The Big Wheel of Trade

he U.S. government's trade effort is organized like a wheel, says a high-ranking civil servant in the Office of the U.S. Trade Representative (USTR). USTR is at the center. The State, Treasury, Commerce and Agriculture departments, along with an ever-growing list of other federal departments, are spokes. And three interagency committees-the Trade Policy Staff Committee, the Cabinet-level Trade Policy Review Group and the National Economic Council-are the rings that bind the wheel together.

The process of fragmenting the U.S. trade effort dates back more than 200 years. The Constitution gave Congress, rather than the President, the power to regulate foreign commerce. In 1789, Congress authorized the collection of duties on imported goods and established the Bureau of Customs (made part of the Treasury Department in 1875 and renamed the U.S. Customs Service in 1973) to collect the money. The State Department assumed responsibility for trade negotiations.

For many years, the biggest problem in international trade was foreign countries' dumping goods below the cost of production in the United States and injuring U.S. industries. In 1916, Congress set up the U.S. Tariff Commission as an independent, quasi-judicial agency to investigate dumping cases, conduct studies, and report and recommend to the President and Congress on trade policy. The agency was renamed the International Trade Commission in 1974.

The first U.S. tariffs averaged a low 9 percent on imports, but that figure rose over time. In 1930, Congress passed the Smoot-Hawley Tariff Act, which set the average U.S. tariff at 60 percent, the highest level in U.S. history. President Franklin Roosevelt took the view that high tariffs worsened the Depression. The Reciprocal Trade Agreements Act of 1934 authorized the President to negotiate reductions of up to 50 percent in tariffs. Presidents Roosevelt and Truman signed 25 bilateral trade agreements, and by 1951 U.S. tariffs had been reduced to 12.5 percent, the lowest rate since 1789. (Today the average U.S. tariff is 5 percent.)

After World War II, bilateral trade negotiations were replaced with multilateral rounds of talks. In 1947, the United States and 40 other countries signed the General Agreement on Tariffs and Trade (GATT), creating a multilateral institution to administer agreed-upon trade rules.

As tariff levels went down, free trade advocates began to focus on the reduction or elimination of the non-tariff barriers, which required complicated changes in U.S. law. The 1974 Trade Act gave the President "fast track" trading authority under which the executive branch agreed to consult with Congress during the negotiating period and Congress agreed to vote only "yes" or "no" on trade pacts.

Because Congress did not want foreign policy or special interests to determine trade policy, the 1974 Trade Act also moved the trade negotiator's office to the Executive Office of the President. The trade representative got Cabinet rank in the 1970s, and President Carter in 1979 redesignated the bureau as the Office of the U.S. Trade Representative to indicate its responsibility for developing overall trade policy.

USTR, which has offices only in Washington and Geneva, did not take over responsibilities that other agencies had been given to implement U.S. trade law. Since 1913, the Commerce Department has been charged with assuring that U.S. exporters have access to foreign markets. Commerce's International Trade Administration administers anti-dumping and countervailing duty laws, export controls, trade adjustment assistance to firms and U.S. compliance with international trade agreements. Commerce maintains offices in 83 U.S. cities and 134 foreign cities in 69 countries.

The Agriculture Department has had responsibility for trade agreements since 1935, when Congress amended the 1933 Agricultural Adjustment Act to discourage imports that interfered with the operation of the U.S. farm program. This provision was repealed in the Uruguay Round, but USDA maintains primary responsibility for the agricultural portions of trade agreements. The Foreign Agriculture Service (FAS), created in 1953, maintains 77 offices abroad with a mandate to increase agricultural sales, analyze foreign production and monitor compliance with trade agreements.

The 1993 North American Free Trade Agreement and the Uruguay Round broadened the sectors in which trade-and trade disputes-can take place. Today virtually every U.S. government agency has a division or at least a few employees to handle trade issues.