Bannerman on Nye, _War, Wine, and Taxes: The Political Economy of Anglo-French Trade, 1689-1900_

[eh.net-review at eh.net]

Published by EH.NET (October 2007)

John V.C. Nye, _War, Wine, and Taxes: The Political Economy of 
Anglo-French Trade, 1689-1900_. Princeton, NJ: Princeton University 
Press, 2007. xvi + 174 pp. $30 (cloth), ISBN: 978-0-691-12917-4.

Reviewed for EH.NET by Gordon Bannerman, London School of Economics.


As befits the occupant of the prestigious Frederic Bastiat Chair in 
Political Economy at the Mercatus Center, and as Professor of 
Economics at George Mason University, John Nye's work is always 
challenging, not to say iconoclastic. His latest work is clearly 
aimed at specialists, and the intricate calculations and models in 
the appendix may baffle non-economists. However, the fundamental 
argument of the book is a simple refutation of the widely-held 
assumption that Britain was the world's leading free trade nation 
after repeal of the Corn Laws in 1846. Nye argues that France's 
tariff regime was more liberal than that of Britain, at least until 
the final quarter of the nineteenth century, and boldly claims: "This 
is not quite a story about the past; it is the beginning of a 
fundamental reassessment of our understanding of commercial policy in 
economic history" (p. xvi). Is this claim sustainable on the evidence 
presented in the book? This reviewer thinks it is not.

One can agree that previous studies of commercial policy have tended 
to concentrate on leading sectors of the manufacturing economy, and 
the symbolically important Corn Laws. This has perhaps led to 
ignorance of the wider application, incidence, and extent of tariffs 
(p. 90). However, historians will ask how such an argument can be 
sustained when Britain moved to unilateral free trade in 1846? The 
answer given is that Britain did not move to unilateral free trade in 
1846, but retained a significant number of protective import duties. 
The traditional interpretation holds that by 1860 protective duties 
on import-competing products were abolished, and only revenue duties 
remained. This is contested by Nye, who argues the wine duties in 
particular served a protective function. By the 1703 Methuen treaty, 
differential wine duties gave preference to Portuguese and Spanish 
over French wines. The retention of higher tariffs on French products 
into the "free trade era" made a mockery of Ricardian comparative 
advantage and the doctrine of "buying in the cheapest market and 
selling in the dearest" (p. 59). The wine duties also afforded 
effective protection to the British brewing industry, and in the 
eighteenth century served a financial and political function by 
operating as a quid pro quo ensuring the compliance of brewers in the 
collection of "otherwise impolitic domestic excises" (p. 71). Thus, 
wine duties were an important component of the successful tax-seeking 
state. One can agree to the centrality of alcoholic beverages in the 
eighteenth century taxation structure, for there were limits to 
raising the Land Tax, and the advanced industrial organization of the 
brewing industry made it relatively easy to monitor and implement the 
tax (p. 76). Discriminatory tariffs discouraged mass wine 
consumption, just at the time when mass consumer tastes and markets 
were being developed (p. 40). Thus presented the wine duties 
constitute the primary, though perhaps only example, of the 
persistence of mercantilism in the British tariff regime in the 
second half of the nineteenth century.

The methodology chosen is an adapted version of the Anderson/Neary 
model, which measures the welfare-enhancing effects on Great Britain 
and France of eliminating all trade barriers. The extent of 
protection is measured by the differential, with the larger drop 
signifying a higher degree of protectionism. Yet, how does one define 
a protective tariff? Nye argues that import substitution is too 
narrow a measure, and that nominal average tariff levels as a 
fraction of all imports measure protection more accurately than 
effective tariff rates (p. 3). The contentious nature of this claim 
arises from Nye's argument that tariffs hitherto considered revenue 
tariffs and thus non-protective were in fact protective. This may be 
true of wine duties but does it apply to sugar, coffee, tea, and 
tobacco? Which domestic industries were protected by these tariffs? 
Nye, perhaps wisely, gives these industries rather short shrift (pp. 
17-18). A related element in this disposition to discount the nature 
of tariff regimes relates to French prohibitions. While absolute 
prohibitions on certain imports were in place, can France really be 
characterized as possessing a more liberal tariff regime than 
Britain? By attempting to explain so much, Nye over-extends his 
argument.

In many ways, despite the adoption of new models measuring the extent 
of protection, the debate has not really moved on from the dispute 
between Nye and Douglas Irwin in the early 1990s.[1] The divergence 
then -- and one feels it is likely to be the same now -- is the 
fundamental one of defining protective tariffs. As Nye concedes, 
there is not, nor is there ever likely to be, a certain method of 
measuring the extent of liberalization within tariff regimes (p. 5). 
To choose one of many potential examples: how does one define, far 
less measure, export bounties? Surely as an artificial intervention 
in the productive process, and abrogation of the principles of free 
exchange? Perhaps even as a form of protection? Yet, bounties given 
by the French government to French sugar refiners more than offset 
Britain's sugar duties, and had inflicted serious damage on the 
British sugar refining industry by the 1870s. In Nye's account it is 
merely recorded that British refiners were "protected until 1874" (p. 
18).

Despite these difficulties, there is much in the book that is 
praiseworthy and calls for attention. It is a very scholarly and 
readable piece of work, and fairly well-organized, although one feels 
that a portion of the historiographical material in chapters 7 and 8 
may have usefully been introduced earlier. Historians will be 
surprised to learn that "James II achieved stability through a royal 
apparatus supported by a strong standing army, the whole of which was 
dependent in financial and economic matters on the will of 
Parliament" (p. 45). However, such errors are few. Nye convincingly 
argues against simple acceptance of textual historical evidence in 
technical economic subjects, for "contemporary observers were often 
_less_ reliable witnesses to the economy of their day than modern-day 
scholars making effective use of retroactive tools of discovery" (p. 
118). In challenging contemporary evidence and modern liberal 
assumptions towards British commercial policy, Nye has produced an 
interesting and valuable cliometric study. Nevertheless, this does 
not mean that in evaluating commercial policy, motives and intentions 
can be discarded, or that the nature and historical context of 
trading regimes can be subordinated to sophisticated models of 
statistical analysis.

Note:
1. John Vincent Nye, "The Myth of Free-trade Britain and Fortress 
France: Tariffs and Trade in the Nineteenth Century," _Journal of 
Economic History_ 51:1 (1991), pp. 23-46; Douglas A. Irwin, "Free 
Trade and Protection in Nineteenth-century Britain and France 
Revisited: A Comment on Nye," _Journal of Economic History_ 53:1 
(1993), pp. 146-52


Gordon Bannerman is a research assistant at the London School of 
Economics, and has previously taught modern British history at LSE 
and King's College London. His research interests predominantly 
concern the eighteenth-century fiscal-military state and British 
commercial policy in the eighteenth and nineteenth century. His 
forthcoming publications include _Merchants and the Military in 
Eighteenth-century Britain: British Army Contracts and Domestic 
Supply, 1739-1763_ (London: Pickering and Chatto, 2008) and "The 
'Nabob of the North": Sir Lawrence Dundas as Government Contractor," 
_Historical Research_ (forthcoming). He is currently co-editing, with 
Cheryl Schonhardt-Bailey and Anthony Howe, two volumes of _Battles 
over Free Trade: Anglo-American Experiences with International Trade, 
1776-2006_, a four volume series based on rare documentation to be 
published by Pickering and Chatto in May 2008.

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