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Revenue or Reciprocity? Founding Feuds over Early U.S. Trade Policy

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  • Douglas A. Irwin

Abstract

The Constitution of 1787 was designed to give Congress powers over trade policy that it lacked under the Articles of Confederation. The Washington administration was split over whether to use these powers to raise revenue or to retaliate against Britain's discriminatory trade policies. Obsessed with funding the national debt, Alexander Hamilton sought to avoid any conflict with Britain that might disrupt imports and diminish the customs revenue flowing into the Treasury coffers. By contrast, Thomas Jefferson and James Madison advocated a policy of "aggressive reciprocity" to force Britain to open its home and colonial markets to American goods and shipping services. This paper examines how the nation's founding policymakers confronted this dilemma and evaluates the merits of different trade policy options. The main conclusion is that the Federalist policy of moderate tariffs, non-discrimination, and conflict avoidance provided much needed stability during the critical first decade of the new government.

Suggested Citation

  • Douglas A. Irwin, 2009. "Revenue or Reciprocity? Founding Feuds over Early U.S. Trade Policy," NBER Working Papers 15144, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:15144
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    References listed on IDEAS

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    1. Bordo, Michael D. & Vegh, Carlos A., 2002. "What if Alexander Hamilton had been Argentinean? A comparison of the early monetary experiences of Argentina and the United States," Journal of Monetary Economics, Elsevier, vol. 49(3), pages 459-494, April.
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    Cited by:

    1. Thomas J. Sargent, 2012. "Nobel Lecture: United States Then, Europe Now," Journal of Political Economy, University of Chicago Press, vol. 120(1), pages 1-40.

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • N11 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: Pre-1913
    • N71 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - U.S.; Canada: Pre-1913

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