Bargaining on Europe: Britain and the First Common Market, 1860-1892

Published by EH.NET (February 2002)

?

Peter T. Marsh, Bargaining on Europe: Britain and the First Common Market, 1860-1892. New Haven: Yale University Press, 1999. ix + 246 pp. $30 (cloth), ISBN: 0-300-08103-0.

Reviewed for EH.NET by Douglas A. Irwin, Department of Economics, Dartmouth College.

Those interested in the history of trade policy know the late nineteenth century as the period in which Britain pursued a policy of unilateral free trade after its repeal of the Corn Laws in 1846. Having tried unsuccessfully to negotiate reciprocity treaties in the 1820s, Britain foreswore tariff bargaining as counterproductive. With sentiments running in favor of laissez faire, Britain chose low tariffs for itself and left other countries to decide upon the best policies for themselves. In addition, Britain had virtually no tariffs to bargain away by the late nineteenth century.

Yet there is an important qualification to this story. Britain succumbed to temptation and violated its “no bargaining” policy by signing the Anglo-French Treaty of Commerce in 1860. Although Britain never again signed a major tariff-reduction agreement with another major power during this period, the Anglo-French treaty ushered in a new era in European trade relations. As a result of the treaty, a network of bilateral trade agreements based on most favored nation (MFN) trading status spread across Europe as other countries sought to obtain equal access to the French market in the aftermath of the accord. (The British tariff reductions were made on an MFN basis, while the French tariff reductions were preferential.) This network of treaties was never formalized into a single regime, but British policy makers did explore whether a pan-European trade agreement would be viable. If pursued, this venture could have been a precursor of European Economic Community (formed in 1958) or even the General Agreement on Tariffs and Trade (formed in 1947).

Britain’s trade policy vis-a-vis Europe from 1860 to 1893 is the main subject of Peter Marsh’s fine book. He explores this neglected chapter in trade policy history through extensive archival research that sheds much new light on the views and conflicts among British policy makers, as well as the European reaction to the British efforts.

Marsh opens by investigating the (mainly British) politics behind the Anglo-French accord. As he notes, “the most remarkable thing about the Anglo-French treaty of 1860 was the chain reaction it produced.” Within six years, France had signed commercial treaties with eleven other countries. But Britain faced a serious dilemma: having reduced its own duties, it had no leverage with which to induce other countries to reduce their tariffs. Britain hoped that equity considerations would persuade other countries to treat British products liberally since its own market was open. This was a slim reed on which to base policy, since few countries were moved by such “equity” considerations. As Marsh puts it, “The example that Britain set in scuttling most of its tariff found few continental admirers and all but destroyed Britain’s bargaining power.” Partly as a result of the 1860 accord, other countries thought about tariff reductions as “concessions” and not necessarily a domestic benefit. Britain could never adequately resolve the dilemma on how to formulate a trade policy when its tariffs were already very low.

The internal politics of trade policy in Britain further complicated matters. The Foreign Office was loath to act on behalf of domestic commercial interests. The Board of Trade wanted Britain to play a more activist role, but the Foreign Office lorded over foreign negotiations and the Exchequer fretted about the revenue impact of cutting duties on wine and spirits any further. The result was inaction.

By 1866, the treaty network was largely in place. The network survived the strains of war (Austro-Prussian in 1866, Franco-Prussian in 1870) and the “great depression” (read recession) of the early 1870s. Although it suffered a setback with the Bismarck tariff of 1879, the network never received a completely fatal blow. Negotiations to renew the Anglo-French treaty collapsed in 1882, but this did not significantly change the course of trade or European trade policy. (Gladstone was even relieved, dismissing commercial discussions as “huckstering.”)

Britain remained paralyzed with its quandary through the 1880s. Trade became more of a political issue, with the Conservative leader Salisbury by criticizing free trade on two grounds: that it prevented Britain from retaliating against other high tariff countries, and that Britain was unable to give preferences to its colonies. Some in the Board of Trade flirted with an attempt to start European negotiations on trade, but this never received support at the top of Britain’s leadership. And without leadership from a major power, any European commercial agreement was unlikely to come to fruition.

Marsh ends his book in 1892 with Britain still standing on the sidelines, France still ambivalent about free trade, and only Germany attempting to revitalize the treaty network in eastern and southern Europe. He concludes by noting that Britain’s Liberal high-mindedness prevented it from playing a more constructive role in European trade negotiations during this period, and that this ambivalence is still present today in British attitudes toward the European Union.

In all, Marsh sheds new light on an important chapter in the history of trade policy. With Marsh having set out the history in great detail, economic historians will be in a better position when trying to determine the economic consequences of the treaty system.

Douglas A. Irwin is professor of economics at Dartmouth College and author of Free Trade under Fire (2002) and Against the Tide: An Intellectual History of Free Trade (1996), both published by Princeton University Press.