Regime III. Executive Dictation of Tariffs, 1934-1967
Reciprocal Trade Agreements Act Dramatically Increases Executive Trade Authority, 1934-45
A new and sweeping form of delegated authority was established in the Trade Agreement Expansion Act of 1934, more commonly known as the Reciprocal Trade Agreements Act (RTAA). The legislation authorized the executive branch to enter into trade agreements that modified tariffs and other import restrictions (such as quotas), and unilaterally proclaim tariff increases or decreases within a 50 percent band for pact partners' U.S. exports. While duty negotiations would proceed on an item-by-item basis, the legislation set no limit on the types of goods for which duties could be revised, unlike many past congressional delegations. The proposed authority also left to the executive's discretion whether or not to extend benefits negotiated bilaterally to all other countries on a most-favored nation basis, or only to specific countries that engaged in U.S. negotiations.43
The act an amendment to Smoot-Hawley that the Franklin Roosevelt administration justified as "emergency" legislation provided for no subsequent congressional votes on the resulting agreements, or congressional right of appeal on executive-branch decisions. The act specified no negotiating objectives or countries with which to negotiate. The only minimal requirement was for "reasonable public notice of the intention to negotiate an agreement," and for presidential consultation with relevant governmental agencies. But in at least one respect, the administration's painting of the bill as emergency legislation was backed up on paper: the authority was to only last for three years, and agreements that it established were subject to termination upon its expiration.44
However, in practice, the authority and the agreements it established were extended every few years for a generation, and the sweeping authority became a precedent for future even more expansive delegations. In his recent book on Fast Track, Hal Shapiro, a former associate general counsel in the Office of the U.S. Trade Representative (USTR), notes how the RTAA "was a major departure in that it effectively 'pre-approved' presidential authority to negotiate international trade agreements."45 Congress had previously delegated to the executive both tariff-proclamation authority (for certain goods within certain bands) and limited authority to negotiate trade agreements that did not require congressional approval. But the RTAA which included authority for the president to also change non-tariff items like quotas without a congressional vote nonetheless significantly expanded presidential power.
What was the purpose of this new delegation? The RTAA divided opinion even within the Roosevelt administration. One faction held that the authority should be used primarily to ink bilateral agreements to stimulate exports and thus national income. Others maintained that the purpose was to unilaterally lower tariffs so as to increase imports, because the United States had too high of a trade surplus at the time.46
Such debates were beside the point to Roosevelt's secretary of state, former senator Cordell Hull. His outlook was as simplistic and unsubstantiated as it was infectious: low tariffs equal peace, and high tariffs equal war. Hull, infamous for his role in the refusal of U.S. entry to the passengers on the S.S. St. Louis (a Jewish refugee ship dubbed the "ship of the damned") during the Nazi Holocaust,47 had spent years in Congress advocating for trade liberalization and greater executive authority. When Hull testified before Ways & Means, he employed all imaginable rationales for the new authority: it was an essential part of the president's domestic recovery plan; it was to help poor people abroad; and it was to put the U.S. executive on equal footing with heads of state in parliamentary systems (who had total tariff authority). He also admitted that the authority went beyond just tariffs, to encompass quotas and even possibly product-safety standards. He refused to speak in detail about how he planned to use the authority, citing a desire to avoid broadcasting U.S. negotiating positions to foreign governments. In an exchange with Rep. Allen Treadway (R-Mass.), Hull made clear that he thought the constitutionality of the measure was beside the point:
Treadway: "Under the Constitution, article 1, section 7, all bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other bills. Are we in any way violating that provision of the Constitution in setting up a law such as we have before us?
Hull: "This bill is originating in the House, is it not? So far as I am individually concerned, I think I have in mind all of these phases, but at the same time I am literally moved, driven and kicked into another line of thinking, which relates to 30 million unemployed people in the world who cannot furnish food or clothing to their people because international trade has been choked down...
