years after 1922.

Among agricultural goods, wool was a major import from the Pacific Rim as well

as a particularly import-sensitive product. In fact, Taussig (1931) specifically pointed out

wool as a key product that the Fordney-McCumber Act aimed to protect. Figures 5 and 6

show the trend for carpet wool and clothing/combing wool, respectively. Carpet wool

was primarily imported from China. An initial glance at Figure 5 might lead one to

conclude that the depressed effects on wool imports did not emerge until a few years after

1922. However, only carpet wool that was not used for manufacturing carpets, which

composed only about 5% of all domestically consumed carpet wools, was levied a duty

(Taussig 1931). Hence, the import trend of carpet wool was more subject to the influence

of other factors such as economic conditions, industry fluctuations, etc. On the other

hand, clothing and combing wool, which show a high degree of substitutability and

almost identical tariff rates, were mainly imported from Australia and New Zealand, two

of the world’s major producers of wool. After 1922, both types of wool showed dramatic

decline in value, as tariff rates rose from virtually zero in the post-WWI era to more than

100% (Figure 6)!

11

Interestingly, the trends examined have led to a common observation: while the

Smoot-Hawley Act of 1930 was the most infamous tariff legislation (some say of all

legislations) in U.S. history, the Fordney-McCumber Act was more critical in triggering a

serious retreat to protectionism. For all goods analyzed, Smoot-Hawley served to

increase an already high tariff rate to an all time high, but it was Fordney-McCumber that

helped establish this high tariff base from a much lower one in the post-WWI era. This

confirms the view of Schattschneider (Engerman and Gallman 2000). Only in the case of

wool did the Smoot-Hawley rates significantly widen the gap over the Fordney-

McCumber rates. Among the textiles, the Fordney-McCumber tariffs already devastated

the Pacific Rim imports, where as the Smoot-Hawley tariffs at best served to further

reinforce or exacerbate this heavy pressure on imports. In fact, Hayford and Pasurka’s

analysis (1992) show that the change in tariff structure from Fordney-McCumber to

Smoot-Hawley actually decreased tariff rates for more labor-intensive industries.

When we examine the import of the same goods after 1934, marked by the

enactment of the Reciprocal Trade Agreements Act (RTAA) and what’s widely regarded

as the beginning of the breakdown in trade barriers (Lusztig 2004, Bailey et al. 1997),

trends were more mixed. Cotton manufactures showed signs of recovery, especially with

Japan’s export of them rising phenomenally from 1934 to 1937. Silk products,

meanwhile, seemed to stagnate; with import values dropping even lower than 1900

levels. Wool also showed very little recovery. One explanation for the diverse trends is

that while tariff rates had declined significantly after 1934, for many items they remained

virtually prohibitory. When the tariff rate for silk laces and embroideries declined from

90% in 1934 to 68% in 1940, we could not expect the import for silk laces and

12

embroideries to rebound. On the other hand, the decline from a 60% to 42% tariff rate

for cotton manufactures could be expected to and did stimulate imports more.

Of course, not all imports from the Pacific Rim were subjected to duty, as the

region also supplied many duty-free raw materials that the U.S. needed. One important

item that is worth noting is raw silk. Raw silk was a crucial input in silk and rayon

manufacturing. Because there was no significant domestic production, almost all raw silk

were imported from China and Japan. Hence, consumption in the U.S. drove the demand

for imports. As Figure 2 shows, import of raw silk had increased steadily (due to rising

consumption) until 1929, the year in which it became the largest import item of the

United States. The later decline in raw silk imports was attributed to the worldwide

depression that adversely affected the raw silk market in China and Japan (Latham and

Kawakatsu 2000). Not surprisingly, raw silk had remained on the duty-free list

throughout 1900-1940. The combination of a duty-free list based on raw materials such

as raw silk and high tariff rates on manufactured goods like textiles implied even higher

rates of effective protection for the latter goods.

All the evidence so far has demonstrated a significant correlation between the

level of protection (as measured by the ad valorem equivalent tariff rate) and the total

value of imports of major products from the Pacific Rim. Reduction in imports could not

be exclusively attributed to the onset of the Fordney-McCumber Tariff, as imports could

be affected by other factors such as domestic and foreign economic conditions,

technology change, industry conditions, etc. Nonetheless, the policy levied a major

barrier to trade, as evidenced by the dramatic rise in tariff rates, and most directly

contributed to changes in import values. These import flow evidence, however, did not

13

document whether there were any differential barriers to trade between the Pacific Rim

and the rest of the world. We now know that import of goods from the Pacific Rim was

indeed depressed, but was it depressed more so than imports from the rest of the world?

Building upon our initial evidence, we attempt to shed some light on this question in the

subsequent sections.

14

Figure 1:

Figure 2:

15

Figure 3:

Figure 4:

16

Figure 5:

Figure 6:

17

18

III. Empirical Investigation of Differences in Tariff Rates Between the Pacific Rim and the Rest of the World

The previous section highlighted some correlations between tariff rates and

import values among major imports from the Pacific Rim. These effects undoubtedly

reflected general trends in U.S. tariff rates. A key follow-up question is whether imports

from the Pacific Rim encountered a consistently higher trade barrier relative to the rest of

the world? If so, how did the U.S. tariff structure induce such a difference, and did this

difference increase or diminish for goods in different stages of manufacturing? In this

section, I attempt to address these questions by presenting a new set of tariff rates for the

Pacific Rim trade in 1926, 1928, 1931, 1935, 1940, and 1946. The first two years were

under the tariff structure of the Fordney-McCumber Act; 1931 was one year after the

Smoot-Hawley Act; 1935 was one year after the Reciprocal Trade Agreements Act

(RTAA); and 1940 and 1946 were in the decade leading up to the General Agreement on

Tariffs and Trade (GATT). While U.S. government publications publish data on tariff

rates of all U.S. imports in a given year, they do not provide any measure of the average

tariff rate on imports from particular regions or countries. Hence, calculations must be

made from available raw data on imports and duties. The average tariff rate is not a

comprehensive measure of the level of protection, but in this era it was the most direct,

visible, and accessible index available to policy makers. Hence, it is a logical first place

to begin empirical investigation.

Methodology

In calculating this new set of tariff rates, the raw data source I use are the annual

volumes of the Foreign Commerce and Navigation of the United States (FCNUS), which

19

is published by the U.S. Department of Commerce. These volumes contain relatively

complete information on import value of goods broken down by country and duties

collected broken down by items.

I have grouped the data into three categories: all goods, semi-manufactures, and

finished manufactures. Semi-manufactures and finished manufactures represent

selections of goods approximately as defined in the 1931 edition of FCNUS. Please see

Appendix A for a detailed list of goods represented in each category. For the other years,

every effort has been made to maintain the same set of goods in each category for

consistency. Some discrepancies arise due to slight changes in classification and

grouping throughout the different years. However, the tariff rates within a year should

not be affected. As for tariff rates across years, the broad trends should not be largely

affected by the discrepancies either.

To compute estimates for the average ad valorem tariff rates of imports from the

Pacific Rim in year i, denoted ti, I use the following simple form for each category:

tipacific

= (∑jαjDjworld)/ ∑j∑k Ijk

pacific

where Ijkpacific denotes the import value of good (or product group)2 j in country k in the

Pacific Rim,3 Djworld denotes the duties collected for good j from all countries, and αj

denotes the percentage of good j (that was dutiable) imported from Pacific Rim in year i.

In other words,

αj=(∑k Ijkpacific)/Ij

world)

2 When computing the total imports and estimated duties from the Pacific Rim, the breakdown was not by goods, but instead the nine commodity groups as defined in FCNUS (e.g. Table No. XVI of the 1931 edition). 3 Pacific Rim countries (as named in those years) for which data were collected were China (including Kwantung, which was recorded separately in the source), Japan, Australia, New Zealand, Hong Kong, British Malaya, French Indochina, Netherlands Indies, Thailand, and Korea. Names of countries varied slightly across the years, but the regions covered are the same.

20

In this estimate, I have assumed that αj is also equal to the percentage of duties

collected from the Pacific Rim4, because data on duties collected broken down by country

is not available. tipacific is then compared to ti

r.o.w., the tariff rate of imports from the rest of

the world excluding the Pacific Rim, which is denoted as

tir.o.w. = (∑jDj

world-∑jαjDjworld)/(∑jIj

world-∑jIjpacific)

Within each of the three broad categories of goods, both Pacific Rim and rest of

the world tariff rates are calculated over the set of good j’s that comprise only dutiable

goods as well as dutiable and free goods combined. In short, I assumed that tariffs on

any given good are constant across countries. However, I am calculating average tariff

levels for a region. Average tariff levels may differ if regions differed in the composition

of goods exported, and these estimates explore whether average tariffs were higher for

the Pacific Rim because it exported a disproportionate share of the goods that faced high

tariffs. Tables 1 to 6 show each year’s result in sets of three 2×2 matrices of values, with

one matrix for each category of goods. This set of results serves to explain the difference

in tariff barriers between the Pacific Rim and the rest of the world.

The Results

The results for the six years of data as presented in Tables 1-6 exhibit consistent

trends. First, tariff rates for both rest of the world and the Pacific Rim were significantly

4 This simplifying assumption is an estimation of the actual duties collected from the Pacific Rim. It does not take into account that certain goods were levied specific, rather than ad valorem, duties. Because many of the items considered are actually a broad set of items (e.g. cotton manufactures), many different specific duties may apply. Hence, the percentage of imports of a good from the Pacific Rim is not always equivalent to the percentage of duties collected from that region. However, this assumption is still quite reasonable, because tariff rates on particular commodities were generally the same for all countries of origin. Because data on duties collected broken down by country is simply not available, making this assumption is the best option, and will not detract from the main insight of the analysis.

21

higher for finished manufactures than semi-manufactures across all years. Hence, the

positive relationship between the level of protection and the stage of manufacturing as

described by Hawke (1975) for the years 1899 and 1904 persisted through World War II.

In addition, the tariff data is broadly consistent with the trend in tariff policy-making for

this twenty-year stretch. The high tariff rates of 1926, 1928, and 1931 reflect the

protectionist policies of the Fordney-McCumber and Smoot-Hawley Act, while the lower

tariff rates of 1935, 1940, and 1946 were consistent with the argument that the RTAA

Act of 1934 marked the beginning of a downward trend in U.S. trade barriers (Bailey et

al. 1997).

When comparing the Pacific Rim and the rest of the world within each product

grouping, however, the difference is clear and quite consistent. Among all goods, the

tariff rate for Pacific Rim was consistently lower when taking into account both free and

dutiable goods. However, among only dutiable goods, the Pacific Rim had roughly the

same or only slightly lower tariff rate than the rest of the world. The two disparate trends

imply that relative to the rest of the world, the Pacific Rim economies were exporting

proportionally more goods on the duty-free list to the United States. Hence, counting

duty-free goods in the calculation of tariff rates dramatically lowers the tariff rate for the

Pacific Rim.

However, to conclude that Pacific Rim countries actually enjoyed a lower tariff

barrier is inaccurate. The above trend was fully anticipated before the calculations,

because most of the items on the duty-free list were raw materials in primitive stages of

manufacturing that the U.S. did not produce domestically anyway. Perhaps the prime

example was raw silk, which as mentioned before was almost exclusively imported from

22

China and Japan. Even during the most protectionist era of 1922-1930, raw silk had

never been levied a tariff. Compared to the European economies on the Atlantic front,

the Pacific Rim was supplying much more of these raw materials relative to

manufactures. In a way, including these free goods in the calculation distorts the picture,

because these materials were not targeted by much protectionist incentives.

Interestingly, for semi-manufactures, Pacific Rim imports actually show

consistently lower tariff rates than the rest of the world as well. With one exception, this

was true for all the years excluding free goods or not. In many ways, the story with semi-

manufactures is the same as above. Many goods that were included in this category in

FCNUS were also imported free of duty, including many goods that were in relatively

primitive stages of manufacturing. In fact, if we examine the cells of the semi-

manufacture matrices and compare them with the corresponding cells of the all-goods

matrices, the semi-manufactures have a lower tariff rate in every instance. This implies

that even though semi-manufactures excluded both raw materials such as metal ores and

finished manufactures such as silk fabric, the exclusion of the latter goods had a greater

weight. Hence, even more so in this category than the all-goods category, the lower tariff

rates of Pacific Rim imports reflected the relatively heavier import of more primitive

stage goods.

