As the Industrial Revolution spread throughout Europe and beyond in the 19th century, so did new approaches to economic thinking. Protectionism was slowly but steadily going out of vogue, and free trade, or at least liberalized trade, was making headway. In Britain, the repeal of the Corn Laws in the 1840s was a major turning point in trade policy. It was followed up in 1860 by what has been called the first free trade agreement between two countries, the Cobden-Chevalier Treaty between Britain and France. In fact, these two milestones were causes taken up by the same man, Richard Cobden, who led the Anti-Corn Law League in the 1840s and then helped convince the French government of the merits of free trade a decade later.
Pre-Treaty
The Cobden-Chevalier Treaty greatly reduced the tariffs levied on goods traded between Britain and France. But what exactly did trade look like in Europe when Cobden arrived in France to push for the treaty in 1859? In that era, trade in Europe could be divided across two geographic dimensions: internal vs. external and northern vs. southern. For the first, it is worth noting that at the beginning of the 19th century, many European countries still had some form of internal tariff barriers as well as the more recognizable external barriers. Regarding the second dimension, countries in northwestern Europe such as the UK and Denmark were generally more liberal in their trade policies than those of southern Europe, including France.
In the early to mid-1800s, internal tariffs were gradually being abolished in continental Europe. Often forgotten about in the history of trade liberalization is that many countries, including France, had customs barriers within their own countries, suppressing internal trade. In France, many of these were abolished during the French Revolution decades earlier. However, the city of Paris continued to collect a duty, called the octroi, on goods entering the city until the late 1800s. In some other southern European countries, such internal customs duties existed into the 20th century.
Nonetheless, internal trade barriers were being whittled away and attention turned to international barriers which remained firmly established. While the more “liberal” countries like Britain, the Netherlands, and Denmark had merely high tariffs, many countries in continental Europe had outright import bans on manufactured goods, such as in Spain, France, and Austria. However, such strong protectionist measures were usually limited to industrial goods. Already by the 1850s, tariffs had been reduced to low levels on agricultural products and raw materials, not just in Britain following repeal of the Corn Laws, but across much of Europe. Though tariffs in Europe remained high on industrial goods, Britain did make progress in reducing customs duties in the years prior to the Cobden-Chevalier Treaty; by the 1850s, the most heavily taxed imports were usually mere luxury goods such as foreign wine and spirits.
Regardless of the negligible pace of liberalization, trade volumes in Europe grew much faster in the ten years preceding Cobden’s arrival to France than in earlier decades. Though, with tariff barriers as high as they were, there was considerable room for growth. In 1859, for example, the UK had an average tariff of 8.9% (this was the average tariff on imported goods, weighted by the amount of imports of that good) and France’s average tariff was 18.7%, as shown in blue below. In the years following the Cobden-Chevalier Treaty, tariffs would go down across Europe, but most notably in Britain.
Free Trade
The motivation for both Britain and France to liberalize their trade relationship had been building for years leading up to the treaty. This was most notable in France, which had the more protected industry up to that point. In 1852, Napoleon III, nephew of the more famous Napoleon, was ‘elected’ Emperor in a popular referendum. The new emperor set about looking for ways to modernize French industry. Unlike many other business-oriented leaders, he had no problem ruffling the feathers of the business elite and as such was drawn to the idea of reducing protective tariffs.
Michel Chevalier was at the time a semi-retired French statesman. Somewhat remarkably, neither of the men who lent their names to the agreement held great offices in their respective countries, reflecting the somewhat informal way the agreement was brought about. Both Cobden and Chevalier had earned reputations for advocating liberalized trade and sensing that the political opportunity had arrived, Chevalier invited Cobden to meet with him in France to discuss the idea of a free trade agreement. Cobden’s meeting with Chevalier in 1859 eventually turned into an audience with the French Minister of Commerce and then with the Emperor himself.
Cobden had managed to convince the Emperor of the merits of the idea and Cobden had the backing of the British government in bringing about an agreement. The result was remarkable; in just three months a treaty was drawn up and signed. The deal was met with uproar by French industrialists who increasingly opposed the Emperor’s reforms. Despite the strong reaction, the agreement was actually far from a true free trade deal, tariffs were greatly reduced, but not altogether eliminated.
In the treaty, the British agreed to eliminate most tariffs on French luxury goods and the French capped their tariffs on British goods. Crucially though, it was agreed that Britain and France would also extend to each other any tariff reduction they offered to another country in the future. These “most-favored-nation” clauses resulted in a cascading series of tariff cuts as the two nations went on to sign deals with other countries.
Legacy
The Cobden-Chevalier Treaty had the obvious impact of increasing trade between Britain and France. In 1869, The Economist published an expert opinion claiming that British imports from France had at least doubled in the eight years after the treaty’s signing with exports to France rising by even more. However, the deal was judged to have had a larger impact on French industry than on British industry. Many French businesses were strongly opposed to free trade and some industries were greatly affected by British imports. Charcoal forges and textile manufacturers, for example, were impacted by growing imports of British coal and cloth.
However, the period following the treaty came amid rapid industrialization in France as the threat of British imports forced manufacturers to modernize their production. Some government assistance is said to have helped French competitiveness as well; this included everything from low-interest loans provided to industries by the state as well as state-planned railroad construction.
For France, the political push for trade liberalization did not end with the Cobden-Chevalier Treaty. After 1860, trade agreements were made with Belgium, Italy, Switzerland, Spain, Austria and still other countries; still more impressive was that all these treaties were made in the ten years following the deal with Britain. Like the Cobden-Chevalier Treaty, these agreements also tended to come with most-favored-nation clauses that ensured that signatories would benefit from tariff reductions granted to third countries after the treaties were signed. These clauses meant that the trend towards liberalization accelerated, resulting in the rapid breakdown in tariff barriers across Europe. The chart already presented above shows the reduction of European tariffs that took place over a mere 16-year period in stark terms.
Lesson
The Cobden-Chevalier Treaty kickstarted a rapid trend towards trade liberalization, a stunning change from the rigid protectionism that characterized the world before it. While this liberalization would be mostly a European phenomenon and would partially reverse in later decades, free trade as a convincing concept was here to stay. It’s true that free trade has gotten a bad reputation as of late, largely for the economic dislocation it causes in particular localities whose industries have become less competitive with time. However, the recently increased prospect of protective trade barriers has only caused further trouble and revealed their negative consequences. Regardless though, the prospect of two like-minded men like Richard Cobden and Michel Chevalier being able to make such transformative change so quickly has become unrealistic. Trade deals today seem to languish for years if they ever come to fruition at all.
Further Reading
1. “Cobden-Chevalier Treaty.” Encyclopedia of Modern Europe: Europe 1789-1914: Encyclopedia of the Age of Industry and Empire. , 2006.
2. Fonseca, Gonçalo L. “Michel Chevalier, 1806-1879.” The History of Economic Thought, Institute for New Economic Thinking.
3. Lampe, Markus. “Bilateral Trade Flows in Europe, 1857–1875: A New Dataset.” Research in Economic History, 28 Feb. 2008, pp. 81–155.
4. Lampe, Markus. “Effects of Bilateralism and the MFN Clause on International Trade: Evidence for the Cobden-Chevalier Network, 1860-1875.” The Journal of Economic History, vol. 69, no. 04, 2009, p. 1012.
5. Tena-Junguito, Antonio, et al. “How Much Trade Liberalization Was There in the World Before and After Cobden-Chevalier?” The Journal of Economic History, vol. 72, no. 03, 2012, pp. 708–740.
