Foreign Trade

The Problem

Under the Articles of Confederation, the national legislature had the right to appoint foreign ambassadors and sign treaties and alliances. However, the document denied Congress the power of regulating foreign trade or international commerce, leaving these decisions with the individual states. Without power over foreign commerce, the United States could do little to negotiate favorable economic terms with the likes of England and Spain who, sensing Congress's political weakness, enacted harsh restrictions on American trade, knowing full well that the United States could not organize any economic retaliation. As a result, the United States found itself economically isolated from most of Europe, crippling the already fragile domestic economy.


Overview

51kSoKBEP0L._SX425_.jpg

Article 9 of the Articles of Confederation gave the newly formed Congress of the United States the power to declare war and make treaties with foreign nations. However, it specifically prohibited the regulation of foreign trade except with Indian tribes, leaving Congress unable to protect American trade overseas. Instead, control was delegated to the individual states, where each state could enact whatever foreign trade policies it wanted, regardless of the approval of Congress or any of the other states.1 For instance, when all of New England closed their ports to British shipping, Connecticut reopened theirs and profited immensely from the monopoly of British shipping. Under these circumstances, Congress could do little to regulate foreign trade, as it was unable to coordinate every state's foreign trade regulation.

In addition to the lack of political power delegated to Congress, the fledgling Fledgling: adjective
young, newly created
nation had little international cloutclout noun
influence
compared to the well-established European powers. Many of them didn't take the United States seriously as a trading partner, noting its unreliable system of government and lack of enforcement power. Thus, the United States under the Articles of Confederation rarely held a strong negotiating presence, often failing to attain any of its negotiating terms, most notably with Spain through the Jay-Gardoqui Treatysee below, which barred Americans from using the Mississippi River.2 Forced into unfair agreements, the United States could do little to ease the economic harm caused by its international isolation. It took until the ratification of the Constitution for the United States to finally be considered a "civilized" nation in European trade.3

America's Exclusion from British Trading

Soon after the end of the Revolutionary War, the United States wanted to restore all previous trade arrangements with European nations from the colonial era, though many of these nations had different intentions. In 1783 England reenacted the Navigation ActsA series of laws designed to limit foreign trade by requiring trade between the British West Indies and any foreign country to be conducted solely on British ships., which dealt a serious blow to the United States. Americans heavily relied on the wheat, fish, and lumber trade with the West Indies, and thus the Navigation Acts heavily restricted the market for them. At the same time, British traders dumped loads of low-cost goods into the American states. As a result, excess supply of many goods built up, driving down prices and forcing many American merchants and traders out of business. In the hopes of negotiating the repeal of the Navigation Acts, Congress sent John Adams to England. He soon realized however that Britain was unwilling to repeal the Navigation Acts under any circumstances, prompting Adams to argue in a letter written to Thomas Jefferson that "If the English will not abolish their Aliens Duty, relatively to us, We must establish an Alien Duty in all the United States."4 He noted that uniting the states under a retaliatory trade policy would demonstrate the strength of the new nation and protect American businesses from cheap British goods. However, given the lack of political power Congress held in foreign trade, Adams's demand was nothing more than an empty threat, and he could do little to prevent Britain from continuing to exclude American ships from the West Indies.

To an extent though, the Navigation Acts did trigger responses among individual states, who made their own policies to restrict foreign trade to compensate for the lack of national action. Many states such as New York, Massachusetts, and Pennsylvania added tariffs on British goods or barred British ships completely from their harbors. Even so, however, they collectively had little effect on its economy or foreign trade. With a wide network of territories as well as trade agreements with other European powers, Britain had little trouble withstanding the American trade restrictions. Worse yet, some states took advantage of trade restrictions to profit, such as Connecticut as mentioned before, while others shifted the focus of those restrictions from British trading to other states. Seeking self-interest, individual states started aggressively regulating interstate trade, creating economic conflicts between states that further damaged the national economy. It was these interstate trade restrictions that later inspired the Annapolis Convention of 1786, which was the forerunner of the Constitutional Convention.

Failed Trade Negotiations with Spain

Spain also used the international weakness of the United States to wring concessions out of the new nation. In 1784, they closed the port of New Orleans to American ships, which also blocked American use of the Mississippi River. Hoping to negotiate a treaty granting American access, Congress sent diplomat and Secretary of Foreign Affairs John Jay to Madrid. Complicating the negotiations, Spain insisted on having unrestricted access to the Mississippi River. In a letter to Thomas Jefferson, Jay noted the complications in negotiations, stating “Spain insists on the Navigation of the great River, and that renders a Treaty with her uncertain as yet.”5 As the United States was not in a strong negotiating position, Jay could do little to resist Spanish demands for access to the Mississippi.

john_jay__28gilbert_stuart_portrait_29_large.jpg

The resulting treaty, later known as the Jay-Gardoqui Treaty of 1786, completely rejected Congress’s terms of negotiation. Rather than open up the Mississippi to American trade, the treaty guaranteed Spain’s sole right to navigate the river for twenty five years in exchange for shipping access at Spanish ports in Europe and the West Indies, a term that primarily benefited the merchant and shipping economies of New England at the expense of the western settlers that actually needed access to the Mississippi, as well as the central and southern states that invested heavily in western settlement. Thus, when the treaty was brought before Congress, only seven states supported it, short of the nine necessary for approval. Spain, upon realizing that the U.S. had failed to ratify the treaty, not only retained control of the Mississippi but also banned American ships from their own ports. As a result, America remained in a state of trade isolation with Spain for over ten years, until another treaty restored trading rights, long after the ratification of the Constitution.

Conclusion

Deprived of the necessary power to negotiate foreign trade agreements, Congress under the Articles of Confederation failed to win any favorable terms through negotiations with the dominating economic powers of Europe. Economically isolated by most European nations, the already weak American economy took further hits from the heavy trade restrictions placed upon American ships, driving down prices and bankrupting many merchants and traders. With a central government unable to compel any European nation into accepting their demands and a collection of states too weak to have an effect on European trade, many Americans demanded the need for a stronger centralized government that could directly regulate commerce. Thus, when the Constitutional Convention met to amend the Articles of Confederation, they prioritized giving the newly created legislature this power, thereby asserting the United States as a legitimate power in international trade.

Discussion Questions

  • Why do you think the Articles of Confederation explicitly denied Congress the power to regulate foreign trade?
  • In what ways did the states' strong individuality affect international trade (or the lack thereof)?
  • If a stronger document like the U.S. Constitution were enacted instead of the Articles of Confederation, how would that affect America's presence in international trade (if at all)?
Further Reading
Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License