The most notable results from this panel-dataset arrive at the finished

manufactures, the group of goods that was truly targeted by U.S. tariff policy and that

was in most direct competition with domestic industries. For every one of the six years,

the tariff rates on Pacific Rim finished manufactures have been higher. This consistent

set of results is almost certainly not coincidental. The tariff differentials were much

23

greater when we include free imports, implying that the Pacific Rim imported less free

finished manufactures (of which there were not much of). However, even the differences

among just the dutiable goods were significant, ranging from 3% to 8%.

This tariff rate differential suggests an implicit bias built in U.S. tariff legislation

throughout this period. Among finished manufactures, what the Pacific Rim was

exporting in much greater proportion relative to total imports were textile products and,

to a lesser extent, manufactures of animal products and agricultural materials. At the

same time, it was precisely these goods that had received much higher levels of

protection. Items such as cotton manufactures, woolen goods, and silk products were

among some of the most heavily protected items on the U.S. import list. Hence, the

relative weighting of these goods was much higher when calculating tariff rates on

Pacific Rim imports.

In contrast, finished manufactures that were more heavy industry and technology-

oriented such as machineries, chemicals, and metal manufactures were imported in

almost trivial percentages from the Pacific Rim. For example, the imports of iron and

steel advanced manufactures from the Pacific Rim had been no more than 10% of total

for any of the years considered (FCNUS various years). The manufactures of these

heavy-industrial goods had a much more established presence in the European

economies. In addition, these goods also included most of the duty-free finished

manufactures, which explains why the tariff differential widens when both free and

dutiable imports are included.

The results for finished manufactures are consistent with Hayford and Pasurka’s

finding (1992) that the Fordney-McCumber and Smoot-Hawley tariff rates were

24

positively correlated with both labor-intensive and agricultural products. The same study

finds that capital-intensive goods and those with natural resource abundance tend to have

lower rates. Thus, even though U.S. trade policy throughout this period did not officially

discriminate imports from any particular region, the higher level of protection toward

industries such as textiles implicitly imposed greater protection against Pacific Rim

imports.

As an extension of the above analysis, it is highly probable that my calculation of

Pacific Rim imports’ tariff rate underestimates the level of protection imposed on Pacific

Rim countries among finished manufactures, if not all goods. As mentioned in section II,

even within a group of goods like textiles, imports from the Pacific Rim tend to be those

that were in higher stage of refinement, such as the hand-made silk laces from China

(Wright 1935). However, while the current estimates of Pacific Rim tariff rates assign

more weights to imports of products or product groups that the region was exporting

more heavily, they do not take into account tariff level differences within a product

group. For example, if the Pacific Rim had to export about 50% of all silk products that

the U.S. imports, then the current estimate would assume 50% of duties on all silk

products were collected from the Pacific Rim. However, because the Pacific Rim

imported relatively more silk laces than silk fabric, and silk laces had a higher tariff rate,

the actual amount of duties attributed to the Pacific Rim should be higher. Hence, the

actual difference in the level of protection for Pacific Rim economies versus the rest of

the world should actually be greater than presented.

In order to obtain a sense of the magnitude of underestimation as well as to extend

the analysis into 1960, I construct a similar set of estimates from a different data source.

25

The Annual Report of the Secretary of the Treasury on the State of the Finances presents

duties collected on dutiable imports for consumption for various years. This source lacks

the details on import value of goods broken down by country that FCNUS provides.

However, its greatest advantage is that the amount of duties collected is recorded

according to region. Recognizing this feature, I compute the ad valorem equivalent tariff

rates for all dutiable imports for consumption from 1938-1960 (Table 7).5

The results are even more striking. In every year except for 1951, the tariff rate

for the Pacific Rim is higher than that of Europe and the rest of the world including

Europe. Hence, this table shows that higher tariff rates for the Pacific Rim persisted after

1946. Furthermore, comparing these rates for 1940 and 1946 to my previous estimates of

the same measures, the latter significantly underestimated the gap in tariff rates. In 1940,

the Treasury figures show a 10% higher rate for the Pacific Rim than the rest of the

world, while my own estimates suggest they were about the same. In 1946, the Treasury

figures show a 30% difference, compared to my own of 12%. Hence, we expect the gap

in tariff rates among manufactured goods to be even higher than what my estimates show,

even though the Treasury reports did not record the duties broken down by

manufacturing stage such that precise calculations could be made.

It should be noted that the average ad valorem tariff rate as computed in this

section is not the only possible measure of the level of trade barrier. In fact, there is no

“true” measure of the correct tariff rate in economic terms. Using unweighted averages

could be misleading, giving high weight to items whose importance for trade was minor.

Weighted averages such as my estimates are an improvement on this account. Trade-

share weights, however, are nevertheless partly endogenous to the effects of tariff rates 5 Similar data for 1922-1938 and 1958 were not available.

26

on trade flows. The most commonly used alternative is the “effective” tariff rate [such as

those computed in Hayford and Pasurka (1991) and Archibald et al. (2000)], which takes

account of tariff rates on inputs. However, existing studies such as Hawke (1975)

suggest that American effective tariff rates were highly correlated with average tariff

rates during the historical period we are considering. If this is so, then the additional

investment involved in calculating effective tariff rates may not have contributed

substantial new insights for the purpose of this paper.

Overall, the data show that Pacific Rim countries faced consistently higher

barriers to trade, primarily on finished goods. Their exports of raw materials or primitive

stage manufactures enjoyed low or no tariffs. These goods, however, were not under

import competition with the U.S. It was among the finished manufactures that the Pacific

Rim faced implicit discrimination. It is as if U.S. trade policy were designed to

discourage Pacific Rim economies from moving into production of finished

manufactures. Was this a bias built into the design of U.S. trade policy for reasons of

international diplomacy? Or was it instead merely an incidental outcome of the domestic

political processes? In the next section, with a special focus on Congress, we analyze

some political economy issues that may explain this difference in level of protection.

27

Table 1: Tariff Rates (in Percentages), 1926

All Goods: Rest of the World Pacific Rim free and dutiable 16.4 4.7 dutiable only 39.5 37.3 Semi-Manufactures: Rest of the World Pacific Rim free and dutiable 8.6 3.5 dutiable only 26.0 21.0 Finished Manufactures:

Rest of the World Pacific Rim free and dutiable 25.5 44.4 dutiable only 39.6 48.0

28

Table 2: Tariff Rates (in Percentages), 1928 All Goods: Rest of the World Pacific Rim free and dutiable 15.5 5.4 dutiable only 38.9 37.2 Semi-Manufactures: Rest of the World Pacific Rim free and dutiable 8.4 2.8 dutiable only 26.0 18.5 Finished Manufactures: Rest of the World Pacific Rim free and dutiable 25.0 44.3 dutiable only 40.9 48.6

29

Table 3: Tariff Rates (in Percentages), 1931 All Goods:

Rest of the World Pacific Rim free and dutiable 20.2 7.8 dutiable only 53.8 48.0 Semi-Manufactures: Rest of the World Pacific Rim free and dutiable 5.8 6.9 dutiable only 23.3 18.7 Finished Manufactures: Rest of the World Pacific Rim free and dutiable 23.9 42.6 dutiable only 46.6 49.0

30

Table 4: Tariff Rates (in Percentages), 1935 All Goods: Rest of the World Pacific Rim free and dutiable 20.3 7.5 dutiable only 43.1 40.8 Semi-Manufactures: Rest of the World Pacific Rim free and dutiable 9.6 2.4 dutiable only 25.1 20.0 Finished Manufactures: Rest of the World Pacific Rim free and dutiable 22.6 43.7 dutiable only 40.6 47.7

31

Table 5: Tariff Rates (in Percentages), 1940 All Goods: Rest of the World Pacific Rim free and dutiable 15.6 4.8 dutiable only 35.7 34.9 Semi-Manufactures: Rest of the World Pacific Rim free and dutiable 7.3 2.9 dutiable only 16.5 10.6 Finished Manufactures: Rest of the World Pacific Rim free and dutiable 15.9 35.7 dutiable only 31.9 40.2

32

Table 6: Tariff Rates (in Percentages), 1946 All Goods: Rest of the World Pacific Rim free and dutiable 9.7 11.2 dutiable only 24.2 36.7 Semi-Manufactures: Rest of the World Pacific Rim free and dutiable 5.7 3.9 dutiable only 9.7 7.2 Finished Manufactures: Rest of the World Pacific Rim free and dutiable 13.5 23.8 dutiable only 25.1 29.8

33

Table 7: Tariff Rates of Dutiable Imports for Consumption (in Percentages)

Source: Annual Report of the Secretary of the Treasury on the State of the Finances. Department of Treasury, various years.

6 The original source did not record value of duties in a given year from all countries in the Pacific Rim as defined in my previous estimate. Hence, the Pacific Rim’s scope varied some throughout different years. However, the tariff rates should not be affected greatly, because the source suggests that the countries that weren’t recorded had low value of duties.

Year Pacific Rim6 Europe Rest of the World (including Europe)

1938 47.6 38.2 37.2 1939 48.5 36.4 37.1 1940 47.0 36.9 35.9 1941 48.1 40.1 36.6 1942 55.6 39.5 30.4 1943 61.0 41.2 28.9 1944 54.8 40.5 31.5 1945 61.3 34.8 26.2 1946 58.5 28.2 23.9 1947 46.9 28.0 20.3 1948 28.9 24.4 15.2 1949 21.2 20.8 12.6 1950 23.2 21.0 12.6 1951 17.8 18.0 11.9 1952 18.8 17.3 11.6 1953 21.6 17.2 11.7 1954 20.4 17.0 11.0 1955 22.2 17.3 11.1 1956 21.0 16.8 10.7 1957 20.5 15.9 10.1 1959 19.5 14.5 10.1 1960 18.8 14.3 10.7

34

IV. Political Economy of Trade Legislation: Evidence from Congressional Roll-Call Votes

From 1922 to 1962, Congress was an influential, if not central, institution in guiding

U.S. trade policy. Before the 1934 Reciprocal Trade Agreements Act, Congress held the

power of setting tariff rates on U.S. imports on an item-by-item basis. Even though trade

agreements existed before 1934, they played a relatively minor role, and were subject to

two-thirds approval from Congress. While the executive branch began to play a

prominent role in making trade policy after the RTAA Act, many aspects of which will

be examined in the next section, Congress was still a major player in the subsequent

years. Most importantly, studies have emphasized that Congress could have severely

impeded or destroyed the trend toward lower trade barriers after 1934, and its support for

trade liberalization was by no means a sudden enlightenment of its members’ knowledge

of international trade (see Bailey et al. 1997 and Lusztig 2004).

For these reasons, this section studies Congressional roll-call votes as the main

framework of analysis. Were members of Congress responsive to economic interests that

competed relatively more heavily with the Pacific Rim? If so, how important were these

interests compared to other factors such as party affiliation? And lastly, how did these

trends change from 1922 to 1962? To address these questions, two complementary sets

of data are presented. The first is a set of tables on Congressional votes, by parties as

well as economic interests, namely cotton manufacturing, silk manufacturing, and wool.

These three items were selected not only because they were major import-competing

industries in the United States, but also because they were significant for the economic

development of the Pacific Rim. All voting records are obtained from InterUniversity

Consortium for Political and Social Research (ICPSR). Table Set 1 presented the vote

35

breakdown among Congress members of the top five states of production for each item,

as well as among all members. Please see Appendix B for a detailed description of the

data sources used to determine the top five states of production for each good and each

vote. Tables were separated for the House and Senate, and were constructed for votes on

the following bills: 1922 Fordney-McCumber Act; 1930 Smoot-Hawley Act; 1934

RTAA Act; 1945, 1949, and 1955 RTAA renewals; and the Trade Expansion Act of

1962.

As already discussed in Section II, the Fordney-McCumber and Smoot-Hawley Act

were two of the most protectionist bills in U.S. trade history. Both bills were initially

designed to help the agriculture sector. The Fordney-McCumber Act was passed because

farmers in western United States faced severe price declines in their products after World

War I. Hence, the Western agricultural interests were identified as the primary coalition

in supporting the bill (Taussig 1931). The Smoot-Hawley Act originated from a special

session called on by President Hoover to aid the farmers, as Midwestern and other

regions’ farming interests had been advocating higher duties since Hoover’s election in

1928. President Hoover did not intend to significantly alter the duties on manufactures,

calling for “limited revision” when necessary, but the domestic political process in

Congress put that far from reality. When the bill was passed, both agricultural and

manufacturing duties were raised dramatically.

The Smoot-Hawley Tariff not only failed to achieve its aim of aiding the farmers, but

also helped spur retaliatory trade measures from other nations (Kaplan 1996).