Treadway: "If those 30 million people scattered throughout the world and their families are a first consideration, should not that clause of the Constitution be amended in order to take care of the 30 million people and not to violate the Constitution directly by legislative action?"
Hull: "That is what they said to Abraham Lincoln when he had to suspend one or two phases for the time being... Very few democratic forms of government are left mighty few. My observation after rather careful investigation has been that the mainspring or the moving influence of those revolutions has been people out of work... We are not going to fall into that soon, but you could easily become victims of those things in other parts of the world, and for that reason I would invoke your attention long enough to deal with this emergency situation"...
Treadway: "Assuming that to be true, and of course it is all open to debate... is the measure you are presenting to us today constitutional?"
Hull: "My opinion is that it is up to the Congress to cooperate with another coordinate branch of the Government to determine, first, whether this real exigency, present and prospective, does exist, and whether it is of such magnitude in its effect upon our country as would justify either branch of Congress or both in giving authority to the executive department in advance to perform certain functions which would ordinarily be reviewed by one branch of the legislative department."48
Hull and administration allies like Rep. Samuel Hill (D-Wash.) also argued that the Supreme Court was likely to uphold the constitutionality of the delegation, since the previous trade regime's flexible tariff provisions had been upheld as constitutional. In a later hearing, Hill argued that the record of congressional approval of only three reciprocity treaties
"show[s] the inefficiency of that kind of treaty making... whereas Executive agreements have produced a substantial number of reciprocal trade agreements. It seems to me in the fact of the history of this country upon that subject that to advocate a resort to the ordinary treaty-making power of the President for the purpose of effecting trade agreements or trade relationships, we must concede it simply an argument that that does not get us anywhere so far as effective progress is concerned toward improving our trade relationships with foreign countries."49
Hull established an inter-agency Committee on Trade Agreements housed in the State Department tasked with promoting what he saw as U.S. foreign-policy interests by reducing U.S. tariffs. The arrangement was so far removed from the days of congressional control of trade policy that Roosevelt and successor administrations would not even reveal the identity of the committee's members to the public. Rep. Daniel Reed (R-N.Y.) made a prescient remark during RTAA's floor debate that "such power, if granted, will place the life and death of every industry at the mercy of the 'brain trust'."50 These Committee officials saw their role as picking economic winners and losers, and even coded industries based on their perceived export competitiveness.51 Congress renewed the RTAA in 1937, 1940, 1943 and 1945, each for a three-year term.52 Roosevelt and later Truman proclaimed 40 bilateral deals with 24 countries between 1935 and 1946, dealing mostly with tariffs, but also occasionally with quotas and customs regulations.53
Rise of the GATT, 1945-51
A major challenge to the RTAA's expanded executive trade authority came when the Truman administration interpreted it as allowing the multilateral trade negotiations that established the General Agreement on Tariffs and Trade (GATT). The 1944 Bretton Woods Conference has originally envisioned the creation of three new institutions to regulate postwar global economic relations: the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (the World Bank), and an International Trade Organization (ITO).
However, many in Congress were opposed to the ITO. Some in Congress raised concerns that, while the administration agreed to submit U.S. membership in the ITO to a treaty vote, Congress would have no vote on the nearly two-dozen reciprocal trade agreements that prospective ITO member countries had negotiated. The RTAA did allow the executive branch to enter unilaterally into such tariff-cutting agreements. But the practical implications of the RTAA's delegation of power was revealed dramatically by the prospect of the ITO establishing in one fell swoop a comparable number of new trade agreements as had been established in the previous 12 years.
Others in Congress opposed the ITO on the grounds that establishing a global commerce agency would undermine U.S. sovereignty. On April 7, 1947, several House members engaged in an impassioned colloquy on the topic:
Rep. Noah Mason (R-Ill.): "This International Trade Organization, in effect, would be an international super state. It would take away from the American people control of American production... [it] would mean to transfer our governmental powers to a world economic authority.... We must halt this vicious plan for an International Trade Organization before it goes too far or it will be the undoing of everything that we have built up and developed under our Constitution."...
