Between Free Trade and Protectionism: 1846 - 1914
A battle took place in the 19th century between the supporters of free trade and their opponents who supported protectionism. When we talk about free trade, we are talking about an organization of international trade relations in which states do not put any obstacle to the entry of foreign goods. The goods produced abroad are intended to be sold or processed on the national territory. Protectionism aims to protect domestic producers from competition from foreign productions. Such protectionism can be either tariff or non-tariff, such as import quotas or red tape that creates barriers. The level of tariffs is used as an estimate of the level of protectionism. When we look at tariffs, we use an estimate to get an idea of the trends we have.
If we are talking about a transition between these two policies, such a transition applies the dismantling of protectionist measures and in particular the abolition of customs duties.
If we look at the trade policies of Europeans in the 17th and 18th centuries, we are talking about mercantilism which aims to reduce imports to a minimum and increase exports to a maximum. The aim of mercantilism is to concentrate as many precious metals as possible in a country. Towards the end of the 18th century, ideas began to change, notably with Adam Smith's 1776 publication Recherches sur la nature et les causes de la richesse des nations attaquant le mercantilisme. Changing ideas does not necessarily begin in Scotland, but also in France with the physiocrats. There is an ideological tendency that leads to an opening to freer trade relations between nations.
A first effort appeared in 1786 when England signed a trade and navigation treaty with France based on free trade. We soon see that this free trade agreement is displeasing French industrialists because French industry is in very bad shape.
« In the first year after the treaty in 1787, the English brought more than 30 million manufactured objects into France. This enormous amount far exceeded ordinary consumption. They were forced to sell at 30, 40, for 100 loss. These sales at degraded prices have been very detrimental to our factories, which have not been able to withstand such unequal competition. They then rightly demanded against a treaty which had aroused similar speculations; speculations which did not go unpunished, because in 1787 and 1788 there were in the factories of England for more than 100 million bankruptcies. »
— Mr. Boislandry in the National Assembly on November 30, 1790, Moniteur December 1, 1790.
There is a criticism of the behaviour of the English because waves of imports arrive in France. The English are not capable of producing products at these prices and being profitable at the same time. There is not a sustainable situation, but a situation that affects the chances of the French to survive.
Throughout the 19th century, there was a similar reaction from industrialists in Europe, creating a very significant obstacle to free trade in continental Europe. Until the 1850s, English industries dominated the world industrial sector mainly in the framework of buoyant industries.
This treaty of 1786 was a first failure, but it was above all the Franco-British war which lasted twenty years which led to a return to protectionism. It is a very strict protectionism that is practised in Europe. In 1848 a very liberal policy was applied by the United Kingdom which was a break considered a lasting trend towards free trade.
Major Trends in Trade Policy: 1846 - 1913
Towards Free Trade in Europe: 1846 - 1875
In the United Kingdom, the political struggle between supporters of free trade and protectionism began in 1815. The powerful Gentry in parliament passed the first grain law of the 19th century to protect British agriculture from importing foreign grain. The goal of Corn Laws is to keep grain prices high.
Therefore, there are other implications. This pushes up the wages of the workers because wheat continues to represent a very important part of the workers' diet and if we decide to maintain prices at a fairly high level this means that the cost of living is also maintained at a rather high level. There is a negative reaction from industrialists to farmers' policies since they want to increase their foreign market share by playing on wages in order to make their products cheaper on foreign markets.
In 1815, the agricultural owners had much influence and the opposition of the industrialists to Corn Laws failed. We see the structure of the opposition which will lead to another result a little later. The power of industrialists increased during the 18th century and free traders played on the idea that rising food prices had a negative influence on wages. By reducing food imports from countries with agricultural surplus, Corn Laws reduce export opportunities for manufactured goods to other countries. These two arguments are often used to demand a reduction in customs tariffs. With the intensification of the industrialization process in the United Kingdom, we see that the industrial sector is becoming more important.
There are other reasons why there is increasing political support as there is a growing population and increasing urbanisation making Britain's food autonomy increasingly difficult. There is a concern in Britain to feed itself without imports.
The fact is that industrialists have convinced and convincing allies. Ricardo edited Principes de l'économie politique et de l'impôt in 1817 where he presented the comparative advantages which is the foundation of international trade. Already during the years 1820 - 1830, the free traders manage to ban customs restrictions, but the protection is still very solid concerning the grains so they decide to increase the political pressure.
