COMMERCIAL POLICY
=404. War and peace in the nineteenth century.=—Although, for the
convenience of a round number, the date 1800 has been chosen in this
book to fix the beginning of the recent period, the great changes
which marked the passing of previous conditions began with the French
Revolution of 1789. The effects of the revolution were soon felt
outside the country in which it started. In a few years the powers of
Europe were engaged in a war which, with slight intermission, endured
for almost the period of a generation, and ceased finally only with
the defeat of Napoleon at Waterloo. Since 1815 commerce has enjoyed
singular freedom from the vexation of war, and our attention will be
occupied in this chapter mainly with the commercial policy of states at
peace. The convulsive struggle, however, in which the century began,
has such importance, commercial as well as political, that it demands
more than passing comment.
=405. French privateers and English commerce.=—The commercial interest
of the revolutionary and Napoleonic wars centers in the contest between
France and England. These two powers were the greatest commercial
states of Europe, and France still retained important colonial
possessions. England, however, had specialized in the development of
sea power, while France now followed the course to which she had long
been tending and sought to win the victory by the development of her
power on land. After 1795 France abandoned the policy of maintaining
great fleets to oppose the British, sacrificed the merchant vessels
flying the French flag, and sought to destroy the commerce on which
the life of England depended by sending out innumerable privateers to
prey upon it. France enjoyed, apparently, an extraordinarily favorable
position for making this policy effective. The port of London carried
on more than half of British foreign trade; of the ships which
contributed to its annual record of thirteen or fourteen thousand
entries and departures, two thirds had to pass through the English
Channel; and French privateers, sailing at sundown from a home port,
could reach their cruising ground before it was light again. Some of
the French privateers inflicted very serious loss on the British. A
large one, captured in 1799, is said to have taken 160 prizes in four
years, and to have cleared for her owners in Bordeaux five million
dollars. English ships were forced to gather in convoys, sailing under
the protection of ships of war. Fleets of 200 or 300 vessels were not
unusual, and sometimes 500 or 1,000 were seen together, in dangerous
places like the Chops of the Channel or the entrance to the Baltic.
This system consumed the time and money of English merchants, and did
not entirely prevent losses, which amounted perhaps to 2 per cent or
more of the total volume of British trade. Still, the effort of France
to crush her enemy by this means was clearly futile. France, on the
other hand, saw her commerce decline until, as a literal fact, not
a single merchant vessel flying the French flag was on the seas. In
1800 France received directly from Asia, Africa, and America less than
$300,000 worth of goods altogether, and exported to those continents
only $56,000.
=406. Napoleon and the Continental System.=—A new period in the war
against commerce can be dated from the reopening of hostilities, after
a brief interval of peace, in 1803. Napoleon, now the ruling spirit
in France, found that a direct contest with the English on their own
element, the sea, was hopeless. His schemes for the conquest of his
great enemies may be summarized as follows: first, direct invasion,
from which he was always deterred by the English sea power; second,
a blow at England through her eastern empire, to which the Egyptian
expedition was preparatory; and finally, the “commercial strangulation”
of England by the exclusion of her goods from Europe. This last scheme,
to which his efforts finally narrowed themselves, simply continued
a policy which had already been applied in France, of excluding the
wares and ships of British commerce. Napoleon was able, however, by his
extraordinary successes on land, to extend the system of prohibition
far beyond the bounds of France, and make it truly deserving of its
name of Continental System. By 1809 he had closed to English trade all
Europe except Turkey, Sicily, and Portugal. Decrees named from the
place at which they were issued (Berlin, Milan), sought with savage
thoroughness to stop all openings through which the English might carry
on their trade and recruit their resources for the war against him.
Commerce with Europe, according to Napoleon’s plan, was to be carried
on exclusively by his allies or by neutrals like the Americans; and the
English, by being totally excluded, were to be starved into submission.
=407. English reprisals; the position of neutrals.=—To these measures
England replied with various Orders in Council which matched in spirit
Napoleon’s decrees. As Napoleon sought to exclude England from European
commerce, so England sought to drive the commerce of Napoleon’s allies
from the sea, and, furthermore, to make neutral commerce aid her in her
measures against him. An order of 1807 required any neutral trading
with the Continent to stop at a British station both going and coming,
to land and reship the cargo, and to pay certain duties. Its purpose
was to make England the center and warehouse of the world’s commerce.
Neutrals were placed between the upper and the nether millstone. In
obeying the orders of either belligerent they exposed themselves to
the punishment of the other. The merchants of the United States, who
had profited by the early stages of the war to extend their commerce
greatly, were forced into the seclusion of the embargo (to be described
later), and were led in 1812 to the declaration of open war with
England.
