Regime I. U.S. Trade Agreement Policymaking for the First 100 Years
America's founding fathers were acutely aware of the perils of concentrated power in trade policymaking. "No taxation without representation" was the rallying cry of the Boston colonists, including some of the founders themselves. Their Boston Tea Party was a turning point in the independence movement. The tax in question, however, was a tariff on tea, imported for sale in the colonies and initially imposed by King George to pay off his French war debts. In December 1773, Sam Adams, later a signatory of the new Constitution, led his fellow Sons of Liberty onto ships that had broken a colonial tea boycott organized in response to the tariff, and threw the ships' cargo into the Boston Harbor.7
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In designing the Constitution, America's founding fathers created a clear separation of powers regarding trade policymaking. They sought to avoid twin dangers they had experienced: a British crown too susceptible to foreign intrigues that bartered away the national interest, and a states-dominated Articles of Confederation where each state could slap tariffs on each other's products. Chief Justice John Marshall later remarked that nothing "contributed more to that general revolution which introduced the present system, than the deep and general conviction that commerce ought to be regulated by Congress."8 As outlined in Article I, Section 8 of the U.S. Constitution, the body closest to the people was given the exclusive authority to "to regulate commerce with foreign nations" and "lay and collect taxes [and] duties." This authority ensured a federally uniform trade policy. Meanwhile, the executive branch was given the authority to negotiate treaties on behalf of the United States in Article II, Section 2. Alexander Hamilton wrote in The Federalist No. 75 about the power over treaties (which was at the time the sole form of trade pacts) and the balance between the executive and legislative:
"The power of making treaties is, plainly, neither the one nor the other. It relates neither to the execution of the subsisting laws, nor to the enaction of new ones; and still less to an exertion of the common strength. Its objects are CONTRACTS with foreign nations, which have the force of law, but derive it from the obligations of good faith. They are not rules prescribed by the sovereign to the subject, but agreements between sovereign and sovereign. The power in question seems therefore to form a distinct department, and to belong, properly, neither to the legislative nor to the executive. The qualities elsewhere detailed as indispensable in the management of foreign negotiations, point out the Executive as the most fit agent in those transactions; while the vast importance of the trust, and the operation of treaties as laws, plead strongly for the participation of the whole or a portion of the legislative body in the office of making them... The history of human conduct does not warrant that exalted opinion of human virtue which would make it wise in a nation to commit interests of so delicate and momentous a kind, as those which concern its intercourse with the rest of the world, to the sole disposal of a magistrate created and circumstanced as would be a President of the United States."
In the words of one trade historian, "this complex system of checks and balances guarded the nation against human error and foreign corruption."9 The divided power system had the added benefit of giving soapboxes to a variety of competing views about the best mode of development for the new American nation. While heads of state like Thomas Jefferson embraced the idea of an economy that would export agriculture to Europe and import manufactured goods, congressional leaders like Henry Clay of Kentucky could advocate from their congressional perch for an "American system" of infant-industry protection and government investments to diversify the American economy. Because the Constitution gave Clay and his congressional colleagues the ultimate authority to approve trade policies, but required the president to conduct negotiations, neither branch could control the process.
Tariff acts were the primary means of implementing policy regarding the terms of trade between the United States and other nations. From 1789 until 1890, Congress enacted 16 major tariff acts, most of which increased rates, but nearly a third of which decreased them.10 Each of these bills consisted of a long list of duties for customs officials to charge on imports, irrespective of originating country. The "single-column" tariff schedule greatly frustrated the executive branch, which sought the use of country-differentiated tariff tools in its diplomatic toolbox. In 1790-93, then-Secretary of State Jefferson advocated for the executive branch to dangle both carrots (reciprocal tariff reductions) and sticks (retaliatory sanctions) in front of Europe to gain better treatment for American traders. However, providing the executive branch with such a broad delegation of Congress' constitutional tariff-setting authority and such a high degree of discretion about tariff rates and treatment of specific countries did not gain traction in Congress for another 100 years.
That does not mean that the executive did not try to sign trade treaties. However, in doing so, presidents were required to surmount two constitutional hurdles. First, they were to use the constitutional treaty process (Senate advice and consent by two-thirds vote) to approve the agreements in question. Second, once an agreement was so approved, both chambers had to pass legislation making the treaty-required changes to U.S. tariff rates.11 A comprehensive review of U.S. statute books did not yield a single bilateral tariff-lowering treaty adopted through this two-step process until 1854. (There were, however, several instances of Congress passing embargoes on certain nations' goods at wartime, but then allowing the executive to unilaterally remove the embargo once hostilities ceased or diminished. This delegation was upheld by the Supreme Court in Aurora v. the United States in 1813.)