Rep. Cliff Clevenger (R-Ohio): "As we sit in this committee, our Democratic friends are in a quandary. They have got their feet all tangled up and their eyes dim with the mist of the halo that has been around the head of Cordell Hull for so many years. They do not know where they are going... It is time that somebody rub a little Americanism on this party that rules the other end of [Pennsylvania] Avenue in order to get them to think America and work for America and protect America."...
Rep. Thomas Owens (R-Ill.): "Aside from the fact that the executive department has emergency powers during wartime, is there any question in the gentleman's mind but that this Congress has the right to make laws and have the executive department enforce them, and that it is about time that we begin to do that in order to save our national policy?"
Mason: "Of course, for 150 years, that was true, but that has not been true during the last 16 years, because not only has the judiciary department interpreted the laws and said what the Congress should have put in, whether they put it in or not, but our executive departments have been themselves interpreting the laws to suit themselves, and the business of the Congress today is quite largely the vetoing of department rulings which misinterpret the laws, and even vetoing some of the rulings of the Supreme Court on the laws that we have passed."...
Rep. John Rankin (D-Mo.): "I understood that... whatever agreements were made [in Geneva] should come back to the Congress for ratification; at least, to the Senate."...
Mason: "[The administration] said he would submit that to the Senate for approval before it would go into effect. He said, however, that as to the 18 reciprocal trade agreements which they expect to put into effect before this International Trade Organization is set up, they, of course, would not go to the Senate."54
Indeed, by late 1947, the 23 countries that had originally engaged in GATT negotiations had already agreed to many tariff concessions. These were made on an item-by-item, bilateral, request-offer basis, and then generalized on a most-favored nation basis to the entire group. Truman, anxious to lock in these agreements, invoked the RTAA to proclaim the "provisional application" of the GATT to the United States in October 1947.55 On March 24, 1948, Truman's Assistant Secretary of State William Clayton signed the ITO's draft charter, which would go into effect subject to congressional approval. On April 28, 1949, the Truman administration notified Congress it would submit the ITO for a Senate treaty vote, but then formally abandoned the effort in 1951 in the face of unbending congressional opposition.56
Members of Congress were irate at the executive branch's GATT maneuvering, as evidenced by comments at a Senate Finance Committee hearing from 1949:
Sen. Eugene Millikin (R-Colo.): "Would the provisions of this article or any other part of GATT impose upon the Federal Government any duties to do anything as to local State laws or movements, which are intended to promote State products, such as 'Buy Georgia Peaches,' 'Buy Colorado Cantaloupes,' state advertising campaigns out of public funds to promote those local buying campaigns?"
Winthrop Brown (State Department Official): "No, sir."
Millikin: "Is there anything in this agreement any place that imposes any obligation on the Federal Government to stop anything of that sort?"
Brown: "I don't think so sir."
Millikin: "Is there any question about it?"
Brown: "No, I don't know of anything."57
Millikin and Brown had another face-off in March 1951:
Millikin: "You are unwilling then to present the whole of GATT to Congress so that it might not only compare GATT against existing laws, but also against the Constitution? ... What about the future laws of Congress?"
Brown: "The answer to that question is that if the Congress should pass legislation in the future that was inconsistent with the GATT, they would put the United States in the position of violating the GATT."
Millikin: "And you feel that the President is warranted in making future executive agreements which in themselves might conflict with future laws of Congress?"
