Introduction
Governments find the regulation of international trade sometimes rather a challenge and resort to different trade policies and tariffs in search of a remedy to the problem. It is indeed a fact that domestic institutions’ role in establishing trade rules is irrefutable; however, it is worth noting that these institutions do not have absolute control over the process (Oatley). They are taking a closer look at three distinct tariff or trade policies that have been discussed in class and assigned readings: the Smoot-Hawley Tariff Act of 1930, the Cobden-Chevalier Treaty of 1860, and the Corn Laws in Britain from the First to the Second half of the 19th century. This paper explores how domestic political institutions have formed part of the deliberation of each policy and how these institutions have enacted the policies through additional elements.
The Smoot-Hawley Tariff Act of 1930
The Smoot-Hawley Tariff Act of 1930 was undoubtedly the most crucial trade legislation enacted in the United States. It locked in tariffs, or taxes, on around 20,000 goods imported from American markets at unprecedented levels, making it impossible for other countries to compete with U.S. businesses and farmers (Brawley). The domestic institutions of politics, especially Congress, were significant in providing a structure for the controversial policy. In the second part of the 1920s, overproduction and unfair international competition caused non-competitive and stagnant agricultural commodity prices. Farmers pressed Congress for duty-free import assistance.
In contrast, the Great Depression made competing with cheap imported products harder for other home businesses. Farmers joined companies in requesting quota revision (Brawley). Congress passed a tariff revision to protect these interests via logrolling. Power groupings in Senate and House committees like Senator Reed Smoot and Representative Willis C. Hawley altered tariff hikes to benefit diverse political constituencies.
The final Smoot-Hawley law included hefty industrial and agricultural tariffs. Congress approved this bill following industry pressure. This demonstrated that domestic political institutions could enact trade policies that benefited them. However, also other issues contribute to the acceptance of Smoot-Hawley. Besides, the economic distress of the Great Depression supported the political pressure for the tariff increase even more to maintain American jobs (Brawley). The economic crisis of 1929 worsened the call for intervention. The American Farm Bureau Federation and the industry trade associations also went for lobbying to influence legislators through their programs. People also started thinking that protectionism was the answer to safeguarding their jobs. Hence, Smoot-Hawley was a child of the domestic political institutions but is not close to the only one – economic and interest groups are also quite influential here.
Cobden-Chevalier Treaty
The Cobden-Chevalier Treaty of 1860, signed between Britain and France, is a real-world example of how domestic political institutions may affect regional trade policy. This treaty reduced or eliminated the taxes imposed on commodities from both nations. Before 1860, Richard Cobden of Britain and Michele Chevalier of France were well-known for advocating free commerce, also known as free trade (Brawley). In addition, they were in positions of significant influence inside the governments of their respective countries. As an economic counselor to Napoleon III, Chevalier realized that a treaty would allow him to accomplish his free trade objectives. This realization occurred due to the French legislative corps’s inability to make any headway on tariff reduction.
The whole process of discussing the treaty, which began in 1859 and continued until 1860, was conducted in complete secrecy. Taxes were reduced on various products, including textiles, wine, and spirits. As a result of the backing of William E. Gladstone, the Chancellor of the United Kingdom, it was approved by the British Parliament. The protectionists in France claimed that Napoleon had betrayed them and covertly negotiated the deal, so the treaty presented several challenges for France (Brawley). By subjecting French industry to the threat of competition from British businesses, the treaty facilitated the modernization of the French industrial sector. A political resistance to Napoleon III was sparked due to this (Brawley). This treaty demonstrates that the changes in internal politics and institutions in both nations significantly impacted the respective countries’ policies regarding their foreign commerce.
Britain’s Corn Laws
Corn Laws in Britain symbolize how domestic politics determined trade policies in the 19th century. Discouraging cheap grain imports through agricultural protection tariffs was a boon for domestic farmers. Put into force in 1815, the unpopular Corn Laws aggravated the food shortage and the price increase for commoners by safeguarding the acquisition of landowners from foreign competition in the British market (Brawley). The Opposition Conservative Party took up the policy in the Parliament, representing the wealthy rural interests of which they enjoyed a majority in Parliament. In the spirit of free trade, the Tory party was controlled by grain growers and voted against any measures to move away from laissez-faire. The Corn Laws demonstrate partisan trade policies shaped by domestic interest group political power. The landed nobility firmly controlled Parliament. Thus, it rejected improvements even as the Industrial Revolution gained speed. Changing domestic circumstances led to the repeal of the Corn Law. Most urbanites supported industry and unrestricted commerce of cheap food after industrialization. Cities flourished, and working-class people moved there, strengthening their voting power (Brawley). Thus, voters would favor eliminating high-cost tariffs. Last, domestic politics superseded Corn Law reform restrictions due to the change.
Several domestic developments induced political pressure for reform. The Irish potato famine in 1846 prompted demands for free trade and condemnation of the Corn Laws for exacerbating poverty. A new economic theory also helped. Adam Smith and David Ricardo opposed protectionism and promoted free trade. A growing repeal movement spread these views and progressively influenced public opinion. Corn Laws lasted so long because of the policymaking power of domestic political institutions. Still, the transformation of British economic ideas, demographics, and world position led to their repeal despite landlords’ resistance.
Conclusion
Domestic political institutions have substantially affected trade policies and tariffs since ancient times. Legislatures, interest groups, politicians, and others pass protectionist or liberal laws and regulations to benefit the national interests. Domestic institutions only determine trade regimes with external participation. The tariffs are based not only on world economic conditions, demographic factors, pressure groups, economic ideologies, geopolitics, etc. A critical element of trade policy lies in the domestic political issues that must be considered while dealing with such matters. The impacts of historical turning points determine the direction of a state’s regime choice between protectionism and free trade regardless of their internal institutional arrangements and social patterns. American businesspeople’s lobbying and the country’s economic suffering led to adopting the 1930 Smith-Hawley Tariff Act. The Cobden-Chevalier Treaty was clear evidence that agricultural communities were at that time molding industrial policies even in Europe. In England of old, the Corn Laws showed a robust control of politicians from landed elites, who made the political system class until society was transformed. Political factors have always been the determining node of trade issues.
On the other hand, economic philosophies, vested interests, and foreign policy agendas are also of great importance in policy building. The social relations proffered by local institutions influence trade policies. This study also provides empirical arguments for why governments take protectionist measures even when the world is economically integrated.
Works Cited
Brawley, Mark R. “Power, Money, and Trade: Decisions That Shape Global Economic Relations.” University of Toronto Press, 2005.
Oatley, Thomas H. “International Political Economy.” Rutledge, 2023.