1954 Agricultural Act & Decline of US Textiles
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This document discusses how the 1954 Agricultural Trade Development and Assistance Act contributed to the decline of the US textile industry. It allowed cotton exports to spike, with Japan becoming the largest customer. This threatened the US textile industry as Japan's cotton purchases from the US doubled from 1949-1954 to 1955-1960. Eisenhower used trade policies like the Reciprocal Trade Agreement Act to support Japan, further threatening the US textile industry. The textile industry lobbied for protections, and Japan eventually agreed to voluntary export restraints on textiles for two years. However, the document notes that while the ATDA had an effect, other factors like presidential trade negotiating powers and the textile industry's slow innovation also contributed to its decline
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1954 Agricultural Act & Decline of US Textiles
- 1. The 1954 Agricultural Trade Development and Assistance Act and the Decline of the U.S. Textile Industry
- 2. When the bottom fell out for textiles Source: U.S. Bureau of the Census, Historical Statistics, figures for Cotton Manufacturers, p. 898-890.
- 3. 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.
- 4. 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.
- 5. 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
- 6. 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.
- 7. Textiles down but not out Textiles 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.
- 8. 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.
- 9. 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.
- 10. 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
Editor's Notes
- My interest in textiles is that both sets of my grandparents worked in textile mills in Porterdale and Griffin. I heard the stories, and as a kid I recall going to my grandparents and driving by these hulking, empty mill buildings. I always wondered what happened to them. This graph I pulled from Census figures really caught my attention as I began my research. It shows textile imports coming into the country and exports going out. As you can see, exports dropped significantly right after WWII to 1950 while imports increased at a steady rate. Imports really began to jump in 1955. The only thing that I could find that correlated to this import increase is a piece of federal legislation called the Agricultural Trade and Development Assistance Act of 1954.
- If you go back to look, Senate hearing testimony, communications among White House staffers and media reports call it Public Law 480 and also Food for Peace. What it did was provide an easier way to sell American surplus farm products to underdeveloped countries. The big three commodities it targeted was corn, wheat and cotton. 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. Congress passed the ATDA and Dwight Eisenhower signed the bill into law without controversy. The bill was a concession to farming interests that was promised with passage of the U.S. Farm bill of 1954, and it was the type of legislation that everyone could support. It helped farmers sell their crops. Eisenhower sold it as a way to help feed starving people in underdeveloped countries. The bill also addressed foreign policy by supporting favored countries of the U.S. and building and/or strengthening alliances. So, what happened?
- Japan happened, particularly with raw cotton. The Japanese had been one of the United States’ best trading partners in the postwar years and had brought a lot of cotton since 1950. The trend continued throughout the decade, but spiked after ATDA was signed into law. Cotton exports spiked upwards shortly after the ATDA became law. Not surprisingly, Japan became the largest customer of American cotton. In the six years from 1949 to 1954, Japan’s annual U.S. cotton purchases averaged to 880,166 bales per year. After ATDA, Japan’s annual U.S. cotton purchases was 1.265 million bales per year from 1955 to 1960. Japan enjoyed favorable trade with the United States throughout the decade and was the top buyer of U.S. cotton each year by a couple of thousands of bales in most years. A quick look at the data shows that in the years after ATDA passed Japan’s cotton purchases from the U.S. was double and triple more than what other countries purchased. So, the ADTA created lower prices for exported U.S. cotton which the Japanese used to make shirts, blouses and socks cheaper and killed the U.S. textile industry. End of story. Right?
- But wait! Not so fast, my friend. There was a lot of other stuff going on that led up to the ATDA. First, there was the need to rebuild Japan after the war. Eisenhower and his Secretary of State John Foster Dulles wanted to build up Japan as a strong ally as a bulwark against Communist expansion. Second, cotton growers wanted to sell more cotton. There was too much raw cotton on the market which suppressed prices and farm policy reform was unpopular, particularly the Soil Bank where the government agreed to pay farmers to grow less to reduce inventory. Third, U.S. textiles did well supplying products for the war efforts during World War II and the Korean War, but postwar consumers wanted big ticket items – refrigerators, living room sets and Buicks – things that people were denied to have because of war rationing. Sales slumped for textiles. Eisenhower had to navigate a lot of issues to reach his primary foreign policy goals of containing communism and building up Japan. He had one powerful tool for this: The Reciprocal Trade Agreement Act of 1934.
- The Reciprocal Trade Agreement Act was historic in that it took power to set trade and tariff policy away from Congress and gave it to the executive branch For the first time, the president could levy tariffs. This transformed U.S. trade policy from a domestic issue to a foreign policy issue. There were controls to RTAA: The president was required to go to Congress to renew RTAA powers every three years. It took a two-thirds super majority in both houses to overturn a tariff. The president was to consult with the Tariff Commission – made up of members of Congress, Commerce and State administrators. It worked great. The president gave only what he got in trade negotiations with other countries. Congress stopped passing protectionist tariffs every time an industry would lobby for one and there were checks and balance mechanisms in place to prevent abuse. RTAA worked out so well, that it was the basis used in formulation the General Agreement on Trade and Tariffs in 1947 that took RTAA’s principles to the international level. Ike followed Truman’s policy in nurturing good trade policies with Japan using RTAA powers. Japan imported more cotton from the U.S., and then turned around to exported finished textile products into the U.S. The U.S. textile industry took notice and began to fight back, primarily through lobbying members of Congress and extracting concessions from the Eisenhower Administration.
- Talk about industry organizing as ACMI “Fragile Southern economy” still recuperating from the Civil War Re-focused on threatening the textile industry Got Congress to include the escape clause in RTAA renewal in 1950 Adjusted the time period used to set tariffs Minor note: got some Southern states to pass laws that required stores to post signs outside stating they sold Japanese products
- Eisenhower worked to get RTAA renewed for three full years Helped Japan to become a provisional member of GATT the year before Textile lobbying intensified; Jackson and others called the 2-for-1 pricing a tax on textiles. Cotton joined textiles to lobby for protectionist legislation. Big Cotton still liked to sell cotton overseas. However, they were getting competition from India and Egypt and therefore sought to protect the domestic textile market; one market it had it’s biggest influence over.
- You come across some interesting things about famous people you didn’t know much about. Dulles was one for me and I learned redefined the Secretary of State job. Critics said he was a pure political man and did not care how policies effected people. Abba Eban, an Israeli diplomat, said of him: “John Foster Dulles often wrestled with his conscience and always won.” Feeling the heat, Dulles convinces the Japanese to reduce its exports to the U.S. for two years. Many GATT members believed VERs were violations of the trade agreement. Eisenhower and Dulles disagreed, stating that Japan volunteered on its own to sell less. Textiles appreciated the VER, but were not satisfied. Of note, after the results of secret negotiations produced a 40 percent reciprocal tariff reduction on finished textile products textiles dug in continued to lobby for quotas and tariffs. However, I think textiles began to see the writing on the wall. Starting in 1955, several companies began to consolidate operations and reduce work force. They got out of the mill village business by selling the houses.
- U.S. textiles industry continued its market share slide after Eisenhower left office. It remained in a much smaller form until the World Trade Organization replaced GATT in 1996 and opened textiles up to more countries – Vietnam, Bangladesh and China.