Brown: "That has been the situation with respect to all of our trade agreements since the beginning, Senator."58
In 1947, Sen. Hugh Butler (R-Neb.) summed up the views of many when he said: "I think it is fair to say that it was not contemplated when this act was passed that it would be used as the vehicle for a general revision of our entire tariff system... the State Department has tried to commit us permanently to a reversal of our long-standing policies by putting this agreement through during a temporary period of world shortages. We may not realize fully what has happened to us for some little time... Present authority to negotiate these treaties under the Trade Agreements Act will expire next year. I believe the Congress will scrutinize very, very carefully any request for an extension."59
Congress Begins to Reassert Its Constitutional Trade Authority, 1948-1962
Butler's prediction came true. Republicans took over both chambers in the 1947 election on a pledge to rein in Truman. The following year, Congress enacted its first major RTAA revision, extending the authority for only a single year, rather than the customary three years. The 1948 RTAA introduced the rather modest notion that Congress and the trade gatekeeper committees (Senate Finance and House Ways & Means) would have to receive copies of any trade agreement that threatened "serious injury" to domestic industries within 30 days of entering into the pact. (This was known as the "peril-point" provision.60) In the House, 98 percent of Republicans supported the bill, and 90 percent of Democrats opposed a total inversion of the pattern from previous RTAA extensions.
The Republican resurgence was short-lived: Democrats retook both chambers later that year. In 1949, Congress reestablished the RTAA authority for its standard three-year duration, and removed the peril-point language.61 While Democrats continued to hold the majority in the next Congress, the Republican minority was able to reinsert and expand the injury provision, and limit the 1951 extension of the authority to two years. The new language allowed either congressional chamber or gatekeeper committee to request that the Commerce Department's U.S. Tariff Commission (now called the U.S. International Trade Commission)62 investigate and report on any "serious injury" caused to U.S. industries under a trade agreement. If the commission made a recommendation to alter tariff rates to compensate for the injury, the executive was authorized to proclaim further duty changes. If he chose to ignore the commission's advice, the president would have to file a report with the gatekeeper committees explaining his decision.
Additionally, the 1951 legislation specified, "the enactment of this act shall not be construed to indicate approval or disapproval by the Congress of the Executive Agreement known as the General Agreement on Tariffs and Trade."63 Similar clauses appeared in the 1953, 1955 and 1958 acts, and were one means Congress had of showing that, while it accepted the tariff reductions proclaimed by the executive, it did not accept or recognize the GATT agreement itself.64 In an early foreshadowing of how enhanced executive authority implicated non-tariff policy, the Truman administration admitted that a dozen domestic laws would have to be changed if the United States were to move from provisional to non-provisional acceptance of the GATT.65
While Roosevelt, Truman and congressional Democrats had hitherto treated any congressional alterations to the RTAA as partisan affronts, the 1952 elections provided something of a wakeup call. Republican Dwight Eisenhower defeated Democrat Adlai Stevenson for the presidency, and the Grand Old Party took both chambers of Congress. Democrats were henceforth less resistant to modifying the underlying formula, and bipartisan majorities voted over the decade to substantially increase congressional involvement in trade policy. The 1953 RTAA created a commission appointed by the executive and Congress that would study foreign economic policy, including its constitutional implications.66 In the 1955 RTAA, Congress increased the executive's congressional reporting requirements.67
The 1958 RTAA renewal was Congress' most significant reassertion of congressional trade prerogatives during the third regime. This act allowed Congress to force the president to proclaim tariff modifications recommended by the Tariff Commission if he had initially rejected their advice. The exact process was the following: within 60 days of receiving the commission report initially mandated by the 1951 act, if both the House and Senate adopted a concurrent resolution by a two-thirds vote in each chamber requiring the commission's advice to be implemented, Congress could override the president. The bill also specified the rules that Congress would follow in considering such resolutions, while noting that these could be changed as per the legislature's constitutional rights. Under the rules, any member of Congress could propose such a "disapproval resolution," which would be automatically reported to the gatekeeper committees, who would have 10 days to report it out. If they did not take action after that time, any member of Congress could make a highly privileged motion (no amendments, one hour of debate, and other expediting procedures) for the resolution to be immediately discharged and brought up for a floor vote.68