Congress generally viewed executive trade treaties as infringing on Congress' constitutional authority to set tariff rates. In 1844, 1855, and 1859, the executive branch negotiated reciprocal trade deals with Prussia, Hawaii and Mexico that would have applied tariffs to these countries' products lower than the single-rate duty established by Congress. In the first two instances, the executive branch wrote specific tariff changes into the treaties, while the Mexico treaty would have allowed Congress to select specific items for tariff reductions from a list pre-selected by the U.S. and Mexican executives. In each of these instances, Congress voted down the treaties. On the Prussia treaty, historian Alfred Eckes writes:
"On June 14, 1844, the Senate Foreign Relations Committee released a critical report advising against ratification. It held that the control of trade and the function of taxing belong, without abridgement or participation, to Congress.' Representatives of the people may better discern what true policy prescribes and rejects, than is within the competence of the Executive department.' The appropriate function of the executive, the committee said, was to follow, not to lead; to fulfil, not to ordain, the law..., not to go forward with [a] too ambitious enterprise." [The Senate report] counsel[ed] rejection on constitutional grounds."12
Congress shelved various other executive attempts at trade treaties in this period. One such instance was a later 1867 Hawaii pact that Congress never considered in a legislative agenda dominated by Southern Reconstruction efforts. In the face of congressional opposition, the executive abandoned still other tariff-cutting trade pacts, including a tariff reciprocity pact with Canada that the James Polk administration had attempted to pass via normal (non-treaty) legislative procedures in the 1840s.13
There were only a few exceptions to Congress' general antipathy to trade pacts during the first regime. One occurred when the executive negotiated a reciprocity treaty in 1854 with Canada signed on June 5 that eliminated duties on 28 items (mostly food and raw materials). The Senate gave its advice and consent to the treaty, whose text specified that: "The present treaty shall take effect as soon as the law required to carry it into operation shall have been passed... by the Congress of the United States." Thus, in order to make the duty eliminations operational, Congress had to pass separate implementing legislation, which it did on August 5. Once these steps were completed, President Franklin Pierce ratified the treaty in September.14 Congress later abrogated the treaty in 1866, since Canada had angered Congress by increasing duties on other U.S. products during the period. At the time, Senator Justin Morrill (R-Vt.), chair of the Senate Finance Committee, declared that tariff reciprocity treaties are "a plain and palpable violation of the Constitution, which gives to the House of Representatives the sole power to originate revenue bills."15 (Since America's early years, the Senate Finance and House Ways & Means committees have played a leading role in trade policy, given tariffs are considered an instrument of tax policy, and these committees have jurisdiction over such revenue measures. Because of this jurisdictional distinction, the committees are often called trade-policy "gatekeepers.")
In another exceptional move, the Senate gave its advice and consent to and Congress passed implementing legislation for an 1875 Hawaii tariff-reciprocity treaty negotiated by the Ulysses Grant administration. This surprised some, since the Senate had failed to give its advice and consent to yet another Canadian tariff reciprocity treaty the year before. However, the pro-tariff Republican Chicago Daily Tribune (now known simply as the Chicago Tribune) editorialized that one could be for the Hawaii pact and still against reciprocity more generally, since the former "affects injuriously very few, if any, vested interests in this country," and, "It is better to have reciprocal free trade with the Sandwich Islands [Hawaii] than to annex them." (Policymakers considered annexation the only alternative policy, given U.S. military interests in securing the Pacific.16 Hawaii became a U.S. territory in 1900, an arrangement that supplanted the reciprocity treaty.)
From a purely economic point of view, the almost total lack of U.S. trade pacts during America's first 100 years did not prove detrimental: real per capita income grew 389 percent, or an annual average of 4 percent.17 During the nation's first century, presidents and legislators of all political parties tended to agree on the constitutional basis for congressional control over trade policy, even when they disagreed on trade policies and economics per se. (Democrats tended to favor tariffs for revenue only, while Republicans tended to favor tariffs in order to develop infant industries.) Nevertheless, the congressionally controlled system began to unravel as U.S. global ambitions expanded, and the executive branch increasingly demanded it be granted trade tools to reward allies and punish enemies in the context of broader foreign-policy goals.