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Clashing over Commerce: A History of U.S. Trade Policy

Author(s):Irwin, Douglas A.
Reviewer(s):Eckes, Alfred E.

Published by EH.Net (May 2018)

Douglas A. Irwin, Clashing over Commerce: A History of U.S. Trade Policy. Chicago: University of Chicago Press, 2017. x + 860 pp. $35 (hardcover), ISBN: 978-0-226-39896-9.

Reviewed for EH.Net by Alfred E. Eckes, Jr., Department of History, Ohio University.
At a time when concerns about trade wars unsettle financial markets and engage media pundits, those seeking a deeper understanding of trade issues may choose to consult Douglas Irwin’s hefty volume. Prospective readers should be aware of the book’s strengths and limitations.

The author, a Dartmouth College economist, is interested more in the “formation of trade policy rather than the consequences of any particular policy outcome” (p. 4). He seeks to update economist Frank Taussig’s classic Tariff History of the United States, whose eighth edition was published in 1931. His approach involves explaining how changing regional economic interests and domestic political forces have impacted average tariff levels over more than two centuries. These changes transformed the tariff system during the 1930s and produced a consensus in Congress for lower tariffs.

The book has three distinct sections. The first focuses on the U.S. government’s reliance on tariffs from 1789 to the Civil War to generate revenue. Irwin argues that Treasury Secretary Alexander Hamilton was primarily concerned about securing adequate revenue for the new national government, not in establishing a program of high tariffs to protect infant industry. To promote industry Hamilton preferred subsidies to tariffs. Irwin also says that Adam Smith’s writings were known to the Founding Fathers and influenced early policy debates. While Irwin stresses Smith’s influence, he gives little attention to Friedrich List, the German economic journalist and railroad builder, who helped mobilize U.S. support for protection in the 1820s. List’s thinking later influenced the twentieth century mercantilist trade policies of Japan, China, and other developing countries.

A second section examines the rise of protective tariffs during the Civil War. This phase of restrictive tariffs continued with only brief interruptions until the Great Depression, as Northern industry sought to limit import competition. Irwin emphasizes that lobbyists representing affected industries, mobilized in Washington and bombarded Congress with requests for tariff protection. Here the author’s account seems one sided since he overlooks the countervailing influence of Cobden Clubs, funded and supported by British interests, eager to persuade U.S. officials to adopt freer trade policies. The historian Marc William Palen (2016, pp. 59-69) has shown that the membership of Cobden organizations, extended from President James Garfield to leading public figures, business leaders, and academics, including the renown international economist Frank Taussig, who became President Woodrow Wilson’s first chairman of the U.S. Tariff Commission.

Regarding the Hawley-Smoot Tariff (or Smoot-Hawley as many prefer) Irwin agrees that the act had little impact on the Great Depression. However, he believes that passage of the 1930 tariff spurred significant retaliation from trading partners. On this point we disagree. In May 1931 the State Department asked consular officials at 96 posts to report on foreign discrimination against U.S. exports, and little was reported. Irwin has apparently not taken into account diplomatic records in the National Archives that contradict his conclusion (see Eckes 1995, p. 125-29).

In a third section, Irwin emphasizes that the transition to a reciprocity-based trade policy, begun with Secretary of State Cordell Hull’s reciprocal trade program in 1934 and continued after World War II as the U.S. sponsored the GATT/WTO multilateral system, which flourished until recent years. Cordell Hull, a tariff-cutting enthusiast from rural Tennessee, was a single-minded proponent of reciprocal trade, and although Irwin notes that he had little influence on foreign policy during the 1930s he left a huge imprint on twentieth-century trade policy. His reciprocal trade program and the successor multilateral trade initiative under the auspices of GATT and the WTO can be credited to Hull’s vision and determination.

It is said that economist Paul Samuelson wore a green-eye shade to White House discussions on tax policy during the Kennedy administration. Irwin seems to have introduced the green-eye shade approach to tariff policy. His massive 860-page volume rests on detailed research on congressional debates and legislative proposals. His narrative is filled with information about obscure provisions of long-forgotten tariff bills. His bibliography lists a variety of relevant published materials, including memoirs of participants, and scholarly articles. He appears to have made excellent use of the data and secondary research of other economists. But, his 123-pages of bibliography and end notes expose some significant, and surprising, omissions.

