About 1450 England's principal exports of raw wool and wool cloth entered a period of remarkable growth that lasted over 100 years. The origin was the evolution of a manufacturing base in the previous century, which led to an increasing proportion of the trade in manufactured cloth, from 55 to about 90 percent in the period 1450 to 1547 (by raw wool equivalent volume). More and more the trade centered on London, eclipsing many small ports in the south of England, the main wool-producing region. The wool and cloth trade has also been connected to the rise of an independent merchant class, breaking down the old wool-market monopolies. Foreign merchants from the Low Countries and the Hanseatic League were present in the London market, and by the 1540s they handled over one-third of all British wool and cloth exports. These exports were an important source of revenue for the Crown through the levying of duties; wool and cloth merchants also were often the source of loans—sometimes forced—to the Crown. Although the wool and cloth trade was mainly with northern Europe, there were also exports to the Iberian Peninsula, with return imports of wine. Other significant export demand of the late medieval period was for salted fish, which stimulated the expansion of the English fishery.
Late medieval Scotland, an independent country, found its main export market inneighboring England. Live cattle, the main export, were driven over the ancient drovers' trails to northern English markets such as Carlisle. Despite Anglo-Scottish war interruptions, this trade continued well into the nineteenth century. There were also close Scottish trade links with nearby North Sea countries. Scottish merchants exported wool, salt fish, leather, and coal, and, like the English, imported fine textiles, wine, and manufactured iron goods.
TRADING COMPANIES OF THE EARLY MODERN ERA
Although much English overseas trade took place without excessive regulation, by the sixteenth century there was an increasing use of Crown-granted import monopolies. The trade was then taxed, producing revenue for the Crown. Often these monopolies were sold by the Crown for lump-sum payments, or in some instances were awarded to political favorites. By the seventeenth century English trade burgeoned with the creation and subsequent expansion of merchant trading companies. Groups secured a royal charter with a monopoly to pursue a particular commodity trade, although the monopoly restriction was later removed from some. The most important of these companies were: the Muscovy Company (1553, reorganized 1660), which monopolized the Russian trade; the East India Company (1600), the spice trade; the Royal African Company (1660), the slave trade; and the Hudson's Bay Company (1670), the fur trade. There were many others, including trading and settlement companies established to exploit the resources and trade of North America. The success of these trading ventures was made possible by England's control of the major sea routes after the seventeenth-century Dutch wars. Empire tended to follow trade.
By the late seventeenth century Scotland increasingly found itself in trade disputes with an increasingly protectionist England. Resolution of this dispute was one of the reasons that led the Scottish Parliament to vote for the Act of Union of 1707. Scotland, now joined with England and Wales, became part of a larger customs union, and from then onward Scottish exports and imports were part of overall British trade. The spread of the Industrial Revolution in the eighteenth century, and its early appearance in southern Scotland, led to the creation of heavy industry whose output was to become a British major export.
Individual British traders were the main participants in the Atlantic slave trade in the early 1600s. The traders made substantial returns on this trade, which were remitted to Britain—exactly how large these returns were is the subject of debate. Slave-based trade profits attracted the creation of the Royal African Company, which secured a royal monopoly at midcentury. The subsequent removal of the monopoly status in 1698 permitted the reentry of individual voyage slaving ventures, which actually led to a large increase in the amount of slaving activity. The slave trade was conducted on one of the great triangular trade routes of the Atlantic in the days of sail. Trade goods such as textiles, knives, and other metal goods were exported from Great Britain, carried by British traders, taken to the Bight of Benin, and traded for slaves. The slaves were then carried to the slave markets in the Americas—Kingston and Curaçao. Some slaves were subsequently moved on to the British North American colonies. The proceeds of slave sales returned to Britain in the form of Caribbean goods and, of course, as profits. Only a small portion of the slave shipments actually took place through the slaving ports of Bristol and Liverpool. The rise of antislavery sentiment in Britain eventually brought an end to legal British involvement in the trade in 1807.
