Adam Romney's Entry For The 2004 Moffatt Prize in Economics
After the economic disaster caused by the Smoot-Hawley Act in 1930, the United States Congress granted the executive branch the authority to negotiate free trade agreements. Although the Reciprocal Trade Agreements Act (RTAA) is widely credited with being a force in the liberalization of America's trade policies on the theory that "the president is likely to be less protectionist than [the legislature] "(1), it has not always been the case that the president attempts to liberalize trade. In fact, at times presidents have fallen victim to the same protectionist tendencies experienced by the legislature in 1930. This leads us to the question: Why has the executive branch sometimes tended towards protectionism despite representing a national constituency? The answer is twofold. First, structural factors in American presidential elections encourage the president to cater to specific districts, and by extension specific trade interests; and second, domestic legislative elections can induce the president to give concessions to specific members of congress in order to ensure their re-election. Essentially, in certain circumstances the president's interests lie not with a national constituency, but with a relatively regional one.In proving this point, one can look primarily to two examples from recent American politics. By examining President Bush's rationale behind adopting higher steel tariffs in 2002, we can see that the president can craft trade policy in order to secure votes from a specific state while looking forward to his re-election campaign. This paper shall argue that this mechanism is made possible because of the peculiarities of the American Electoral College, which rewards candidates on a winner-take-all level in each state. Also, by carefully investigating the politics behind President Reagan's decision to push for tariff increases to shield the textile industry, we can see that the president has incentives to push policies in favor of specific districts in order to influence that state's elections. These conclusions point out a fatal flaw in the logic of the RTAA and other similar acts: that the president does not always truly represent a national constituency when it comes to trade policy. Although these trade-liberalizing measures have been somewhat successful, they will not reach their full potential unless the American political system undergoes some fundamental changes.
That the president caters to the interests of specific districts cuts against the underpinnings of the RTAA and disproves its implications. The theoretical rationale behind the RTAA is relatively simple to understand and is likely grasped onto as a result of its simplicity. Because individual legislators political fortunes are tied to specific geographic districts, legislators will routinely vote to protect interests within those districts. Empirically, this much of the theory has been proven true. As one study indicates:
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The 1998 vote on fast track legislation in the House of Representatives provides plenty of evidence that U.S. legislators do in fact vote their districts economic interest. The Typical representative that voted against fast track legislation represented a district dominated by import-competing industries...Conversely, the typical representative who voted for fast track represented a district that was dominated by export-oriented industries.(2)
Be Sure to Continue to Page 2 of "The Executive's Local Constituencies".
