The 1954 Agricultural Trade Development and Assistance Act and the Decline of the U.S. Textile Industry

When the bottom fell out for textiles

Source: U.S. Bureau of the Census, Historical Statistics, figures for Cotton Manufacturers, p. 898-890.

What ATDA did: Allowed cotton, wheat and corn to be sold to countries in

need of these commodities.

Allowed the countries to use their own currency to purchase U.S. commodities.

Developed new markets for American farm products.

Japan, America’s best customer

Cotton exports spiked upwards shortly after the ATDA became law. Not surprisingly, Japan became the largest customer of American cotton.

From 1949 to 1954, Japan annual raw cotton purchases from the U.S. averaged to 880,166 bales per year.

From 1955 to 1960, Japan annual raw cotton purchases from the U.S. averaged to 1.265 million bales per year.

After ATDA, Japan purchased doubled and even tripled the amount of U.S. raw cotton of what other countries purchased!

But wait!• Eisenhower wanted to support

the Japanese through favorable trade

• Communists had taken over China and North Korea and threatened in French Indochina

• Big Cotton wanted to sell more… well, more cotton

• U.S. textiles products suffered a sales slump after World War II

Eisenhower also had a powerful tool for trade policy….

The Reciprocal Trade Agreement Act of 1934

Trading guns for cotton The Reciprocal Trade Agreement Act of 1934

Congress renews every 3 years Countries must agree to lower their tariffs

in order for the U.S. to lower theirs. Controversial with 1-year extensions

done in 1949 and 1953. General Agreement on Trade and Tariffs of

1947 Ike used RTAA to support Japan trade 1952-

1953 Textiles fought back.

Textiles down but not outTextiles industries, mostly in the South, formed the American Cotton Manufacturers Institute in 1949.

Lobbied Congress for concessions in the 1950 renewal of RTAA. Created the “escape clause”

for industries threatened by imports.

Raised the floor for tariff negotiations.

1952-54: pivotal years for textiles Eisenhower elected president Renewing RTAA for a full three

years Japan becomes a provisional

GATT member Textile lobbying intensifies;

more trade quota and tariff bills are introduced in Congress

Farm Bill and Agricultural Trade and Development Assistance Act passed

Ultimately, Dulles convinces Japan to agree to Voluntary Export Restraints (VERs) in textiles for two years.

Voluntary Export Restraints Feeling the heat from Congress, Dulles

convinces the Japanese to reduce its textile exports for two years utilizing VERs.

Some GATT members complained that VERs violated the treaty and was used to go around established trade rules.

Textiles appreciated VERs but continued to lobby for protectionist legislation.

Epilogue

The ATDA had an effect, but it was not the single factor in the downfall of the U.S. textile industry:

Presidential negotiating powers under RTAA had a larger impact

Cold War politics and postwar trade realities Textile industry was slow to innovate itself