In 1930 the Smoot-Hawley act was enacted to prevent U.S owners of factors of production from being threatened by the Great Depression at the time. The rates were set high to cushion them from incurring losses. On the other hand, the trading partners responded promptly by taking similar measures a move which worsened the economic condition that was prevailing. The congress was forced to act very fast in order to control the situation that was deteriorating and consequently the Reciprocal Trade Agreement Act was implemented in 1934.The act gave the president the powers allow for tariffs that met the thresholds that had been agreed jointly by the trading partners (Cooper, 2014,pgs 2-3).
Political institutions play a major role in coming up with trade tariffs and trade policies. Their main purpose is to protect the interests of traders from being exploited by their trading partners. When they participate in coming up with the tariffs such as having bilateral and multilateral agreements, a lot of opportunities are opened up for the citizens of the country and businesses operate in an efficient manner. The decisions made in coming up with these trade tariffs and policies has political consequences for the government in power because producers are most likely to support regimes that come up with policies that favor them. On the other hand, producers are likely to disregard regimes that come up with unfavorable policies according to them because they seem to be undermining their operations (World Trade Report, 2007, Pg 55).
The Great Depression in the 1930s forced the U.S to review its trade policies and tariffs. The country was forced to bend low the trade barriers so as to forge economic cooperation with other countries. Trade became liberalized although the move was seen to have some political agenda. The U.S congress was adamant to give the president freedom