Portugal

Portugal's foreign trade was for a long time related to empire building. Portugal was distant from Europe's main trading routes, and its exports were thus limited by the distance they had to cross to reach the urban markets for raw materials, foodstuffs, and manufactures. Moreover, Portugal was not well-endowed with the products in greatest demand in Europe, except for salt and, later, wine. In addition, Portugal was not situated at a crossroads for the entrance of products to Europe, such as cereals, which came through the Baltic, and Asian products, which came through the Italian peninsula. The empire played a crucial role on Portugal's trade with the rest of Europe, as the country served as a re-export platform.

Thus, the history of Portugal's trade follows closely the three epochs that marked the empire. The first epoch was that of the East Indian Empire, which developed when Vasco da Gama reached the Indian coast in 1498 and lasted to the end of the sixteenth century. The second epoch centered on the colonization of Brazil, where sugar plantations were developed in the mid-sixteenth century and gold was found around the end of the seventeenth century. In the third and last epoch, Portugal turned to Africa, although during this period trade with Europe dominated.

TRADE AND EMPIRE: THE EAST INDIES, 1450–1703

The quest for sources of trade and profit was certainly one of the most important—if not the most important—motivations for the maritime expeditions to North Africa, Madeira and Azores, and along the western coast of Africa to the Indian continent and to Brazil. The small size of the Portuguese economy and the large effort involved in looking for alternative sources of trade in distant areas explain why the king intervened directly and why an empire was formed from that search for commercial activity with foreign parts.

METHUEN TREATY

During the War of the Spanish Succession (1702–1713) English merchants feared French trade competition, or even outright exclusion from Spanish trade, under a possible dual Bourbon rule of both France and Spain. So in 1703 Portugal and England signed the Methuen Treaty, which was named for John Methuen (c. 1650–1706), England's special envoy to Portugal, who negotiated the agreement. The treaty granted Portuguese wines preferential duties in the English market at a rate one-third below that for the French product. In return, Portugal agreed to end restrictions on the importation of English textiles, especially woollens. The treaty boosted the port wine industry, as Porto-area producers especially benefitted from the reduced tariffs.Another effect of the treaty was to divert such trade away from the hostile French. Even with the conclusion of peace in 1713 the Methuen Treaty remained important. When British Tories suggested that Parliament again reduce tariffs with France, the Whigs, backed by members of the woollen industry and East Indian merchants, successfully resisted the proposal. The Methuen Treaty remained in effect until 1836.

David J. Clarke

The East Indies trade consisted mainly of spices which were exchanged with northern Europe via Lisbon. Guns secured the Indian trade, but it was also based on convenience. In fact, the Portuguese served as middlemen in the complex trading nets across the Indic Ocean, connecting trading posts among themselves and with Europe. The role of Portugal in the European connection suffered from strong competition from other nations with higher military and economic capabilities, particularly Holland. However, a large number of Portuguese merchants kept an important role within the Indian sub-continent. The loss of the Indian Empire was the consequence of a weak economy in mainland Portugal, not a cause of it. In fact, the Portuguese did not have the resources to maintain armies there because they did not supply goods to exchange with species and silver that would make such trade relations profitable.

Although Portugal did not reap fully the profits from the Indian trade, this trade did indeed provide large gains for those directly or indirectly involved, and Portugal's economy probably gained in absolute terms. There is some evidence that resources were diverted from other activities such as agriculture, though, and many historians argue that the excessive concentration in trading activities with the outside world led to Portugal's lagging behind in the European economy; this became evident later on, principally during the nineteenth century. However, there was a positive—not negative—correlation between agrarian growth and trade with the empire during this period. The Indian trade was complemented with few exports from mainland Portugal, including salt, wool, hides, and some wine. In exchange, Portugal bought mainly cereals, fisheries, and textiles from other nations.

SUGAR, GOLD, AND WINE, 1703–1808

Another source of international trade, based on Brazilian sugar, already had been developing since the mid-sixteenth century. Sugar plantations needed African slaves, whom Portugal moved across the ocean, but they also depended on the Spanish under asientos contracts. Sugar quickly became the most important product exported from Portugal to Europe. The second most important export from Portugal in the beginning of the eighteenth century was, again, salt. The third was Port wine; that trade developed considerably after the signing of the Methuen treaties between Portugal and England in 1703. Portugal became an important ally for England during the War of the Spanish Succession (1701–1714), and its wines gained advantage over its closest competitors, Spain and France, in England, the largest wine-importing market in Europe.

Portugal's eighteenth-century trade, too, was dominated by concerns of empire, due to the discovery of gold in Brazil. Gold production peaked in the 1760s, and at that time Portugal's participation in Europe's trade increased significantly. The fact that Portugal became a major supplier of bullion implied that it was able to finance imports from Europe, which increased throughout the eighteenth century. Another outcome of the development of sugar plantations and gold mines was the expansion of the Brazilian domestic economy, which led ultimately to an increase in the demand for imports from mainland Portugal. The share of Brazil in Portugal's foreign trade increased substantially during the eighteenth century, particularly at century end.