The Bricker Amendment: Criticism of Executive Unilateralism GrowsDuring this period, congressional concern about executive-branch unilateralism was significant, and not limited to trade-agreement matters. A constitutional amendment known as the Bricker Amendment, which would have significantly limited executive authority in the international arena, came within one vote of Senate approval. Since the 1890s, Congress had allowed the executive to sign certain executive agreements that impacted trade without subsequent congressional approval, such as the argol agreements. Executive agreements around non-trade issues dated back even further. But their usage was getting increasingly controversial, as international agreements like the United Nations and GATT seemed to be creating supranational forms of governance. In 1951-52, Sen. John Bricker (R-Ohio) with support from the American Bar Association proposed a constitutional amendment that no treaty or executive agreement could be made: 1) with respect to, abridging, or prohibiting the free exercise of Americans' constitutional rights; 2) that vests in any international organization or in any foreign power any of the legislative, executive, or judicial powers vested by this Constitution in the Congress, the President, and in the courts of the United States; or 3) that alters or abridges the Constitution or U.S. federal or state laws unless, and then only to the extent that, Congress shall so provide by joint resolution. The Bricker Amendment would have also forbade executive agreements made in lieu of treaties, and would require that any executive agreements terminate within a year after the president who made them had left office, unless the following president asked Congress for an extension. Although not specifically directed against Truman's GATT maneuvers, Bricker's floor statements from January 1952 made his thinking clear: "The General Agreement on Tariffs and Trade is an illegal executive agreement launched with the idea of greasing the way for the International Trade Organization. The ITO, in both treaty and joint resolution form, met a stone wall in Congress. GATT, its illegitimate forerunner, lingers on."69 In 1953-54, after the Republicans took back Congress, Bricker introduced revised versions of his Constitutional amendment, which attracted broad bipartisan support. But, Senate Minority Leader Lyndon Johnson perhaps thinking about the executive-power question in the context of his own presidential aspirations teamed up with Eisenhower to kill the amendment. On February 26, 1954, a watered down version of the Bricker Amendment authored by Sen. Walter George (D-Ga.) fell one vote short of the needed two-thirds supermajority, and thus died.70 |
Despite growing bipartisan concerns about executive-branch unilateralism in the international arena, Truman and Eisenhower continued to rely on GATT's "provisional application," even as GATT contracting parties completed five rounds of GATT negotiations and U.S. administrations proclaimed the resulting tariff changes into U.S. law.
Yet Another Congressional-Executive Trade Authority Showdown, 1962-67
John F. Kennedy came to office promising an overhaul of U.S. trade policy, stating that the 1934 RTAA model "must not simply be renewed, it must be replaced." He argued that this was necessary to meet the challenges of new developments on the trade horizon, such as the "need for us to maintain a balance of trade in our favor" by reducing European tariffs.71 In practice, the 1962 Trade Expansion Act (TEA) did not represent a huge change in the RTAA's executive-legislative relationship. It added provisions that required the president to accredit a member of each party from each chamber to go on negotiating teams, and to send copies of completed agreements to Congress. Presidential tariff-proclamation authority was limited to increases or decreases within a 50 percent band. Certain duties could be totally eliminated, such as those already under 5 percent ad valorem, on tropical products, or on products where the U.S. dominated global markets. Moreover, the TEA extended tariff-proclamation authority from three to five years, through 1967, and created the Office of the Special Trade Representative (later called the U.S. Trade Representative) to lead negotiating teams and serve as a broker between executive agencies.72 Kennedy later placed the STR in the Executive Office of the President.
