|An aspect of |
Edward III (1312–1377) was the first king who deliberately tried to expand the wool cloth manufacture. He brought Flemish weavers, centralized the raw wool trade and banned the importation of wool fabrics (Davies, 1999; Davis, 1966).
The Tudor monarchs, particularly Henry VII (1485-1509), transformed England from a raw wool exporter into the world's largest wool manufacturing nation, through tariff (A Plan of the English Commerce, Daniel Defoe): beginning in 1489, Henry VII implemented schemes to promote woolen manufacturing, which included: increasing duties on the export of raw wool and even temporarily banning the export of raw wool (Ramsay, 1982).
In 1721, Robert Walpole, the first British Prime Minister, introduced the most significant political and economic reform in British history. Walpole stated, through the king's address to the Parliament: "it is evident that nothing so much contributes to promote the public well-being as the exportation of manufactured goods and the importation of foreig raw material" (The National System of Political Economy, Friedrich List, 1885). The 1721 Act and supplementary amendments included severals measures: import tariffs on raw materials used for manufactures were lowered; export tariff on most manufactures were dropped; tariffs on imported foreign manufactured goods were raised; export subsidies were increased and extended to new export items ; regulation was introduced to control the quality of manufactured products (Brisco, 1907; McCusker, 1996; Davis, 1966).
At the beginning of the 19th century, Britain's average tariff on manufactured goods was roughly 51 percent, the highest of any major nation in Europe. And even after Britain embraced free trade in most goods, it continued to tightly regulate trade in strategic capital goods, such as the machinery for the mass production of textiles. Thus seen, according to Bairoch, Britain's technological lead had been achieved "behind high and long-lasting tariff barriers" (Economics and World History: Myths and Paradoxes, Bairoch).
Tariffs were reduced in 1833 and the Corn Law was repealed in 1846, which amounted to free trade in food. (The Corn Laws were passed in 1815 to restrict wheat imports and guarantee British farmers' incomes ). It devastated Britain's old rural economy and the aristocracy that had lived off its agricultural rents. Tariffs on many manufactured goods have also been abolished (Economics and World History: Myths and Paradoxes, Bairoch). British elites expected that thanks to free trade their lead in shipping, technology, scale economies and financial infrastructure to be self-reinforcing and thus last indefinitely. Britain practiced free trade unilaterally in the vain hope of imitation, but the United States emerged from the Civil War even more explicitly protectionist than before, Germany under Bismarck turned in this direction in 1879, and the rest of Europe followed. During the 1880s and 1890s, tariffs went up in Sweden, Italy, France, Austria-Hungary and Spain.
Britain's economy still grew, but inexorably lagged: from 1870 to 1913, industrial production rose an average of 4.7 percent per year in the U.S., 4.1 percent in Germany, but only 2.1 percent in Britain. It was surpassed economically by the U.S. only around 1880. Britain's lead in textiles and steelheld eroded as other nations caught up. Britain then fell behind as new industries, using more advanced technology, emerged after 1870 in states that still practiced protectionism.
Fundamentally, the country believed that free trade was optimal as a permanent policy and was satisfied with laissez faire absence of industrial policy . But contrary to British belief, free trade did not improve the economic situation and increased competition from foreign production eventually devastated Britain's old rural economy. Britain finally abandoned free trade in 1932 until 1950.
The largest user of tariff was the United States. According to
Britain did not want to industrialize the American colonies and the American Revolution was, to some extent, a rebellion against being forced to play a lesser role in the emerging Atlantic economy. This explains why, after independence, the
Most American intellectuals were against the free trade theory advocated by classical economists like Adam Smith, Ricardo and Jean Baptiste Say. Alexander Hamilton, the first Secretary of the Treasury of the United States (1789–1795) and economist Daniel Raymond were the first theorists of the emerging industry argument, not the German economist Friedrich List (Corden, 1974, c. 8; Reinert, 1996). Alexander Hamilton feared that Britain's policy towards the colonies would condemn the United States to be only producers of agricultural products and raw materials. Washington and Hamilton believed that political independence was predicated upon economic independence. Increasing the domestic supply of manufactured goods, particularly war materials, was seen as an issue of national security. Hamilton called in the
Between 1816 and the end of the Second World War, the U.S. had one of the highest average tariff rates on manufacturing imports in the world (" The Age of Enterprise " : A Social History of Industrial America, Thomas C. Cochran, William Miller,1942). According to
Between 1792 and the war with Britain in 1812, the average tariff level was 12.5%. In 1812, all tariffs were increased to 25% due to the war. There was a brief episode of free trade from 1846 but the panic of 1857 eventually led to higher tariff demands than President James Buchanan, signed in 1861 (Morrill Tariff).
The American Civil War (1861-1865) was fought over the issue of tariffs as well as slavery. At the time of independence, the agrarian interests of the South were opposed to any protection, while the manufacturing interests of the North wanted to maintain it.
Alfred Eckes Jr notes that from 1871 to 1913, the average U.S. tariff on dutiable imports never fell below 38 percent and gross national product (GNP) grew 4.3 percent annually, twice the pace in free trade Britain and well above the U.S. average in the 20th century (Opening America's Market: U.S. Foreign Trade Policy Since 1776, Alfred Eckes Jr). According to Ian Fletcher, the protectionist periode "was the golden age of American industry, when America’s economic performance surpassed the rest of the world by the greatest margin".
Most economists hold the opinion that the tariff act did not greatly worsen the great depression:
William Bernstein wrote: "Between 1929 and 1932, real GDP fell 17 percent worldwide, and by 26 percent in the United States, but most economic historians now believe that only a miniscule part of that huge loss of both world GDP and the United States’ GDP can be ascribed to the tariff wars. .. At the time of Smoot-Hawley’s passage, trade volume accounted for only about 9 percent of world economic output. Had all international trade been eliminated, and had no domestic use for the previously exported goods been found, world GDP would have fallen by the same amount — 9 percent. Between 1930 and 1933, worldwide trade volume fell off by one-third to one-half. Depending on how the falloff is measured, this computes to 3 to 5 percent of world GDP, and these losses were partially made up by more expensive domestic goods. Thus, the damage done could not possibly have exceeded 1 or 2 percent of world GDP — nowhere near the 17 percent falloff seen during the Great Depression... The inescapable conclusion: contrary to public perception, Smoot-Hawley did not cause, or even significantly deepen, the Great Depression"(A Splendid Exchange: How Trade Shaped the World)