Understanding the history of the U.S. and World Trade

by Roger Albee

In 2005, the author Thomas Friedman wrote a book called The World is Flat.    The theme of this book is that the World today is economically flat, and Friedman suggests “that countries, companies, and individuals need to remain competitive in the global marketplace.”

It is hard to ignore the globalization of our society today.   Much of what we use today is connected to products from other countries. These include the clothes we wear, the shoes we walk on, parts in the cars we drive today (and sometimes even the cars themselves), the mobile phones we use, the computers we use for our work, the watches we wear, kitchenware, toys, furniture, building materials, the solar panels used to generate electricity, many of the wines, coffee’s, tea’s, and specialty food items we consume to name a few. The list is extensive, but it was not always that way.

History of Trade Policy in the U.S.

The Tariff Act of 1789 was the second bill signed by George Washington to protect domestic industries. In his inaugural address, George Washington said, “I use no porter or cheese in my family, but such is made in America.” It is recorded that Alexander Hamilton, the first Secretary of the U.S. Treasury, believed, as did other early economic leaders of the United States, that political independence depended upon financial freedom and hence the need for protecting domestic production as a growing nation.”  Even Abraham Lincoln is reported to have said, “give us a protective tariff and we shall have the greatest nation on earth.”   According to historical documents, “Between 1816 and World War II, the U.S. had one of the toughest tariff rates on manufactured imports in the world, and it was only after World War II that the United States took on the role of liberalizing international trade and trade policies.”

At the end of World War II, the U.S. took the lead in formulating and promoting GATT, the General Agreement on Tariffs and Trade, to reduce tariff and trade barriers worldwide.   Twenty-three noncommunist countries were party to this agreement.  Also, “beginning in 1947, U.S. Presidents have negotiated multilateral trade agreements with several countries worldwide to reduce tariffs.” GATT became a precursor to the World Trade Organization that began life on January 1, 1995, with one hundred and twenty-three countries supporting it.

China became a member of the WTO on December 11, 2002, becoming the 143rd member after a lengthy process of negotiations that required significant changes in the Chinese economy.   President Bill Clinton pushed Congress to approve China’s accession to the WTO, saying “that more trade with China would advance America’s economic interest.” (I was fortunate to attend the White House briefing outlining China’s entry into the WTO). The WTO is the only global and international organization dealing with the global rules of trade. Its mission “is to improve the welfare of people worldwide by ensuring that trade flows as smoothly, predictably, and freely as possible.” It regulates and settles trade disputes between WTO members. 

The United States has been behind and part of some very significant trade policies and agreements. The Trade Act of 1974 gives the President Fast-track authority to negotiate trade agreements with our U.S. Congress. The North American Trade Agreement of 1992 took effect on January 1, 1994. It immediately lifted tariffs on most goods produced by the signatory nations. The U.S.-Mexico-Canada Trade Agreement replaced NAFTA in 2018 and was ratified by all three countries by March 2020 during the term of President Trump. This agreement is one of the World’s most significant free trade agreements, representing 30 percent of the global economy. The Central America Free Trade Agreement is a NAFTA-style deal with five Central American nations (Guatemala, El Salvador, Honduras, Costa Ria, Nicaragua, and the Dominican Republic) passed in 2005.

What Has the Trade Between Major Trading Counties Since These Agreements?

According to U.S. Commerce and other data, Canada and Mexico accounted for nearly one-third of all U.S. merchandise exports in 2021. China is the third largest destination for U.S. exports. China accounts for 39% of all computer equipment imported into the United States and 14% of all imports. Also, according to trade data, approximately 50% of U.S. Trade with Canada and Mexico is driven by supply chains in autos, medical equipment, energy, and agricultural products. The disruption of these supply chains would cause product supply disruptions. Canada is said to be the top export market for 36 U.S. States, and Mexico ranks among the top three export destinations for 33 of the 50 U.S. states. The top destinations for U.S. Exports in ranking order in 2022 are Canada, Mexico, China, Japan, and the United Kingdom.

On the agricultural side that I am familiar with, exports of crops are essential to the U.S. farm economy as exports make up a large share of what is produced in American agriculture.   According to USDA, since 2023, the share of U.S. agriculture and food production sold in international markets has been around 20 percent of all U.S. agricultural trade. Agricultural exports from 2013 to 2023 have increased at an annual rate of 2.1 percent. This increase in global trade has been facilitated by technology, productivity gains, and trade liberalization (USDA ERS). China is one of the top U.S. trading partners in agricultural products. USDA contends, however, that Mexico is on track to become the largest importer of grains from the United States. Relative to the U.S. dairy industry, “nearly all the growth in the U.S. dairy exports is tied to demand in Mexico.” However, it is a so-called two-way trade street between Mexico, Canada, and the United States. Mexico and Canada are two of the biggest exporters of fresh fruits and vegetables to the United States. About 15% of cars sold in the U.S. are from Mexico, and 8% of auto’s sold cross the border from Canada. Millions of dollars of auto parts come from Mexico and Canada. Cross-border trade is vital to Mexico, Canada, and the United States.   It is stated that “17 million jobs rely on trade across North America, to include 4.5 million U.S. jobs.”

One of the Reports stated that Canada is the top export market for 36 U.S. States: where does the State of Vermont fit into this profile?

