The policies deployed by Britain included the following. First, policies were deployed to encourage primary production in the colonies. For example, in the 1720s, Walpole provided export subsidies (‘bounties’) to and abolished British import duties on raw materials produced in the American colonies (such as hemp, wood and timber). This was done in the belief that encouraging the production of raw material would ‘divert them from carrying on manufactures which interfered with those of England’.[206] Note that this is exactly the same logic that Cobden used in justifying the repeal of the Corn Law, which he thought was unwittingly helping continental Europe and the USA to industrialize by making their agricultural exports more difficult (see section 2.2.1 above).
Second, some manufacturing activities were outlawed. For example, the construction of new rolling and slitting steel mills in America was outlawed, which forced the Americans to specialize in the low-value-added pig and bar iron, rather than high-value-added steel products.[207] Some historians argue that this kind of policy did not actually damage the US economy significantly at the time, as the country did not have comparative advantage in manufacturing.[208] It seems reasonable to argue, however, that such policy would have become a major obstacle, if not an insurmountable barrier, to US industrial development if the country had remained a British colony beyond the early (mainly agrarian and commercial) stages of development.[209]
Third, exports from the colonies that competed with British products were banned. We have already mentioned that the cotton textile industry of India was dealt a heavy blow in the eighteenth century by the British ban on cotton textile imports from India (‘calicoes’), even when the latter’s products were superior to the British ones (see section 2.2.1 above).[210] Another example of this came in 1699, when Britain banned the export of woollen cloth from its colonies to other countries (the Wool Act), essentially destroying the Irish woollen industry. This Act also stifled the emergence of the woollen manufacturing industry in the American colonies.[211] In yet another example, a law was introduced in 1732, which mainly targeted the beaver-skin hat industry that had grown up in America; this law banned the exports of hats from colonies either to foreign countries or to other colonies.[212]
Fourth, the use of tariffs by colonial authorities was banned or, if they were considered necessary for revenue reasons, countered in a number of ways. When in 1859 the British colonial government in India imposed small import duties on textile goods (between three and ten per cent) for purely fiscal reasons, the local producers were taxed to the same extent in order to provide a ‘level playing field’.[213] Even with this ‘compensation’, the British cotton manufacturers put constant pressure on the government for the repeal of the duties, which they finally obtained in 1882.[214] In the 1890s, when the colonial government in India once again tried to impose tariffs on cotton products – this time in order to protect the Indian cotton industry, rather than for revenue reasons – the cotton textile pressure groups thwarted the attempt. Until 1917, there was no tariff on cotton goods imports into India.[215]
2.3.2. Semi-Independent Countries
Outside the formal colonies, the British (and other NDCs’) attempts to impede the development of manufacturing in less developed countries mainly took the form of imposing free trade through so-called ‘unequal treaties’ during the nineteenth century. These treaties normally involved the imposition of tariff ceilings, typically at the five per cent flat rate, and the deprivation of tariff autonomy.[216]
It is extremely disconcerting to note that the binding of tariffs at a low, uniform rate (although not necessarily below five per cent) is exactly what modern-day free-trade economists recommend to developing countries. The classic work by Little et al. argues that the appropriate level of protection is at most 20 per cent for the poorest countries and virtually zero for the more advanced developing countries. World Bank argues that ‘[e] vidence suggests the merits of phasing out quantitative restrictions rapidly, and reducing tariffs to reasonably
Britain first used unequal treaties in Latin America, starting with Brazil in 1810, as the countries in the continent acquired political independence. Starting with the Nanking Treaty (1842), which followed the Opium War (1839-42), China was forced to sign a series of unequal treaties over the next couple of decades. These eventually resulted in a complete loss of tariff autonomy and, symbolically, a Briton being the head of customs for 55 years, from 1863 to 1908. From 1824 onwards, Siam (now Thailand) signed various unequal treaties, ending with the most comprehensive one in 1855. Persia signed unequal treaties in 1836 and 1857, as did the Ottoman Empire in 1838 and 1861.[218]
Even Japan lost its tariff autonomy following the unequal treaties signed after its opening up in 1854 (see section 2.2.7 above). It was eventually able to end the unequal treaties, but that did not happen until 1911[219] In this context, it is also interesting to note that when Japan forcefully opened up Korea in 1876 it exactly imitated the Western countries, forcing Korea to sign an unequal treaty that deprived the latter of its tariff autonomy despite the fact that Japan itself still did not have tariff autonomy itself.
The larger Latin American countries were able to regain tariff autonomy from the 1880s, before Japan did. Many others regained it only after the First World War, but Turkey had to wait for tariff autonomy until 1923 (despite the unequal treaty having been signed as early as 1838!) and China until 1929.[220] Amsden shows how industrialization in these countries was only able to begin in earnest when they regained their tariff (and other policy) autonomy.[221]
2.3.3. Competitor Nations
In relation to other competitor nations of Europe (and later the USA), Britain could not use the blatant measures mentioned above in order to pull away. Rather, it concentrated mainly on preventing the outflow of its superior technologies, although such measures were not always effective. [222]
Until the mid-nineteenth century, when the machinery came to embody key technologies, the most important means of technological transfer was the movement of skilled workers, in whom most technological knowledge was then embodied. As a result, the less advanced countries tried to recruit skilled workers from the more advanced countries, especially from Britain, and also to bring back nationals who were employed in establishments in these countries. This was often done through a concerted effort orchestrated and endorsed by their governments – while the governments of the more advanced countries tried their best to prevent such migration.
As mentioned above (section 2.2.4), it was thanks to France’s, and other European countries’, attempts to recruit skilled workers on a large scale that in 1719 Britain was finally galvanized into introducing a ban on the emigration of skilled workers, particularly on ‘suborning’, or attempting to recruit such workers for jobs abroad. According to this law, suborning was punishable through fine or even imprisonment. Emigrant workers who did not return home within six months of being warned to do so by an accredited British official (usually a diplomat stationed abroad) would in effect lose their right to lands arid goods in Britain and have their citizenship withdrawn. The law specifically mentioned industries such as wool, steel, iron, brass and other metals, as well as watchmaking; in practice, however, it covered all industries.[223] The ban on the emigration of skilled labour and suborning lasted until 1825.[224]
