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US Trade Laws

Smoot-Hawley Act

The Hawley-Smooth Traffic act, 1930, passed by the US congress, has brought the US tariff to the highest productive level in the history of United States.

The then President Hoover desired to have a limited upward revision of tariff rates with general increases on farm products and adjustment of a few industrial rates. A congressional joint committee, however, considering the differences between a high Senate tariff bill and a higher House tariff
bill, arrived at new high rates by generally

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adopting the increased rates of the Senate on farm products and those of the House on manufactures. Despite wide protest, the tariff act, called the Hawley-Smoot Tariff Act because of its joint sponsorship by Representative Willis C. Hawley and Senator Reed Smoot, both Republicans, was signed (June, 1930) by President Hoover. The act brought retaliatory tariff acts from foreign countries, U.S. foreign trade suffered a sharp decline, and the depression intensified.

Legislation that amended the Tariff Act of 1930 (Smoot-Hawley Tariff Act), providing authority for the United States to negotiate agreements with other countries for reciprocally beneficial tariff reductions. The resulting agreements were then applied to other countries through most-favored-nation clauses. The original 1934 legislation, as extended by several further acts of the U.S. Congress, provided authority for U.S. participation in the first five "Rounds" of GATT trade negotiations, from 1947 through the Dillon Round. The Trade Expansion Act of 1962 superseded the basic registration form -Form- S-1.

Reciprocal Trade Agreement Act of 1934

Reciprocal trade agreement, international commercial treaty in which two or more nations grant equally advantageous trade concessions to each other. It usually refers to treaties dealing with tariffs. For example, one nation may grant another a special schedule of tariff concessions in return for equivalent advantages.

Since 1948 the general policy of the United States has been to negotiate reciprocal tariff concessions within the framework originally established by the General Agreement on Tariffs and Trade (GATT). The Trade Expansion Act (1962) provided for negotiations, under GATT auspices, to expand reciprocal trade agreements, especially with the European Economic Community, or Common Market (now part of the European Union). The act resulted in the Kennedy Round (1964-67) and the Tokyo Round (1974-79) of GATT talks, which produced reciprocal tariff reductions, mainly between the United States and W Europe, and new rules on customs and duties. GATT's Uruguay Round (1986-93) culminated in the creation (1995) of the World Trade Organization. Reciprocal agreements may also deal with such matters as rights of foreigners and consular relations.

Trade Agreement Act of 1979

Legislation authorizing the United States to implement trade agreements dealing with non-tariff barriers negotiated during the Tokyo Round, including agreements that required changes in existing U.S. laws, and certain concessions that had not been explicitly authorized by the Trade Act of 1974. Specifically, the Trade Agreements Act of 1979 incorporated into U.S. law the Tokyo Round agreements on dumping, customs valuation, import licensing procedures, government procurement practices, product standards, civil aircraft, meat and dairy products, and liquor duties. In addition, it extended the president's authority to negotiate trade agreements with foreign countries to reduce or eliminate non-tariff barriers to trade.

NAFTA

The North American Free Trade Agreement (NAFTA) entered into force in Canada, the United States and Mexico on January 1, 1994. Designed to foster increased trade and investment among the partners, the NAFTA contains an ambitious schedule for tariff elimination and reduction of non-tariff barriers, as well as comprehensive provisions on the conduct of business in the free trade area. These include disciplines on the regulation of investment, services, intellectual property, competition and the temporary entry of businesspersons.

The NAFTA did not affect the phase-out of tariffs between Canada and the U.S. under the Canada-U.S. Free Trade Agreement (FTA), which was completed on schedule on January 1, 1998. As of that date, virtually all tariffs on Canada-U.S. trade in originating goods were eliminated. Some tariffs remain in place for certain products in Canada's supply-managed sectors (e.g. dairy and poultry), as well as sugar, dairy, peanuts and cotton in the United States. The NAFTA provides for nearly all tariffs to be eliminated on trade in originating goods between Canada and Mexico by January 1, 2003. A second round of "accelerated" tariff reductions, covering some $1 billion in NAFTA trade, was implemented in August 1998. In short, most tariffs have been removed for NAFTA-eligible trade.

At the most recent NAFTA Commission meeting in April 1998, Ministers launched a comprehensive "Operational Review" of the NAFTA work program to examine the structure, achievements, mandates and future priorities of the NAFTA work program. Results of this review, which can be found on the Operational Review chart on the Department of Foreign Affairs and International Trade website, indicate that NAFTA implementation is on track with some exceptions such as certain land transportation services (i.e. bus and trucking services) where commitments have yet to be implemented. Fulfilling these overdue commitments is a top priority for all three countries. (Details of the principal achievements since the implementation of the NAFTA are provided in the preceding "Scorecard.")