Increasingly higher trade barriers were levied among countries, and world trade sank

rapidly. Recognizing the international instability that trade barriers helped contribute to

36

as well as recovering from the effects of the Great Depression, the United States finally

took a direction toward trade liberalization in 1934, when the Reciprocal Trade

Agreements Act was passed. This measure was a product of the newly elected Roosevelt

Administration, and was designed by free-trade advocates such as Secretary of State

Cordell Hull. The RTAA Act was technically an amendment to the Smoot-Hawley Act,

but gave the President the authority to reduce (or raise) tariffs up to 50% in exchange for

reciprocal reductions on American exports with other nations. The bill was passed

relatively quickly with the help of a Democrat-majority Congress, and was subject to

renewal in three years.

The RTAA was renewed eleven times over the next thirty years or so. In this section,

the analysis included the 1945, 1949, and 1955 renewals. The 1945 renewal was chosen

because it was the last renewal before the creation of the General Agreement on Tariffs

and Trade (GATT). The GATT was initiated by the United States as a framework for

multilateral trade negotiations for the first time. However, the GATT was not technically

an organization, and hence bypassed the approval of Congress, to the dismay of many

Congress members (Kaplan 1996). The 1949 renewal of RTAA came one year after the

GATT talks in Geneva were concluded. Hence, votes on these two renewals allow us to

compare changes in voting patterns in the pre and post-GATT years. Furthermore, these

two years were also the first instances in which the Republican Party was split on, instead

of overwhelmingly against, voting for free-trade legislation.

The 1955 renewal was chosen to reflect voting patterns in the 1950s. Irwin

(unpublished manuscript 2006) described the 1950s renewals as reluctant, often

containing exception clauses and peril points. In addition, there were more shifts in

37

attitudes on international trade within parties. For example, unlike the previous years, the

Republicans now had a group of internationalists in favor of free trade, and the Southern

Democrats had begun to turn away from free trade.

The last bill that this section will analyze is the Trade Expansion Act of 1962, which

was passed during the Kennedy Administration. By then, both the executive and

legislative branch were again under the control of Democrats. The purpose of this Act

was to strengthen Atlantic unity (Irwin, unpublished manuscript, 2006), and it did away

with the item and country-specific approach in tariff reduction used in earlier years. The

Kennedy administration successfully tied this bill to business interests, and the bill easily

passed in Congress. The Trade Expansion Act set the scene for modern U.S. trade policy

making. Overall, the seven bills studied were major trade bills that altogether represented

a sequential roadmap of U.S. trade policy trends during those five decades.

The second piece of empirical work assembled is a complementary set of regression

tables on the same votes and years. The regression method is probit voting analysis, in

which the dependent variable is a binary (0,1) variable where 0=vote against free trade

and 1=vote in favor of free trade. Voting in favor of free trade means a “no” vote on the

1922 and 1930 bills, and a “yes” vote on all the other bills. All Congressional voting

records and members’ party affiliations are obtained from data available at

InterUniversity Consortium for Political and Social Research (ICPSR). The independent

variables are a binary party affiliation variable (0=Democrat, 1=Republican), variables of

several economic interests – cotton and silk manufacturing, wool, sugar, wheat, cotton;

and an agriculture production variable. These variables are values of state-level per

capita production or value added, or per capita land and farm value for the agriculture

38

variable in some years.7 Data for each variable is calculated from the nearest years’

Census of Manufactures or Census of Agriculture. Please see Appendix C for a more

detailed description of the source data used for each year. For each Chamber of Congress

for a particular vote, the regressions are conducted according to the following basic

model for 1922 and 1930:

(1) Vi = a1+a2Party+u1

(2) Vi= b1+b2CottonManuf.+b3SilkManuf.+u2

(3) Vi= c1+c2CottonManuf.+c3SilkManuf.+c4Wool+c5Cotton+c6Sugar+c7Wheat+u3

(4) Vi= d1+d2CottonManuf.+d3SilkManuf.+d4Wool+d5Cotton+d6Sugar+d7Wheat+d8Agric+u4

(5) Vi= f1+f2Party+f3CottonManuf.+f4SilkManuf.+f5Wool+f6Cotton+f7Sugar+f8Wheat+f9Agric+u5

The model is essentially the same for the other years, except that variables for

cotton manufacturing and silk manufacturing are combined into one variable for 1945

and 1949, and a broad variable for all textile products are used for the years 1955 and

1962. These changes are made due to the lack of detailed available data on cotton and

silk manufacturing production as separate industries. The results are shown in Table Set

2, and each equation denotes a column in each regression table. Minor deviations to this

model occurred in a few instances for reasons that will be explained later on. This model

builds on the tables of roll-call votes and attempts to confirm the same trends as well as

offer additional insights on the degree to which Congress members were responsive to

economic interests and party affiliation. Hence, I will discuss the results of these

regressions in conjunction with the results from the vote tables.

7 Data on value-added are used for production of textiles in the 1955 and 1962 votes. Data on total value of farms (land and buildings) are used for votes starting in 1934.

39

The Results

One of the most prominent features of the results is the powerful effect of party

affiliation in predicting a Congress member’s vote. A brief glance at the voting tables

shows that in almost all instances, votes were strongly partisan – Democrats more likely

to vote in favor of free trade and Republicans in favor of protectionism. The regression

tables showed these effects more precisely. For House votes, the party variables in both

equations (1) and (5) are significant at least in the five percent level for all the years

studied. The same result is true for Senate votes except for 1922 and 1955, in which the

significance, if any, is weaker. In addition, the Pseudo-R2 values indicate that party

affiliation had by far the strongest predictive power compared to any other variables. Just

by regressing vote on party itself, the Pseudo-R2 can be as high as 0.75 (in 1934’s House

vote on the RTAA Act). Since 1945, party’s predictive power was still high but

weakened significantly. This trend is consistent with the Republican’s conversion to

trade liberalization in the 1940s as argued by Irwin and Kroszner (1997). In fact, they

have conducted the same regression on party alone for Senate votes on the 1934 RTAA

Act and 1945 renewal, and the Pseudo-R2 they have estimated are almost identical to my

estimates. Irwin and Kroszner did not study votes in the House, but my estimates show

that party effect on House votes are even stronger in both cases.

When all the economic interest variables are taken into account, party still adds

significant prediction power. This effect can be seen from the increase in Pseudo-R2

from equation (4) to (5) for each vote. This increase averaged 0.42 for votes from 1922

to 1934, and 0.21 for 1945 to 1962. Because coefficients in a probit regression can only

be interpreted for the significance of the direction of voting, not the magnitude, I attempt

40

to make a more precise estimate of the coefficients by calculating the predicted

probabilities of voting in favor of free trade given a certain party. To do so, I utilized a

Stata© command, prtab, written by Long (package spost9_ado from

http://www.indiana.edu/~jslsoc/stata, 2007). prtab calculates the predicted probability of

a variable as defined in Long and Reese (2001, p.120) with all other variables held at the

mean.8

Table Set 3 indicates the predicted probability of a Democrat or Republican

voting in favor of free trade for a particular year, holding all variables at the mean. As

this table shows, the Fordney-McCumber, Smoot-Hawley, as well as the RTAA Acts

were strictly partisan. The Senate showed breakdown in partisanship in 1945 and 1949,

in which Republicans were much more likely to vote in favor of free trade, and in 1955

their predicted probability of voting in favor of free trade was actually more than 0.9.

The same breakdown in the House was slower and weaker, as it was not until 1949 that

House Republicans’ likelihood to vote in favor of free trade took a major jump.

Interestingly, there seems to be a retreat to stronger partisanship in 1962 as the predicted

probability for Republicans to vote for free trade decreased significantly. Despite the

breakdown in partisanship, party remains the most reliable single variable to predict a

Congress member’s vote throughout this period.

While party affiliation was an important predictor of voting patterns, economic

interests also played important roles at various points. The signs of silk manufacturing’s

coefficients for 1922, 30, and 34 were negative, indicating states with heavier production

of silk manufactures were more likely to vote in favor of protectionism. Without

8 The predicted probability as defined by Long and Reese (2001, p.120) for Probit models is Pˆr(y=1|x)=Φ(xβ^), where Φ is the c.d.f. of the normal distribution where variance equals 1.

41

including the party variables, these coefficients are significant at the one percent level in

the House votes on all three years. Once party is added in equation (5), the coefficients

became less significant or insignificant. To explain this, we can refer back to the voting

tables. In these three years, the Republican Party was the majority party in the top silk

manufacturing states, which were heavily concentrated in the Northeastern states of

Pennsylvania, New York, and New Jersey. Hence, once taking into account this

Republican Party effect, the coefficients are not as significant. The same coefficients for

the Senate votes are significant in column (2) of each table, but not the other columns.

The weaker significance of silk manufacturing is expected in the Senate since a Senator is

representing a much broader set of interests.

Interestingly, for the same three years, coefficients on cotton manufacturing

showed very little, if any significance. In fact, their signs were often slightly positive,

though some became negative once party is controlled for. This can be explained by the

shift of cotton manufacturing toward the South since the 1920s. In fact, Massachusetts

was the only Northeastern state that was still on the top-five list of cotton manufacturing

production for these years. Again referring back to the vote tables, the cotton

manufacturing states were more heavily Democratic, and hence they were more likely to

vote in favor of free trade. These regressions suggest that their response to party

affiliation had outweighed their response to economic interests in these cases.

Unfortunately, data limitations do not allow us to see strictly comparable

coefficients on cotton and silk manufacturing for the years since 1945. Nevertheless, we

can gain insights by examining the combined variable of cotton, rayon, and silk

manufacturing or textile products in general. For the 1945 and 1949 renewals, cotton and

42

rayon manufactures (which included silk production) had mostly positive coefficients.

They were significant in the House votes for equation (2), but not so for the other

instances. Because cotton manufacturing is likely weighted heavily in this variable, the

coefficients’ trend resembled closely to those of cotton manufacturing in the previous

years. But turning to 1955 and 1962, textile groups showed significant resistance to free

trade, as the coefficient in (5) were negative and significant in the 1955 House votes and

1962 House and Senate votes. Even though this period is well into the steady course of

trade liberalization in the U.S., there seems to be a resurgence of resistance to free trade

by textile groups.

This resurgence of resistance had critical importance for the Pacific Rim, and may

very well have contributed to the higher trade barrier with the Pacific Rim as studied in

the previous section. Even though these free-trade bills were passed, resistance by textile

states can and did create many exception clauses and special provisions that stifled

imports from Pacific Rim. Furthermore, the Pacific Rim, in particular textile-producing

countries like Japan, was on the minds of Congress members. Douglas Irwin has also

made this point by describing 1955 as a turning point,

The 1955 vote was the first in which members of Congress from textile-producing regions in New

England and the South insisted on the strengthening of the peril points and escape clause

provisions for the express purpose of protecting the textile industry from Japanese imports

(unpublished manuscript, 2006, p.47).

The regression results confirm this new orientation in political interest, although if more

detailed data were available, an even more precise statement can be made.

43

In addition to textile products, we also include several major agricultural products

in the analysis. Wool is included because it was a major import from the Pacific Rim,

especially Australia and New Zealand. To give a comparative perspective between

different agricultural interests, cotton, sugar, wheat, and a general agriculture variable are

also included. All these agricultural items were important for the economic development

of the U.S. For wool, almost all coefficients for all votes were negative and thus

associated with greater likelihood to vote for protection. The coefficients were

significant, however, in the beginning and end of the time period. Looking at the House

votes on the Fordney-McCumber tariff, wool coefficients are significant at the one

percent level for equations (3) and at the five percent level for equations (4) and (5). This

strong push for protectionism from the wool-producing states was not surprising, because

the Fordney-McCumber Act was designed to provide relief for an agricultural depression

for which wool producers was a major interest (Taussig 1931). The coefficient is also

significant for the Senate vote on the Smoot-Hawley Act for equation (5) at the five

percent level, as the bill is also designed to support agriculture, though less specifically

for wool as the Fordney-McCumber Act.

The support of wool states for protectionism was statistically insignificant for the

subsequent years until 1955, when it seemed to resurface as an interest in favor of

protectionism. The 1955 Senate vote was significant at the one percent level for

equations (3), (4), and (5), and the 1962 House and Senate votes were significant at the

five percent level in equation (5). Again, this phenomenon was similar to the case of the

textile interests. The wool states’ support for protectionism during a late stage of

liberalization implied greater harm for Pacific Rim imports. In fact, as early as GATT’s

44

Geneva negotiations in 1947, wool was brought up as a major issue. Congress attempted

to impose trade restrictions on wool in order to support domestic prices, and import fees

as well as quotas were passed. President Harry Truman counteracted this highly

protectionist move by vetoing the bill, and made an active move of his own by giving

Undersecretary of State William Clayton the authority to cut wool tariff by 25 percent

(Irwin, unpublished manuscript, 2006).