TRADE AND INDUSTRIALIZATION, 1808–1947

The Napoleonic Wars had a negative impact on Brazilian trade because of the Continental blockade imposed on Portugal beginning in 1806. In 1807 Portugal was invaded by French troops, the prince regent moved the court to Brazil, and in the following year the empire trade routes were open to foreign ships, particularly British. This was the informal end of the Brazilian Empire, which would end formally in 1822 with the independence of the colony. But the impact of the end of the second empire was only part of a general contraction of Portugal's international trade, which happened as a consequence of domestic and international instability up to the mid-1830s. Conditions for trade improved afterwards, and Brazilian and European trade resumed. Portugal's trade with Brazil had periods of strong growth due to the links of the two economies through emigration and remittances.

Portugal's trade changed markedly in the second half of the nineteenth century with the development of exports (mainly primary products, but also some manufactures to Brazil) and with domestic industrialization, which brought greater demand for imports of foodstuffs and consumer goods, raw materials, and machinery. Trade relations developed mainly with European countries—Britain, France, and Germany—as well as with the United States, and trade increased with Brazil and colonies of the African empire, mainly Angola, São Tomé, and Mozambique.

World War I severely affected the Portuguese economy and foreign trade. Yet, during the 1920s the Portuguese economy expanded, as in other Western European countries, and foreign trade resumed despite the increase in tariff protection. In 1930 the colonial tariff system was reinforced, but that failed to increase Portugal's trade with Africa. Exports from the colonies depended on buoyant markets and investments, which the Portuguese economy could not offer, and the African trade declined accordingly.

PORTUGAL AND EUROPEAN INTEGRATION SINCE 1947

As elsewhere in Europe, the second postwar period marked a divide in Portugal's trade. The creation of international institutions of cooperation implied that the resurgence of the domestic economies after the war was accompanied by an increase in international trade. Portugal participated in that resurgence. It was a founding member of the Organization for European Economic Cooperation and, more importantly, the European Free Trade Association, which was founded in 1959 in response to the creation of the European Economic Community two years earlier. Portugal's trade with the industrialized world increased accordingly. It became a major exporter of foodstuffs, textiles, and a few light manufactures, and an importer of consumer goods and inputs for its expanding industrial sector. Imports expanded more rapidly than exports, and the country faced a persistent commercial deficit, which, however, was compensated for by revenues from colonial re-exports, emigrant remittances, and capital imports. Trade with the African colonies also increased rapidly despite a chronic current-account deficit in the colonies, which was partially solved by a new colonial regime imposed in 1962. In 1974 democracy was restored, and in 1975 the African colonies gained their independence. Democracy was crucial for Portugal to join the European Economic Community in 1986, and decolonization led to the virtual disappearance of the empire in Portugal's foreign trade. The years since then have been marked by greater participation in Europe's trade, which has brought some problems of growth due to Portugal's adverse pattern of comparative advantages. Portugal today exports capital to less-developed economies. Future trade trends will depend on the development of new sources of comparative advantage, which will include service industries. It also will depend on the effects of capital exports, where the former colonies of the empire may again play a role.

SEE ALSO Agriculture; Albuquerque, Afonso de; Angola; Bahia; Balance of Payments; Brazil; Cargoes, Freight; Cargoes, Passenger; Common Market and the European Union; Empire, Portuguese; Empire, Spanish; Free Trade, Theory and Practice; Gama, Vasco Da; GATT, WTO;Great Depression of the 1930s; Industrialization;International Trade Agreements;Lisbon;Magellan, Ferdinand;Pombal, MarquÊs de;Porto;Regional Trade Agreements;Rio de Janeiro;Senegambia;Slavery and the African Slave Trade;Wine.

BIBLIOGRAPHY

Clarence-Smith, Gervase. The Third Portuguese Empire, 1825–1975. A Study in Economic Imperialism. Manchester, U.K.: Manchester University Press, 1985.

Fisher, H. E. S. The Portugal Trade, 1700–1770. London: Methuen, 1971.

Lains, Pedro. Os Progressos do Atraso. Uma Nova História Económica de Portugal, 1842–1992 (Growth and Backwardness. A New Economic History of Portugal, 1842–1992). Lisbon: Imprensa de Ciências Sociais, 2003.

O'Brien, Patrick K., and Prados, Leandro, eds. "The Costs and Benefits of European Imperialism from the Conquest of Ceuta, 1415, to the Treaty of Lusaka, 1974." Revista de História Económica, vol. 16, no. 1 1998, pp. 7-402.

Pedro Lains