Corn Laws

BIBLIOGRAPHY

The British repeal of the Corn Laws in 1846 is usually seen as the beginning of a unilateral move to free trade that served as the pivotal event in the spread of economic liberalization throughout western Europe. Historians have also seen the Repeal Act as reflecting Prime Minister Robert Peel’s (1788-1850) personal devotion to free trade. It was a powerful symbol of his desire to minimize the role of vested interests and state power in the functioning of the economy, even at great political cost to his party (Howe 1997).

But more recent, revisionist work suggests that the transition to a free trade regime did not come as swiftly nor as smoothly as the conventional narrative presents. Nor was the Corn Law repeal as important for the spread of free trade in Europe. Many of the most onerous tariffs and import restrictions that had distorted British trade throughout the eighteenth century remained in place for decades.

Though often seen as symbolic of the various tariffs and quotes on imports denounced by Adam Smith (1723-1790) in his indictment of the mercantile system in The Wealth of Nations (1776), the Corn Laws themselves mostly came after Smith’s great work. The Corn Laws referred to the various restrictions on both imports and exports of grain and related agricultural products put into place beginning in 1804, which were then followed by further restrictions culminating in the Corn Law of 1815. These laws, in turn, extended regulations in 1773 that had (1) prohibited exports of wheat when prices reached a preset level, and (2) imposed a sliding scale of duties on wheat that declined if market prices were high enough.

The intense attention paid to the political and ideological debates leading to the eventual repeal of these restrictions in the 1840s shows the danger of judging the economic importance of a legislative change by focusing on the political and cultural significance of that event. Whatever the symbolic meaning of the repeal for contemporaries, it is now clear that historical accounts of a lone free-trade Britain are inconsistent with an objective examination of the statistical record of British trade.

One of the reasons why the British tariff repeal has seemed so dramatic was the high level of British average tariffs in the 1820s (the average tariff is the value of all import duties as a fraction of the value of all imports). What matters is not how high the statutory level of tariffs was, but the level of tariffs for the goods that represented the bulk of British trade. (For a more technical analysis of the relative importance of British tariff restrictiveness based on a rigorous general equilibrium model, see Dakhlia and Nye [2004] and Nye [2007].) And British tariff levels were among the highest in Europe in the 1820s. Indeed, they were fully comparable to average tariffs for the United States, one of the most openly protectionist nations in the world. A comparison with Britain’s traditional rival, France, shows how exaggerated the tale of unilateral British free trade has been. For the first three quarters of the nineteenth century, average tariffs in Britain were consistently higher than they were in France, a nation that was avowedly not a free trader. More refined calculations also indicate that British tariff policies imposed a greater burden on British welfare than did French tariffs on French trade. Part of this is due to the fact that history has exaggerated the extent to which French policy was protectionist.

But the important point is that after the abolition of the Corn Laws, most of the duties that Britain abolished were on manufactures or on items of minor importance to trade. Because Britain had an absolute and comparative advantage in the production of textiles and other manufactures, the effect of these liberalizations on British trade was muted. Though Britain in the 1850s had only a few tariffs, they were set at very high levels and were imposed on consumables such as wine, spirits, tea, coffee, and sugar that composed a large portion of British import trade.

Central to the system were the nearly prohibitive tariffs on wine and spirits—imposed after the War of Spanish Succession in the early 1700s—which were designed to spite Britain’s enemy, France, and favor British allies such as Portugal. Britain had been especially concerned with its large trade deficit with France, and the war gave a pretext for crippling the French trade. Despite this, Britain ran a merchandise trade deficit for much of the eighteenth century and all of the nineteenth. The 1804 Methuen Treaty—cited as a prime example by Adam Smith of the old mercantilist system—established a permanent preferential tariff for Portuguese wines and spirits in exchange for continued British export access to Portuguese markets. Given that almost all Portuguese alcoholic exports went to only one nation, Britain, as a result of this preference, this gives the lie to David Ricardo’s (1772-1823) famous example of trade between Britain and Portugal as illustrative of the virtues of comparative advantage.

High tariffs on imported wines and spirits, as well as on substitute beverages such as tea and coffee, had the effect of protecting domestic producers of beer, whiskey, and other spirits. Complicated preferential tariffs also favored colonial products such as rum.