Among the other variables, cotton-producing states show mostly positive

coefficients for all the years. These coefficients are often significant for equations (3)

and (4), but generally not so for equation (5). Cotton was mainly produced in

Democratic states in the South, and the crop itself has always been a significant export

item. Thus, it is expected to find cotton states voting in favor of free trade. One odd

exception to this is the high significance of cotton in the direction of protectionism for the

1962 House vote. It is not clear why this is the case. One possible reason is its

collinearity with the party variable. In fact, column (4) shows that by removing the party

variable and including all other independent variables, the cotton coefficient becomes

positive. In any case, this outlier would not detract from cotton states’ general trend in

favor of free trade.

The sugar variable shows significant coefficients toward protectionism for the

years 1922, 1930, and 1934, though this variable was dropped in the 1930 Senate vote

due to collinearity problems. Sugar production was primarily concentrated in Louisiana,

and there were strong sentiments in favor of protecting domestic production. But sugar’s

coefficients were generally not significant for the later years. This, however, could be

due to the increasing importance of the sugar quota system after 1934. The sugar quota

45

was revised downward in 1948, 1951, and 1956 (Dye and Sicotte 2004), suggesting that

support for protectionism shifted away from tariffs to quotas in this sector. The wheat

variables were also very weakly significant, if at all. Their mostly negative signs suggest

weak correlation with voting for protectionism.

Lastly, the variable for agriculture in general also did not show strong consistent

trend. Most of its coefficients are close to 0, suggesting a relatively neutral attitude from

agriculture as a whole. For the 1922 and 1934 Senate votes, agriculture is significant in

favor of free trade at the ten percent level. Interestingly, agriculture is also significant at

the one percent level for the Smoot-Hawley votes in both the House and the Senate. This

is somewhat paradoxical given that President Hoover signed this bill intending to help

agriculture -- yet overall agriculture seemed to have been against the bill. On another

level, this is not all surprising, because the agricultural interests during that time had

conflicted attitudes toward protection.

The push for higher protectionism in agriculture was sector-specific and region-

specific. Those who produced export-oriented crops did not need protection, as it could

do them more harm than good. In fact, Eichengreen (1989) cites inland agriculture as a

coalition against the Smoot-Hawley tariff, and analysis from Callahan et al. (1994) shows

that even border agricultural interests were more likely to vote against the bill once

controlled for party. In addition, evidence from Kaplan (1996) has shown that some

farming groups resisted the Smoot-Hawley tariff for another reason – the higher tariffs on

manufacturing would impose higher prices on agricultural implements and inputs.

Agriculture variable’s coefficients were generally not significant after 1934, perhaps

46

because agriculture was no longer the dominating focus of tariff legislation or because

legislators no longer set tariff rates on specific items.

Overall, the prediction power that all the per-capita production variables could

add to the party effect is sizable. For all fourteen regressions, these economic interest

variables increased the Pseudo-R2 from column (1) to column (5) by 15 percentage points

on average. Overall, votes on all the trade legislations have clearly been responsive to

economic interests in addition to party affiliation. However, the extent of the ability of

economic interests to lobby for protection varied. As this period progressed, some

interests clearly weakened in their support for protectionism, which allowed the U.S. to

internalize a large part of domestic opposition to trade liberalization. The results broadly

suggest that constant adjustment and realignment of economic interests were taking place

in Congress, and there were considerable movement for negotiations and trade-offs in

supporting freer trade. However, this movement happened in a way that disadvantaged

the Pacific Rim, as domestic economic interests that had stronger ability to maintain

protection were often competitive with Pacific Rim imports.

Based on the above analysis, we attempted to explain the higher barrier to trade

with the Pacific Rim from a political economy perspective. This task was challenging in

that each Congress member’s vote on a trade policy was not a binary decision to impose

higher tariff barriers on the Pacific Rim or not. It was a binary decision on a bill that in

principle applied to all countries. In addition, tariff rates are only one measure of

protection, and in some sectors alternative measures such as quotas were even more

protectionist. These embedded measures in trade bills may not be reflected easily in a

47

yea or no vote. However, from examining voting patterns, we are able to draw some

insights on how the Pacific Rim was affected.

First, we see that economic interests were important contributors to predicting a

vote, but altogether not nearly as important as a Congress member’s party affiliation. In

the years before 1945, many economic interests, especially those that were export-

oriented, were much more likely to be correlated with voting pattern. But overall, the

votes’ sensitivity to many economic interests were not strongly significant as the U.S.

began to pass a series of measures toward free trade.

However, despite this breakdown in the protectionist coalition, there remained

specific interests in which Congress members who represented these interests

significantly voted in favor of protectionism. In this section, textile and wool served as

the representatives. And it is precisely these goods that had important trading

relationships with the Pacific Rim. In 1955 and 1962, when neither sugar, wheat, cotton,

or agriculture production were strongly associated with a vote in favor of protectionism,

wool and textiles remained significant economic interests in that direction. This evidence

suggests that imports that competed with the Pacific Rim were often subject to more

political support for protection than those of other agricultural products. However, was

the higher barrier only a byproduct of Congress’s relative weighting of domestic

economic interests? Could there have been a more international and diplomatic aspect

that also contributed to the higher barriers to trade with the Pacific Rim? To extend this

question, in the next section we examine historical and diplomatic evidence on U.S. trade

policy-making, now incorporating the important role played by the executive branch.

48

Table Set 1: Congressional Roll-Call Votes on Various Trade Bills.*

Votes on 1922 Fordney-McCumber Act, 67th House. Party Yea Nay Total

Democrats 0 8 8 Republicans 62 5 67

Silk States

All 62 (82.67%)

13 75

Democrats 0 12 12 Republicans 11 1 12

Cotton States

All 11 (45.83%)

13 24

Democrats 0 0 0 Republicans 26 1 27

Wool States

All 26 (96.3%)

1 27

Democrats 4 76 80 Republicans 205 13 218

All States

All 210 (69.77%)

91 301

Votes on 1922 Fordney-McCumber Act, 67th Senate. Party Yea Nay Total

Democrats 0 2 2 Republicans 6 0 6

Silk States

All 6 (75%)

2 8

Democrats 0 5 5 Republicans 1 0 1

Cotton States

All 1 (16.67%)

5 6

Democrats 0 1 1 Republicans 4 1 5

Wool States

All 4 (66.67%)

2 6

Democrats 2 23 25 Republicans 41 5 46

All States

All 43 (60.56%)

28 71

*Note: 1. Percentage values in parentheses denote the percentage of votes in favor of the bill. 2. In the last row, the total number of votes includes Congressional members who voted but were neither in the Democratic or Republican Party.

49

Votes on 1930 Smoot-Hawley Act, 71st House Party Yea Nay Total

Democrats 1 27 28 Republicans 68 2 70

Silk States

All 69 (70.41%)

29 98

Democrats 1 36 37 Republicans 12 0 12

Cotton States

All 13 (26.53%)

36 49

Democrats 2 15 17 Republicans 12 1 13

Wool States

All 14 (46.67%)

16 30

Democrats 14 132 146 Republicans 208 20 228

All States

All

222 (59.2%)

153 375

Votes on 1930 Smoot-Hawley Act, 71st Senate Party Yea Nay Total

Democrats 0 3 3 Republicans 7 0 7

Silk States

All 7 (70%)

3 10

Democrats 0 7 7 Republicans 1 0 1

Cotton States

All 1 (12.5%)

7 8

Democrats 1 4 5 Republicans 4 0 4

Wool States

All 5 (55.56%)

4 9

Democrats 5 30 35 Republicans 39 9 48

All States

All

44 (51.16%)

42 86

50

Votes on 1934 RTAA Act, 73rd House Party Yea Nay Total

Democrats 47 1 48 Republicans 0 50 50

Silk States

All 47 (47.96%)

51 98

Democrats 29 1 30 Republicans 0 10 10

Cotton States

All 29 (72.5%)

11 40

Democrats 33 1 34 Republicans 1 10 11

Wool States

All 34 (75.56%)

11 45

Democrats 269 11 280 Republicans 2 99 101

All States

All

274 (71.17%)

111 385

Votes on 1934 RTAA Act, 73rd Senate Party Yea Nay Total

Democrats 2 0 2 Republicans 0 5 5

Silk States

All 2 (28.57%)

5 7

Democrats 9 0 9 Republicans 0 0 0

Cotton States

All 9 (100%)

0 9

Democrats 4 0 4 Republicans 0 4 4

Wool States

All 4 (50.00%)

4 8

Democrats 46 5 51 Republicans 4 25 29

All States

All

52 (63.41%)

30 82

51

Votes on 1945 RTTA renewal, 79th House Party Yea Nay Total

Democrats 47 2 49 Republicans 16 41 57

Silk States

All 63 (59.43%)

43 106

Democrats 36 2 38 Republicans 1 9 10

Cotton States

All 37 (77.08%)

11 48

Democrats 31 4 35 Republicans 2 6 8

Wool States

All 33 (76.74%)

10 43

Democrats 205 12 217 Republicans 34 140 174

All States

All

239 (60.97%)

153 392

Votes on 1945 RTTA renewal, 79th Senate Party Yea Nay Total

Democrats 5 1 6 Republicans 2 1 3

Silk States

All 7 (77.78%)

2 9

Democrats 5 1 6 Republicans 1 0 1

Cotton States

All 6 (85.71%)

1 7

Democrats 3 2 5 Republicans 0 1 1

Wool States

All 3 (50%)

3 6

Democrats 39 5 44 Republicans 15 16 31

All States

All

54 (72%)

21 75

52

Votes on 1949 RTAA renewal, 81st House Party Yea Nay Total

Democrats 55 2 57 Republicans 31 17 48

Silk States

All 86 (81.90%)

19 105

Democrats 37 2 39 Republicans 4 4 8

Cotton States

All 41 (87.23%)

6 47

Democrats 30 1 31 Republicans 7 6 13

Wool States

All 37 (84.09%)

7 44

Democrats 234 6 240 Republicans 84 63 147

All States

All

319 (82.22%)

69 388

Votes on 1949 RTAA renewal, 81st Senate Party Yea Nay Total

Democrats 3 0 3 Republicans 3 1 4

Silk States

All 6 (85.71%)

1 7

Democrats 8 0 8 Republicans 1 0 1

Cotton States

All 9 (100%)

0 9

Democrats 6 0 6 Republicans 0 2 2

Wool States

All 6 (75%)

2 8

Democrats 47 1 48 Republicans 15 18 33

All States

All

62 (76.54%)

19 81

53

Votes on 1955 RTAA renewal, 84th House Party Yea Nay Total

Democrats 36 11 47 Republicans 9 10 19

Silk States

All 45 (68.18%)

21 66

Democrats 28 14 42 Republicans 5 3 8

Cotton States

All 33 (66%)

17 50

Democrats 29 4 33 Republicans 17 5 22

Wool States

All 46 (83.64%)

9 55

Democrats 186 35 221 Republicans 109 75 184

All States

All

295 (72.84%)

110 405

Votes on 1955 RTAA renewal, 84th Senate Party Yea Nay Total

Democrats 6 1 7 Republicans 2 0 2

Silk States

All 8 (88.89%)

1 9

Democrats 6 1 7 Republicans 1 0 1

Cotton States

All 7 (87.5%)

1 8

Democrats 2 1 3 Republicans 4 1 5

Wool States

All 6 (75%)

2 8

Democrats 36 6 42 Republicans 39 7 46

All States

All

75 (85.23%)

13 88

54

Votes on 1962 Trade Expansion Act, 87th House Party Yea Nay Total

Democrats 39 7 46 Republicans 10 9 19

Silk States

All 49 (75.38%)

16 65

Democrats 35 7 42 Republicans 2 1 3

Cotton States

All 37 (82.22%)

8 45

Democrats 29 7 36 Republicans 6 13 19

Wool States

All 35 (63.64%)

20 55

Democrats 218 35 253 Republicans 80 90 170

All States

All

298 (70.45%)

125 423

Votes on 1962 Trade Expansion Act, 87th Senate Party Yea Nay Total

Democrats 8 1 9 Republicans 1 0 1

Silk States

All 9 (90%)

1 10

Democrats 8 1 9 Republicans 0 0 0

Cotton States

All 8 (88.89%)

1 9

Democrats 6 0 6 Republicans 1 1 2

Wool States

All 7 (87.5%)

1 8

Democrats 56 1 57 Republicans 22 7 29

All States

All

78 (90.7%)

8 86

55

Table Set 2: Probit Analysis of Various Trade Bills Probit Analysis of Vote on 1922 Fordney-McCumber Act, 67th House Variable (1) (2) (3) (4) (5)

Constant 1.64**

(6.96) -0.443** (-5.06)

-0.420* (-2.32)

-0.272 (-1.06)

7.20* (2.23)

Party -3.20** (-11.76)

-- -- -- -8.00* (-2.54)

Cotton Manuf. -- 0.008* (2.58)

0.000 (-0.04)

0.000 (-0.20)

-0.004 (-0.54)

Silk Manuf. -- -0.043** (-4.07)

-0.032** (-2.86)

-0.035** (-2.92)

-0.047+ (-1.73)

Wool -- -- -0.373** (-2.67)

-0.356* (-2.52)

-0.748* (-2.19)

Cotton -- -- 0.026** (6.44)

0.026** (6.44)

-0.033 (-1.45)

Sugar -- -- -0.010 (-0.34)

-0.012 (-0.43)

-0.316* (-2.37)

Wheat -- -- -0.005+ (-1.67)

-0.003 (-0.84)

-0.002 (-0.46)

Agriculture -- -- -- -0.001 (-0.82)

0.001 (0.36)

Observations 298 301 301 301 298

Pseudo-R2 0.64 0.07 0.40 0.40 0.71

+=significant at the 10 percent level *=significant at the 5 percent level **=significant at the 1 percent level Party=binary independent variable where 0=Democrats and 1=Republicans Vote=binary dependent variable where 0=protectionist and 1=free trade. All production variables are on a per-capita basis.

