War, Wine, and Taxes: The Political Economy of Anglo-French Trade, 1689-1900
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.