SCOTLAND: GIVING UP FREEDOM TO GAIN BENEFITS OF TRADE
The Act of Union of 1707 brought England and Scotland together to form the United Kingdom of Great Britain. Each country had different interests that made the union appealing. For England, it meant a secure northern border during Queen Anne's War, when the French threatened the coasts. For Scotland, it meant a much-needed injection of economic support through English subsidies and the opening of new markets after the removal of trade restrictions. The union dissolved the Scottish Parliament but allowed Scotland to retain control over the Church of Scotland and the country's legal system.
Many Scottish citizens denounced the union, claiming political and economic bribery were the main influences behind it.
Some Scottish industries, such as wool, were hurt by dominant competition from England. Other industries, including the linen and cattle trades, benefited from upgrades in production processes and the removal of trade restrictions. Glasgow was an example of a harbor that prospered during the eighteenth century when it became a key port for the tobacco trade with North America.
Another of the great trading companies founded in the seventeenth century was the (British) East India Company, which was formed to exploit the spice and, later, tea trades in South Asia. The company came into a long conflict with the Dutch traders and, in the eighteenth century, the French. Conflict with the French (a spill-over of the Seven Years' War) led to a full-scale war that the British eventually won. "John Company," as the East India Company was known, established an imperial presence in India, taking on much political and military control which was later assumed by the British government. In the nineteenth century the main commodity China from India. The Opium Wars of the mid–traffic of the East India Company was opium, shipped to nineteenth century were a consequence.
|SOURCE: Adapted from Mitchell, Brian. British Historical Statistics. Cambridge; New York: Cambridge University Press, 1988.
|Grains and flour
|Iron & steel
|Sugar (raw & refined)
|Hardwares & cutlery
|Non-ferrous metals & manufactures
|Meat & animals
|Timber & lumber
|Textiles, hats, haberdashery, apparel, etc.
|Silk yarn and goods
|Oils, oil-seed, gums,
|Resin & tallow
|Hats, haberdashery, apparel, etc.
|Iron & steel
|Fibres (hemp, jute and flax)
|Undressed hides, skins & furs
|Dye woods & dye stuffs
|Non-ferrous metals & manufactured goods
|Paper making materials
|Annual average, 1854–56 (in £ millions)
RISE OF MERCANTILISM
The imperial system of trade that emerged in the seventeenth century was regulated by a variety of laws and administrative practices based on the doctrine of mercantilism. It assumed (incorrectly) that trade is a zero-sum game, and policy was aimed at expanding exports while restraining imports, thereby inducing an inflow of gold and silver. Control was achieved through the overarching legislation of the Navigation Acts (1660, 1696). These acts required all trade with England (later Great Britain) to be carried in British ships ("bottoms"), ensuring capture of the shipping trade and entrepôt profits. All traded goods from within the empire, even if ultimately destined for foreign, non-empire markets, were required to pass through Great Britain. Famously, the shipment of colonial North American tobacco to continental Europe went initially to British ports before reexport. The perceived burden of these extra transaction costs fed into the general colonial disquiet of the 1770s, although the real burden of these costs in colonial income was actually relatively small. The Navigation Acts were supplemented by a host of custom duties (discriminatory tariffs), subsidies, and specific drawbacks (reimbursement of customs duties). In addition to restrictions on trade between the empire and non-empire countries, there were also customs duties that applied within the empire. For instance, molasses and rum bore a high tariff if shipped directly from the British Caribbean to the British North America colonies, but were subject to a very low tariff if transshipped through a British port. This had the inevitable consequence of encouraging smuggling. The imperial system of trade regulation was altered frequently. An important innovation was the increased enforcement of existing regulations in the mid-eighteenth century, which set the North American colonies and Great Britain on a collision course.