Richard Cobden.
David Ricardo.
Engraving representing Manchester. Edward Goodall (1795-1870).
In 1838, Richard Cobden, an industrialist from Manchester participated in the anti Corn Laws League launching a campaign to convince the most of the free trade position. In 1841, the battle broke out in parliament. The Whig Party is supported by the merchants who are in power creating a favourable situation for free trade, but when the government proposes a reduction in tariffs on wheat and sugar it is a defeat. The Tories won the majority, Robert Peel was appointed Prime Minister of an extremely conservative government. Robert Peel changed his position under Cobden's influence, but his party remained opposed to the abolition of protectionist measures.
The position changed following the Irish famine in 1845. This measure is supported by the Conservatives and the whigs, but paves the way for free trade in the United Kingdom. 1846 is considered by historians to mark the free trade era in the United Kingdom. Following the repeal of the Corns Laws, we see a split of the Conservative Party. The whigs eliminated other traces of protectionism and by 1860 most tariffs had almost disappeared in the United Kingdom.
In Europe, there is a sharp contrast to the British experience. Most European nations such as France and Prussia see their customs legislation amended several times in favour of free trade. Continental industrialists see protectionism as necessary for their survival in a global economy increasingly dominated by British industrialists. In Europe, farmers and industrialists tend to agree on the benefits of protectionism. Nevertheless, the supporters of liberalism on the continent are gaining more and more weight, the Tories themselves are making efforts to engage liberal politics in France and throughout Europe.
Cobden began a European tour with stays abroad until 1859 to campaign for free trade. We are beginning to see that there are some tariff reductions in most European countries, but these reductions are limited, because they very slightly reduce the protectionist character of continental European countries. In smaller countries, liberalism is growing; Denmark, the Netherlands and Portugal are specialists in international trade. The Netherlands has a different attitude to trade policy, which is rather free trade for quite a long time. These countries continue to maintain the liberal position, but this is not the case for all the small countries such as the Scandinavian countries, which remain protectionist, and as for Switzerland, each canton has its own legislation and its own trade policy.
With the overwhelming majority adhering to the principle of free trade, protectionism remained intact until the 1850s.
Free trade in Europe really began only with a Franco-British treaty and the publication of a letter from Napoleon III. This letter makes informal negotiations with the United Kingdom public. It is the Cobden-Chevalier Treaty which abolishes all British prohibions to French imports, France for its part reduces its customs tariffs to an average of 15% of the value of its products.
The negotiations were led by Michel Chevalier who was professor of economics at the Collège de France, pressing William Gladstone who was then Prime Minister to sign the treaty with the help of his friend Richard Cobden. However, not only the agreement of the British but also that of the French is needed.
Napoleon III was committed to free trade ideas and wanted to create a diplomatic rapprochement with the United Kingdom, giving its support to free trade. Thanks to a legislative provision, it is possible for Napoleon III to avoid the parliament which would probably have been fatal to him. In fact, the Cobden-Chevalier treaty was described as a coup by the vast majority of the House of Commons at the time.
We see that the influence of the Cobden-Chevalier Treaty is very important beyond the borders of France and the United Kingdom. A most-favoured-nation clause means that the principle of any advantage granted by one country to another country must be automatically granted to the other countries with which they sign treaties.
Richard Cobden.
Lord Palmerston addressing the House of Commons during debates on the Franco-English Treaty of 1860.
Michel Chevalier.
The Cobden-Chevalier Treaty is followed by other treaties in other countries involved in customs disarmament in Europe. Already in 1861, a Franco-Belgian treaty was signed, Prussia ratified the treaty on behalf of Zollverein with France in 1862, and between 1863 and 1866, most European nations entered a free trade network. During this decade we see a transition between protectionism and a system that seems to be free trade. Even if we can speak of customs disarmament in comparison with the internal situation, it is far from being as complete as that carried out by the United Kingdom.
Outside Europe: autonomous countries, dominions and colonies
This table shows that we are not in a pure free trade system. This table also shows that in contrast to the liberal shift seen in Europe, virtually all overseas countries reinforced protectionism during the 1860s to 1880s and, more particularly, overseas countries with political autonomy. For example, for the United States, protectionist policy has played a key role since the independence of the United States.
