Trade, Foreign

Trade, Foreign. This essay on foreign trade as an instrument of foreign and defense policy is divided into three sections: Wartime provides an overview of the role of foreign trade in U.S. strategic and economic policies in wartime; Trade Restrictions examines the use of embargoes and economic sanctions as instruments of U.S. security policy against hostile nations; and Neutral Trade explores America's assertion of commercial rights when it was a neutral nation affected by other countries' wars.
Trade, Foreign: Wartime The drive for American national economic security has existed since 1776, and foreign trade has played a strategic and economic role in U.S. policy. The interaction of commerce and defense was necessary and obvious. Historians have long argued over the relative importance of economic and strategic concerns in foreign policy, with revisionists emphasizing the profitability of trade expansion and realists stressing strategic defense imperatives. Regardless of this debate, the trade/security linkage has prevailed throughout the nation's history.

International commerce was central to the American search for independence in the Revolutionary War. The alliance with France, 1778–1800, allowed trade to serve political purposes. As president, George Washington perceived national security in terms of commercial relations and a military establishment, not entangling alliances, yet trade discrimination, mercantilism, and pirates threatened the security of the new nation. In response, Secretary of State Thomas Jefferson issued a Report on Commerce in 1793 that would reflect trade ideology for the next two centuries. Recommending specialization at home, Jefferson demanded reciprocity treaties and equal access to markets abroad to enhance national defense. American commerce flourished in the early nineteenth century, but was inevitably vulnerable to reprisals from warring Europeans. Terminating the commercial alliance with France in 1800, the country still developed North Atlantic and western frontier trade. Neutrality and trade expansion collided with British maritime coercion and led to mutual sanctions. The nearly disastrous War of 1812 convinced U.S. policymakers further that trade and military power were complementary.

Although American diplomacy was “altogether, of a commercial character,” as the historian Theodore Lyman wrote in 1828, the dimension of power was integrated into the trade/security formula in the late nineteenth century. While it still neglected the merchant marine fleet, the government funded a modern navy in the 1880s to promote commercial penetration overseas. Seapower and vigorous trade were complementary, wrote Alfred T. Mahan in promoting American greatness through imperialism, and pursuit of an interoceanic canal became part of this equation. By 1890, tariff policy shifted from protectionism to export expansion through reciprocity treaties as a way to boost American power. And trade and security—essential elements of international status—fused after the Spanish‐American War of 1898, as America acquired territories in the Caribbean and stepping‐stone islands across the Pacific to the fabled China market.

Officials did not necessarily elevate trade over diplomatic issues, yet they understood that trade policy meshed with global strategic objectives. President Theodore Roosevelt recognized the limits of American power in Asia, for instance, but viewed export growth as a component of military might, industrial strength, and domestic social order. Maintaining a balance of power in Europe, predominance in Latin America, and a presence in Asia all hinged on expanding and defending trade routes to U.S. possessions and markets. The building of the Panama Canal exemplified this coupling of commerce and security.

By World War I, this bond was inseparable. President Woodrow Wilson's Fourteen Points proposed that peace and prosperity could exist only by equal access to markets and an end to trade conflict. In the 1920s, American officials such as Secretary of Commerce Herbert C. Hoover also realized that America depended on foreign supplies of raw materials for its industrial production, which strengthened the country's military. Oil imports, for instance, became a priority. Thus, the commercial retaliation of the early depression gave way to mutually beneficial negotiations under the Reciprocal Trade Agreements Act of 1934, the brainchild of Secretary of State Cordell Hull. Protectionism led to political strife, he claimed, and his proof was that no trade agreement signee ever fought America. In the movement toward World War II, the administration of Franklin D. Roosevelt looked on German trade autarchy as a threat to U.S. commerce and peace, while American security required an export embargo to slow Japanese aggression in Asia. By the end of World War II, Washington planned for a cooperative, multilateral trade system based on nondiscriminatory commercial practices as the economic means to assure peace and security.

Multilateralism was a pillar of national security policies in the Cold War. With unparalleled economic power, America forged a trade system under the General Agreement on Tariff and Trade (GATT) in 1947 that boosted the recovery and prosperity of its Cold War allies. GATT promoted trade liberalization among the capitalist nations, strengthened their economies, and thereby brought them political stability, rendering them invulnerable to Soviet penetration. Liberal trade with American allies, and commercial restrictions against Communist rivals, were hallmarks of the Cold War until the demise of the Soviet bloc by 1991. Every president since Harry S. Truman has pursued liberal trade as a weapon against aggression and instability. Multilateralism built world trade equilibrium and interdependence among like‐minded nations, continuing the service of trade to security imperatives.

Bibliography

Cordell Hull , The Memoirs of Cordell Hull, 1948.
Peggy Liss , Atlantic Empires: The Network of Trade and Revolution, 1713–1826, 1983.
William H. Becker and and Samuel F. Wells, Jr. , Economics and World Power: An Assessment of American Diplomacy Since 1789, 1984.
Robert Pollard , Economic Security and the Origins of the Cold War, 1945–1950, 1985.
Walter LaFeber , The American Search for Opportunity, 1865–1913, 1993.

Thomas W. Zeiler

Trade, Foreign: Trade Restrictions A priority in U.S. wartime foreign policy has always been to restrict trade with the enemy; yet as America's global power changed, so too did the nature and scope of these constraints and their efficacy. Commercial sanctions usually hurt American enemies in wartime, but were often difficult to maintain effectively. Nonetheless, sanctions and embargoes were readily used tools of warfare, not as substitutes for, but usually complements to, military measures.

Trade with the enemy in the Revolutionary War hinged on international law. The U.S. Model Commercial Treaty of 1776 and the Treaty of Amity and Commerce with France in 1778 struck at British control of the seas by asserting the rights of neutral trade from capture by belligerents. This “free ships make free goods” doctrine served military purposes. Joining with other small‐navy nations to demand neutral rights, Americans sought to undercut Britain's maritime dominance and imperial power. This defensive approach helped win the war; thereafter, the doctrine of neutrality remained an American trade weapon.

More aggressive approaches to trade restriction as a means of coercing other nations, however, became the policy rule, and frequently created equivocal or even detrimental results. Trade sanctions against Britain from 1806, in response to London's coercive Orders of Council on U.S. shipping, helped cause the War of 1812. But rather than unduly hurting Britain with its sanctions, America incurred losses as its merchants were driven from the seas and the Royal Navy blockaded the coast. Later in the century, the brevity of the Mexican War and the Spanish‐American War made trade restrictions irrelevant; but the Union used sanctions successfully against the Confederacy in the Civil War. A naval blockade hurt the southerners by cutting them off from cotton markets in Europe. Hindered by British acquiescence in the blockade, Confederate blockade runners tried to evade the U.S. Navy. Although these missions were initially successful, the blockade took an increasing toll after 1862.

A Trading with the Enemy Act passed in 1917 and modified ever since has formed the legal basis for policies on trade coercion since World War I. Congress's authorization of an embargo on American exports—in tandem with a British blockade—was instrumental in strangling the central powers in 1917–18. Before and during World War II, the administration of Franklin D. Roosevelt relied on the act to deny scarce materials to the Axis, utilizing export controls and other economic warfare measures to wield its trade restrictions effectively. Even so, some neutral nations had no incentive to cooperate with the Allied blockade of Germany until the tide of battle turned. Thus, the Nazis were able to stockpile supplies of iron ore and wolfram from neutral Sweden, Spain, and Portugal, better surviving the blockade in this world war than in the first. By contrast, the American embargo hurt Japan badly. America imposed a gradual embargo in the fourteen months leading up to the attack on Pearl Harbor, as Japanese forces marched through China and Indochina. Designed to restrict Japan, the embargo helped drive Tokyo to war with the United States; but during the conflict, Japan could never capitalize on its conquests in Southeast Asia to ship home enough oil, tin, and other commodities. World War II thus revealed both the successes and the limitations of trade sanctions.

The realization of these limits, and pressure from America's Cold War allies, led to a more flexible approach to trade with the enemy after 1945. Anti‐Communist sentiment prompted Congress to restrict trade severely with the Soviet bloc under the Export Control Act of 1949. But U.S. allies depended on trade with the Communist nations, and with their recovery from the war stagnant, America allowed for the sale of nonstrategic goods to the East from the early 1950s onward. The Soviet Union's ability to develop substitute goods also weakened export control policy. American leaders realized that trade sanctions oftentimes alienated friends, diverted trade to other nations, and took away the country's leverage with the satellite nations. These problems, and the possibility of shaping Soviet behavior by economic contacts, resulted in a moderation of U.S. policy. Still, China remained under economic quarantine until 1972, while America used its Trading with the Enemy Act and other measures to halt commerce with Vietnam, Cuba, North Korea, and other hostile powers in the Cold War.

After the Cold War, the United States led the United Nations to embargo Iraq's oil and other trade goods in an attempt to force that nation's retreat from Kuwait. In 1991, while most Democrats in Congress preferred economic sanctions to military measures, the country nonetheless fought the Persian Gulf War. Regardless of their effectiveness, then, trade sanctions in wartime have been viewed as necessary and natural complements to military efforts.

Bibliography

Stuart L. Bernath , Squall Across the Atlantic: American Civil War Prize Cases and Diplomacy, 1970.
U.S. Congress, House Subcommittee on International Trade and Commerce of the Committee on International Relations , Trading with the Enemy: Legislative and Executive Documents Concerning Regulation of International Transactions in Time of Declared National Emergency, 1976.
Richard J. Ellings , Embargoes and World Power: Lessons from American Foreign Policy, 1985.
Reginald Horsman , The Diplomacy of the New Republic, 1776–1815, 1985.
Philip Funigiello , American‐Soviet Trade in the Cold War, 1988.
Homer Moyer, Jr., and and Linda Mabry , Export Controls as Instruments of Foreign Policy: The History, Legal Issues, and Policy Lessons of Three Recent Cases, 1988.