=408. Failure of the Continental System.=—England scarcely needed
political allies in a contest in which the material interests of most
of the people of Europe were allied with her own. The obstacles to
commerce with the Continent caused the prices of articles like the
colonial wares to rise to double, triple, even tenfold, what they were
in England. The reader will remember that the practical beginnings
of beet sugar manufacture can be dated from this period of dearth.
Commercial forces were too strong for any political restrictions, and
smugglers brought goods to the people who wanted and would pay for
them, despite all penalties. At a time (1809-10) when all the great
ports from Riga to Triest were closed, goods reached the interior
still, through the Greek islands, Malta, parts of Spain, the Channel
Islands, and Heligoland. Napoleon himself had to recognize the
impossibility of making the Continental System effective. He clad his
own armies in English cloth, sold constantly licenses to evade his
own decrees, and sought to win the profits away from smugglers by
allowing the introduction of colonial products on payment of duties
equivalent to the smugglers’ gain. Certain branches of production and
manufacture were furthered on the Continent by the restrictions on
trade, but the Continental System, on the whole, resulted only in loss
to the people and in the defeat of Napoleon’s own plans. It furnishes a
signal example of the futility of attempting to crush a sea power like
England, without meeting it on its own element.
=409. Effect of the war on England and France.=—The effect of the
war and the prohibitive system was necessarily injurious to British
commerce, and showed itself in a decline of British exports. The
injury, however, far from being mortal, was extremely slight. Smuggling
was incessant, and if one opening to British trade was closed another
was quickly found. When Holland became allied to France and hence
closed to England, British exports to Germany increased rapidly; the
German people were not consuming more British goods, but acted merely
as distributing agents, through whom the goods reached their old
markets. Napoleon could not forever coerce a whole continent, and his
blockade was generally evaded in northern Europe, with the connivance
of the governments, before 1810. On the last day of that year the Czar
of Russia bade open defiance to the Continental System; and it crumbled
beyond hope of repair after the failure of the Moscow campaign. Even
the losses which England suffered were made up, in considerable part,
by the profits which she secured from the expansion of neutral trade.
England gained valuable additions to her maritime empire (Malta,
Heligoland, Cape Colony, Ceylon, etc.), and entered the nineteenth
century with her commercial primacy established beyond dispute. France,
on the other hand, emerged from the struggle weakened at home and shorn
still further of possessions abroad. Hayti (or San Domingo) had been
lost by a native revolt; the Louisiana territory had been ceded to the
United States; and some of her small islands had passed into the hands
of England.
=410. Other wars of the nineteenth century.=—After the conclusion
of this great war the world enjoyed a long interval of peace. The
nineteenth century has been marked by internal political development,
rather than by international strife. The growth of the spirit of
nationality, the idea that people conscious of likeness in language,
religion, etc., should be grouped under the same government, has
led to several sharp struggles between states; but these have, in
general, been short and of no great commercial significance. More
important, from the commercial standpoint, has been the revolution in
South America, which has enabled the people, formerly bound by the
restrictions of the colonial system, to establish independent trade
relations. Commerce was seriously affected, moreover, by the Civil War
in the United States, which closed to the world for a few years its
great source of supply of cotton. Other countries proved incapable of
supplying the lack; a considerable portion of the English people (one
fifth, it was said then), supported by the cotton manufacture, suffered
from the stoppage of work; and consumers were forced to adopt other
clothing materials, and did not, for many years, use cotton as freely
as before. Of the other wars preceding 1914 the only one that had great
economic significance was the war between Japan and Russia in 1905,
which brought into the rank of the great powers an Asiatic country with
far-reaching commercial ambitions.
=411. Removal of old obstacles to commerce.=—The greatest benefit
which Europe enjoyed from the French Revolution and the ensuing wars
was the removal of many remnants of feudal institutions which had
persisted, petrified as it were, to this late period of history. Of
these remnants none was more harmful to commerce than the feudal
institution of the staple. This flourished especially in the German
states, and resulted in depriving of a large part of their commercial
value the German rivers, which were by nature the cheapest and best
means of transportation. It was impossible to travel far on any German
river without reaching a staple, where the boatman was subject to
delay, inconvenience, and considerable expense. On the Rhine, for
instance, there were thirty-two stations of this character where
dues were still levied in 1800. As far as regarded the effect on
commerce the flow of the rivers might as well have been interrupted
by cataracts. It was a great step in progress, therefore, when these
interruptions were removed, as little by little they were in the first
half of the nineteenth century. The principle of free navigation was
extended gradually to include important international rivers like the
Scheldt and the Danube. The reader will remember that in the Middle
Ages various countries tried to monopolize parts of the sea itself.
Denmark had kept its hold on the straits leading into the Baltic Sea,
and required ships to stop at Elsinore and pay toll, until 1857, when
it sold out its right to levy toll on the payment of a lump sum by the
countries interested in free navigation.
