As part of a series of essays on the deeper questions behind politics, grassroots assistant Kieran Neild-Ali writes about the history of free trade.
This week, the third round of the UK-EU trade talks began. Many Brexiteers claim the UK’s departure from the EU presents an opportunity for a renewed free trade policy. Free from the Customs Union’s common external tariff, they argue consumers can benefit from affordable imports and increased consumer choice. Producers can innovate and improve their products by opening themselves up to global competitors in dynamic markets. To this end, on Wednesday Parliament will vote on the Agriculture Bill 2019-2021, which aims to establish the playing field British farmers will face without EU subsidies and high tariffs on non-EU agriculture imports.
Free trade, without subsidies and tariffs, has been a tenant of Britain’s political philosophy for centuries. As before in our history, voices for protectionist measures have surfaced. Despite suggestions that freer agricultural trade will allow UK farmers to increase exports, particularly to the US, some wish to see market standards and tariffs exclude affordable imports of agriculture products from abroad.
The essence of protectionism has remained constant throughout history, just under a different guise. Advocates of protectionism today are calling for restrictions based on an ideology of environmentalism and fear mongering over standards. The protectionist mantra tugs at the heartstrings, but history tells us it always favours the interest of a few at the expense of ordinary people. The whole country would be better served by unleashing the potential of Britain’s agricultural and agrifood sectors with free trade.
Facets of this debate are reminiscent of a political battle fought numerous times in the UK. Protectionism has been touted as a panacea for vulnerable British industry for centuries, but it has always faltered to our historic instinct for free trade.
The repeal of the corn laws 1846
The corn laws were a piecemeal collection of government measures to control the export and import of food and different forms of grain (known as corn). Governments only permitted the import of corn if it was over a certain price, protecting British producers from cheaper imports. In 1813, the House of Commons recommended that foreign-grown corn be excluded from the domestic market until the price of domestically grown corn exceeded a government-set price. The stated aim was to prevent foreign grain imports from undercutting British suppliers, in order to prevent wages from falling. In reality, it favoured the landed elite who benefited from high prices in an uncompetitive market. The end of the Napoleonic Wars in 1815 led to a collapse in grain prices, but thanks to the protectionist corn laws, consumers were compelled to keep paying high prices for bread, leading to riots in London.
From 1815 to 1846, opposition to the corn laws grew among the emerging industrial heartlands of the north of England, economists in the city and the starving population that suffered from high food prices. The coalition for free trade was born.
Protectionism and high domestic prices caused by the corn laws hampered the export capability of manufacturers in Lancashire. Foreign markets reduced access to British industry with reciprocal protectionist measures and manufacturers were beholden to high domestic prices, making industry less competitive. The high cost of living also reduced disposable income and reduced economic activity. This prompted the foundation of the Anti-Corn Law League, a movement arguing for free trade on the basis exports would soar, profits rise, wages increase and unemployment fall.
The core ideas of the Anti-Corn Law League were based on Adam Smith and David Ricado’s economic theories. Free trade, it was argued, was mutually beneficial for all nations and could improve the lives of all of society. A nation which traded in its comparative advantage would reap the greatest benefit from trade and consumers could enjoy the choice and price of imports of foreign goods, which could not be produced as efficiently at home. In many cases, the country would benefit more from a freer supply of imports than from trying to bolster an inefficient domestic one.These pro-free trade arguments became known as the Manchester School.
For decades, the debate over the corn laws continued. Pamphlets were circulated and petitions signed across the country to repeal the laws. Eventually, to both fanfare and intense opposition, Robert Peel’s Conservative administration repealed the corn laws in 1846.
On a basic level, there are many lessons we should keep in mind today. The repeal of the measures, and the subsequent economic success, demonstrated that the interests of a relatively small section of land owners are not the same as those of the nation as a whole. Lower prices and more choice boosted the lives of millions in the 1840s. Furthermore, fears of domestic producers being ruined by foreign competition were misplaced. Since 1846, British agriculture has gone from strength to strength. Protectionism ended up an impediment to our great agrifood exporters, who would suffer today just as then from reciprocal protectionist measures if the UK was foolish enough to apply tariffs or quotas to food imports.