Another important trade control method was the Corn Laws (1804). Their purpose was to ensure some measure of British self-sufficiency in the production of wheat and flour. By the early nineteenth century, after the fall in wheat prices following the Napoleonic Wars, the Corn Laws effectively transferred income from the consuming public to the British land-owning classes. Under the laws, which were modified several times during the forty-two years of their existence, grains and flour were legally imported only when the British price was high. The tariff was based on a sliding scale. The growing industrial interests took up vigorous political opposition to the Corn Laws on the grounds that they put upward pressure on British wages. With the election of the government of Robert Peel in 1842, British trade policy increasingly favored a reduction of trade barriers. The famine in Ireland in 1846 and the consequent need to obtain cheap foodstuffs on an emergency basis directly led to the suspension and subsequent abolition of the Corn Laws. By about 1860 all other major custom duties had been removed; Great Britain was essentially a free-trade nation. Underlying this change in attitude towards trade was the growth of economic liberalism based on the works of the great thinkers of the late eighteenth and early nineteenth centuries, particularly Adam Smith (1723–1790), David Ricardo (1772–1823), and John Stuart Mill (1806–1873).
The collection of import (and export) custom duties, or tariffs, and remission of the revenue to the Crown dates to the thirteenth century. In 1643 the task of regulation and collection was taken over by a parliamentary committee (of England and Wales) and applied in a more systematic way. High customs duties on external trade, the inland taxes on commodities such as alcohol, and the interruption of trade due to the frequent wars of the seventeenth and eighteenth centuries encouraged the smuggling of imports, especially from continental Europe. The southern counties of England were the main routes into Great Britain. During the long disruption of trade during the French Revolution and Napoleonic period (1790–1815) smuggling was endemic. No estimate of the lost government revenue is available, but contemporaries believed it to be substantial. After 1815 a reinvigorated and reorganized Customs and Excise branch of the British government began a systematic attempt to wipe out smuggling. It proved only partly successful, but the adoption of free trade in the 1840s removed much of the remaining external incentive.
THE INDUSTRIAL REVOLUTION
The success of the British trade sector in the in the late eighteenth century was based on the decreasing relative costs of British manufacturing as a consequence of the Industrial Revolution. The trade boom of was also stimulated by the removal of competitors, particularly France, from many major markets due to the revolutionary turmoil and the subsequent Napoleonic Wars. But it was the nineteenth century that witnessed the greatest gains. There is wide debate about the contributions of British exports to the pace of national income and per capita national income growth prior to 1831 (Crafts and Harley). During the trade boom of the late eighteenth century personal annual income probably rose by less than 1 percent. British trade in goods (exports plus imports) was a rising proportion of national income in the nineteenth century as the products of the Industrial Revolution found new and growing markets. This was based on exports of consumer goods. Textiles and their products alone accounted for over 68 percent of exports by value during the mid-Victorian economic boom of the 1850s. Imports were principally raw materials (cotton, wheat, lumber) and tropical goods such as sugar and tea. During the mid-nineteenth-century economic boom the rate of growth of trade was a direct cause of the rapid rise in national income and income per capita. This trade had important, spreading effects. British shipping, which dominated the carrying of trade, created a demand for ships, stimulating the shipbuilding industry of cities such as Glasgow and Belfast.
Despite a rising proportion of external trade in national income British goods exports in the late nineteenth century increased less rapidly than at midcentury, and the rate of growth of income also fell. The late-Victorian–Edwardian industrial economy, despite a flurry of exports in the years before World War I, apparent lacked sufficient productivity growth. The technological lead of the Industrial Revolution slipped away, and as other nations entered world markets British industry and its trade exhibited neither more competitive costs nor diversification into new products. The rate of income growth slowed down.
Throughout the nineteenth century Liverpool was the port through which most British trade—by volume and value—flowed. Liverpool's main imports were grain, lumber, and raw cotton, the latter for the nearby Lancashire textile industry. Its exports included finished textile goods, iron, machinery, and a variety of manufactured consumer goods from the industrial Midlands, such as porcelain. Many other ports grew in relative importance, and many developed import specializations based on efficient shipping locations and the demands of their industrial hinterlands. (Many more ports developed around the requirements of the coastal trade, notably the Welsh ports, in coal and iron.) Based on material imports, some of these port cities also developed manufacturing specializations that fed into exports. Glasgow became a center for tobacco and jam manufacturing, the latter based on imports of sugar (from the West Indies) and fruit (from Spain). Dundee was the jute capital; Belfast shipped linen and contributed to the export of ships. Bristol had long been the port for the importation of sherry from Portugal. Ports on the east coast, including London, traded more with the Baltic and North Sea ports of Europe. West coast ports, particularly Liverpool and Glasgow, carried more of the North Atlantic and long-distance trades.
