U.S. Had Changed Its Policy

¶ … U.S. had changed its policy from being a protectionist to free trade? Why the U.S. had Changed its Policy from being a Protectionist to a Free Trade Economy The modern day United States is a declared advocate of free trade. However, this approach was only implemented throughout the past five decades, prior to that, the U.S. economy being rather enclosed and protectionist. The aim of this paper is to reveal the reasons that determined this modification in the approach to international trade.

It can be argued that it all commenced when the First World War ended. As it was not directly involved in the war, the United States economy continued to prosper through 1910s. As the war ended then, the Unites States became the creditor of the economies affected by the war. In 1929, the Americans were faced with the threats of the greatest economic crisis to that day and their consequent involvement in the Second World War further deepened the financial troubles. In this light of events, the U.S.

officials perceived consumerism as an appropriate means of achieving economic prosperity. To accomplish growth through consumerism however, the national and foreign customers had to be offered extended access to the American and international products. Consequently, the barriers to international trade were lifted and the U.S. economy turned from an enclosed and protectionist one to an economy that supported and forwarded free trade.

The movement supported economic growth not only due to consumerism, but also due to the increased ability to benefit from the comparative advantages of various global regions, as initially forwarded by economic David Ricardo in his theory of the comparative advantage. The initial openness to international trade revolved around lifting the barriers on the trade of products, or finished goods. In time however, barriers were also removed on the circulation of capitals, technologies and even labor force. Stephen D.

Krasner (1976) argues that the United States, just like any other country, motivated its decision in favor of free trade based on its desire to accomplish its domestic goals. Additionally, the author of State Power and the Structure of International Trade points out that a country will change its approach to international trade because it has the power and it is in its best interest to do so. Krasner identifies four types of national goals that were followed by the U.S.

In its changed approach to international trade: Increase the aggregate national income Consolidate social stability Increase political power, and finally, Maximize economic growth. The aim of the United States was to achieve and maintain these four goals. As a state, the U.S. had already become an important international player. The change from an enclosed economy to an open one would further increase its power, not only in terms of politics, but also economics.

In this light of events, despite the mentioned importance of all goals, the primary ones seem to have revolved around political power and economic prosperity. Despite the usage of the European countries to exemplify his ideas, Timothy J. McKeown (983) also points in the direction that a state will play an important role in international trade when it has gains to register from this movement and when the respective state has sufficient power to modify its role -- the U.S.

revealed a significant superiority over its neighbors and rivals throughout the twentieth century. In 1850 for instance, it only accounted for 8% of all international trade, but by 1913, its percentage totaled to 11% and it continued to follow the ascendant trend for the years to come. The extrapolated conclusion is then similar to the previous one in the meaning that the United States changed from a protectionist to an open trade economy in order to maximize its national objectives and its success was due to its ability to implement the discussed change.

Correlating these academic findings with the initial statements in the paper, it can be said that the United States of American was eager to revive its economically challenged power and with this objective in mind, they made the transition from protectionism to free trade. Without denying the importance of the previously mentioned arguments explaining the United States' movement from an enclosed and protectionist economy to one based on free trade, Ronald Rogowski (1987) introduces a new concept.

According to the author of Political Cleavages and Changing Exposure to Trade, the change in the U.S.' approach to international trade could be based on the relative power of other international players. Otherwise put, the United States could have changed its trade policies as a response to external forces.

Some of these forces could include the relationship between the national exposure to trade and the growth rate in national expenditure or the costs and benefits of conducting international trade, in the context of the barriers or stimulations offered by international partners. A translation of Rogowski's findings could relate to the social structure of the post-war United States. With more and more people migrating from the rural to the urban areas, and with the opening of more and more factories, the U.S.

manufacturers were able to produce more than they needed to consume internally. Additionally, the focus on agricultural activities had decreased and the adjacent products needed to be imported. Ergo, the change to an open trade economy could also be due to structural changes in the society, which in turn generated modifications in the domestic exposure to trade. The post-war United States was characterized by rich lands, but reduced labor force and capitals.

The rural sector rebelled against the protectionist policies which prevented them from benefiting from the comparative advantage of other countries. As a result then, the authorities might have implemented the movement from protectionism to free trade in order to respond to the national demands of the rural and urban societies.