Free Trade and the New Deal: the Nitu Ed States and the International Economy of the 1930S Scott Ichm Ael Nystrom Iowa State University
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Iowa State University Capstones, Theses and Graduate Theses and Dissertations Dissertations 2010 Free trade and the New Deal: The nitU ed States and the international economy of the 1930s Scott ichM ael Nystrom Iowa State University Follow this and additional works at: https://lib.dr.iastate.edu/etd Part of the History Commons Recommended Citation Nystrom, Scott ichM ael, "Free trade and the New Deal: The nitU ed States and the international economy of the 1930s" (2010). Graduate Theses and Dissertations. 11887. https://lib.dr.iastate.edu/etd/11887 This Thesis is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository. It has been accepted for inclusion in Graduate Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. Free trade and the New Deal: The United States and the international economy of the 1930s By Scott Michael Nystrom A thesis submitted to the graduate faculty In partial fulfillment of the requirements for the degree of MASTER OF ARTS Major: History Program of Study Committee: Charles Dobbs, Major Professor Brian Behnken Linda Shenk Iowa State University Ames, Iowa 2010 Copyright © Scott Michael Nystrom, 2010. All rights reserved. ii TABLE OF CONTENTS ACKNOWLEDGMENTS iv CHAPTER 1: INTRODUCTION 1 Figure 1.1 – The NRA and the Philadelphia Eagles 9 CHAPTER 2: HISTORIOGRAPHY ESSAY 16 CHAPTER 3: THE SMOOT-HAWLEY TARIFF 36 The Background of Foreign Trade 37 Figure 3.1 – The American Balance of Payments 39 The Roaring Twenties 40 Figure 3.2 – Duty Classification of 1924 Imports 45 The Economic Crisis of 1929 45 Figure 3.3– Agricultural Exports in the 1930s 51 Why a Smoot-Hawley Tariff? 51 President Hoover and the Smoot-Hawley Tariff 58 Economic Analysis of Smoot-Hawley 64 Figure 3.4 – American-Swiss Trade, 1930-1931 66 Figure 3.5 – American-Canadian Egg Trade, 1930-1932 69 Figure 3.6 – Free and Dutiable Imports, 1928-1930 73 CHAPTER 4: CORDELL HULL 75 Hull‘s Early Career 76 Hull and the New Deal 85 Figure 4.1 – Photograph of Cordell Hull 90 The World Economic Conference 91 President Roosevelt and Secretary of State Hull 102 Figure 4.2 – Picture of Dale Hollow Dam and Reservoir 113 CHAPTER 5: THE RECIPROCAL TRADE AGREEMENTS ACT OF 1934 128 The Economic Theory of Reciprocal Trade 129 Figure 5.1 – The Scale of the International Market 143 The Social Representation of Reciprocal Trade 145 CHAPTER 6: NEW DEAL TRADE RECIPROCITY 165 Economic Analysis of Reciprocal Trade 166 Figure 6.1 – Gross Domestic Product and Exports 168 Figure 6.2 – Exports‘ Disproportionate Recovery 170 Figure 6.3 – Imports‘ Proportionate Recovery 170 Figure 6.4 – The Rapid Expansion of Reciprocal Trade 172 Figure 6.5 – Farm Income and Reciprocal Trade 174 iii Diplomatic Analysis of Reciprocal Trade 176 Figure 6.6 – Map of the Reciprocal Trade Program 181 Spain and Reciprocal Trade 185 Figure 6.7 – American-Spanish Trade, 1925-1934 188 Latin America and Reciprocal Trade 188 Germany and Reciprocal Trade 195 Japan and Reciprocal Trade 199 Figure 6.8 – American-Japanese Trade, 1929-1933 202 The British Empire and Reciprocal Trade 208 Foreign Trade and the Second World War 217 Figure 6.9 – American Steel Production 219 Free Trade and the Postwar Order 222 CHAPTER 7: CONCLUSION 228 BIBLIOGRAPHY 241 Note on Sources 241 Audio and Visual Media 242 Articles 242 Books 243 Lectures 245 Manuscript Collections 246 Online Articles 246 Online Databases 248 Online Encyclopedias 248 iv ACKNOWLEDGMENTS I would like to thank, in no order, a number of individuals and groups for helping me in the completion of this thesis. First, thank you to my family. Thank you to Cristofer and Jordan, for providing me with a sibling and housing along with everyone else. Thank you to David Imberti for being my intellectual foil and providing some of the ideas to germinate this project in the first place. Thank you to my committee, Dr. Behnken, Dr. Shenk, and Dr. Dobbs, for allowing me to bother you. Especially to Dr. Dobbs, who guided me through this project and endured constant demands for reassurances. Thank you to teachers I have had, as there are too many of them to name. Thank you to the anonymous donor, as the travel grant paid for most of my research. My wonderful, fuzzy cats deserve my gratitude for their cuteness, support, and apathy. Yet, the most thanks to Jennifer Diane Loftus. You were there for me while I worked on it, all summer long. I could not have done it without you, and I would not have done it without you. 1 CHAPTER 1: INTRODUCTION ―I ask you if you have lost faith in our Yankee tradition of good old-fashioned trading. Do you believe that our early instincts for successful barter have atrophied or degenerated? I do not think so.