=412. Customs tariffs; the prohibitive system.=—The most important
topic which remains to be considered in this chapter is that of
commercial policy as shown in the customs tariffs. The details of
tariff policy must be left to later chapters, in which the different
states will be considered separately; place can be found here only
for a brief review of the general course of development, and for a
consideration of some of the factors which explain the great changes.
Only a few years before the outbreak of the French Revolution France
and England had agreed to a commercial treaty, which marked a great
departure from the restrictive principles of the old mercantilist
policy, and seemed to promise a new era of freedom in trade. The
outbreak of war destroyed the new system almost as soon as it had
been carried into effect, and changed the relations between the two
states into that attitude of fierce antagonism which has been described
above. The return of peace found the tariff systems of both France
and England set in the old lines. The tariffs included a vast number
of duties, both on imports and on exports; the rates were high and
often prohibitive; the protection of national shipping by navigation
acts was maintained. Similar characteristics marked the tariffs of
other European states, and this period may fitly be termed the era of
prohibition in recent commercial policy.
=413. The period of free trade, 1860-1880.=—The prohibitive system
held its ground, however, only by force of custom and by the active
support of small groups whom it favored. The writings of French and
English economists, of whom Adam Smith was the great representative,
had convinced thinking men that the people and countries of Europe
would benefit by greater freedom of trade, and governments waited
only for favorable conditions, political and economic, to lower their
customs duties. The movement toward reform was at first local, finding
place especially in England and Germany. Soon after the middle of the
century, however, it became general in Europe, and led to such sweeping
changes that the period extending, roughly, from 1860 to 1880 has often
been called the free-trade period in commercial history. This was the
time when the technical inventions, especially the application of
steam on a large scale to manufactures and transportation, were first
showing their full power in increasing productiveness. At this time a
state which secluded itself commercially seemed to be renouncing the
chance to share in the great movement of progress. Industrial states
sought markets for their manufactures and sources of supply for their
food and raw materials. Agricultural states found the offers for
their surplus products too tempting to be refused. So many profitable
openings appeared everywhere that there was little dread of competition
and little call for protection.
=414. Reduction of customs duties.=—In this period, therefore,
there was a general overhauling of the old tariffs. Export duties
disappeared. Prohibitions were dropped, and import duties were reduced.
Narrow restrictions, designed to favor merchant shipping, were
reformed. Liberal commercial treaties became the fashion, and Europe
was soon covered with a network of them after England and France had
set the example in 1860. These treaties became of especial importance
because they now included generally the clause of “the most favored
nation,” by which a participant in the treaty was assured that it
should share, without delay and without need of recompense, in any
favors that might be granted to other states. The slightest concession,
therefore, effected a general reduction of duties in Europe. An English
author, writing in 1882, found that in the period from 1860 to 1880
tariffs had been raised in only two of the sixteen European states.
Apart from these two exceptions, which were not important, tariffs had
undergone substantial reductions; of 2,140 items existing in 1860 only
136 had been raised, while 900 had remained the same and no less than
1,104 had either been lowered or removed altogether from the list.
These reforms were undoubtedly responsible in part for the remarkable
growth of the world’s commerce in the period which they covered.
=415. The return to protection.=—The free-trade movement has been
followed, in the last quarter of the century, by a decided reaction
to protection. Since about 1880 increase in the customs duties has
been the rule in Europe, and reductions have been exceptional. No
single cause can be held responsible for this change. The growth of
national feeling and of international tension in Europe since 1870
has undoubtedly disposed governments to listen more readily to the
complaints of citizens who suffer from competition, and ask for
protection against foreigners. Competition, moreover, has widened
its range of action and become more keen. The countries which gained
new markets for their agricultural products, and flourished during
the period of development of steam transportation in Europe, have
lost their foreign markets and find their home markets menaced, as
the transportation system has grown to embrace other continents and
now brings cheap products from across the seas to the door of the
European consumer. Countries which willingly accepted the manufactures
of advanced industrial states when their own industries were in a
primitive stage of development have since aspired to establish modern
factories of their own at home.
In spite of the return to higher duties the present protectionist
policy has retained many of the changes of the period of free trade.
The statesmen who guide the commercial policy of European countries
have discarded prohibitions, and use duties discriminating against
particular countries only exceptionally. Down to the close of the
century they have continued to grant to nations in general the
treatment accorded to the most favored nation, and in some ways have
extended the scope of this practice. The general level of duties,
moreover, though it may seem high in comparison even with the general
average of the period of prohibitions, offers a much less effective bar
to trade, because of the reduction of the expense of transportation.
