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Free Trade and Protection in Nineteenth-Century Britain and France Revisited: A Comment on Nye

Published online by Cambridge University Press:  03 March 2009

Douglas A. Irwin
Douglas A. Irwin
Affiliation:
The author is Assistant Professor of Business Economics in the Graduate School of Business, The University of Chicago, Chicago, IL 60637.
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Notes and Discussion
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The Journal of Economic History , Volume 53 , Issue 1 , March 1993 , pp. 146 - 152
Copyright
Copyright © The Economic History Association 1993

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References

1 Nye, John Vincent, “The Myth of Free-Trade Britain and Fortress France: Tariffs and Trade in the Nineteenth Century,” this Journal, 51 (03 1991), pp. 23–46.Google Scholar

2 Ibid., pp. 25, 27.

3 Ibid., p. 24.

4 Ibid., p. 25.

5 Lévy-Leboyer, Maurice and Bourguignon, François, The French Economy in the Nineteenth Century (Cambridge, 1990)Google Scholar, table A–3; and Mitchell, B. R., British Historical Statistics (Cambridge, 1988), pp. 451, 831.Google Scholar

6 Imlah, Albert H., Economic Elements in the Pax Britannica (Cambridge, 1958), p. 120CrossRefGoogle Scholar (emphasis added).

7 As Gladstone put it, the changes in 1860 marked “a final disappearance of all protective and differential duties; and the merchant, with the consumer, will know that every shilling that he pays, he pays in order that it may go to the revenue, and not to the domestic as against the foreign producer.” Hansard's Parliamentary Debates, 3rd series, vol. 156 (1860), p. 868.Google Scholar

8 House of Commons, Sessional Papers, “Customs Tariffs of the United Kingdom from 1800 to 1897,” vol. 85 (London, 1898), pp. 890ff.Google Scholar

9 Calculated from data in House of Commons, Sessional Papers, “Annual Statement of Trade of the United Kingdom (1880),” vol. 137 (London, 1881).Google Scholar

10 House of Commons, “Customs Tariffs,” p. 40.Google Scholar Nye denied the economic basis for distinguishing between protective and revenue tariffs, calling it an “artificial distinction,” even though Adam Smith accepted the legitimacy of tariffs designed to offset domestic excises because they did not protect domestic producers from import competition (Smith, , Wealth of Nations, London, 1776, book 4, chap. 2Google Scholar). For a more recent discussion, see Corden, W. M., The Theory of Protection (Oxford, 1971), pp. 11–12.Google Scholar

11 House of Commons, Sessional Papers, “Treaty of Commerce between Her Majesty and the Emperor of the French, January 23, 1860,” vol. 118 (1860), pp. 473–74.Google Scholar British policy survived the expiration of the Anglo-French accord because its stance was one of unilateral free trade; the policy was not viewed as a negotiating concession, and it extended the provisions of the accord to all other countries unconditionally.

12 Ibid., p. 474.

13 House of Commons, “Customs Tariffs,” p. 166.Google Scholar

14 Domestic excise taxes (on beer, plate, playing cards, vinegar, and so on) are listed in the “Annual Report of the Commissioner on Inland Revenue,” and import tariffs (on the same) are listed in the “Annual Statement of Trade of the United Kingdom.” On malt and beer, also see Dowell, Stephen, A History of Taxation and Taxes in England, Vol. 4: Taxes on Articles of Consumption (London, 1884), pp. 85ff.Google Scholar For tobacco, see House of Commons, “Customs Tariffs,” pp. 185ff.Google Scholar

15 Nye, , “The Myth,” p. 36.Google Scholar Even if wine had been taxed more heavily than beer, however, beer producers may not have been indirectly protected. One could speculate that if Britain were a “small” part of the European beer market—that is, if beer was imported (exported) under conditions of perfectly elastic foreign supply (demand)—and a tariff on imported wine shifted domestic demand toward beer, the volume of imports would rise (or exports fall) to accommodate the entire increase in demand, and domestic production would not change.

16 As Gladstone noted, “the principle on which the duty on wine is levied is one which lies at the very root of half our indirect taxation—the imposition of duties on strong liquors.” Hansard's Parliamentary Debates, 3rd series, vol. 156 (1860), p. 1845.Google Scholar

17 See House of Commons, Sessional Papers, “Report from the Select Committee on Wine Duties,” vol. 14 (London, 1878–1879), p. 318.Google Scholar