Tariff reform 1906
The wealth and prosperity of Victorian Britain was built on the back of free trade established in 1846. However, calls for its abandonment were never far away. The hugely influential minister Joseph Chamberlain launched an enormous campaign in favour of ‘imperial preference’ in the opening years of the 20th century.
The growing economies of the USA and Germany had begun to implement tariffs in an attempt to shield their industry from competitive British goods. Chamberlain called for a wall of tariffs in response. British industry would supply the empire and the colonies would in return supply the mother country within an imperial trade zone. Tariffs would be levied on foreign goods outside the empire trading zone and the revenue from tariffs would be used to fund social welfare programmes in Britain.
But the idea of Britain turning its back on the free trade principles which had delivered such prosperity and power to the public was unfathomable for many. Conservative MP Winston Churchill crossed the floor to the Liberals in 1904 in dismay at the Conservatives’ support for protectionism. Many were concerned that industry would become flabby and less efficient than its international rivals. Tariffs on goods outside the empire would mean higher prices, especially for certain foods. Many began to dub Chamberlain's wall of tariffs a ‘stomach tax’ on Britain's poor.
After three years of intense debate, the issue was decisively dealt with when the free trade Liberals won a landslide, beating their protectionist Conservative opponents at the 1906 election. The arguments of the Manchester school won out. The electorate, far larger than it had been before, voted for cheaper goods over a form of ideological preference. In this case, it was the ideology of the empire as opposed to land-owning aristocracy, but once again the public backed free trade over fashionable political doctrine. Since 1906, and despite some temporary challenges, free trade has enjoyed consistent support at the ballot box.
In the 1920s, the ghost of Chamberlain's tariff reform and imperial preference returned. Prime minister Stanley Baldwin called an election on tariff reform in 1923, but lost. The Conservatives regained power in 1924, standing without a protectionist policy. The people seemed adamant that free trade was in their interest.
However, this did not stop the protectionist movement. In 1932 Imperial preference was eventually implemented after the British Empire Economic Conference in Ottawa. But this period of protectionism did not last.
After the Second World War, the General Agreement on Tariffs and Trade 1947 prohibited a return to tariffs and quotas. It was recognised that tariffs prohibited economic growth and cooperation between nations. Peace and prosperity was achieved by mutually beneficial free trade and the post war world would not return to the dogmas of empire first.
The Manchester School of the Anti Corn League survived the turmoil of centuries of debate and eventually informed, not only British, but world trade policy. Free trade, practiced and preached through the institutions of the world order today - including the World Trade Organisation - has become perhaps Britain’s most endearing legacy on the world stage.
Lessons for contemporary Britain
Despite shifts elsewhere, notably under the current Trump administration in the US, Britain remains one of the most committed advocates of free trade in the world today.
Taxpayers remember that free trade works and has improved the lives of countless millions in Britain and across the world. When people call for protectionism, that will always mean artificially high prices. Whatever the reason of the day, this has always been to the detriment of those who could benefit from a lower cost of living. Society is always better off, and the ordinary taxpayer more powerful, when the consumer has greater choice. As we have seen during this current coronavirus crisis, a wide array of affordable products in supermarkets supplied by free trade is miles better than a limited supply of expensive home grown products that reduces choice for the poorest.
Politicians considering supporting protectionism ought to consider both the benefits of free trade to Britain since the 1840s, and how the British electorate have normally treated protectionist political causes. The principles on which Chamberlain’s ‘stomach taxes’ were opposed remain largely unchanged. Either Britain turns in on itself, or it embraces competition from abroad, steps up to the plate and allows our agriculture exporters to take foreign markets by storm. For supporters of free trade, history is on our side.
Joseph Chamberlain, speech at Birmingham, 15 May 1903 (In Boyd, C.W. (ed.), Mr. Chamberlain’s Speeches. Vol. 11, London, Constable, 1903, pp. 131—9.
Gilbert, M. Churchill: A Life. London. 1991.
Sutherland, K., ed. Wealth of Nations. Oxford. 2008.
Williamson, J. G . "The impact of the Corn Laws just prior to repeal". Explorations in Economic History. Vol. 27, no.2, 1990, pp 123–156.
Zebel, S.H. “Joseph Chamberlain and the Genesis of Tariff Reform”. Journal of British Studies. Vol. 7, No. 1, 1967, pp. 131-157.