56

Probit Analysis of Vote on 1922 Fordney-McCumber Act, 67th Senate Variable (1) (2) (3) (4)

(5)

Constant 1.405** (3.85)

-0.298+ (-1.77)

-0.227 (-0.82)

-0.646 (-1.50)

56.3 (0.30)

Party

-2.639** (-5.99)

-- -- -- -58.1 (-0.31)

Cotton Manuf.

-- 0.013* (2.24)

0.008 (1.22)

0.008 (1.31)

-0.224 (-0.48)

Silk Manuf. -- -0.048* (-2.15)

-0.035+ (-1.65)

-0.028 (-1.29)

-0.203 (-0.06)

Wool -- -- -0.005 (-0.26)

-0.009 (-0.42)

-0.004 (-0.17)

Sugar -- -- -0.076 (-1.23)

-0.067 (-1.10)

-3.17 (-0.32)

Wheat -- -- -0.009 (-1.57)

-0.016+ (-1.86)

-0.019+ (-1.72)

Cotton -- -- 0.019** (2.64)

0.019* (2.55)

0.014 (1.17)

Agriculture -- -- -- 0.002 (1.28)

0.004+ (1.79)

Observations 71 71 71 71 71

Pseudo-R2 0.52 0.08 0.27 0.29 0.76

57

Probit Analysis of Vote on 1930 Smoot Hawley Act, 71st House. Variable (1)

(2) (3) (4) (5)

Constant 1.31** (9.2)

-0.200* (-2.54)

-0.372** (-3.51)

-0.369* (-2.14)

1.11** (3.88)

Party

-2.66** (-14.36)

-- -- -- -3.13** (-11.68)

Cotton Manuf.

-- 0.12** (4.52)

0.005 (1.56)

0.005 (1.55)

0.001 (0.19)

Silk Manuf. -- -0.042** (-4.77)

-0.030** (-3.35)

-0.030** (-3.13)

-0.011 (-0.71)

Wool -- -- -0.060 (-1.38)

-0.060 (-1.38)

-0.088 (-1.22)

Sugar -- -- -0.306** (-3.17)

-0.306** (-3.16)

-0.543** (-4.86)

Wheat -- -- -0.005 (-0.98)

-0.005 (-0.82)

-0.019+

(-1.89) Cotton -- -- 0.034**

(6.43) 0.034** (6.39)

0.009 (1.18)

Agriculture -- -- -- 0.00 (-0.02)

0.007** (3.87)

Observations 374 375 375 375 374

Pseudo-R2 0.55 0.10 0.25 0.25 0.67

58

Probit Analysis of Vote on 1930 Smoot-Hawley Act, 71st Senate. Variable (1)

(2) (3) (4) (5)

Constant 1.07** (4.07)

0.030 (0.20)

-0.445+ (-1.86)

-1.25** (-2.80)

-1.12 (-1.60)

Party

-1.95** (-5.83)

-- -- -- -3.44** (-4.53)

Cotton Manuf.

-- 0.011+ (1.72)

0.001 (0.07)

0.004 (0.41)

0.013 (0.88)

Silk Manuf. -- -0.060* (-2.46)

-0.032 (-1.30)

-0.016 (-0.66)

0.023 (0.51)

Wool -- -- -0.014 (-0.57)

-0.025 (-1.01)

-0.109* (-2.58)

Sugar -- -- -2.22 (-1.04)

-2.17 (-0.86)

dropped

Wheat -- -- 0.012+ (1.75)

-0.002 (-0.17)

-0.012 (-0.96)

Cotton -- -- 0.123* (2.23)

0.122* (2.13)

0.008 (0.57)

Agriculture -- -- -- 0.007* (2.13)

0.024** (3.15)

Observations 83 86 86 86 83

Pseudo-R2 0.35 0.09 0.36 0.41 0.64

Note: sugar dropped due to high number of 0 value cases.

59

Probit Analysis of Vote on 1934 RTAA Act, 73rd House Variable (1)

(2) (3) (4) (5)

Constant 1.76** (12.87)

0.657** (8.33)

0.464** (4.55)

0.483** (3.54)

1.82** (7.03)

Party

-3.82** (-11.95)

-- -- --

-3.82** (-11.37)

Cotton Manuf.

--

0.015* (2.50)

0.004 (0.54)

0.004 (0.53)

-0.009 (-0.82)

Silk Manuf. -- -0.073** (-4.83)

-0.050** (-3.08)

-0.051** (-3.02)

-0.010 (-0.36)

Wool -- -- -0.015 (-0.52)

-0.014 (-0.47)

-0.080 (-1.42)

Sugar -- -- -0.227 (-1.24)

-0.229 (-1.25)

-0.473* (-2.04)

Wheat -- -- 0.008 (0.77)

0.009 (0.79)

0.011 (0.51)

Cotton -- -- 0.069** (3.94)

0.069** (3.95)

0.045+ (1.75)

Agriculture -- -- -- 0.000 (-0.21)

0.000 (-0.19)

Observations 381 385 385 385 381

Pseudo-R2 0.75 0.05 0.12 0.12 0.77

60

Probit Analysis of Vote on 1934 RTAA Act, 73rd Senate Variable (1) (2) (3) (4) (5)

Constant 1.29** (5.37)

0.337* (2.13)

0.179 (0.77)

0.038 (0.11)

0.913+

(1.93) Party

-2.38** (-6.31)

--

-- -- -2.845** (-5.64)

Cotton Manuf.

-- 0.014 (1.52)

0.007 (0.61)

0.008 (0.69)

0.010 (0.54)

Silk Manuf. -- -0.066* (-1.97)

-0.052 (-1.48)

-0.049 (-1.38)

-0.024 (-0.39)

Wool -- -- 0.009 (0.35)

0.005 (0.20)

-0.021 (-0.50)

Sugar -- -- -0.658* (-2.39)

-0.646* (-2.35)

-0.724* (-2.19)

Wheat -- -- 0.002 (0.11)

-0.003 (-0.17)

-0.010 (-0.42)

Cotton -- -- 0.059* (2.47)

0.060* (2.51)

0.030 (0.97)

Agriculture -- -- -- 0.000 (0.61)

0.002+ (1.82)

Observations 80 82 82 82 80

Pseudo-R2 0.47 0.06 0.14 0.14 0.60

61

Probit Analysis of Vote on 1945 RTAA Renewal, 79th House Variable (1) (2) (3) (4) (5)

Constant 1.59** (11.49)

0.138+

(1.95) 0.025 (0.30)

0.306* (2.40)

1.77** (8.01)

Party

-2.45** (-13.9)

-- -- -- -2.38** (-11.64)

Cotton and Silk Manuf.

-- 0.006** (3.62)

0.004* (2.07)

0.003 (1.49)

0.000 (0.24)

Wool -- -- -0.032 (-0.98)

-0.011 (-0.35)

-0.077 (-1.43)

Sugar -- -- -0.002 (-0.04)

-0.018 (-0.32)

-0.093 (-1.64)

Wheat -- -- -0.004 (-1.44)

0.000 (-0.09)

0.004 (1.21)

Cotton -- -- 0.034** (4.56)

0.036** (4.80)

0.012 (1.42)

Agriculture -- -- -- -0.001** (-2.83)

-0.001+ (-1.73)

Observations 391 392 392 392 391

Pseudo-R2 0.49 0.05 0.15 0.16 0.52

62

Probit Analysis of Vote on 1945 RTAA Renewal, 79th Senate Variable (1) (2) (3) (4) (5)

Constant 1.21** (4.86)

0.510** (3.09)

0.712** (3.16)

0.787* (2.39)

1.47** (3.30)

Party

-1.25** (-3.72)

-- -- -- -1.16** (-2.71)

Cotton and Silk Manuf.

-- 0.003 (1.08)

0.000 (0.15)

0.000 (0.07)

-0.001 (-0.47)

Wool -- -- -0.054 (-1.55)

-0.050 (-1.40)

-0.078 (-1.53)

Sugar -- -- 1.26 (0.52)

1.26 (0.52)

1.09 (0.40)

Wheat -- -- -0.008+ (-1.74)

-0.007 (-1.35)

-0.005 (-1.03)

Cotton -- -- 0.014 (1.16)

0.014 (1.16)

0.004 (0.29)

Agriculture -- -- -- 0.000 (-0.31)

0.000 (-0.08)

Observations 75 75 75 75 75

Pseudo-R2 0.17 0.02 0.20 0.20 0.29

63

Probit Analysis of Vote on 1949 RTAA Renewal, 81st House Variable (1) (2) (3) (4) (5)

Constant 1.96** (11.37)

0.833** (10.34)

0.732** (7.62)

0.857** (6.75)

1.89** (8.36)

Party

-1.78** (-8.84)

-- -- -- -1.69** (-7.41)

Cotton and Silk Manuf.

-- 0.005* (2.18)

0.004 (1.51)

0.003 (1.36)

0.002 (0.70)

Wool -- -- -0.027 (-0.63)

-0.010 (-0.23)

-0.029 (-0.56)

Sugar -- -- 0.760 (0.52)

0.780 (0.55)

-0.695 (-0.55)

Wheat -- -- -0.001 (-0.68)

0.001 (0.27)

0.001 (0.37)

Cotton -- -- 0.014** (2.81)

0.015** (2.92)

0.004 (0.86)

Agriculture -- -- -- 0.000 (-1.51)

0.000 (-0.36)

Observations 387 388 388 388 387

Pseudo-R2 0.29 0.02 0.08 0.09 0.30

64

Probit Analysis of Vote on 1949 RTAA Renewal, 81st Senate Variable (1) (2) (3) (4) (5)

Constant 2.04** (4.95)

0.51** (3.02)

0.396+ (1.64)

0.599+

(1.73) 2.17** (3.22)

Party

-2.15** (-4.62)

-- -- -- -2.23**

(-3.67) Cotton and Silk Manuf.

-- 0.033 (1.37)

0.035 (1.41)

0.030 (1.26)

0.038 (1.27)

Wool -- -- 0.009 (0.19)

0.022 (0.43)

-0.058 (-0.97)

Sugar -- -- -- -- --

Wheat -- -- -0.003 (-1.27)

-0.002 (-0.52)

0.000 (-0.13)

Cotton -- -- 0.026 (1.45)

0.025 (1.44)

0.008 (0.44)

Agriculture -- -- -- 0.000 (-0.83)

0.000 (-0.46)

Observations 81 81 81 81 81

Pseudo-R2 0.37 0.11 0.23 0.24 0.48

Note: sugar dropped in column (5) because it predicts success perfectly.

