Regime II. Baby Steps Towards Delegated Tariff Authority, 1890-1934
Initial Delegation of Tariff Authority Raises Supreme Court Challenge, 1890-97
The traditionally pro-tariff Republican Party initiated the shift away from congressional control over trade policy. In 1890, Republican President Benjamin Harrison and his secretary of state, James Blaine, tried to persuade Congress to grant the executive branch expanded discretion of tariff policy. Again, Finance Committee Chair Morrill blocked the executive-branch intrusions, angering Blaine to the point where he smashed his silk hat in one of Morrill's hearings.18
Blaine was able to get around Morrill by developing a partnership with the traditionally pro-tariff Ways & Means Chair William McKinley. The outcome of their joint effort was the 1890 McKinley Tariff Act. The bill cleverly introduced the notion of delegated authority. It employed Congress' trade authority to eliminate (via statute) duties on sugar, molasses, tea, coffee and hides. Meanwhile, it authorized the executive to re-impose such tariffs on countries that exported these products and treated U.S. exports in a "reciprocally unequal and unreasonable" fashion, "with a view to secure reciprocal trade" with said countries [italics added].19 The delegation of tariff authority did not have a phase-out date. In effect, it allowed the Harrison administration to threaten to proclaim duty increases as a way of bringing foreign nations to the bargaining table. Congress did not have to vote on any trade pacts that resulted from these negotiations, since the intention was only to get other countries to lower their tariffs on U.S. exports.
Democrats assailed the measure, which they saw as a behind-the-scenes, inter-branch deal within the Republican Party. Rep. John F. Andrew (D-Mass.) told the House: "It is free to say that such extraordinary powers as this amendment contemplates has never, in recent times, been given by a free people to the executive." [sic] Rep. Benton McMillin (D-Tenn.) declared, "the reciprocity provision of the bill was a cowardly surrender of the highest prerogative of the House. The bill gave the president power not exercised by the Czar of Russia."20
The Harrison administration rarely proclaimed any duty increases, but used the threat of doing so to negotiate 10 treaties that compelled other counties to lower their tariffs on select U.S. exports, in return for enjoying the statutorily established free rate on sugar and the other items.21 These pacts also established a precedent of the executive branch framing requests for expanded authority around promises to penalize countries that kept out U.S. exports.
|
|
In 1892, the Supreme Court was asked to rule on the constitutionality of the delegated tariff authority. This case involved a suit brought by an importer to obtain a refund of duties. The plaintiff, Marshall Field & Co., claimed that the duties it had been charged on its imported merchandise had been illegally exacted. Field filed against John Clark, the Chicago port's duty collector, to recover duties paid on woolen dress goods, woolen wearing apparel, and silk embroideries. The company, which was not an importer of sugar or other items contemplated for special treatment under the McKinley Act, nonetheless maintained that the statutory rates on the items it did import (which had been set by the act) were not legal. Field argued that the McKinley Act (and its tariffs on wool and other items) did not have the force of law because (among other technical reasons) it unconstitutionally delegated congressional authority in the section on sugar powers. The majority opinion of the Supreme Court noted: "That Congress cannot delegate legislative power to the President is a principle universally recognized as vital to the integrity and maintenance of the system of government ordained by the Constitution." However, the Court majority decided that the Act's delegated authority "was not the making of law," but only allowing the executive branch to serve as "the mere agent of the law-making department."