‖ ~President Franklin Delano Roosevelt (1934)1 Tariffs and international trade were a hot, contentious question in the Democratic Party‘s presidential primaries of 2008. On August 6, 2007, the presumptive frontrunner, Senator Hillary Clinton (D-NY), and other candidates were in a forum in Chicago where Clinton stated, ―Well, I had said that for many years that, you know, NAFTA and the way it‘s been implemented have hurt a lot of American workers.‖2 She referred to the North American Free Trade Agreement that her husband, former President Bill Clinton, signed into law in 1993. NAFTA eliminated all legal restrictions on the movement of goods and services between Canada, Mexico, and the United States‘ economies. Yet, despite her husband‘s signature on the bill, she said this about NAFTA: ―I‘m tired of being played for a patsy […] It‘s time we said to the rest of the world, ‗If you want to have anything to do with our market, you have to play by our rules.‘‖3 She was not the only Democrat to criticize NAFTA or demand regulatory consideration from countries. Governor Bill Richardson (D-NM), who ran but received no convention delegates, said that, ―We should never have another trade agreement unless it enforces labor protection, 1 Franklin Roosevelt quoted in ―Address by Charles William Taussig at the 12th Annual Dinner of The Propeller Club of the United States at the Downtown Athletic Club, New York City, on National Maritime Day,‖ May 22, 1934, Economics – General, Box #65, Subject File, Cordell Hull Papers, Library of Congress (Washington, DC). 2 Helene Cooper, ―Democrats‘ Third Rail: Free Trade,‖ New York Times, August 12, 2008, Week in Review. 3 David Weigel, ―Free Market Clintonism, R.I.P.,‖ Reason, http://www.reason.com/news/show/125402.html (all citations to websites henceforth reference them as they were on November 11, 2010). 2 environmental standards, and job safety.‖4 Ironically, Richardson had helped NAFTA through Congress as House majority whip in 1993. Richardson was vital in the original passage of NAFTA, but now he worked the other way on trade. Clinton and Richardson were not the only Democrats in resistance to free trade, and the rest of the party joined in the chorus throughout the autumn. Senator Barack Obama (D-IL), the eventual party nominee and winner in the general election, also spoke about trade. David Weigel, a contributor for Reason, wrote that, ―Barack Obama, meanwhile, matched her [Clinton] stride for stride towards the old economic left. Before the January 3 Iowa caucus, the Iowa Fair Trade Campaign, a union-backed group that describes NAFTA and the World Trade Organization as ‗a proven failure for working people‘ asked the candidates to explain their trade stances. Obama promises that revising NAFTA was ‗one of the first things I‘ll do as president,‘ language in line with what he‘s said to other audiences but a lot tougher.‖5 International trade and NAFTA remained in Obama‘s sights. He said in Chicago that, ―I would immediately call the president of Mexico, the president of Canada, to try to amend NAFTA because I think that we can get labor agreements in that agreement right now.‖6 Obama made it clear his opposition to free trade agreements. Upon taking office, his administration stalled proposed agreements with Columbia, Panama, and South Korea.7 An outside candidate, Dennis Kucinich (D-OH), went so far as to advocate the United States‘ unilateral withdrawal from NAFTA, the World Trade Organization (WTO), and 4 Cooper, ―Democrats‘ Third Rail: Free Trade.‖ 5 Weigel, ―Free Market Clintonism, R.I.P.‖ 6 Cooper, ―Democrats‘ Third Rail: Free Trade.‖ 7 Office of the United States Trade Representative, ―Free Trade Agreements,‖ Executive Office of the President, http://www.ustr.gov/trade-agreements/free-trade-agreements. 3 treaty commitments involving trade and the United States.8 Therefore, the Democratic Party of 2008 was clearly in a protectionist mood. Nonetheless, this flies right in the face of the stance of the party throughout most of its most crucial history in the early part of the twentieth-century. The American story of the economics, implications, policy, and politics of trade is long and complicated. Yet, a few patterns emerge. Trading with foreign lands and the rhetoric of free trade have been stalwarts in Washington from the beginning, ―Presidents—from the founding fathers to contemporary executives—have uniformly espoused adherence to the principle of free trade.‖9 The United States absorbed the libertarian ideal of free exchange in its founding, and its history reflects this. Modern Democrats do not ascribe to this principle. The largest divergence from the contemporary Democratic Party came in the person of Cordell Hull (D-TN).