The Reaction of Private Interests to the 1934 Reciprocal Trade Agreements Act

In recent research on the 1934 Reciprocal Trade Agreements Act (RTAA), there has been no examination of the reaction of private actors to the RTAA. Did producer groups and investors in 1934 believe the Democratic RTAA was the solution to Republican protectionism, as institutional analyses of the RTAA claim, or did they realize the RTAA was no magic bullet against a return of protectionism, as skeptics argue? Archival data suggests that many producer groups believed the RTAA would result in durable liberalization, but that fewer understood the likely effects of its specific features. An event study of investor reaction to the RTAA reveals that export-dependent firms experienced a significant, positive stock return increase on news of the RTAA, while heavily tariff-protected firms experienced a significant stock decline, albeit several months later.Many thanks to George Kanatas, David Mowery, Barbara Ostdiek, Joanne Oxley, Dennis Quinn, Duane Windsor, Bernard Yeung, two anonymous reviewers, and Peter Gourevitch and David Lake for helpful comments on earlier drafts of this paper. I am also indebted to Scott Baggett for statistical assistance and to Katie Schwenker, Helen El-Mallakh, and Clara Montz for patient research assistance.