Irwin has made little use of unpublished records in government archives and presidential libraries. Documents in these facilities offer an unexpurgated look at trade negotiations and policy implementation issues at the working level. They enable research historians to peer behind the spin in memoirs and to unearth discoveries that alter conventional wisdom. Another major omission involves contemporary newspaper accounts and periodicals. On-line databases such as Newspapers.com and ProQuest’s American Periodicals now enable researchers to access easily a variety of primary sources, not examined extensively by scholars, on topics such as customs fraud and smuggling that may skew Irwin’s average tariff calculations.

In the nineteenth century, high tariffs invited extensive smuggling and customs corruption, subjects not examined in this book. In 1865, for example, Commissioner of Customs Nathan Sargent reported an extensive system of smuggling along the Canadian border from New Hampshire to Lake Superior. He said that hundreds of men of “pretended respectability” were secretly engaged in smuggling liquors, teas, silks, spices, laces and other light goods to evade payment of U.S. tariffs (see, for example, Buffalo Commercial, 1865). Researchers can find many other accounts of smuggling and customs fraud by using newspapers, periodicals, court, and Treasury records from the period. These detail a wide range of enforcement issues from piracy to customs fraud. Apparently, at the New York Customhouse, which processed two-thirds of U.S. imports after the Civil War, fraud was rampant and continued over an extended period. It involved undervaluation, kickbacks and bribery (see Cohen 2010 and 2015). As a result, many of the trade data seem suspect, and generalizations about tariff levels and the effectiveness of protection do not take into account the significance of pervasive corruption and circumvention.

Despite the claim on the book jacket describing it as the “most authoritative and comprehensive history of U.S. trade policy to date,” this book offers an incomplete account of U.S. trade history. The author gives relatively little attention to non-tariff issues, such as customs corruption, smuggling, and theft of intellectual property, which were present even in the founding years of the American republic. In the last hundred years — particularly, since the Great Depression — other non-tariff issues such as export controls and strategic trade, technology transfer, dispute settlement, and forms of managed trade that distort the global market place have gained in importance. It is worth emphasizing that Irwin’s focus on tariff levels largely overlooks some of the difficult issues of policy implementation, including the free rider problem growing out of Hull’s enthusiasm for the unconditional most-favored nation policy.

Examples of free-riding involve the integration of Japan and China into the GATT/WTO multilateral trading system. In the post-World War II period, a series of U.S. administrations used tariff liberalization as a tool to integrate former adversaries into the world trading system. In GATT accession negotiations with Japan the Eisenhower administration failed to open the Japanese market significantly for American manufactures and agricultural exports. Japan, however, upon entering GATT qualified for the lowest tariff levels in the American market. This facilitated the rapid growth of Japanese manufactured exports, while continuing to restrict U.S. exports to Japan. A similar asymmetry resulted from the Clinton administration’s negotiations for Chinese accession to the WTO.

Irwin’s book represents an impressive effort by an economist to survey U.S. tariff history, but it breaks little new ground. Many important areas of trade policy and implementation continue to invite the efforts of scholars with the discipline to undertake archival research and the training to employ the research methods of economics, history, and law.
References:

Andrew Wender Cohen, “Smuggling, Globalization, and America’s Outward State, 1870-1909,” Journal of American History, 92:2 (September, 2010), 371-398.

Andrew Wender Cohen, Contraband: Smuggling and the Birth of the American Century (New York: Norton, 2015), 122-35.

Alfred Eckes, Opening America’s Market: U.S. Foreign Trade Policy since 1776 (Chapel Hill: University of North Carolina Press, 1995).

“Extensive Smuggling along Canadian Frontier,” Buffalo Commercial (July 13, 1865), 2.

Marc-William Palen, The ‘Conspiracy’ of Free Trade: The Anglo-American Struggle over Empire and Economic Globalization, 1846-1896 (Cambridge: Cambridge University Press, 2016).
Alfred E. Eckes, Jr., is an emeritus professor in the Department of History at Ohio University, a former Chairman and Commissioner of the U.S. International Trade Commission and author of several books on U.S. trade policy.

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Subject(s):Government, Law and Regulation, Public Finance
International and Domestic Trade and Relations
Geographic Area(s):North America
Time Period(s):18th Century
19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII