The impact of ideas on trade policy: the origins of U.S. agricultural and manufacturing policies

Abstract

Since the close of World War II, the United States has supported contradictory trade policies. In manufacturing, the United States has fostered a liberal trade regime, spurning government involvement in market transactions. In agriculture, it has sanctioned policies of import restrictions, export subsidies, and import fees. This variation is rooted in decisions that were made in the 1930s and institutionalized in the 1940s. In the wake of the Great Depression, policymakers concluded that state intervention helped agriculture and hurt industry. This article argues that the choice of government policy and its appropriateness to the economic problems faced by each sector reflect the accepted knowledge at the time. Neither liberalization nor subsidization was inevitable; both were economically viable options. However, central decision-makers made choices that were often based on inaccurate beliefs about the utility of different policy options.