One of the important features of the British trade in goods is that since the first detailed and accurate measurement in the nineteenth century, the annual value of imports was greater than the value of exports. But in the nineteenth century and through until 1913 Great Britain was also the world's major source of international capital with a sustained, high-capital outflow. From the perspective of the international balance of payments, this capital outflow was only sustained by a surplus in the overall current account. Because the British balance of trade in goods was negative, the current account of the balance of payments contained other items that more than offset it. These items, called invisibles, were shipping services, financial services, and, importantly, the return of interest and dividends from the large stock of British overseas investment.
THE WORLD WARS TO THE PRESENT
Between the two world wars, from 1919 to 1939, the British economy performed very sluggishly. Unemployment in Great Britain was as high throughout the 1920s as it would be during the world depression of the next decade. It was particularly severe in the export sectors of the British economy. This was part of a continuing pattern evident in the late nineteenth century to 1913: British trade (industry) was most committed to that part of world trade, consumer goods, that was expanding least rapidly, and least committed to that part of world trade, producer
|SOURCE: Adapted from The United Kingdom Balance of Payments, The Pink Book, 2003.
|Food, beverages & tobacco
|Coal, gas & electricity
|Precious stones & silver
|Total semi-manufactured goods
|Finished manufactured goods
|Other consumer goods
|Ships & aircraft
|Total finished manufactured goods
|Commodities & trade not classified
|Average annual current value (£million)
goods, that was expanding most rapidly. Furthermore, compared to the nineteenth century, Britain had many more competitors. This was nowhere more evident than in its traditional export industries of the early twentieth century (cotton textiles, iron and steel, and coal). Along with shipbuilding, the decline of these particular industries contributed to the relative stagnation of the British interwar economy. The second reason for the poor performance of the export sectors was a set of disastrous macroeconomic policies. The decision to return to the pre-1914 gold-exchange rate after the wartime suspension left Britain with an overvalued exchange rate, making her exports relatively expensive. Great Britain by the 1920s was in full retreat from its historical free-trade position. As in most other developed countries, custom duties rose even further in the next decade. In order to stem the descent into autarky, Great Britain sponsored several important empire conferences, the outcome of which was the British Preferential Tariff (1934). This involved offering a special, lower rate to British (Empire) Commonwealth trade partners. The British Preferential Tariff evolved into the "Most Favoured Nation" rate schedule of the postwar years, and was adopted by many trading nations and extended widely on a bilateral basis.
After World War II Great Britain joined the new world order of the General Agreement on Tariffs and Trade (GATT), which was committed to lowering both tariff and nontariff barriers to trade. However, the disappointing growth of exports and income in the immediate postwar period led to the strategy of finding trade alliances. In 1960 Great Britain became one of the original members of the European Free Trade Association (EFTA), which was designed as an alternative to the rapidly evolving European Economic Community (EEC, or "common market"). Growing links and potential trade gains with EEC countries, however, eventually led in 1973 to Britain's joining this larger unit (which became the European Union [EU] in 1993), with its common external tariff and its commitment to common trade practices and general economic harmonization. Given the high level of agricultural subsidies within the EEC, joining the common market gave rise to a debate in Great Britain in the 1960s about the abandonment of the historical position of low custom duties on food and raw material imports from traditional sources such as Australia and New Zealand (Commonwealth countries). These economic welfare costs, however, were offset by the income benefits in the export sector of scale economies and easier entrance to the European market in services. The EU is now the main market for British exports and the source of most imports, although, by country, the United States is Britain's single-largest national trading partner.