65

Probit Analysis of Vote on 1955 RTAA Renewal, 84th House Variable (1) (2) (3) (4) (5)

Constant 1.00** (9.85)

0.719** (8.98)

0.612** (6.34)

0.519** (4.04)

0.994** (6.00)

Party

-0.767** (-5.56)

-- -- -- -0.791** (-4.95)

Textile -- -0.003* (-2.58)

-0.004** (-3.15)

-0.004** (-2.79)

-0.005** (-3.47)

Wool -- -- -0.022 (-0.71)

-0.032 (-1.00)

-0.036 (-1.13)

Sugar -- -- 1.78 (1.59)

1.83 (1.64)

0.790 (0.71)

Wheat -- -- -0.001 (-0.41)

-0.002 (-0.97)

-0.003 (-1.00)

Cotton -- -- 0.010** (2.71)

0.009* (2.35)

0.004 (1.22)

Agriculture -- -- -- 0.000 (1.08)

0.000 (1.61)

Observations 405 405 405 405 405

Pseudo-R2 0.07 0.01 0.06 0.06 0.12

66

Probit Analysis of Vote on 1955 RTAA Renewal, 84th Senate Variable (1) (2) (3) (4) (5)

Constant 1.07** (4.46)

0.980** (5.38)

1.75** (5.14)

1.35** (3.13)

0.947+ (1.93)

Party

-0.040 (-0.12)

-- --

-- 0.993+ (1.79)

Textile -- 0.002 (0.79)

-0.003 (-1.02)

-0.002 (-0.66)

-0.002 (-0.52)

Wool -- -- -0.163* (-2.56)

-0.240** (-2.71)

-0.263** (-2.76)

Sugar -- -- 3.24 (0.51)

3.23 (0.55)

5.33 (0.75)

Wheat -- -- -0.007* (-2.11)

-0.015* (-2.12)

-0.016* (-2.16)

Cotton -- -- 0.003 (0.36)

-0.001 (-0.13)

0.004 (0.40)

Agriculture -- -- -- 0.001 (1.29)

0.001 (1.05)

Observations 88 88 88 88 88

Pseudo-R2 0.0002 0.01 0.34 0.37 0.42

67

Probit Analysis of Vote on 1962 Trade Expansion Act, 87th House Variable (1) (2) (3) (4) (5)

Constant 1.09** (11.06)

0.508** (7.09)

0.601** (6.85)

0.712** (6.14)

1.62** (9.37)

Party

-1.16** (-8.44)

-- -- -- -1.50** (-8.93)

Textile -- 0.001 (0.78)

0.000 (0.30)

0.00 (0.09)

-0.002* (-2.03)

Wool -- -- -0.131* (-2.17)

-0.083 (-1.34)

-0.188* (-2.28)

Sugar -- -- -0.017 (-0.59)

-0.0152 (-0.53)

-0.074* (-2.46)

Wheat -- -- 0.001 (0.50)

0.004 (1.17)

0.005 (1.63)

Cotton -- -- 0.000 (-0.21)

0.001 (0.27)

-0.008** (-2.93)

Agriculture -- -- -- 0.000 (-1.48)

0.000 (-0.79)

Observations 423 421 421 421 421

Pseudo-R2 0.15 0.001 0.02 0.02 0.20

68

Probit Analysis of Vote on 1962 Trade Expansion Act, 87th Senate Variable (1) (2) (3) (4) (5)

Constant 2.11** (5.25)

1.39** (6.43)

1.58** (5.24)

2.00** (4.84)

18.3* (2.41)

Party

-1.41** (-2.96)

-- -- -- -15.0* (-2.26)

Textile -- -0.002 (-0.96)

-0.003 (-1.31)

-0.004+ (-1.66)

-0.040* (-2.37)

Wool -- -- -0.029 (-0.78)

0.014 (0.31)

-0.513* (-2.08)

Sugar -- -- 21.8 (0.79)

19.3 (0.63)

-0.795 (-0.26)

Wheat -- -- -0.002 (-0.62)

0.005 (0.78)

-0.005 (-0.40)

Cotton -- -- -0.009 (-1.05)

-0.006 (-0.63)

-0.055 (-0.73)

Agriculture -- -- -- 0.000+ (-1.71)

0.000 (-1.20)

Observation 86 83 83 83 83

Pseudo-R2 0.21 0.02 0.09 0.14 0.66

69

Table Set 3: Predicted Effect of Party on Vote *Each cell indicates the probability that Democratic or Republican members will vote in favor of free trade for each year’s legislation (i.e. voting “no” for 1922 and 1930, and “yes” for all other years). All variables are held at the mean. House Votes: 1922

Democrat: 1.000

Republican: .003 Party=.732 ; CottonManuf.=11.471; SilkManuf.=5.597; Wool=1.286; Wheat=21.385; Cotton=18.598; Sugar=.583; Agric=207.634 1930

Democrat: .943

Republican: .060 Party=.610 ; CottonManfuc.=12.554; SilkManuf.=5.358; Wool=.804 ; Wheat=7.028; Cotton=12.700; Sugar=.228; Agric=99.551 1934

Democrat: .968

Republican: .024 Party=.265; CottonManuf.=6.073; SilkManuf.=2.222; Wool=.699; Wheat=3.851; Cotton=4.989; Sugar=.146; Agric=275.125 1945

Democrat: .945

Republican: .216 Party=.445, CotSilkManuf.=34.666; Wool=.885; Wheat=10.687; Cotton=11.515; Sugar=.301; Agric=351.037

70

1949

Democrat: .975

Republican: .601 Party=.380; CotSilManuf.=29.812; Wool=.615; Wheat=13.487; Cotton=17.401; Sugar=.051; Agric=510.733 1955

Democrat: .857

Republican: .608 Party=.454; Textile=32.636; Wool=.775; Wheat=13.416; Cotton=16.743; Sugar=.038; Agric=651.498 1962

Democrat: .896

Republican: .407 Party=.404; Textile=35.998; Wool=.599; Wheat=10.198; Cotton=13.238; Sugar=.410; Agric=908.947 Senate Votes: 1922

Democrat: 1.000

Republican: .000 Party=.648; CottonManuf=15.866; SilkManuf=4.727; Wool=3.657; Wheat=27.702; Cotton=19.785; Sugar=.799; Agric=242.256 1930

Democrat: 1.000

Republican: .000 Party=.578; CottonManuf.=12.493; SilkManuf=4.275; Wool=2.888; Wheat=13.638; Cotton=12.669; Sugar=.248; Agric=123.037

71

1934

Democrat: .942

Republican: .100 Party=.363; CottonManuf.=9.820; SilkManuf.=1.883; Wool=2.446; Wheat=5.581; Cotton=6.585; Sugar=.205; Agric=370.426 1945

Democrat: .942

Republican: .657 Party=.413; CotSilkManuf=32.292; Wool=2.380; Wheat=21.963; Cotton=13.071; Sugar=.387; Agric=441.802 1949*

Democrat: 1.000

Republican: .885 Party=.407; CotSilManuf=35.828; Wool=1.499; Wheat=28.322; Cotton=19.180; Agric=700.983 1955

Democrat: .823

Republican: .973 Party=.523; Textile=34.233; Wool=2.152; Wheat=24.037; Cotton=20.192; Sugar=0.042; Agric=899.142 1962

Democrat: 1.000

Republican: .119 Party=.337; Textile=40.797; Wool=1.817; Wheat=19.840; Cotton=13.279; Sugar=.610; Agric=1209.415 *: sugar variable was dropped due to perfect prediction error.

72

V. A Historical Interpretation of U.S.-Pacific Rim Trade Barriers 1922 to 1962 was a transformative period in U.S. foreign trade history,

encompassing the height of protectionism, the move toward bilateral trade negotiations,

and eventually the creation of a multinational framework in the name of GATT. Yet, the

large swings in policy direction did not prevent consistently higher barriers to U.S. trade

with the Pacific Rim than with the rest of the world. As shown in the previous sections,

U.S. trade policy was more likely to protect goods that were more heavily imported from

the Pacific Rim in relative terms, and Congressional politics throughout this period have

supported this bias. However, as this section will show, the consistency of this bias

cannot be explained solely by the role played by domestic economic interests.

The transformation of U.S. trade policy during this period was based on a broader

set of principles and goals in U.S. foreign policy and international relations, and was

intimately tied to the influential role that the executive branch began to play after 1934.

To begin a course of trade liberalization, the executive branch had to resort to an

incremental approach. As a result, it had to carefully assess trade relations with different

regions. In this process, the U.S. pursued a policy that prioritized freer trade with certain

regions over others, and as a result the liberalization of trade with the Pacific Rim

occurred much more slowly. In this section, I examine the historical circumstances that

contributed to this trend by focusing on three themes: the reciprocal trade agreements, the

GATT framework, and the Pacific Rim’s historical development.

73

The Use of Reciprocal Trade Agreements

Shortly after the Smoot-Hawley Act in 1930 and the subsequent downward spiral

of world trade, the United States began to reconsider its position in international trade.

The newly elected Roosevelt administration decided to pursue trade liberalization based

on bilateral reciprocity. In 1934, the Reciprocal Trade Agreements Act (RTAA) shifted

trade policy making from Congress to the executive branch, and the President was given

power to reduce tariffs by as much as 50% of Smoot-Hawley levels. The administration

pursued reciprocal trade agreements for two reasons. First, a unilateral tariff reduction

was not politically feasible, as protectionist sentiments had by no means disappeared;

such an action would have faced strong resistance from Congress. Second, reciprocal

trade agreements closely tied export-oriented coalitions into the policy-making process,

and increased the political cost of lobbying for import-competing groups (Brenner 1977).

However, the U.S. had to select which nations to negotiate trade agreements with,

and in this process the Pacific Rim was largely neglected. In fact, among all the nations

that signed trade agreements with the United States between 1934 and 1947, none were

Pacific Rim nations (see Table 8). The United States was much more interested in

opening up trade with nations in Europe or the Western Hemisphere. This is not

surprising, since the bulk of U.S. foreign trade was with these two regions. Even more

importantly, the main priority of the U.S. in negotiating agreements was the opening of

its export market, and the Pacific Rim was not seen as an important partner for this

purpose. Through reciprocal trade agreements, import liberalization of certain products

could only be achieved by simultaneously tying them to export expansion of similar

scope for U.S. products. The export-oriented coalition that advocated trade liberalization

74

in the U.S. was led by large industry groups (Lusztig 2004), which often represented

heavy industry and technology-based goods such as automobiles. U.S. export of these

goods to the Pacific Rim was relatively low, since many Pacific Rim economies lacked

the purchasing power of many more developed economies of Europe at the time.

Special agencies and committees were set up in the State Department to make

decisions on negotiation partners and strategy. For example, in 1934 Assistant Secretary

of State Sayre submitted to Congress a list of 29 countries that were chief suppliers of

certain products, sometimes know as the “Sayre’s List” (Tasca 1938, p.137). Only three

of these countries were Pacific Rim economies – China, Japan, and Australia.

Eventually, the U.S. only negotiated agreements with eight of these nations, and none

included the three Pacific Rim countries. The Pacific Rim was effectively screened out

through the decision-making process in the State Department.

In addition to the selection of countries, the State Department also had to carefully

craft its negotiations by choosing an appropriate range of products. This process also

placed the Pacific Rim at a disadvantage. In order to maintain its newly delegated

powers in trade negotiations, the executive branch was careful to minimize the domestic

political costs of reciprocal trade agreements. In doing so, it tended to choose tariff

reduction in products that avoided stiff domestic resistance. In fact, evidence by Henry

Tasca (1939) showed that duty reductions were most substantial among five schedules –

earths, earthenware, and glassware; agricultural products; metals and manufactures;

chemicals, oils and paint; and sundries. The Pacific Rim exported little of these goods.

Of the 447 reductions achieved by the negotiated trade agreements, a total 356 of them

were in these five schedules. In contrast, among the five textile schedules in which the

75

Pacific Rim did have substantial specialization, only 56 reductions were negotiated

(Tasca 1938). The textile industries were strong domestic interests in favor of

protectionism, and by focusing tariff reductions on less sensitive industries, the executive

branch tried to divert these interests from influencing the general direction of trade

liberalization.

Some might point out that these discriminatory effects were mitigated by the

unconditional most-favored-nation (MFN) principle of the reciprocal agreements, under

which trade reductions negotiated with one country would apply to all other countries as

well. Thus, the Pacific Rim could have benefited as external participants. However,

evidence suggests that the extent of the benefit was limited. First, even though the

unconditional MFN principle applied, the executive branch negotiated agreements by

adhering to the “chief-supplier principle”: reciprocal trade agreement on a certain product

was negotiated with the country that was the chief supplier of that product (Lusztig

2004). Thus, the external benefits to third parties were minimized. Secondly, a

reclassification of products occurred after the RTAA was passed (Tasca 1938). As a

result, products defined in the Smoot-Hawley legislation were classified into finer

categories, providing a second channel to minimize third-party benefits. Take an

example given by Tasca (1938, p.143): in U.S. negotiations with Belgium, tariff

reductions were included on “woven green billiard fabrics.” In this case, even though the

reduction was in a textile product, the East Asian economies could not expect to reap

much benefit because the defined product was very specific. In fact, Brenner (1977)

noted that the reclassification had helped U.S. negotiate textile reduction with Great

Britain without affecting the more competitive textiles from Japan.

