Clashing Over Commerce: A History of US Trade Policy (Markets and Governments in Economic History)

by Douglas A. Irwin

The case of sugar illustrates how America’s commercial expansion came with new foreign policy entanglements. In 1876, the United States signed a limited reciprocity treaty with Hawaii (for political not commercial reasons) that gave preferential access to its sugar in the United States in exchange for Hawaiian preferences for selected American products. Bilateral trade soared after the treaty and transformed Hawaiian politics, enriching the islands’ planter class, which had made large investments in sugar production. The McKinley tariff of 1890, however, granted duty-free access to all imported sugar. Having lost its preferential access to the US market, Hawaii plunged into a deep recession. This led to political instability, and a group of Americans on the island overthrew the Hawaiian monarch in 1893. A few years later the United States annexed the territory.50 Meanwhile, Cuba benefited from having been granted duty-free access for its sugar under the McKinley tariff. But when Congress reimposed duties on imported sugar (except from Hawaii) in 1894, Cuba’s sugar production plummeted. The collapse of the Cuban economy led to an insurrection against Spanish rule in 1895, which Spain brutally suppressed. Eventually this led to US military intervention in the Spanish-American War of 1898.51 Thus, the tariff on just one commodity—sugar—deeply embroiled the United States in the domestic politics of two island territories.