Thomas W. Zeiler

Trade, Foreign: Neutral Trade The United States has historically interpreted neutral commercial rights both legalistically and pragmatically as a tool of business and diplomacy. Entrepreneurs demanded an impartiality in international politics that permitted them freedom to export and import goods, while the government interpreted the neutrality doctrine broadly to help friendly nations threatened by aggressors. Views of neutral trade policy, therefore, became entangled in debates over the proper role of commerce in wartime. In general, however, America exercised its neutral rights to enhance profits and security.

Beset with threats to U.S. commerce due to the European war led by Britain against France, President Thomas Jefferson in 1803 sanctioned the practice of the broken voyage by which French West Indian goods were Americanized and then re‐exported to British enemies as neutral trade. The United States held that neutrals had the right to trade noncontraband goods with belligerents, but such indirect trade naturally provoked Britain, which began taxing this neutral commerce and impressing American sailors into its navy. America nonetheless prospered from its clever policy, although an infuriated Congress passed the Non‐Importation Act of 1806 to counter British violations of neutrality. When Britain attacked the USS Chesapeake in 1807, Jefferson implemented both the act and an embargo on shipping and exports. Assertive action ultimately failed, however, and the War of 1812 resulted largely from resentments that had accumulated over neutral rights.

World War I placed neutral trade again at the center of Anglo‐American relations. During the Civil War, Britain had honored the Union trade quarantine against the Confederacy, and in 1914, London expected Washington to follow this precedent of respecting a belligerent's blockade. Shutting down neutral trade to the central powers in 1914, Britain seized U.S. ships, expanded the list of contraband goods, and even flew the American flag on some of its merchant ships to avoid attacks from German submarines. President Woodrow Wilson largely acquiesced in these tactics, but they sparked debate over the character of neutrality. Germany had good cause to cry foul. U.S. exports to France and Britain rocketed to $2.75 billion in 1916, aided by banking arrangements under which the House of Morgan loaned the Allies $2.3 billion before 1917. By contrast, exports to Germany plummeted to $2 million in 1916, and loans totaled only $27 million in 1914–17. Trade and credit profited the United States as New York City came to dominate world finance by 1916. Improved Anglo‐American relations, British propaganda, and the huge English market for U.S. goods helped generate sympathy for the Allied war effort, while German aggression seemingly threatened U.S. power in the western hemisphere and on the seas. Wilson and his advisers, especially Edward House and Secretary of State Robert Lansing, clearly wanted Allied victory; Lan sing developed a pro‐British neutrality policy to secure it.

America maintained an increasingly technical neutrality. Wilson protested restraints on American trade, but because Britain controlled the seas, U.S. products ended up in Allied ports. Whether the United States pursued its neutral policies as a moneymaker for private interests remains a matter of debate. At any rate, German efforts to use submarine warfare to curb the trade flowing to Britain and France eventually brought America into the war.

In the 1930s, isolationists wanted stricter neutrality as war loomed again in Europe. Congress imposed an arms embargo and prohibited loans in the first of the Neutrality Acts (1935). Isolationists claimed that the selfish economic interests of merchants and bankers had dragged America into World War I, but President Franklin D. Roosevelt pressed for fewer restraints on arms and commercial trade, until by 1939, the most onerous provisions of the Neutrality Acts had been repealed. Despite U.S. neutrality in the event of war, foreign nations could buy U.S. goods as long as they paid in cash (which circumvented restrictions on loans) and carried the products away on their own ships (which kept American merchants out of the war zone). The revision of the acts allowed the United States to aid allies at war and maintain commercial profits, while remaining legally neutral. America had once again bent the concept of neutrality to suit its economic and political interests.

Unlike Wilson in World War I, however, Roosevelt tried to prevent private interests from trading with aggressors. Unfortunately for many victims of aggression and violence, the neutral trade policies of the United States worked all too well. Republicans fighting Franco's Fascist‐backed forces in Spain, and Ethiopians struggling against Mussolini's Italian invasion, could not obtain vital war supplies. American exports of petroleum reached Mussolini's army in increasing amounts, while goods were denied to Ethiopia. Roosevelt sought an embargo against Italy, but American business saw no reason to curb sales with a nation at peace with the United States. Once war broke out in Europe, America remained neutral until the attack on Pearl Harbor in December 1941, but Roosevelt bent the rules even further to aid the Allies through loans, Lend‐Lease assistance, and other means. Once again, the exercise of neutrality meant that trade would serve the economic, diplomatic, and military interests of the United States.

Bibliography

Louis Martin Sears , Jefferson and the Embargo, 1966.
Jeffrey J. Safford , Wilsonian Maritime Diplomacy, 1913–1921, 1978.
Robert Dallek , Franklin D. Roosevelt and American Foreign Policy, 1932–1945, 1979.
Kathleen Burk , Britain, America, and the Sinews of War, 1914–1918, 1985.
Robert W. Tucker and and David C. Hendrickson , Empire of Liberty: The Statecraft of Thomas Jefferson, 1990.

Thomas W. Zeiler