РефератыИностранный языкWhWhat Were The Effects Of Tariffs And

What Were The Effects Of Tariffs And

Essay, Research Paper


Historians of the 19th century


have traditionally linked economic growth with a move to free trade.? The mid-Victorian boom in Britain for


example has been attributed to the significant moves to free trade in the


period 1840 ? 1860.? Typically this


British characteristic has been compared to the free trading stance of


France.? The supposedly higher levels of


protection in France have been linked, often in a post hoc ergo propter


fashion, to its? economic retardation.?


The debate on the relative economic merits of free trade is by no means


original.? The political environment in


Britain during the 19th century was dominated by free trade


arguments.? The free traders of the


Anti-Corn Law League saw free trade in a much broader context.? It was Cobden who rather dramatically said


that: ?In the Free Trade principle which shall act on the moral? world as the principle of gravitation in the


universe? -drawing men together,


thrusting aside the antagonism of race and creed, and language, and uniting us


in bonds of eternal peace?.? Clearly


it is not in the remit of this essay to analyse and discuss these potential effects of


free trade, but Cobden?s quotes highlights the importance and passion that contemporaries,


and historians, have placed on the question of free trade.? Initially I shall attempt to compare the


level of free trade in Britain and France in the 19th century.? I will then begin to assess the effects of


tariffs and free trade during this period.Historians have often seen Britain as


leading the world in implementation of free trading policies.? It is argued that Britain?s move to free


trade accentuated its? already pronounced economic lead over her continental


competitors.? France and the other hand


is viewed as highly protectionist and adopting free trade polices only in the


later stages of the 19th century. Nye, however, has empirically


criticized the assumption that Britain had more open economy than France.? In his study Nye calculates tariff revenue


as a percentage of total imports.? His


figures show us that France?s average rate of tariff was 50% lower than


Britain?s during the 1820s, and that Britain?s tariffs were only comparable to


those of France after the great free trade reforms of the 1840s.? Nye admits that British tariffs were based


primarily on consumption goods such as tea, wine and tobacco, but he argues


against discounting these products as indicators of protection.? He suggests that, whilst not protecting


domestic industries, these tariffs still distorted the efficient allocation of


resources.? In short Nye?s empirical


study finds a paradoxical gap between the historical perception and commercial


reality.? Nye bemoans the seemingly


obligatory over-emphasis on leading sectors, such as textiles where Britain was


clearly less protectionist, and points out that economic development should not


be confused with industrialization.? Irwin reasserts the


view that the French economy was more protectionist than Britain.? Irwin states that Nye?s rate of tariff


revenue indicator is a poor indicator of levels of protectionism.? Crucially Irwin is quick to differentiate


between protectionist tariffs and consumption tariffs.? Yes, tariffs on the consumption of a few


luxury items were high, but, unlike Nye, Irwin finds little evidence for the


availability of substitutes.?


Contemporary opinion is used to reinforce Irwin?s argument.? It was Cobden himself who stated that: ?We


have many duties ? such as that, for example on tea ? which are too heavy, but


they are not maintained in the interest of any British producer?.? The structure of the British tariff is


examined in detail and we see that Gladstone?s budget of 1860 removed all


protectionist tariffs, whilst half of the remaining items were ?solely for the


purpose of countervailing duties of excise on the like articles produced in the


UK?.? In this way we see the British


government normalising domestic excise duties on imported goods.? This can hardly be seen as a protectionist


policy.? Indeed by 1897 95% of tariff


revenue is generated by tobacco, tea, spirits and wine.? If one takes Irwin?s position it is safe to


say that there was virtually no protection in Britain after 1860.? This contrasts markedly with that of


France.? Even after the Cobden-Chevalier


treaty of 1860 there was a 10-15% tariff on most goods.? Tariffs in the latter half of the 19th


century were successively ratcheted up and culminated in the highly


protectionist Meline tariff of 1892.? To


Irwin the real test of the relative protectionism of a tariff system lies in


the principles that underlie that system.?


In Britain we see an extension of the excise system and in France we see


a system designed to keep goods out.? It


is difficult to accommodate both Irwin?s and Nye?s arguments.? However Irwin?s more detailed examination of


tariff content is compelling and it would seem harsh to penalise Britain for


taxing mainly consumption items.? Nye?s


evidence does suggest that France, especially in the early half of the 19th


century, was less protectionist, in relative terms, than once thought.? By analysing both views we can safely say


that Britain still held the lead in free trade during the 19th


century.? However the free trading gap


was not as significant as once thought.More recent historians


have begun to suggest that the economic effects of free trade have been


exaggerated.? McCloskey was one of the


first historians to propose that free trade may have retarded Britain?s


economic growth.?? He sees the reduction


of tariffs in the 1840s as the equivalent of a 21% narrowing of the


differential between domestic and world prices.? McCloskey appeals to the logic of free trade, and like the more


