Effects on Trends in Trade Policy





The modernizing world of 1850-1870 belonged to an age of remarkable growth in international trade, stimulating the largest free market the world had ever seen. Yet by 1914, only 30 years later, the trend towards liberal trade policies had mostly ended, replaced by a revival of the protectionist system. A study of the variation in trade policies over time shows a remarkable growth in the power of interest groups to influence the institutional rules and regulations concerning international economic intercourse. The initial major trend can be partly attributed to international conditions, whereas later trends are more attributable to the relative strength of the interest groups within individual nations and their ability to influence institutional policies. It is, however, necessary to always consider the impact of the international economic situation on the interest groups, as changes in the international arena often played a significant role in determining which interest groups held power at any given time.

A convenient starting point for looking at trends in international commerce policy is Great Britain. Prior to the British initiative towards free trade, there were two main barriers to trade, natural and artificial1. Natural barriers were the long distances to be transversed and the high cost of shipping materials. Artificial barriers included tariffs and at times direct prohibitions on the import of certain goods. As the century progressed both barriers fell drastically due to remarkable advances in technology and through the international leadership of Great Britain. This lasted until the 1870s initiated the return to protectionism.

Britain, as the first serious pundit for free trade, led the initial trade liberalization movement for several reasons. First, the philosophical roots which planted the argument in favor of free trade came to fruition with the publication by Adam Smith of The Wealth of Nations. This work was quickly expanded upon by David Ricardo who postulated the concepts of absolute and comparative advantage, and who showed that every nation involved in trade benefited. The first group of influential people to accept and use these arguments thus arose in Britain in the form of the international merchants and industrialists.

Britain in 1832 expanded the franchise to the urban upper middle class, of whose numbers merchants and industrialists constituted a significant amount. Thus at the same time the merchants were beginning to advocate a liberalization of Britain\'s trade policy, they were also becoming empowered to influence the parliamentary rules. Younger politicians intent on simplifying the government architecture gained power as a result, including Robert Peel and William Huskisson.

The greatest barrier to free trade in Great Britain in the 1840s were the Corn Laws. The Corn Laws principally benefited the landed aristocracy, the strongest group traditionally represented in Parliament. Thus the landed aristocracy can and should be viewed as an institution as well as a separate interest group, given their hegemony over policy within the nation for several centuries. The rise of the merchant classes and the enfranchisement thereof provided the catalyst necessary to promote a sweeping change of the traditional policies.

In Britain this political turmoil led to a trend towards free trade and a demand for the repeal of the Corn Laws by the industrialists and merchants. Richard Cobden, an industrialist, formed the Anti-Corn Law League2 in 1839 which created one of the first large scale campaigns to influence public opinion. The Whig party saw the merchants as a way to gain more control in Parliament, but failed to win the election in 1841. Tory Sir Robert Peel was elected prime minister, already intent on making extensive changes in the fiscal system. The Anti-Corn Law League achieved triumph in 1846, not due to their extensive propaganda, but thanks to the Irish potato famine. Faced with mass starvation Peel decided to introduce a bill which would permit the duty free import of grain within a few years.

In some sense it can be argued that without the Irish famine the era of free trade would have come substantially later if at all. As an international event it propelled Great Britain down the path of free trade, and it is significant that the Whigs, which became the party of the industrialists and merchants, were unable to attain the repeal of the Corn Laws without a significant catastrophe to aid