VIII.

Post-World War II

The growth of international trade after World War II (1939-1945) led to the development of regional trade groups such as the European Economic Community (EEC), a customs union. In turn, the EEC, also called the Common Market, led to even closer ties among many European nations (see European Union). By generally maintaining duty-free treatment or low tariffs for trade among members, such trade groups posed problems for the United States and other nations outside the union. To enable the United States to participate in GATT-sponsored negotiations for tariff reductions with these groups and with other GATT signatories, several legislative acts granted specific powers to the president. The Trade Expansion Act of 1962 allowed the president to negotiate tariff reductions of up to 50 percent. GATT negotiations completed in 1967 reduced tariffs by approximately 35 percent on about $40 billion in industrial products. The U.S. duty reductions were implemented in annual stages from 1968 to 1972.

The Trade Act of 1974 authorized the president to eliminate duties on many goods from developing nations. Acting on this power, President Gerald Ford in 1975 designated 89 developing nations and 43 dependent territories as eligible for special tariff concessions under the U.S. Generalized System of Preferences (GSP). The program provides for an annual review to ascertain the competitive status of each country with regard to each product. The program has undergone some changes, focusing on helping more advanced developing countries “graduate” from the GSP, and was renewed until 1993.

The 1974 legislation also empowered the executive branch to participate in another round of GATT negotiations, and to eliminate any U.S. tariffs of 5 percent or less and reduce those tariffs above 5 percent by three-fifths. The GATT negotiations, known as the Tokyo Round, resulted in 1979 not only in broad tariff reductions, but also in several supplementary agreements including codes on subsidies, dumping, standards, and government procurement. These agreements heightened GATT's importance as a forum for handling trade disputes. Tariff reductions—bringing U.S. tariff levels to their lowest point in the 20th century—were implemented by presidential proclamation beginning on January 1, 1980. Participants reduced tariffs by roughly one-third applicable to about $120 billion in world trade.

In the mid-1980s the United States concluded reciprocal agreements with several Caribbean countries and with Israel to allow duty-free treatment to most products by 1995. In 1992 the United States, Canada, and Mexico signed the North American Free Trade Agreement (NAFTA), which called for the virtual elimination of trade barriers that had existed for years between the three nations. Despite opposition from organized labor and protectionist groups, the U.S. Congress ratified the treaty, which went into effect in 1994. Also in 1994 the United States signed a new GATT pact, which called for further reduction in tariffs and the establishment of the World Trade Organization (WTO) to take over the activities of GATT.