The truly major change came about with the 1860 Anglo-French Treaty of Commerce brokered by Richard Cobden (1804-1865) and Michel Chevalier (1806–1879). Despite the correct claims of committed free traders that unilateral tariff reductions were first-best, the unwillingness of Britain to lower wine tariffs prior to 1860 did little to inspire other nations to move to free trade. However the 1860 treaty led to France removing all prohibitions on British textiles and lowering the overall level of tariffs in exchange for British concessions on wine and spirits. This event, not the repeal of the Corn Laws in the 1840s, was in fact the true start of European free trade. By 1870 almost all of the leading powers in Europe were to sign most-favored-nation trade treaties with Britain and France, thus leading to the rapid creation of a truly extensive and open trading network. Where mere exhortation had done little to induce other nations to liberalize commerce, the threat of being excluded from trade arrangements between the two great European powers was the critical incentive for a sustainable liberal trade regime.

The only major exception in the Western world was the United States. Whereas most nations in Europe were lowering tariffs in the 1860s, the United States began to raise tariffs significantly. To some extent, these restrictions were partially offset by the openness of world capital markets and by America’s liberal immigration policy, which allowed free movement of labor.

Toward the end of the century, concerns about falling grain prices due to increased imports from the East caused France and Germany to raise tariffs and abandon the most-favored nation system. But trade in Europe remained fairly open, and British tariffs were at an all-time low. This happy period of open European trade would only be destroyed with the coming of World War I (1914-1918).

SEE ALSO Economics, Classical; Free Trade; Mercantilism; Ricardo, David; Tariffs

BIBLIOGRAPHY

Dakhlia, Sami, and John V. C. Nye. 2004. Tax Britannica: Nineteenth Century Tariffs and British National Income. Public Choice 121 (3-4): 309–333.

Howe, Anthony. 1997. Free Trade and Liberal England, 1846-1946. Oxford: Clarendon.

Nye, John V. C. 2007. War, Wine, and Taxes: The Political Economy of Anglo-French Trade, 1689-1900. Princeton, NJ: Princeton University Press.

Schonhardt-Bailey, Cheryl. 2006. From the Corn Laws to Free Trade: Interests, Ideas, and Institutions in Historical Perspective. Cambridge, MA: MIT Press.

Smith, Adam. [1776] 1976. An Inquiry into the Nature and Causes of the Wealth of Nations, eds. R. H. Campbell and A. S. Skinner. Oxford: Clarendon.

John V. C. Nye

Corn Laws. First passed in 1815, these were always a controversial measure of agricultural protection. Britain's fast-growing population was making the country a food importer rather than exporter as before. The French wars had forced up domestic prices and encouraged agricultural investment, so there was fear of a post-war collapse of prices. Despite protests in some cities, Parliament passed a Corn Law that prohibited the importation of wheat until the domestic price reached 80 shillings a quarter. (Other cereals had similar provisions.) The 1820s still suffered agricultural depression despite a high ceiling for corn prices in years of poor harvests. In 1828 a sliding scale was introduced, which meant that duties would reduce as prices rose and vice versa. Despite this trend to easier importation, the Corn Laws soon came under fierce attack from the Anti-Corn Law League centred in the Lancashire cotton industry, which blamed recurrent industrial depressions on agricultural protection. It was also attacked as a system and symbol of aristocratic privilege. Under pressure the Whig government proposed to move to a fixed duty in 1841 but lost the election to the largely protectionist Conservatives. Peel, alarmed by the industrial crisis of 1842 and fearing the conjunction of high food prices with league agitation and mass unemployment, concluded that political stability required a sacrifice of the Corn Laws. Using the Irish potato famine of 1845 as an excuse, he proposed total repeal. This betrayal of party commitments and the landed interest produced a revolt of Conservative backbenchers and the farmers, led by the Central Agricultural Protection Society. Though Peel carried repeal of the Corn Laws in 1846 with full effect from 1849, he split his party into a free-trading minority and a protectionist majority. Only in 1852 did the latter abandon the idea of protection. Other free-trade measures followed and Corn Law repeal came to be seen as symbolizing the triumph of liberal and free-trading ideas. The main effect of repeal was delayed until the 1870s when cheap transatlantic grain flooded in and produced both sharp falls in food prices and acute agricultural depression. The United Kingdom was unusual among advanced countries in abandoning agricultural protection.

Bruce Coleman

Corn Laws Series of Acts regulating the import and export of grain in Britain. The Act of 1815 prevented the import of wheat until the domestic price exceeded a certain figure. The result was to keep the price of bread high. Opposition led to repeal by the Anti-Corn Law League (1846).