contemporary Robert Torrens, emphasises negative terms of trade effects.? If British demand for imports was a


nonnegligble fraction of the world demand then the elimination of duties, by


means of a rise in import demand, will have caused a nonnegligble rise in


import prices.? If the price of imports


has increased then Britain?s terms of trade have worsened.? McCloskey resorts to theory and proposes an


optimal tariff for Britain given its monopsonistic position in the world


market.? McCloskey, using anti-Ricardian


assumptions, believes Britain to have been an influential player in the world


market.? Thus he estimates low


elasticties of export demand and import supply necessitating the need for a


high tariff.? The 1881 average tariff of


just under 6% is viewed to be optimal only if consistent with elasticities of 35!? McCloskey calculates that a 21% fall in the


tariff, combined with a 20% share of foreign trade in national income, could


account for a 4% loss in national income.?


McCloskey?s application of pure trade theory to mid-Victorian Britain


highlights a crucial point.? A move to


free trade is not, even theoretically, a move to higher income.? Gains from increased efficiency and resource


allocation can be more than offset by deteriorating terms of trade.? In this was we see McCloskey agreeing with


Torrens who cited the terms of trade deterioration as reason for the cautious


adoption of free trading policies.The terms of trade


deterioration is likely to be lessened if moves to free trade are


reciprocal.? Irwin argues that a


unilateral tariff reduction in Britain may well have had detrimental effects.? Irwin agrees with Basevi and Walker that the


effect of the change in relative prices from a tariff removal (terms of trade)


depends on the underlying elasticities.?


Like McCloskey Irwin finds a range of plausible elasticties that show a


unilateral trade reduction as making Britain worse off in GDP terms.? However Irwin?s data diverges from that of


McCloskey and he estimates a fall smaller reduction in total income from a 21%


cut in tariffs.? The emphasis on the


terms of trade deterioration is balanced by the suggestion that bi-lateral or


multi-lateral trace reductions can improve terms of trade.? Many countries followed Britain?s lead and


cut tariffs in the 19th century and these tariff cuts will have


improved Britain?s terms of trade.?


Irwin agrees with Torrens: ?reciprocity should be the rule?.? Again we see the importance of underlying


elasticties as affecting the effects of a move to free trade, a point which is


reinforced by McCloskey, but Irwin develops the argument by placing extra


emphasis on the effects of other countries? tariff behaviour. The emphasis on the


variability of the effects of free trade is furthered using the case study of


the Corn Laws.? The welfare effects of


repeal are thought to be significant when Ricardian small country assumptions


are used.? The living cost for labourers


is reduced by a massive 25% and output rises by 23.6%.? However if Ricardian assumption are


discarded and pro-Torrens (Britain influencing world market prices) views are


taken into consideration we see much smaller welfare effects.? The export boom is tempered by rising import


costs resulting from an inelastic import supply.? In this case the detrimental effects of the terms of trade


deterioration offset efficiency gains, although labourers still benefit from repeal.? Macro effects are lessened, but we must be


careful not overlook intra-industry changes and the effect on the average


Briton.? Williamson reiterates the


importance of elasticties in determining the true effects of repeal.? The lower the elasticties in foreign markets


the more the Corn Laws served to improve the terms of trade.? Williamson suggests, like Irwin, that


plausible estimates of elasticties can be used to state that the Corn Laws were


no burden on manufacturing at all.The effects of tariffs


and free trade in the 19th century are ambiguous.? Some argue free trade aided the


mid-Victorian boom, whilst others argue it retarded growth.? Key factors in this debate seem to be


elasticties of demand and supply, tariff structure and the level of multi-lateral


tariff participation.? Were tariffs


protective or purely fiscal in nature??


Were lurches to free trade mirrored in other countries?? Were tariffs at their optimal level?? Whilst in Britain elasticties are thought to


have been low, there is insufficient data, especially from abroad, to come to a


definitive conclusion on the relative effects of free trade.? Even if one could come to a satisfactory


estimate of elasticities it must be remembered that these factors are far from


static.? Most of the factors mentioned


above are dynamic and thus change over time.?


The arguments for the positive and negative effects of free trade have


been argued explicitly in recent historical studies.? The polarity of the arguments reflects economic theory.? Free trade can have positive and negative


effects.? It is therefore impossible to


come to a simple conclusion to this question.?


The effects of tariffs and free trade in the 19th century


were variable.? The effect of free trade


and tariffs depends on a variety of economic and political factors.? These factors are too varied and too


changeable to allow for a more authoritative answer to this question.

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