It is impossible to state accurately the relative height of various
tariffs. The following table gives an estimate of the tariffs on some
important manufactures towards the close of the century: Russia 130 per
cent, United States 72 per cent, France 30 per cent, Germany 25 per
cent, Belgium 13 per cent, New Zealand 9 per cent, etc.
=416. Colonial policy.=—Colonial policy, a topic which has had for
some years a leading place in public discussion, can receive only
brief consideration in this history. The colonial ventures of the
recent period may in time bring forth the commercial results which
their projectors promise; up to the present the results have been
small. Until far into the century European governments showed little
interest in the expansion of their people or the extension of their
power in distant parts of the world. Their attention was absorbed by
the problems of domestic and foreign policy in Europe. The colonial
question, however, like every other political and economic question,
assumed a new aspect under the changes wrought by steam and the
telegraph. Distant continents were, by those changes, brought nearer
to European capitals than parts of the home territory had been before.
The immense increase of transmarine commerce which marked the latter
part of the century was carried on largely by English-speaking people,
and seemed to promise to states of the Continent similar results if
they could spread broadcast their people and power as England had done.
The best parts of the world had already been occupied, it is true, but
great stretches of territory were still free from claimants of European
descent. France began to raise her flag over new territory in Africa,
Asia, and Oceanica; the Belgian king established his authority in the
region of the Congo; the movement quickened to a scramble in the ‘80’s;
and soon all parts of the habitable world except certain countries in
Asia and Africa had been brought under the sovereignty of European
powers. The colonial question—what to do with these possessions now
that they have been secured, how to govern them—has not yet become a
part of history; it is still a question of the day.
QUESTIONS AND TOPICS
1. Prepare a chronological table of the wars of the nineteenth
century, from a manual of recent history.
2. The English navy during the Napoleonic wars. [Social England, vol.
5, pp. 391-401, 541-544; the sea stories of Captain Marryat.]
3. The Continental System and its effects. [Levi, Hist. Brit.
commerce, part 2, chap. 4, reprinted in Rand, Ec. hist., chap. 5; Rose
in Kirkpatrick, Lectures on hist. of nineteenth century, Cambridge,
1902, 59-78.]
4. Effect of Napoleon’s commercial measures on British finances.
[Audrey Cunningham, British credit in the last Napoleonic war,
Cambridge, 1910.]
5. The question of neutral rights. [Schuyler, Amer. diplomacy, chap.
7; Reeves, Two conceptions of the freedom of the seas, in Amer. Hist.
Rev., April, 1917, 22: 535-543.]
6. The movement for independence in South America, and its commercial
results. [Helmolt, Hist. of the world, vol. 1; History of South
America, transl. by Adnah D. Jones, London (N. Y., Macmillan), 1899.]
7. Free navigation of European rivers. [Schuyler, Amer. diplomacy,
chap. 6, p. 345 ff.]
8. The Sound Dues. [Same, p. 306 ff.].
9. Divide your graphic chart of commercial statistics into blocks,
to correspond with periods of commercial policy; dates may be chosen
as follows, 1800, 1860, 1880, 1900. Be cautious, however, about any
conclusions that may suggest themselves.
10. Relative share of different factors in recent commercial progress.
[Cf. W. E. Gladstone, Free trade, railways, and the growth of
commerce, Nineteenth Century (Magazine), Feb., 1880, 7: 367-378; but
do not regard this article as settling a problem still unsolved.]
11. Significance of the “most favored nation” clause in tariff
history. [Reciprocity and commercial treaties, 389-416.]
12. Various systems of tariff policy. [Reciprocity and commercial
treaties, 461-467.]
BIBLIOGRAPHY
The best single reference on the commercial conditions and policy of
the Napoleonic period is Lingelbach, *Historical investigation and
the commercial history of the Napoleonic era, in Amer. Hist. Rev.,
Jan., 1914, 19: 257-281; this provides a scholarly survey of the whole
literature of the subject and can be used as a guide to further study.
Of later works should be noted Frank E. Melvin, Napoleon’s navigation
system, Univ. of Penn. thesis, 1919, N. Y., Appleton.
On commercial policy in general the best reference is Bastable’s **
Commerce of nations, which treats international trade, the theory and
the history of commercial policy briefly but with admirable clearness.
The history of the commercial policy of particular countries will be
covered in following chapters. A survey of modern tariff systems is
provided in * Reciprocity and commercial treaties, published by the U.
S. Tariff Commission, Washington, 1919; J. W. Root, Tariff and trade,
Liverpool, 1898, combines a general discussion of the tariff question
with a review of the tariff policy of important commercial countries.
Colonial policy can receive but scant treatment in this book. The
student is referred to the bibliography by A. P. C. Griffin, List of
books relating to colonization, Washington, second ed., 1900, and to
the references there given.