For Paul Bairoch, protectionist doctrine was born in the United States with Hamilton. With the Civil War, there is an opposition between the liberal south and the protectionist north because it is industrializing behind Britain. There is the same fear of American industrialists as those of the French. This moment is the crystallization of the opposition between these two regions between the north which is antiesclavagist, but it is also a war between the free trade north and the south. The victory of the north is protectionism. Protectionist measures were reinforced in 1866.
When we look at the level in the United States, it is no exaggeration to say that from 1866 to 1913, the United States was perhaps the most protectionist of the advanced countries. The tariffs are in the order of 40% to 50%, we must also remember that we are talking about an isolated country, protected by the nature of competition from Europe. We must realize that this geographical aspect must be added to this policy in order to see the market, which is strictly controlled.
In the British Dominions and especially in Australia and Canada, this period was the implementation of industrialization policy through customs barriers. If we look at the discourse of industrialists in the United States, they talk about protectionism as a policy to promote industrial development. Carnegie is a fan of this policy in order to let the United States develop its industry and compete with the British. In Australia and Canada, we see much the same thing as we see in the United States, but also in Latin America. In general, in countries that retain or gain political autonomy, protectionism is maintained until the eve of the First World War.
Ferguson, an economic historian, notes that British imperialism was a driving force behind modernisation in the 19th century. According to his position, this was a good thing, however, everyone agrees that the British Empire is not alone in forcing its colonies to adopt a free trade policy.
Return of protectionism in Europe: 1879 - 1913
Despite the important step European countries took on free trade in the 1860s, this new international regime did not last long. A great depression began in 1873 until 1896. This depression supports the relatively low level of customs duties in Europe.
The transport revolution led to the globalisation of trade and especially agricultural trade in the 1870s, with large quantities of wheat and agricultural products exported to Europe.
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It appears that towards the end of the 19th century, competition became really important. The situation is widespread. Increased competition is contributing to a structural decline in agricultural products throughout the world, particularly for European farmers. European farmers facing exports from lowland countries like Australia, the United States and Canada are demanding tariff increases.
This causes a general deflation is deep in European economies for twenty years. Industrialists are also affected by deflation, which is why industrialists are calling for a return to protectionism. These requests led to a great success. The most visible response to the 1873 crisis was a return of continental Europe to protectionism in the last quarter of the 19th century. One speaks of 1879 because it is at this time that Germany behind closed doors are liberal interlude with a new tariff in 1879 changing its mind with regard to trade policy. 1879 is remembered as the end of the free trade period and the beginning of a new protectionist period.
The situation in Germany is interesting, because the crisis plays a decisive role in convincing the Junkers in eastern Germany to support the industrialists. Until then, the Junkers were more in favour of free trade, as they exported their grain via the Baltic Sea. However, with the invasion of wheat in Europe, the Junkers are suffering from falling prices. Bismarck takes the opportunity to operate a new political alliance called the "Rye and Steel Alliance" pushing for a protectionist policy. It should be noted that Bismarck himself is a Junker marking a drastic transition in foreign policy by denouncing the Zollverein treaties. Until now, the ports largely open to imports have made us a dumping ground for the overproduction of foreign products. The idea of dumping is leading the nation into a deflationary spiral.
This is true in all European countries, but there are a few exceptions. The United Kingdom remained a free trader until the outbreak of the First World War. We see that protectionist pressure is increasing in Britain with opposition to Cobden's policy, but proponents of protectionism fail to enforce protectionist policies until the First World War.
Economic thought was oriented towards free trade in the 19th century, the industrial world was similar to that of 1815. Liberal countries remain islands. On the other hand, for autonomous countries, there are protectionist tendencies and colonized countries are subject to treaties that force them to reduce customs barriers.
Explanations of the trade policies of the various countries
Why Britain follows the path of free trade?
Des éléments domestiques
Nous avons suggéré l’importance de l’intérêt économique dans le cadre d’une bataille entre industriels et agriculteurs. La Grande-Bretagne n’est pas aussi efficace dans la production de blé que les pays de plaines faisant que le prix du blé est plus grand qu’à Chicago ou au Tessin. Les industriels britanniques préfèrent des prix du blé plus bas afin de rendre les prix moins chers et justifier des salaires plus bas. Cela est une argumentation économique où l’on voit une opposition entre agriculteurs et industriels en Grande-Bretagne.