76

To be sure, the implementation of the reciprocal trade agreements was a

groundbreaking step in moving the U.S. toward trade liberalization. By 1934, the U.S.

had recognized the unstable international political situation, a large part of which was

contributed by the zealous drive among countries to erect trade barriers. The Roosevelt

administration wanted to take a leadership role in reversing this trend, and found its

answer in the form of bilateral reciprocity. In many ways, this was an ingenious idea,

and perhaps the most politically feasible approach in achieving trade liberalization.

However, the flexibility of reciprocal agreements also induced differential priority of

treatments toward different regions.

Within the international context, it was natural that the U.S. targeted its

negotiations with European and South American countries. The former represented a

long-standing partnership, as well as a major market for the expansion of U.S. exports of

heavy-industry goods. The latter are nearby neighbors of the United States in the

Western Hemisphere, and maintaining stability in the region with sound trade relations

was equally important. The Pacific Rim, far and beyond, was given relatively little

attention. The U.S. saw little opportunity in export expansion there, and it was

constrained in freely negotiating import-sensitive goods that could have benefited the

Pacific Rim. Indeed, evidence by Henry Tasca (1938) has suggested that trade barrier

reductions were higher for agreement countries than non-agreement countries, consistent

with the empirical estimates in this paper. Because the Pacific Rim also benefited little

from external effects of the unconditional MFN clause, it can be said that the RTAA Act

affected the Pacific Rim very little, despite its large success in helping the U.S. jump

toward a course of trade liberalization.

77

Multilateral Agreements Under the GATT

In 1947, the United States moved toward a new stage in trade liberalization. For

the first time, the General Agreement on Tariffs and Trade (GATT) established a

multilateral trade negotiation framework. Further improvements were made over the

previous bilateral framework, as more participants were brought in to achieve more

substantial trade liberalization. In addition, the GATT further reduced the influence of

import-competing domestic interests and simultaneously expanded the participation of

exporters. According to Barton et al. (2006), the GATT was also created to helped solve

a credible commitment problem – small countries were reluctant to negotiate with the

United States after World War II, because if the U.S. failed to commit to the agreements,

the small nation faced large potential losses in the form of non-salvageable investments

in export industries. With a multilateral framework, large nations have smaller incentives

to renege, because agreements are linked for multiple countries and a deviation faced

greater economic losses. If a “small” nation is taken as a nation with relatively low

economic bargaining power, then this mechanism should help the Pacific Rim achieve

deepened trade liberalization. But evidence suggests the contrary, at least from 1947 to

1962. Why did the incorporation of a multilateral framework once again neglect the

Pacific Rim? The answer is reflected in the creation and design of the GATT.

By origin, the GATT was not initiated to include developing nations. The United

States wanted a small forum of nations to discuss the reduction of trade barriers. In fact,

the GATT extended many principles that the U.S. was already pursuing under the

bilateral agreements, such as unconditional MFN clause. Among the original twenty-

three members of the GATT, only China was from the Pacific Rim. Essentially, the

78

exclusion of the Pacific Rim reflected many of the same problems as under the bilateral

agreements. To the U.S., incorporating a developing nation in the Pacific Rim to the

GATT yielded little benefit in the form of export expansion. Bargaining power once

again played an important role. Reducing trade barriers with large nations with greater

bargaining power was more urgent than with small nations with little bargaining power.

Often, the latter group consisted of nations that were very dependent on foreign trade. In

the Pacific Rim, only China could be characterized as a large nation that had a large

internal trade and could be self-sufficient without trade. Many other nations, such as

Singapore, Indonesia, Thailand, etc. were all small nations with which the early GATT

did not have concern. These smaller nations could not effectively threaten the large

nations with closing off its exports, as that would be detrimental to their own economic

growth. Instead, in creating the GATT in the post-war era, the U.S. was more concerned

about recovery of major European economies.

The structure and rules of the GATT also fostered the lack of participation among

Pacific Rim economies. As the primary initiators of the GATT, the United Kingdom and

especially the United States held dominating influence. In 1948, the U.S. alone

accounted for 65% of GDP of all GATT members and never dropped below 50% before

1962 (Barton et al. 2006, p.11-13). In fact, until the Doha rounds of this century, every

round of trade negotiation was initiated by the Congressional delegation of negotiation

power to the President (Barton el al. 2006, p.44). The U.S. preferred a multilateral

framework that was small in membership and relatively flexible in structure, perhaps

believing it was more conducive to achieving deeper trade liberalization. Originally, this

framework was intended as a stepping-stone to the International Trade Organization

79

(ITO), which would have created a bigger and more centralized international

organization. It would have resembled the International Monetary Fund, for example.

But this organization never became a reality, partly because the Truman administration

did not believe Congress would ratify it and hence did not even submit it for a vote.

The GATT continued to operate in a decentralized way, and this dampened the

influence that the Pacific Rim could have had in international trade negotiation. For

example, if the ITO were implemented, the Pacific Rim would have more representation

and total voting power. In fact, evidence from Barton et al. (2006, p. 36) had shown that

the U.S. tried to mitigate this potential effect by proposing to allocate votes in the ITO by

share of world trade as well as to create a permanent committee of a few nations.

Furthermore, while the unconditional MFN principle continued to apply in the GATT,

they were often subject to exceptions. For example, existing members of the GATT can

choose not to apply MFN to newly admitted members (Barton et al. 2006). In any case,

the informal structure of the GATT remained, and it allowed the executive branch of the

U.S. to maintain its ability to conduct trade policy largely free of obstacles from

Congress. Thus, the institutional mechanisms of the GATT was effective in helping the

U.S. reduce trade barriers with its main trading partners in the GATT, but was not the

best design from the perspective of the Pacific Rim. But this might have been avoided if

the Pacific Rim could consolidate bargaining power as a regional bloc.

The Lack of Regional Cooperation

As the above discussion has shown, asymmetry in economic bargaining power

worked to the disadvantage of the Pacific Rim, and contributed to the region’s higher

80

trade barriers with the United States. However, this result may have turned directions if

the Pacific Rim had worked together as an economic bloc and formulated a coordinated

foreign trade policy direction. For example, the Pacific Rim could have attempted

collective negotiation with the United States. Such unified regional efforts would more

closely coordinate common interests, and thereby increase the bargaining strength of the

Pacific Rim. Was such a possibility feasible, and if so, why did it never come to reality?

The Western European nations were already quite active in this regard, especially

in the post-WWII era. Various forms of economic unions and cooperation, such as the

Benelux Union between Belgium, Luxembourg, and later the Netherlands, were pursued

as early as the 1920s (Barton et al. 2006). These efforts eventually fostered the European

Economic Community (ECC) and later the European Union (EU). The evolution of the

EU was closely related to GATT/WTO. For example, the U.S. advocated European

integration in 1957 by using the customs union exception in Article XXVIIII of the

GATT (see Barton et al. 2006, p.35).

The Pacific Rim possessed some ideal characteristics to forge similar kinds of

economic cooperation. Many countries were main suppliers of raw materials: raw silk in

China and Japan, wool in Australia and New Zealand, rubber and tin in Southeast Asia.

The region was also relatively less developed in advanced manufacturing industries,

partly contributed by high trade barriers. Furthermore, with the exception of China, most

other nations in the region were relatively small or sparse in population, and were hence

particularly dependent on foreign trade. All these reasons suggest a real possibility for

these nations to recognize their common interests and create institutions to promote these

interests. But historical circumstances during this period prevented such cooperation.

81

In order to formulate a long-lasting economic cooperation, a region needs to show

some degree of political unity. But the decades leading up to World War II were filled

with regional conflicts. Perhaps the most notable was the one between China and Japan

during World War II, when Japan extended its economic interests and later military

invasion into China and other regions in East Asia starting in the 1920s. Research by

Peter Petri (Frankel and Kahler 1993) has shown that Japan’s military expansion led to

greater economic interdependence in the Pacific Rim. Japan’s desire for raw goods to

fuel its industrialization resulted in numerous trade disputes, and severely disrupted the

region’s trade with the United States. Yet China and Japan would be the biggest two

potential candidates to take a leading role in forming a coordinated effort in negotiating

lower trade barriers with the United States. Regional conflicts excluded this possibility.

In addition, there were no natural alliances between nations that could help initiate or

expand cooperation. Australia and New Zealand could have been important players, but

culturally they did not share a common identity with East Asia, and economically they

were members of the British Commonwealth. Hence they had no particular interest in

East Asian trade policy.

In addition to minimal regional conflicts, regional cooperation also requires that

the participating nations have stable internal governments. The Pacific Rim nations often

did not meet this requirement. China had only recently become a republic in 1912,

ending a five thousand year history of imperial rule. The newly formed republic was

filled with internal conflicts, as warlords often claimed large powers in different regions

of the country. After the war with the Japanese, a civil war ensued until the Communists

established the People’s Republic of China in 1949. The civil war severely restrained

82

China’s foreign trade, and the new People’s Republic of China virtually stopped its trade

with the United States until the economic reforms of the 1970s.

In Southeast Asia, domestic conflicts were also widespread. First, in the early

1920s, many parts of this area were still domains of European colonial powers. These

included British Malaya, Netherlands Indies, French Indo-China, etc. After World War

II, many of these areas became independent, but domestic political conflicts hardly

stopped. Japan needs no further elaboration, as it also underwent a change in government

after its defeat in World War II. Not surprisingly, trade flows in the Pacific Rim declined

sharply (Frankel and Kahler 1993). Domestic political instability in the Pacific Rim was

detrimental to the region’s conduct of foreign trade policy. Nations could not even adopt

consistent foreign trade policy for themselves, much less forge a broad cooperation

among each other.

Incidentally, the period when American foreign trade policy was undergoing its

most dramatic transformation was also one in which the Pacific Rim faced immense

changes. What would have been an opportune time for the Pacific Rim to engage in trade

negotiations with the United States and pursue bilateral or multilateral tariff reductions

instead was taken over by wars and conflicts. This resulted in a weak bargaining power

position for the region, and U.S. foreign policy also recognized this point. When

considering these broad international trends, the consistency of a higher trade barrier with

the Pacific Rim was perhaps no surprise after all. The Pacific Rim lacked the features

that would have been effective for trade liberalization with the United States, and while

its trade barriers with the U.S. have declined in this period, it happened at a much slower

pace than the rest of the world. The extent to which high trade barriers with the United

83

States negatively impacted the economic development of the Pacific Rim is unfortunately

beyond the scope of this paper. The answer to that question would require a much

broader study, looking at factors such as the region’s terms of access to markets in other

parts of the world. Although the regional discrimination implicit in U.S. policies was to

some extent a function of Asia’s economic backwardness at that time, what we can say is

that U.S. policies were not helpful in improving the situation.

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Table 8: Countries that Signed Reciprocal Trade Agreements with the U.S., 1934-1947. Argentina Belgium and Luxembourg Brazil Canada Colombia Costa Rica Cuba Czechoslovakia Ecuador El Salvador Iceland Finland France Guatemala Haiti Honduras Iran Mexico Netherlands Nicaragua Peru Sweden Switzerland Turkey United Kingdom Uruguay Venezuela Source: Lusztig 2004.

85

86

VI. Conclusion

This paper makes a contribution by addressing several closely related questions

regarding U.S. trade with the Pacific Rim from 1922-1962. I begun the discussion by

looking at the depressive effects that U.S. protectionist policies imposed on Pacific Rim

trade. Extremely high if not prohibitory tariff rates of the Fordney-McCumber Act of

1922 and Smoot-Hawley Act of 1930 severely restrained the exports of Pacific Rim

products, especially those in the textile and agricultural sector.

I then expand upon this evidence into the central question of the study – were

U.S. trade barriers with the Pacific Rim higher than those with the rest of the world?

Two sets of empirical estimates of average tariff rates of Pacific Rim imports have shown

that this has been consistently the case during the period studied. More importantly, this

effect was the strongest for products in import-competing industries. These were often

high-stage manufactured goods (e.g. textiles) in which the Pacific Rim had comparative

advantage but faced heavy protection by U.S. trade policy.

