The Senate's repudiation of the Treaty of Versailles following World War I is often seen as ushering in a period of isolationism in American foreign policy. It was impossible for the United States to withdraw completely from world affairs, however, because American possessions stretched from the Caribbean to the Pacific and because the First World War had transformed the country into the world's leading creditor nation. As the threat of war grew in the 1930s — with the rise of the Nazis in Germany and Japanese aggression in China — Congress tried to insulate the United States from potential hostilities through neutrality legislation. While public sentiment remained strongly in favor of staying out of a European conflict, isolationism became increasingly difficult after war broke out in Europe in September 1939.
Although the United States did not join the League of Nations, it did cooperate with international agencies throughout the 1920s and into the 1930s on such matters as trade and drug trafficking. The United States also headed efforts to advance diplomatic talks on limited disarmament, to resolve the tangled questions of war debts and reparations, and to maintain international peace, all while remaining deeply involved in Western Hemisphere affairs, particularly in Central America. American foreign policy was far from isolationist in the '20s.
Disarmament. Two factors prompted American calls for disarmament during the 1920s. First, many Americans believed the arms buildup, particularly the Anglo‐German naval rivalry, was a cause of World War I and that reducing military strength would therefore help prevent another war. Furthermore, the United States was concerned that the growing military power of Japan, which had taken advantage of the war to seize German possessions in China and the western Pacific, was a threat to American interests in the region. Limiting Japan's military capabilities would protect those interests. At the Washington Armaments Conference (November 1921–February 1922), the United States, Japan, Great Britain, France, and Italy signed the Five‐Power Treaty, which limited the tonnage of their navies and placed a ten‐year moratorium on the construction of aircraft carriers and battleships. The treaty did not place any restrictions on the construction of non‐capital ships, such as cruisers, destroyers, and submarines. Several diplomatic agreements were also reached in Washington that focused on maintaining the status quo in Asia. Japan, Great Britain, France, and the United States, for example, recognized each other's possessions in Asia and agreed to consult on outside threats or to settle disputes among themselves. In the Nine‐Power Treaty, a wider circle of nations (Great Britain, France, Italy, Japan, China, Belgium, the Netherlands, Portugal, and the United States) pledged to support the Open Door Policy and respect the territorial integrity of China.
Subsequent attempts at disarmament did not prove as successful. In 1927, President Coolidge called the signatories of the Five‐Power Treaty together in Geneva to work out limits on the building of smaller ships. France and Italy refused to attend, and Great Britain, the United States, and Japan could not reach an agreement on restrictions. At the 1930 London Naval Conference, Great Britain, the United States, and Japan signed a treaty that required scrapping some battleships and placed limitations on cruisers and submarines; France and Italy accepted some of the terms but were not formal signatories. The agreement, however, did not forestall Japanese aggression in Manchuria the following year.
War debts and reparations. The total war debt incurred by Europe exceeded $10 billion, the bulk of which Great Britain and France owed to the United States. Although the nation's wartime allies wanted the United States to cancel the debts altogether, both the Harding and Coolidge administrations approved only reducing the interest rates and forgiving a portion of the obligation. For example, the interest rate Italy paid was lowered to .4 percent and more than 80 percent of Italy's debt was canceled in 1926. Even with these adjustments, European countries found it difficult to pay off their loans. They argued that the high rates imposed by the Fordney‐McCumber Tariff (1922) dramatically reduced the amount of U.S. dollars they could earn through exports and also that they would not be able to pay back their war debts until Germany paid them reparations. Germany, however, was unable to make its reparations payments.
Germany defaulted on its reparations in early 1923. French troops responded by occupying the industrial Ruhr Valley. As German workers protested the occupation with a strike, runaway inflation hit Germany's economy. To avert an international financial crisis, President Coolidge appointed a number of American businessmen, including Charles Dawes and Owen Young, to an international group of experts investigating the problem. The resulting Dawes Plan (1924) fixed Germany's payments over the next five years and provided for a rather large foreign loan, with most of the funds coming from American banks. Essentially, the plan allowed Germany to meet its reparations obligations with U.S. money and for Great Britain and France to use the reparations they received from Germany to pay off their debts to the United States. The Young Plan (1929) reduced the total amount of reparations due from Germany and extended the payment period until 1988 at a fixed interest rate. The plan also provided for the possibility of additional reductions if the United States was willing to cut Allied debts further. The onset of a worldwide depression soon made the entire war debt and reparations question moot.
The Kellogg‐Briand Peace Pact. In August 1928, the United States and France, along with 13 other nations, signed the Kellogg‐Briand Peace Pact. Officially known as the Pact of Paris, the agreement outlawed war as an instrument of foreign policy, although all of the signatories (which eventually included 62 countries around the world) reserved the right to defend themselves in the event of an attack. Events that occurred in China after the signing of the pact, however, made it clear that there were no means of enforcing the treaty — beyond whatever force international public opinion might carry.
From 1931 to 1932, Japan occupied Manchuria and set up a puppet state called Manchukuo. This action was a clear violation of the Peace Pact as well as the Nine‐Power Treaty and the League of Nations Covenant. Despite pleas from China for assistance, neither the League nor the United States took any action to punish Japanese aggression. Rather than imposing military or economic sanctions, the American response was to simply refuse to recognize territorial changes in China achieved by force of arms. This policy of non‐recognition was known as the Stimson Doctrine, after then Secretary of State Henry Stimson.
Developments in the Western Hemisphere. American relations with Caribbean and Central American countries were mixed during the 1920s. In the Dominican Republic, for example, the Marines were withdrawn in 1924 following the election of a constitutional president. Although American troops left Nicaragua in 1925, they returned in 1927 when a civil war broke out. In his message to Congress announcing the intervention, President Coolidge justified the action by stating that its purpose was to protect American business interests, investments, and property rights in the country. A shift in policy, however, became evident during the Hoover administration. Through the Clark Memorandum (1928), the State Department repudiated the decades old Roosevelt Corollary and maintained that the Monroe Doctrine could not be used to justify American intervention in the Western Hemisphere. Hoover went on a ten‐nation goodwill tour of Latin America in 1928 and was quite well‐received.