On constate une intensification du processus d’industrialisation au fur et à mesure que le XIXème siècle se déroule. En fin de compte, les industriels remportent des succès contre l’agriculture tout simplement grâce à leur importance qui augmente dans l’économie britannique expliquant en partie les forces qui conduisent la Grande-Bretagne au libre-échangisme. Cependant cette thèse est trop simpliste.
Le changement des rapports de force entre industriels et agriculteurs dans l’économie britannique ne se répercute pas de suite dans la politique britannique. Même dès les débuts des années 1840, les industriels ne contrôlent pas la politique du pays. Les whigs essaient de dominer le pays en 1841, mais perdent du pouvoir. En fait, on se fixe sur la situation politique en Grande-Bretagne, c’est un casse-tête, car le parti conservateur arrive au pouvoir en 1841 s’engageant à protéger les agriculteurs. La gentry continue à dominer la chambre de commune en 1846 et c’est leur leader Robert Peel qui abroge les Corn Laws. Il y a une situation où la gentry agit d’une manière irrationnelle du point de vue de ses intérêts économiques.
Toutefois, si on prend plus de temps pour comprendre les vrais intérêts économiques des grands propriétaires agricoles, il est possible de résoudre ce paradoxe. Lorsque l’on regarde les agriculteurs, avec la diffusion de l’industrialisation, certains propriétaires diversifient leur portefeuille pour diversifier leurs investissements notamment dans les chemins de fer, dans les mines et dans l’industrie. Pour cette raison, certains propriétaires deviennent plutôt neutres et même légèrement positifs par rapport au libre-échangisme.
Il est possible de nuancer l’analyse des intérêts économiques, mais il y a quelque chose qu’on peut expliquer sur la base d’une analyse des intérêts économiques. On voit qu’on a besoin d’autres idées et il faut mélanger les arguments pour expliquer le tournant de 1846.
On reste à la recherche d’un argument convaincant et complet. Il est possible de regarder un autre élément souvent souligné par des historiens et des spécialistes qui est la montée d’une idéologie libre-échangiste au Royaume-Uni au XIXème siècle. Il est vrai que l’on voit une augmentation de cette idéologie, mais malgré la montée de cette idéologie, si on regarde les votations entre 1841 et 1845 et l’opposition prise par les Tories et le parti conservateur, il n’y a pas d’évolution de leur vote pour un protectionnisme renforcé. On ne voit pas un changement dans leur attitude. Les idées changent par rapport à un choc externe qui est la famine irlandaise en 1845.
On a besoin d’un mélange d’arguments afin d’arriver à expliquer ce changement. D’abord nous avons mis l’accent sur des aspects structurel. Sans la famine irlandaise, étant donné que l’on voit des changements structurels qui conduisent à un mouvement en faveur du libre-échangisme, y aurait-il eu un autre choc qui aurait conduit la Grande-Bretagne dans la même direction ?
En ce qui concerne l’élément domestique, on voit l’importance des intérêts politiques et comment ils s‘organisent. Le rôle des institutions permet de mettre l‘accent sur les structures étatiques et politiques ainsi que les individus qui en sont responsables. Le rôle des idées est que la politique commerciale relève de systèmes de croyances ou des idées.
Des éléments internationaux
La politique commerciale d’un pays émane aussi de la place de chaque nation sur un échiquier international à la fois politique, militaire, diplomatique, économique et financière.
Interactions entre États
Dans le cas de l’exemple britannique, c’est un pays important qui est le pays le plus puissant du monde en termes économiques de l’époque. Les industriels ont confiance pour faire campagne en faveur du libre-échangisme parce qu’ils savent qu’ils vont dominer les marchés internationaux. De plus, comme l’Angleterre dispose d’une marine puissante qui lui permet de dominer les mers, cela lui permet de sécuriser ses sources d’approvisionnement venant d’ailleurs.
Si on regarde la même hiérarchie d’un pays qui se situe en bas, on peut parler de relations coercitives, des pays sont obligés soit directement en tant que colonie ou indirectement en tant que dépendance de suivre la politique d’un pays.