Yet two judges, while agreeing with the majority ruling, dissented on the constitutionality of the delegation of tariff-proclamation authority. Chief Justice Melville Fuller and Associate Justice Joseph Lamar wrote that:
"This [provision] certainly extends to the executive the exercise of those discretionary powers which the constitution has vested in the law-making ... department. It unquestionably vests in the president the power to regulate our commerce with all foreign nations which produce sugar, tea, coffee, molasses, hides, or any of such articles; and to impose revenue duties upon them for a length of time limited solely by his discretion, whenever he deems the revenue system or policy of any nation in which those articles are produced reciprocally unequal and unreasonable in its operation upon the products of this country. These features of this section are, in our opinion, in palpable violation of the Constitution of the United States, and serve to distinguish it from the legislative precedents which are relied upon to sustain it, as the practice of the government."22
After Ohio voters elected McKinley governor, and Democrat Grover Cleveland rode to the presidency on a low-tariff platform, Congress repealed the McKinley Act through the 1894 Wilson-Gorman Tariff Act. The law removed the executive's negotiating authority and abrogated the 10 Harrison treaties. It also modestly lowered duties overall, but was nonetheless full of duty increases designed to benefit certain industries (such as sugar).23 (Cleveland was so embarrassed by the tariff increases that he refused to sign the bill into law. Nevertheless, because he also did not veto it, it became law after a lapse of time anyway.)24 The now Democratic-controlled Ways & Means Committee, in its report on the bill, assailed the previous Congress and administration: "We do not believe that Congress can rightly vest in the President of the United States any authority or power to impose or release taxes on our people by proclamation or otherwise, or to suspend or dispense with the operation of a law of Congress."25
Second Delegation of Tariff-Cutting Authority, 1897-1909
The Democratic Party's control was short-lived. It lost both congressional chambers in the 1894 elections, followed by the presidency in the 1896 elections. Republicans again reinstated executive tariff-proclamation authority through the 1897 Dingley Tariff Act, which authorized now-President McKinley to proclaim unilaterally tariff reductions on wines and a few other specialty items. The authority did not have a phase-out date. As with the 1890 McKinley Act, Congress limited both the items for which tariffs could be modified (for instance, sugar in 1890 and argols26 in 1897) and the countries with which the executive could enter into trade negotiations (only countries that exported these items).27 Eight European countries consented to so-called argol agreements.28 Further, the Dingley Act contained provisions similar to the McKinley Act that authorized the executive branch to impose tariffs on various tropical items, but these provisions were never invoked or used to demand reciprocity treaties. Neither type of agreement required a further congressional vote.
The Dingley Act also authorized the president to negotiate with any country to secure reciprocal trade treaties that would cut tariffs up to 20 percent (and remove tariffs on certain natural resource products). The act specified that these treaties would need the advice and consent of the Senate, and separate implementing legislation approved by congressional vote.29 The McKinley administration finalized 11 such treaties, but leading senators opposed them, keeping them bottled up in the Senate Foreign Affairs Committee. Collectively, these were known as the Kasson Treaties, after John Kasson, the McKinley-appointed special commissioner for reciprocity negotiations.30
While none of the original 11 Kasson treaties gained congressional approval, President Theodore Roosevelt signed a reciprocity treaty with Cuba on Dec. 11, 1902 that lowered rates on Cuban imports by 20 percent. The Senate gave its advice and consent on March 19, 1903, but amended the treaty text to make clear that "This Convention shall not take effect until the same shall have been approved by the Congress." Post facto, Roosevelt decided to use the Kasson authority to get himself out of the mess. After a long fight – with opposition from Democrats like Sen. Joseph Weldon Bailey (D-Texas), who called the act unconstitutional, since the House had only been involved as an afterthought – on December 17, 1903, Roosevelt was able to get implementing legislation through Congress based on foreign-policy arguments.31 Some form of Cuba tariff-reciprocity pact survived until the communist takeover in 1959.
According to historian Alfred Eckes, some Washington officials were disheartened by the Kasson treaties experience, and by the successful completion of only three reciprocity treaties over 100 years (Canada 1854-1866, Hawaii 1875-1900, Cuba 1903-). Their prescription? Congress needed to delegate tariff-cutting negotiating authority to the executive, but not be allowed a vote on the negotiations' final outcome.32
Congress Provides Executive More Flexibility in Tariff Authority, 1909-1934
Until 1909, the U.S. tariff schedule was still officially single-column (one rate applied to all countries for each good) – even though Canada, Hawaii, and Cuba had enjoyed preferential rates under the three pacts described above. The 1909 Payne-Aldrich Act – passed by a Republican Congress – changed that, authorizing the president to proclaim unilaterally a "maximum tariff" for goods from countries that discriminated against U.S. exports. The authority did not have a phase-out date, and proclamations did not require further congressional votes. This maximum rate, which constituted the United States' first foray into a two-column tariff schedule, was equal to the normal (or "minimum") statutory rate plus 25 percent ad valorem.33 The William Taft administration never used this authority.
Moreover, the Payne Act cancelled the eight argol treaties. The only other major trade policy of the Taft administration was to conduct secret trade negotiations with Canada. The executives from both countries planned to seek congressional and parliamentary approval through normal legislative (i.e. non-treaty) procedures. Democrats in the U.S. Congress had teamed up with the Republican executive and passed the bill, making boisterous but highly misleading floor statements to the effect that the act would allow U.S. annexation of the northern country. As a result, Canadian nationalists in the parliament rejected the pact's implementing legislation.34
The Woodrow Wilson administration came to office on a pledge to reduce tariffs and kick-start commerce with a war-torn Europe, and was able to convince a Democratic-controlled Congress to do so through the 1913 Underwood-Simmons Act. The bill did away with the president's authority to penalize foreign countries through application of the maximum tariff, but it also authorized him to conduct reciprocal trade deals – "provided, however, that said trade agreements before becoming operative shall be submitted to the Congress of the United States for ratification or rejection."35 The authority did not have a phase-out date. However, because the Underwood Act unilaterally reduced U.S. tariffs, foreign governments had little incentive to negotiate trade pacts with the United States, having received "something for nothing." No bilateral pacts were signed under the Underwood authority.