In Vermont, 86,800 jobs are supported by international trade, or 19.7 % of all jobs in the state, and 14,200 people work for companies that are at least 50% foreign owned. Further data shows that 1025 companies exported products from the state. In 2023, Canada was the destination for 34% of the total goods exported from the state. Other markets for products from Vermont include Taiwan, China, Mexico, Germany, and South Korea. 

Impact of Massive Tariffs on Mexico and Canada and the Consumer

President-elect Trump has pledged to impose a 25% tariff on all goods from Mexico and Canada and an “additional” 10 percent tariff on Chinese goods on the first day of this administration unless the two countries stop the flow of drugs and migrant crossings. Whether this is a negotiation tactic (it would violate the USMCA) or actual, if enacted, it would significantly impact consumer pricing, trade flow, and relations. Retaliatory actions by Mexico and Canada would disrupt the flow of goods and services between the United States and these two countries. Most experts agree that higher tariffs generally equate to higher prices. The impact on the consumer and U.S. domestic industries exporting products would be significant.

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Roger Allbee, now retired, has an extensive foreign trade and agricultural policy background.   His accomplishments include founding and operating an export company focused on introducing U.S. value-added agricultural products to European markets and those markets that emerged in the old Eastern Europe after the fall of the Soviet Union, collaborating with U.S. agricultural attaches, and participating in numerous international trade shows.   He played a vital role in helping to address food shortages in Southern Russia post-Soviet Union through efforts with USDA and the National Cooperative Business Association. His expertise extends to being an international senior trade advisor to a major D.C. law firm; in that role, he served as the chair of the animal and animal products trade advisory committee to the U.S. Secretary of Agriculture and the U.S. Trade Ambassador. He attended the White House briefing on China’s entry into the WTO. He participated as an NGO in the Seattle Round of Multinational Trade Negotiations. As Vermont Secretary of Agriculture, he spearheaded global efforts to strengthen agricultural connections. He led a dairy delegation to China and collaborated with the French and Quebec governments during the 400-year Celebration of Lake Champlain. He signed an agreement with the Minister of Agriculture in Quebec to exchange information on developing agriculture and food systems in Quebec and Vermont. He was selected by the French government to study their agricultural systems and how terroir and geographic indicators apply to local foods and their promotion. Locally, he co-founded a foreign trade zone in southern Vermont to support international trade activities.

Material Sources for this blog:

• History of Tariffs in the U.S. in Wikipedia
• A History of Tariffs, from Hamilton to Trump.  In Forbes, www.forbes.com
• A Brief History of Tariffs in the U.S. and the Dangers of their use today, by Tyler Halloran, in Fordham Journal of Corporate and Financial Law, March 17, 2019
• A Brief History of Tariffs in the U.S.A. by Laura Ross Thomasnet, 7/23/2020, at www.thomass.com
• How Will Trump’s Tariff’s Impact everyday American’s? by Andrew Dorn in News Nation, Nov 27, 2024. https://www.newsnationnews.com
•  Trump’s Threat to impose tariffs could raise prices for consumers, colliding with promise for relief, by Tom Krisher and Christoper Rugaber, AP in https://wwwapnews.com
• A History of America’s Ever Shifting Stance on Tariffs, Unpacking a debate as old as the United States Itself, by Ryan P. Smith, in Smithsonian Magazine, April 12, 2018, https://www.smithsonnianmag.com
• If Trump Starts a trade war with Mexico and Canada, where will Americans get all their stuff from?  By Elizabeth Buchwald, CNN, Dec. 8, 2024 at https://www.cnn.com
• Assessing Trump’s Proposed 25% tariffs on imports from Mexico and Canada, by Joshua P. Meltzer, in Brookings at https://www.brookings.edu
• What products from other countries do the U.S. consume in Google see https://www.google.com
• Winners and Losers from International Trade: What do we know and what are the implications for policy” by Michael Gasiorek, Julia Magntorn Garrett and llona Serwicka, Briefing Paper 33,  UKTPO UK Trade Policy Observatory July 2019, at https://blogs.susex.ac.uk/
• Most American’s See Value in International Trade, public opinion survey by Karl Friedhoff and Lana EL Buz, The Chicago Counsel on Global Affairs, Oct. 8, 2023

(American’s of both parties support international trade)

• How Trade Agreements Have Enhanced the Freedom and Prosperity of American’s, by Daniel Griswold and Clark Packard, in Policy Commons, August 27, 2024
• The Basic of Tariffs and Trade Barriers by Brent Radcliffe, in Investopedia, June 26, 2024.  https;//www.investopedia.com
• Mexico’s Growth in U.S. Exports Critical to U.S. Dairy Industry, nearly all the growth in total dairy exports tied to demand from Mexico, by Fran Howard in Dairy Herd Management, Sept. 24, 2024 at https://www.dairyherd.com
• Vermont Business Roundtable Report 2013, How the Vermont Economy Benefits from International Trade and Investment at https://www.tradepartnership.com
• Vermont’s Exports of Manufactured Products Supported 8,000 jobs in 2021, in Vermont: Canada-U. S Trade at https://ebt.info
• Mexico Remains America’s top dairy customer by Fran O’Leary in Wisconsin Agriculturist, Nov. 18, 2024 at https://www.farmprogress.com
• U.S. Global Leadership Coalition Impact 2024, at https://www.usglc.org/statefacts/vermont

Author grew up on a small hillside farm in Southern Vermont. From an early age agriculture has been his passion. Many of the areas he has been involved in include agricultural policy, issues, trade, development, value added, credit, local and regional foods, and history. Currently he runs the What Ceres Might Say blog.