The British export of services has been approximately 25 percent of all exports sales since the end of World War II. Fluctuations in this proportion are associated with the competitiveness of the service sector within the United Kingdom. Since 1995, however, the proportion of services in the overall British export bundle has sharply increased, and in 2004 constitutes 32 percent of all exports by value. Indeed, although the balance of overall trade (goods and services) has been for the most part negative, the balance on account of services taken alone has been positive through the last half century—it is one of the dynamic sectors of the export profile. In terms of their net contributions (in a balance-of-payments sense) the most important service sectors are insurance and financial services, industries where the United Kingdom has long enjoyed an historical advantage. Travel and tourism (travel to and tourism within Great Britain) has been for some time the largest sector within services based the gross value of its exports sales. However, the British themselves like traveling abroad, and the value of this activity (classed as an import of services) more than offsets the positive effect.
In the post-1945 period the British industrial economy diversified in several fundamental ways, which are reflected in the trade bundle. First, the proportion of exports in capital and intermediate goods rose along with the export of semi manufactured goods, and the reliance on consumer goods exports fell. Second, the discovery and rapid development of oil resources in the North Sea put the country in the position of a net oil exporter (different grades and types are still imported). The oil industry has had major regional growth effects in manufacturing and construction, especially in the northeast of the country. A surge in oil exports and high prices in the early 1980s actually turned the British commodity trade account balance positive for a few exceptional years. Gross oil exports have averaged about 6.8 percent of the British export of goods in the recent decade. Today, not only is British trade policy sharply different from that of a half-century earlier, but the industrial structure supports trade of an enlarged and more diversified character.
SEE ALSO Agriculture; Anglo American Corporation; ARAMCO; Argentina; Arms, Armaments; Australia and New Zealand; Automobile; Brazil; Balance of Payments; Baltic Exchange; Banking; Baring, Alexander; Bessemer, Henry; Blockades in War; Board of Trade, British; Bonaparte, Napoleon; Boycott; Bretton Woods; Bristol; British-American Tobacco; Bunge and Born; Canals; Brunel, Isambard Kingdom; Canada; Cargoes, Freight; Cargoes, Passenger; Churchill, Winston; Coal; Common Market and the European Union; Corn Laws; Cotton; Cunard, Samuel; Depressions and Recoveries; DÍaz, Porfirio; East India Company, British;Elizabeth I; Empire, British; Ethnic Groups, Gujarati; Ethnic Groups, Huguenots; Ethnic Groups, Irish; Ethnic Groups, Jews; Ethnic Groups, Scots; Famine; France; Free Trade, Theory and Practice; GATT, WTO; Ghana; Gilbert, Sir Humphrey; Glasgow;Gold Coast;Great Depression of the 1930s; Haiti; Hakluyt, Richard, the Younger; Harbors; Hart, Robert;Hong Kong;Hong Kong and Shanghai Bank; Hawkins, John; Hume, David; Imperial Preference; Imperialism; India; Industrial Revolution; Industrialization; Information and Communications;International Trade Agreements; Iran; Iron and Steel; Jamaica; Jardine Matheson; Joint-Stock Companies; Kenya;Law, Common and Civil;Levant Company;Liverpool;Lloyd's of London;London;Loney, Nicholas;Markets, Stock;Mediterranean;Mercantilism;Mill, John Stuart;Mining;Monroe, James;Nationalization;Navigation Acts;Nigeria;OPEC;Packet Boats;Pakistan;Pasha, Ismaʿil;Peel, Sir Robert;Persian Gulf;Petroleum;Pharmaceuticals;Piracy;Port Cities;Privateering;Protectionism and Tariff Wars;Regional Trade Agreements;Rhodes, Cecil;Rothschild Family;Royal Niger Company;SaEud Family;Senegambia;Shipbuilding;Thailand;Silk;Singapore;Slavery and the African Slave Trade;Smith, Adam;Smuggling;South Africa;Sports;Subsidies;Suez Canal;Sugar, Molasses, and Rum;Tea;Textiles;Timber;Tobacco;Toys;Treaties;Unilever;United States;Wars;Wool;Zimbabwe.
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Donald G. Paterson