What were the effects of tariffs and free trade in the 19^th century?
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Introduction

Traditional view: free trade liberalism takes lead unparalleled peace + prosperity + France crippling system of tariffs until 1860 steps away from p.

Free tare – Peel To Gladstone – move to free tarde with national income rising – linked – Cobden much more than that: “in the Free Trade principle that which shall act on the moral world as the principle of gravitation in the universe-drawing men together, thrusting aside the antagonism of race and creed, and language, and uniting us in bonds of eternal peace” OR Cunningham see monopoly of manufactuers, even contemp. Agree – Hume agree substantial benefits.

Tariff Rates – Nye v. Irwin

Nye: France less tariffs than Britain – yes Britain liberalise more quicker but 50% higher in 1820s – only comparable with France after move to free trade 40s and Corn Laws. Index problem underestimate tariffs – prohibition no imports (tariff revenue total imports) underestimates tariffs and therefore reduction in tariffs.

Why: trader larger proportion Britain, policy seems more important + initially large level tariff, any action seems impressive + French tariffs reforms part of a multi pronged strategy

Prohibitive v. Consumption Tariffs – lot of British tariffs consumption tariffs – tea, wine etc – used to protect colonial industries and were substitutes, beer for wine etc.

Paradoxical gap between historical perception and commercial reality – writers confuse development with industrilisation – politically important, economically important – trade and protection leading sector with economy as a whole.

Irwin: rate of tariff revenue poor indicator: - examine tariff structure tariff rates does not eman more liberal trader – simple GDP France imports 5.1% GDP 1830s cf. 13.1 in Britain.

1860s Gladstone removes all protectionist tariffs – few tariffs to raise fiscal revenue – 1897 – tobacco, tea, spirits, wine account 95% tariff revenue + half items 1860s list merely extension of domestic excise “solely for purpose of countervailing duties of excise on the like articles produced in the UK”

Not paradox between few highly taxed imports and free trade – even Cobden talks of: “We have many duties – such as that, for example on tea – which are too heavy, but they are not maintained in the interest of any British producer”

Cf. France 1860 still 10 to 15% on most goods after Cobden-Chevalier treaty – racthed up culminating Meline tariff 1892 – look principle system – Britain’s extension excise system – French designed to keep foreign goods out.

Exaggeration of Economic Effects

By 1840 decision to lower rather than simplify duties – consisted narrowing wedge British and world price by 21% world price.

Was it free trade movement: retrenchment and reform – higher ratio of imports, less government spending, lack of war – meant government revenues raised without tariffs.

Appeal to logic of free trade: if British demand imports nonnegligible part of world demand, elimination duties raise demand and price – terms of trade go against Britain – could be enough to offset advantage from more trade. Imports bought with exports not necessarily raise Britain’s national income – argument for optimal tariff – if purchases have discernible effect on price – well-advised seek optimum tariff – depending on elasticties – Britain not a small country 1860s higher its share in exportables and importables the lower elasticities of excess demand and supply. – need high tariff – tariff of 1881(.058) consistent with elasticties of 35 – Britain magnanimous in her tariff, giving back booty.

21% fall tariff: reduce terms of trade by 21% - price exports relative to imports 21% higher – deterioration terms of trade times foreign trade 20% 4% loss national income

Secondary Effects

Induced effects composition of output – reinforced specialization expense agric.

Bairoch: Free tarde bad for French growth cf. growth rates and era of protection – where other factors separated? Expose agric. To cheap New World reduced agric. Incomes and demand for industrial products – if protection boosted growth - tenuous

O’Rourke – Solow – tariffs positively related growth, and factor-accumulation model DATA SHOWS TARIFFS BOOSTED LATE 19^th CENTURY GROWTH

Tariffs high when output low, tariffs high during depressions – surprisingly robust and not just cyclical.

Broadberry – tariffs protect manufacturing – encourage quicker sectoral shift from agric. To labour – static effect, growth dynamic takes time for labour to be absorbed.

IRWIN: Britain worse off from unilateral trade reduction – but foreign tariff reduction mitigate terms of trade deterioration

Torrens: move to free trade bad due to terms of tarde Nassau Senior extenuates efficiency resource allocation. – Torrens reciprocity should be the general rule.

Britain lose from free trade? – Basevi and Walker – change relative prices (terms of trade restore balance of trade disturbed by a tariff cut to its original value – depends on underlying elasticities. Vairety of plausible elasticties unilateral tariff cut shown to reduce tariffs – terms of tarde dominates efficiency gain BUT largest psosibl smaller than Maccloskey 2% from 21% cut tariffs immediately. NEED TO CONSIDER OTHER COUTNRIES – other countries did follow suit – don’t know these, need to before assessing impact.

Corn Laws

Free trade not era cheap food – wheat production fell only gradually in the 1870s –

Effects with Ricardian Small Country assumption: no effect world market – 21% bigger agric force than needed – augmented manu. Output by 23.6% growth from1 to 1.7% PA – manufacturing exports rise by 246% - offset by loss urban services give up resources to manufacturing – simple two sector blurs intra industry response mining lose 13.3% - lowers cost of albur by 25% so labourers do lose from CLs

Effect Pro-Torrens – Tariffs Effect Terms of Trade

Export boom, inelastic supply cotton faced rising costs – smaller increase manu. Output – imply manufacturing growth v. limited and not cause of mid-Victorian boom. – shifts demand from domestic to foreign

THE LOWER THE ELASTICITES IN FOREIGN MARKETS – MORE CORN LAWS SERVE TO IMPROVE TERMS OF TARDE + PLUASIBLE ESTIMATES SUGGEST CORN LAWS NO BURDEN MANUFCTURING AT ALL.

Conclusion

Debate level of tariffs.

Little evidence now for free trade having boosted growth in Britain or elsewhere

Reading too much leading sector

Elasticities

Other countries

Other Notes in this Category

1. A History of Oppida
2. A Tudor revolution in government?
3. British Banking System in the years 1700-90
4. Explanations of Nuptiality during the first industrial revolution in England
5. Has the “retardation” thesis been overthrown by recent mainly cliometric historians?
6. Wage and consumption levels in england and on the continent in the 1830s – paul uselidin
7. Was standard of living higher in britain or in france?
8. Welfare effects of british free trade: debate and evidence from the 1840s
9. What were the effects of tariffs and free trade in the 19^th century?

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