18 The average import price of French wine (per gallon) was 7.8s. in 1866, 6.1s. in 1870, 9.5s. in 1875, 9.4s. in 1880, 9.0s. in 1885, 10.3s. in 1890, and 9.5s. in 1895 (data collected from various years of the “Annual Statement of Trade of the United Kingdom”). Applying the 1s. tariff yields an ad valorem tariff equivalent ranging from 10 to 16 percent, with an average of about 11 percent at the average 9.4s. per gallon. Wines from other countries were generally subject to the higher tax: in 1879, for example, the average tax burden on all imported wine was about 25 percent, meaning that the average tax burden on Spanish and Portuguese wine was even greater (House of Commons, “Wine Duties,” p. 388). As the average import price of foreign beer (mainly from Holland, Germany, Belgium, and Denmark) ranged from 45s. to 48s. per barrel between 1880 and 1895, foreign beer was subject to an ad valorem equivalent of about 14 percent. (The import tariff and import prices are taken from various years of the “Annual Statement of Trade of the United Kingdom.”) The average retail price of domestically produced beer in Britain (inclusive of excise) was stable in the years after 1880, but ranged from 30s. per barrel for table beer to 43s. per barrel for mild ales to 75s. per barrel for strong ales, meaning that the ad valorem excise tax ranged from 9 to 26 percent. (Retail beer prices are taken from “Report on Wholesale and Retail Prices in the United Kingdom in 1902, with Comparative Statistical Tables for a Series of Years” [London, 1903], pp. 335–36Google Scholar, and table beer prices from Mulhall, M. G., Mulhall's Dictionary of Statistics [London, 1884], p. 45.Google Scholar) Which beverage was the beneficiary of better tax treatment is by no means clear from this calculation alone, however. It excludes a £1 annual license fee on domestic beer producers and other related fees on pubs. The ad valorem rates varied because the aim of revenue officials was to levy taxes not on the basis of price but on the amount of alcohol contained in various beverages. A draft parliamentary report in 1879 found that “the principle of taxing alcoholic drinks on the basis of the alcohol they contain has been shown to apply to the beer and spirits produced in this country, and to apply to them even more rigorously than to the wines imported” (House of Commons, “Wine Duties,” p. xix).Google Scholar

19 In designing the new wine tariff in 1860, the Chancellor of the Exchequer expressed great concern that the lower wine tariffs might reduce revenues from the excise taxes on British and foreign spirits. Little mention was made of the wine tariff's effect on the revenues from beer duties, implying that his office viewed wine and spirits as much closer substitutes than wine and beer. See Hansard's Parliamentary Debates, 3rd series, vol. 156 (1860), pp. 1847ff.Google Scholar

20 Quoted in Hirst, Francis W., Gladstone as Financier and Economist (London, 1931), p. 197.Google Scholar

21 On spirits, see House of Commons, “Wine Duties,” p. 63Google Scholar; on wine tariffs, see Golob, Eugene O., The Méline Tariff: French Agriculture and Nationalist Economic Policy (New York, 1944)Google Scholar and Smith, Michael S., Tariff Reform in France, 1860–1900: The Politics of Economic Interest (Ithaca, 1980).Google Scholar On beer tariffs, see House of Commons, Sessional Papers, “System of Taxing Beer or Malt in Foreign Countries,” vol. 102 (London, 1874), p. 211Google Scholar, which puts the French excise duty on beer at 3.75 FF per hectoliter and the French tariff on beer at 5.75 FF per hectoliter.

22 Ashley, Percy, Modern Tariff History (3rd edn., London, 1920), pp. 299–300.Google Scholar

23 Ibid., p. 300. British authorities were unable to compile an ad valorem tariff estimate for cotton goods because of the complexity of the French tariff schedule, which included an array of specific tariffs depending on the particular characteristics of the goods.

24 Over 75 percent of Britain's exports and roughly 60 percent of France's exports consisted of manufactures in the second half of the nineteenth century, while the share of manufactures in British imports rose from 7 percent (1853 to 1857) to 17 percent (1890 to 1899) and in French imports from 5 percent (1857 to 1866) to 17 percent (1897 to 1906). See Schlote, Werner, British Overseas Trade from 1700 to the 1930s (Oxford, 1952), pp. 68, 71Google Scholar, and Lévy-Leboyer, and Bourguignon, , The French Economy, p. 48.Google Scholar Smith has this to say about the French tariff on manufactures in the late nineteenth century: “By providing a favorable environment for this cartelization and organization, … [the tariff] in some cases provided the increment of protection needed to save domestic producers from foreign competition and to allow them to divide the domestic market among themselves (especially in some branches of textiles and metallurgy)” (Smith, , Tariff Reform in France, p. 238Google Scholar). Britain imposed no tariffs on imported manufactured goods after 1860.

25 The quote is from Golob, , The Méline Tariff, p. 179.Google Scholar As Smith wrote, “by establishing or at least confirming agricultural protection, the Méline tariff saved the peasants from the foreign competition that threatened to destroy them” (Smith, , Tariff Reform in France, p. 241).Google Scholar