The 1962 act also pioneered the idea of buying congressional support for trade deals by attaching delegation authority to authorizations for a new program of trade adjustment assistance (TAA), which aided workers displaced by imports. The TAA legislative "sweetener" has since become standard political cover for members of Congress making difficult trade votes.73 The administration tucked the new TAA program into the larger delegation proposal as a means to win labor support, as AFL-CIO President George Meany indicated when he told the Senate Finance Committee in 1962:
"As you know, we in the AFL-CIO have consistently supported the various extensions of the Reciprocal Trade Act over the last 28 years. However, we agree with the administration that the time has now come for a fundamental revision, an updating and overhauling of this basic approach... Yet I gather from newspaper reports and other sources that trade adjustment assistance still remains one of the more controversial features of the program you are considering. This causes us the gravest concern. In our opinion, there is no question whatever that adjustment assistance is essential to the success of trade expansion. And as we have said before, it is indispensable to our support for the trade program as a whole."74
On June 28, the House approved the TEA by a margin of 299 to 125, and the Senate promptly followed.75 After the Kennedy assassination the following year, countries participating in the sixth GATT negotiating round renamed it in Kennedy's honor. These negotiations were completed by President Lyndon Johnson, who used his TEA authority to make an executive proclamation enacting the round's sweeping tariff reductions.
But Johnson made a number of legislative missteps that aroused congressional anger. First, he negotiated and signed an Automotive Products Agreement with Canada on January 15, 1965 without prior congressional authorization, congressional participation in the negotiations, or the required public hearings. The pact eliminated certain duties on cars and car parts, even though the TEA authority only allowed for reductions on these duties within the 50 percent band.
Sen. William Fulbright (D-Ark.) questioned why the executive was not asking for the Senate's advice and consent. In a letter to Secretary of State Dean Rusk, Fulbright noted: "An increasing number of members are under the impression that executive branch decisions whether to submit international agreements to the Senate for approval by two-thirds of its Members or to the Congress for a majority decision are based on expediency rather than the Constitution."
In response, the State Department wrote: "The United States-Canadian automotive agreement is bilateral and deals with the elimination of duties. It has been the regular practice for over 30 years to use the executive agreement-legislative authority procedure for agreements of this type. In the usual case, the legislative authority has been provided first and the executive agreement made later as under the reciprocal trade legislation of 1934 and the Trade Expansion Act of 1962. However, it is equally within the constitutional powers of the President to make an executive agreement first, subject to the enactment of legislation and have the legislation follow."76 Despite constitutional concerns, Congress passed the legislation, retroactively authorizing the negotiations and duty reductions, on October 21, 1965. Johnson proclaimed the duty reductions into effect the same day.77
Johnson made a second error in calculating Congress' tolerance for executive trade actions taken outside of delegated authority. In the Kennedy Round, he engaged in negotiations with GATT partners about changing U.S. antidumping law, and eliminating what was known as the American Selling Price (ASP), a method for valuating certain foreign imports (of chemicals, for instance) by what they would have cost to produce in America. These were quintessential non-tariff (though trade-related) issues, and in June 1966, the Senate unanimously passed S. Con. Res. 100, which stated that the president should not engage in negotiations on matters for which he had no prior congressional authorization. Sen. Vance Hartke (D-Ind.) noted that "such substantive changes in our law amount to unauthorized legislation by an international agreement whose execution exceeds the mandate for these negotiations and usurps the legislative responsibilities of Congress."78
While Republicans had led the mid-century charge against executive concentration of trade power, Democrats increasingly concerned with American workers' wellbeing under a global trading system also joined the ranks of the critics of delegated trade authorities.
Johnson proclaimed the GATT Kennedy Round tariff reductions on December 16, 1967 (having concluded the negotiations by the July 1 expiration of TEA's authority to "enter into trade agreements.")79 However, by that time, he had reluctantly conceded that he would need legislative authorization to change the ASP and anti-dumping code. In May 1968, he submitted to Congress a new Trade Expansion Act, which would implement changes to the ASP and anti-dumping laws and extend the 1962 authority through 1970. The Ways & Means Chair at the time, Wilbur Mills (D-Ark.), promptly convened a month of hearings, where witness after witness assailed the substance and constitutionality of the ASP measure. In contrast to the unauthorized Canadian auto-tariff eliminations, Congress was unwilling to accept Johnson's unauthorized trade commitments this time. Congress never had a vote on the bill, and the non-tariff aspects of the Kennedy Round never went into effect in the United States.