Turning to the economic picture, Canadian producers are better able under the NAFTA to realize their full potential by operating in a larger, more integrated and efficient North American economy. Consumers benefit from this heightened competition with better products, services and prices. While it is difficult to isolate the precise effects of any trade agreement on jobs and growth, it is clear that the NAFTA has had a significant positive impact on the Canadian economy. Trade and investment between Canada, Mexico and the United States have increased substantially since the NAFTA was implemented in 1994, with total merchandise trade across North America surpassing $752 billion in 1998 (Sources: Statistics Canada, U.S. Department of Commerce and SECOFI). Canada's merchandise trade with its NAFTA partners has also risen sharply. Two-way merchandise trade between Canada and Mexico grew 8% in 1998 over the year before, reaching $9 billion. Our merchandise trade with the United States was up 11% over the same period, reaching $475 billion in 1998. Approximately $1.5 billion in goods and services now crosses the Canada-U.S. border each day.

Enhanced access to NAFTA markets and the existence of clear rules on trade and investment have increased Canada's attractiveness to foreign and domestic investors. Total foreign direct investment (FDI) into Canada reached $218 billion in 1998, with the majority of this investment coming from the United States. FDI into Canada from the United States increased for a fifth straight year to $147.3 billion in 1998 (up 63% since 1993), while investment from Mexico reached $464 million in 1998 (up some 200% over 1993). Canadian direct investment in the NAFTA countries also increased, reaching $126 billion into the United States in 1998 (an increase of 86% over 1993) and more than $2.2 billion into Mexico (an increase of 324% over 1993). Further details on the economic and trade performance of the Canadian economy since the NAFTA was implemented in 1994 are provided in the section of this report on "The NAFTA's Impact."

While the vast majority of trade and investment among the three NAFTA countries flows freely across borders, some disagreements are bound to arise in such a large and diverse trading relationship. The NAFTA created an impartial, rules-based system to resolve disputes between the partners. On the whole, these procedures have worked remarkably well, lending stability, predictability and clarity to the conduct of business across North America. Canada is making full use of these provisions, and took action or was a respondent in a number of cases involving NAFTA procedures in 1998. Details are provided in the "Dispute Settlement" section of this report.

Trade and Tariff Act of 1984

TRADE AGREEMENTS ACT OF 1934.

Legislation that amended the Tariff Act of 1930 (Smoot-Hawley Tariff Act), providing authority for the United States to negotiate agreements with other countries for reciprocally beneficial tariff reductions. The resulting agreements were then applied to other countries through most-favored-nation clauses. The original 1934 legislation, as extended by several further acts of the U.S. Congress, provided authority for US participation in the first five "Rounds" of GATT trade negotiations, from 1947 through the Dillon Round. It was superseded by the Trade Expansion Act of 1962. See also Bilateral Trade Agreement; Dillon Round; Negotiations; Peril Point; Reciprocity; Round; Tariff Act of 1930; Trade Agreement; and Trade Expansion Act of 1962.

TRADE AGREEMENTS ACT OF 1979.
Legislation authorizing the United States to implement trade agreements dealing with non-tariff barriers negotiated during the Tokyo Round, including agreements that required changes in existing US laws, and certain concessions that had not been explicitly authorized by the Trade Act of 1974. Specifically, the Trade Agreements Act of 1979 incorporated into US law the Tokyo Round agreements on dumping, customs valuation, import licensing procedures, government procurement practices, product standards, civil aircraft, meat and dairy products, and liquor duties. In addition, it extended the president's authority to negotiate trade agreements with foreign countries to reduce or eliminate non-tariff barriers to trade. See also Anti-Dumping Code; Countervailing Duties; Customs Valuation Code; Dumping; Government Procurement Policies and Practices; Licensing Code; Non-Tariff Barriers; Standards; Tokyo Round; Trade Act of 1974; Trade Agreements; and United States Trade Representative.

Legislation enacted by the US Congress in late 1974 and signed into law on January 3, 1975, granting the US president broad authority to enter into international agreements to reduce import barriers. The act states that its major purposes are:

  • to stimulate US economic growth and to maintain and enlarge foreign markets for the products of US agriculture, industry, mining and commerce;
  • to strengthen economic relations with other countries through open and non-discriminatory trading practices;
  • to protect American industry and workers against unfair or injurious import competition;
  • and to provide "adjustment assistance" to industries, workers and communities injured or threatened by increased imports.

The act also grants the president authority to extend tariff preferences to certain imports from developing countries and set conditions under which most-favored-nation treatment can be extended to non-market economy countries that previously have not received MFN treatment from the United States. See also Adjustment Assistance; Countervailing Duties; Dumping; Clause; Generalized System of Preferences; Most-Favored-Nation Treatment; Safeguards; Section 301; Tokyo Round; US International Trade Commission; and Williams Commission.

Omnibus Trade and Competitiveness Act of 1988

P.L. 100-418 (August 23, 1988) provided the President with negotiating authority for the General Agreement on Tariffs and Trade (GATT) Uruguay Round, U.S.-Canada Free Trade Agreement, and the North American Free Trade Agreement, and specified US negotiating objectives regarding agriculture. The law revised statutory procedures for dealing with unfair trade practices and import damage to US industries. It gave USDA discretionary authority to trigger marketing loans for wheat, feed grains, and soybeans, if it is determined that unfair trade practices exist.



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