Diffusion des politiques
De plus, on n‘est pas contraint de représenter les relations entre États de façon hiérarchique, il y a une possibilité d’apprentissage et de fusion des politiques. Il y a aussi des processus d’engouement. Pour certaines politiques, notamment en ce qui concerne le libre-échangisme et les politiques monétaires, Bismarck regarde la Grande-Bretagne est considère que sa politique monétaire explique sa richesse.
Les tendances dans le commerce international
On peut voir des possibilités de décalage entre politique libre-échangiste et les importations et les exportations. Avec les Corn Laws, les agriculteurs redoutent le pire avec l’invasion des blés étrangers et l’effondrement des prix.
Dans ce tableau on voit les effets à terme. Il faut attendre un certain temps afin d’avoir cette invasion parce que même s’il y existe du blé qui coûte moins cher en 1846, les coûts de transport sont encore élevés en 1846. C’est-à-dire que le libre-échangisme en soi n’est pas capable lui seul de promouvoir la croissance du commerce international. La chute des coûts de transport peut compenser un protectionnisme très fort.
Malgré le fait que le XIXème siècle se termine avec un fort protectionnisme, le commerce entre les pays du monde entier connaît une croissance historique. La croissance annuelle est de 3,5% au cours du XIXème siècle contre 1% de 1500 à 1800. Par conséquent, l‘importance des échanges extérieurs des pays par rapport à leur économie progresse nettement, ces économies deviennent de plus en plus ouvertes.
Les exportations représentent 2% du PNB en 1830, en 1860 c’est 9% et en 1913 on parle de 14%. Il y a une augmentation de l’ouverture de l’économie européenne. L’expansion des échanges touche de façon inégale les différents pays. Ces différences reflètent plusieurs éléments, mais surtout la taille différente des économies. On le voit clairement avec les États-Unis, car si on regarde le niveau des exportations, elles arrivent presque au même niveau en valeur absolue que celles de la Grande-Bretagne, mais ne compte que pour 6% du PIB alors qu’au Royaume-Uni on parle de 18%.
L’importance des échanges de l’éventuel tiers-monde progresse aussi. Si on regarde les estimations, la part des exportations entre 1830 et 1913 augmente d’à peu près de 2% à 19%.
Les pays européens dominent le commerce international en produits manufacturés. D’une manière plus générale, la participation du pays dans le commerce international est étroitement liée à la structure de son économie. À la fin de la période, l’excédant des exportations est impressionnant pour la Grande-Bretagne alors que pour l’Amérique latine c’est le contraire. C’est typique parce que c’est une région qui a du mal à s’industrialiser.
Il faut reconnaitre que malgré le fait que l’on voit une intensification de l’industrialisation, lorsqu’on regarde une distribution du commerce international du monde, même si ce commerce devient de plus en plus important, on voit que quand même le commerce international en termes de produit brut devient de plus en plus important. La Grande-Bretagne dépend d’autres pays pour ses produits bruts, la taille du déficit augmente pendant cette période. Pour l’Amérique latine, la situation est différente.
Apparaissent certains cas où il y a les deux choses en même temps avec des capacités en produit manufacturé et des ressources naturelles à exploiter.
Faut-il avoir une politique libre-échangiste pour promouvoir en développement économique ?
La réponse est à plus de 90% « oui » pour les spécialistes de la question. Toutefois, cet argument crée un grand problème pour les partisans du libre-échangisme. Pour vanter les atouts du libre-échangisme, la Grande-Bretagne est le modèle à prendre parce qu’elle a suivi une politique libre-échangiste de 1846 à 1913.
Ce pays a déjà fortement était industrialisé avant de faire le passage au libre-échangisme disposant d‘une avance économique acquise derrière les tarifs douaniers. C’est le fait qu’ils sont conscients de l’avantage de la Grande-Bretagne et de leurs origines que les concurrents britanniques n’ont pas honte à mettre en place des politiques protectionnistes, c’est l’idée du protectionnisme éducateur pour défendre son industrie derrière des barrières douanières qu’on retrouve en Allemagne et aux États-Unis.
L’expérience des pays développés est un défi au libre-échangisme. Le protectionnisme et non pas le libre-échangisme selon les données serait un facteur de croissance. Mais un tel constat ne rend pas compte des autres exemples des pays qui n’ont pas le même essor en dépit d’une politique protectionniste. Ils ont évité le même piège dans d’autres entretenant une relation forte entre protectionnisme et croissance économique.