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Trade Restrictions from the Great Depression to Today

Instructor: Christopher Muscato

Chris has a master's degree in history and teaches at the University of Northern Colorado.

How nations trade is an integral part of their diplomatic relationship. In this lesson, we'll talk about how trade restrictions have impacted and defined American international presence over the last 80 years.

Restricting Trade

We live in a globalized world, where interconnected social, political and economic networks define our global position. So why on earth would anybody want to restrict trade? Actually, trade restrictions are one of the most common tools used for achieving both diplomatic and economic goals. In economics, protectionism is the restriction of international trade through tariffs and other regulations, theoretically to increase the strength of domestic products. Over the past several decades, the United States has chosen to increase or decrease its protectionist policies for a variety of reasons. As the world changed, so did the economy, and so did the ways we used this economy to define our place in the global community.

Trade in the Great Depression

Let's start by looking at trade in the Great Depression. As the nation sank quickly into economic turmoil after the stock market crash of 1929, the government looked to international trade policies as a way to strengthen American industry. In 1930, Congress passed the Smoot-Hawley Tariff Act as a measure of protectionism, increasing import and export tariffs to their highest levels in almost a century. The goal was to strengthen domestic industry. However, it was limited in its scope.

Protectionist tariffs were meant to strengthen American products
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By 1934, the United States was ready to try something different. The Reciprocal Tariff Act, signed by president Franklin D. Roosevelt, reformed the process for negotiating reciprocal tariffs between nations. What this meant was that the USA did not have to open up trade to everyone, but could select the strongest trade partners while restricting trade with others. This was the general policy throughout the rest of the Great Depression and World War II, as the United States negotiated lower tariffs with Latin America for hemispheric growth and with our wartime allies for mutual support.

Trade in the Cold War

After the end of WWII, the world entered a period of competition between the capitalist United States and communist USSR (Union of Soviet Socialist Republics) called the Cold War. The United States was one of the only places to leave WWII with a growing economy, undamaged by the war, and that economic strength defined our international presence. The economy became one of our most powerful tools and the USA flipped its policy. Rather than generally restricting trade but opening it up to a few select partners, America would open trade with the world but restrict against a few select enemies.

Throughout the Cold War, the United States used economic sanctions against foreign nations as a form of diplomacy and pressure. Almost immediately after the end of WWII, the USA imposed trade restrictions against the USSR, attempting to prevent the spread of Soviet communism. After Cuba became a socialist nation in 1959, the United States implemented one of the most extensive trade restrictions in our history, barring the export of American products to Cuba and import of Cuban products to America.

The US embargo against Cuba was a response to the socialist revolution of Fidel Castro
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This use of economic restrictions to enforce diplomatic will was embraced by the United States, and due to the nation's major role in founding many multinational organizations, it became an international standard. To this day, the World Trade Organization and United Nations both enforce policies by enacting trade sanctions against non-cooperative member states.

Trade after the Cold War

Between 1989 and 1991, the USSR fell and Soviet communist expansion was abandoned. The Cold War was over, and America was left with a big ''what now''? Throughout the 1990s, the American government debated the role of trade in the post-Cold War world. President Clinton argued to allow China admittance to the World Trade Organization because international economic pressure was the best way to keep it in line. Many trade embargos were lifted, including those against Vietnam (in place since the Vietnam War). At the same time, Mexico and Asia both suffered severe economic crises, and the discussion on trade became a lot less about America, and more about the world. For the first time, people were really becoming aware of the globalized economy and its impacts on everyone.

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