The general drift towards Congress' initial delegation of tariff authority to the executive branch continued in the next decade, as the GOP returned to power. Although it contained no specific tariff reciprocity authority, the 1922 Fordney-McCumber Tariff Act delegated a new authority to President Warren Harding and his successors. Under the act, the executive branch could raise or lower tariffs by proclamation to equalize the costs of production of articles produced in the United States and competitor countries. The authority did not have a phase-out date. It limited the rate alteration, however, to no more than 50 percent of the underlying statutory duty.36 Congress did not have to vote on these reductions. The Republican-controlled Congress supported their party's president in this proposal, but some Democrats bitterly attacked the proposal. The New York Times reported that Sen. Thomas Walsh (D-Mont.) "told the Senate the Constitution specifically reserved to Congress the power to lay and collect taxes and import duties, and Congress could not delegate this authority. He also attacked the flexible plan on the ground that no provision was made for judicial review of the president's action."37
Harding and his immediate successors did not craft reciprocity treaties that required Senate approval and congressional implementing legislation. Instead the administrations negotiated a series of over 40 executive agreements that established most-favored nation treatment for additional countries. By merely guaranteeing tariff treatment already codified in statute, the executive avoided having to ask Congress to change any underlying laws.38
The beginning of the Great Depression in the United States is associated with the stock market crash on October 29, 1929, known as Black Tuesday. One of Congress' responses was to pass the Smoot-Hawley Tariff Act, which went into effect on June 17, 1930. The act returned the United States to 19th Century tariff levels.39 Smoot-Hawley did not change the fundamental executive-legislative balance in any way from the 1922 act. This is notable, because editorial boards and politicians still invoke the bill with contempt, if inaccuracy, anytime the suggestion is made to increase congressional involvement in trade policymaking.
In 1932, Sen. Cordell Hull (D-Tenn.) led an effort to give President Herbert Hoover the discretion to negotiate bilateral tariff-reduction pacts, subject to separate congressional approval. While both chambers passed the legislation, Hoover vetoed the bill, and it never became law.40
The Roaring Twenties produced new constitutional challenges to delegated presidential tariff authority. As it had in 1892, the Supreme Court again upheld the constitutionality of congressional delegation mechanisms. In J. W. Hampton, Jr. & Co. v. United States, the plaintiff imported barium dioxide into New York ports that the customs collector assessed at the dutiable rate of six cents per pound, which was two cents per pound more than that fixed by statute. The higher rate had been established by virtue of the presidential proclamation authority to equalize the costs of domestic and imported goods provided in the Fordney-McCumber Act. The company argued that Congress' delegation of constitutional tariff authority was unconstitutional, and thus did not have the force of law. In 1928, the Supreme Court, affirming a lower-court decision, held that congressional delegation of tariff authority was constitutional. The court interpreted the Fordney-McCumber Act as empowering and directing the president to increase or decrease duties imposed by Congress. The Court reasoned that one of the core functions that the Constitution confers on Congress is the regulation of interstate commerce, yet noted that Congress does not attempt to directly manage interstate freight rates, a highly complex and rapidly changing task. Therefore, the Court concluded that delegation of setting specific tariffs rates to the executive under policies established by Congress should also be constitutional.41
Despite the expanded presidential trade authority during the 1890-1934 regime, the second major period of U.S. trade policymaking ended with high tariffs and relatively few trade agreements. The regime also saw an unusual shift in the politics of trade. Republican Congresses and executives under the Harrison, McKinley, Taft and Harding administrations – while favoring higher tariffs – took groundbreaking steps to expand executive discretion. Democrats – who favored lower tariffs – often argued in favor of the principle of congressional control, regularly raising concern about the constitutional issues involved. The latter party passed legislation scraping back what they deemed overreach into congressional constitutional authority in 1894 and 1913.
Notably, the period also saw the emergence of radical views on altering the constitutional trade checks and balances, such as that of Rep. Martin Ansorge (R-N.Y.), who proposed a constitutional amendment to outsource trade policy permanently from Congress to a non-partisan board.42 Perhaps not surprisingly, he was only a one-term member of Congress. Nevertheless, the notion gained serious traction in the subsequent trade-policy regime from 1934-1967.