The natural follow-up question to my main empirical estimates was what caused

U.S. trade policies to impose heavier trade barriers onto the Pacific Rim? I approached

this question through two sides. The first approach analyzed the underlying nature of the

political process to constructing trade policies. The main focus was Congressional

interest-group politics. By analyzing roll-call votes as well as presenting regressions on

variables of state-level production of several important products and party affiliation, we

find that throughout 1922-1962, there is consistent correlation between state production

of goods that competed significantly with the Pacific Rim and that state’s Congress

members’ likelihood to vote in favor of protectionism. This seems to suggest that these

87

domestic interests were quite successful in maintaining a certain degree of protection

despite the movement to freer trade after 1934.

To further explore why the Pacific Rim could not escape disproportionately

higher level of trade barriers even until the multilateral agreements of the GATT, I also

interpret the phenomenon from a historical and international relations perspective. The

main focus here is the executive branch and the influential role it had played in U.S. trade

policy since 1934. After 1934, the executive branch was clearly serious about trade

liberalization, and it had successfully pursued a strategy that successfully internalized

much domestic opposition to free trade and closely tied the interests of exporters. As

successful as the strategy was, however, its incremental nature as well as U.S. foreign

policy goals put the Pacific Rim on the low end of the priority list. While the Pacific Rim

could have strengthened its bargaining power through forms of economic cooperation,

this only became an unachieved possibility due to regional conflicts and instability.

Hence, even though the U.S. achieved a successful breakdown in trade barrier after 1934,

the Pacific Rim did not benefit as much as trading partners that had more bargaining

power and closer relations to the U.S. It appeared that all circumstances worked against

the Pacific Rim.

Several broad observations can be extracted from the results of this paper. First,

the effect of trade policy is not one-dimensional. Even with a rules-based trade policy

rigorously applying the principles of reciprocity and nondiscrimination, which the U.S.

largely achieved by 1962, trade barriers to different regions can vary greatly. If a trading

system that treats all partners equally is the goal, whether to maximize economic benefits

88

or to avoid regional isolation or antagonism, then trade policy needs to properly take into

account any embedded regional bias.

Secondly, political feasibility has been and will remain a top priority in trade

liberalization efforts. It was difficult to say if the U.S. could have actually achieved its

trade liberalization without designing a policy that effectively marginalized the Pacific

Rim. Had the U.S. actually revised the policy so that the trade barriers to Europe and the

Pacific Rim were equal, domestic resistance would have been higher, perhaps high

enough to undermine the efforts toward freer trade.

Last but not least, bargaining power is crucial to a successful trading relationship.

In this paper, the story was largely about U.S. policies. However, U.S. policies were not

formulated by treating the Pacific Rim as exogenous. Had the Pacific Rim economies

been shaped differently, or had their political developments took a different direction

during this period, U.S. trade policy would have dynamically adjusted in response.

Today, the trading relationship between the same Pacific Rim and the United

States is vastly different from that of the first half of the twentieth century. Economies

like China, Japan, and South Korea are among the largest trading partners of the U.S.

Contributed by the rapid economic growth of these nations, many factors that previously

restrained free flow of goods and services between the two regions are now diminished.

Furthermore, U.S. trade policy has become more aligned with global trading frameworks

like the WTO, and the economic bargaining power of Pacific Rim economies has

substantially increased. However, history reminds us that maintaining a free and stable

international trading system is no easy task. Future policies must build on insights from

past failures as well as successes in reducing barriers to international trade.

89

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Appendix A: Classification of Categories Used to Calculate Tariff Rates Note: This appendix presents the goods and group of goods that are classified as semi-manufactures and finished manufactures in constructing the dataset on ad valroem equivalent tariff rates in section III. The classification attempts to closely match the one given by The Foreign Commerce and Navigation of the United States in 1931 (see p.S68-S69), and modifications were made in other years to best keep the groupings consistent. Parentheses next to certain item groups provide more details regarding items within the group. Semi-Manufactures • Leather • Furs, semi-manufactures (dressed furs; silk or black fox, dressed or undressed) • Cod and cod-liver oil • Whale and fish oil • Stearic acid • Beeswax and other animal wax (bleached beeswax, crude beeswax, manufactures of

beeswax, animal wax, n.s.p.f.) • Rubber, reclaimed and scrap • Bristles, sorted or bunched • Shellac • Gelatin, inedible, and manufactures of • Glue and glue size • Casein or lactarene • Gums and reins, n.e.s. (dutiable only) • Vegetable oils, expressed, inedible, n.e.s. • Tar, pitch, and turpentine. • Extracts for dyeing and tanning • Gambier • Cotton semi-manufactures (cotton yarn, cotton waste) • Jute yarns • Yarns of flax, hemp and ramie • Silk waste • Spun silk • Silk yarns • Hat materials • Wool, semi-manufactures • Rayon waste, yarns, and thread • Cork waste • Wood, unmanufactured (exclude logs) • Sawmill products, except laths and shingles • Boards, planks, etc., n.e.s.; and clapboards • Veneer and ply woods • Marble, onyx, and breccia (in block, rough, square, or tiles) • Cement and lime

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• Paper base stock • Coke, charcoal, briquettes, etc. • Petroleum: topped oils and tops • Paraffin and paraffin wax • Abrasives, crude and artificial • Asbestos (all fibers, suco, asbestos) • Precious stones (dutiable only, diamond cut, pearl and sets) • Gypsum (exclude crude gypsum and plaster) • Mica, cut, split, and manufactures of • Talcum, steatite, soapstone, and French chalk (exclude crude) • Magnesite (dead, burned, grain and periclase) • Other nonmetallic minerals and manufactures of (only dutiable ones listed after salt) • Iron and steel semi-manufactures (listings from granular or sponge iron to tin plates,

terneplates) • Copper (refined in ingots, plates, or bars) and brass (old brass and clippings) • Ferro-Alloys (dutiable only) • Nickel oxide • Tin in bars, blocks, etc • Cobalt ore and metal • Platinum and platinum metals (ores excluded) • Aluminum metal scrap and alloys • Lead (pigs, reclaimed scrap, dross, Babbitt, type metal) • Nickel alloys, in pigs, n.e.s. • Antimony (exclude ore) • Zinc in pigs, blocks, etc. • Quicksilver or mercury • Other metals, alloys, etc. (dutiable only) • Coal-tar products • Industrial chemicals • Pigments • Fertilizer materials • Perfume materials Finished Manufactures • Leather manufactures • Fur manufactures • Bone and horn manufactures • Feathers, artificial, etc., and advanced (dressed feathers, feather, n.s.p.f) • Sponges and manufactures of • Other inedible animal products (listing after tankage) • Camphor, refined and synthetic • Licorice extract • Essential and distilled oils • Tobacco manufactures (cigars and cigarettes, and manufactures n.s.p.f.) • Starch

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• Cotton manufactures (excluding waste and yarn) • Jute manufactures (excluding yarns) • Manufactures of flax, hemp and ramie (exclude yarn) • Hats, bonnets, and hoods of straw, etc. • Hair manufactures • Silk manufactures (exclude spun silk and yarn) • Rayon manufactures (exclude yarn, waste, and threads) • Miscellaneous textiles (all textiles listed after rayon manufactures) • Wood manufactures • Cork manufactures • Refined petroleum oils • Marble, breccia, and onyx manufactures • Glass and glass products • Pottery and other clay products (pottery, tiles, bricks) • Chalk manufactures (cubes, blocks, sticks, etc.) • Earthy and mineral substances (exclude crude and unmanufactured material) • Abrasives (dutiable only) • Asbestos manufactures (shingles, other manufactures) • Salt • Steel-mill products (listing from structural steel to iron to autoclaves, parts, etc.) • Iron and steel advanced manufactures • Aluminum manufactures (plates, sheets, bars, etc., manufactures n.s.p.f.) • Copper manufactures (composition metal, manufactures n.s.p.f.) • Brass and bronze manufactures (exclude old brass and clippings) • Lead, nickel, and zinc manufactures (bars, rods, plates of Nickel, sheets of zinc, dust

of zinc, pipes, sheet of lead, and manufactures n.s.p.f.) • Other metal manufactures, n.s.p.f. • Jewelry and manufactures of precious metals • Machinery and vehicle • Coal-tar finished products (coal-tar medicinal, other coal-tar) • Medicinal products (listings from alkaloids to medicinal preparations containing

alcohol) • Paint, stains, enamels, and varnishes • Fertilizer manufactures • Explosives, fireworks, ammunition • Soap and toilet preparations

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Appendix B: Data Sources for State Production Ranking Note: This appendix presents the sources of data used to define the top five states of production for each product in each vote in Table Set 1 (Section IV).

1922 Fordney-McCumber Act Silk States: value of broad silks from 1921 Biennial Census of Manufactures. Cotton States: value of cotton manufactures from 1921 Biennial Census of Manufactures. Wool States: quantity of wool in 1920 Census of Agriculture.

1930 Smoot-Hawley Act Silk States: leading states in total silk manufacturing (by percent distribution of value) in 1929 Census of Manufactures. Cotton States: value of cotton goods in 1929 Census of Manufactures. Wool States: quantity of wool in 1930 Census of Agriculture.

1934 Reciprocal Trade Agreements Act

Silk States: value of silk and rayon goods from 1933 Biennial Census of Manufactures. Cotton States: value of cotton goods from 1933 Biennial Census of Manufactures. Wool States: quantity of wool from 1934 Statistical Abstract of the United States.

1945 RTAA Renewal Silk States: value of nylon, silk, and other fabrics from 1947 Census of Manufactures. Cotton States: number of cotton spindles from 1947 Statistical Abstract of the United States. Wool States: quantity of wool from 1947 Statistical Abstract of the United States.

1949 RTAA Renewal Silk States: value of nylon, silk, and other fabrics from 1947 Census of Manufactures. Cotton States: number of cotton spindles from 1950 Statistical Abstract of the United States. Wool States: quantity of wool from 1950 Statistical Abstract of the United States.

1955 RTAA Renewal

Silk States: value-added of silk and man-made fiber fabrics from 1954 Census of Manufactures. Cotton States: number of cotton spindles from 1956 Statistical Abstract of the United States. Wool States: value of wool production from 1959 Census of Agriculture (1954 values).

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1962 Trade Expansion Act

Silk States: value of shipments of silk products (weaving mill and synthetic) from 1963 Census of Manufactures. Cotton States: number of cotton system spindles from 1963 Census of Manufactures. Wool States: value of wool from 1964 Census of Agriculture

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Appendix C: Data Sources for Regression Variables Note: This appendix presents the sources of data used on production variables for each vote in the regressions of Table Set 2 (Section IV). All data are by value of production (or for the total agriculture variable starting in 1934, value of farms) unless otherwise noted.

1922 Fordney-McCumber Act Cotton manufactures: 1921 Biennial Census of Manufactures. Silk manufactures: 1921 Biennial Census of Manufactures. All agricultural variables: 1920 Census of Agriculture. Population: 1920 Fourteenth Census of the United States.

1930 Smoot-Hawley Act Cotton manufactures: 1929 Census of Manufactures. Silk manufactures: 1929 Census of Manufactures. All agriculture variables: 1930 Census of Agriculture. Population: 1930 Fifteenth Census of the United States.

1934 Reciprocal Trade Agreements Act Cotton manufacturing: 1933 Biennial Census of Manufactures. Silk manufacturing: 1933 Biennial Census of Manufactures. All agriculture variables: 1935 Census of Agriculture (1934 values for cotton, wheat, wool; 1929 values for sugar; 1935 values for total agriculture). Population: 1930 Fifteenth Census of the United States.

1945 RTAA Renewal Cotton and rayon manufacturing (including silk manufactures): 1947 Census of Manufactures. All agriculture variables: 1945 Census of Agriculture (1945 values for total agriculture, 1944 values for other variables). Population: 1940 Sixteenth Census of the United States.

1949 RTAA Renewal Cotton and rayon manufacturing (including silk manufactures): 1947 Census of Manufactures. All agriculture variables: 1950 Census of Agriculture (1949 values for cotton, sugar, and wheat; 1944 values for sugar; 1950 values for total agriculture). Population: 1950 Census of the Population.

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1955 RTAA Renewal

Textiles: 1954 Census of Manufactures (by value-added of textile mill products). All agriculture variables: 1954 Census of Agriculture (1949 values for wheat, 1954 values for other variables). Population: 1950 Census of the Population.

1962 Trade Expansion Act Textiles: 1963 Census of Manufactures (by value-added of textile mill products). All agriculture variables: 1964 Census of Agriculture. Population: 1960 Census of the Population.