Brexit, Free Trade, and the Perils of History

Lord Palmerston Addressing the House of Commons During the Debates on the Cobden–Chevalier Treaty in February 1860, as painted by John Phillip (1863).
Palmerston before the House of Commons amid the Debates on the Cobden–Chevalier Treaty in February 1860. Painting by John Phillip (1863).

Anthony Howe
University of East Anglia

Amid much discussion of alternatives to Britain’s current relationship with Europe, the Canadian, Norwegian, and Swiss models have featured widely. But surprisingly little attention has been paid to the closest historical model of what Brexiteers might hail as ‘a free trade Europe’.[1]

The first version of a ‘common market’ based on free trade treaties was created in Europe in the 1860s. Following the signing of the 1860 Anglo-French (Cobden-Chevalier) commercial treaty, a further 50-60 interlocking trade treaties were negotiated between European states, in effect creating a free trade area, the closest Europe got to a single market before the 1970s.

The economic benefits of this first common market are still contested by economic historians, but, as a model of a loose institutional framework it successfully lowered tariffs between participating states (only Russia of major European states remained outside it).

And at first glance this treaty network appears remarkably similar to the goals of those wishing to avoid a European super state in favour of simpler trade-based relationships. However, the fate of this model should be less than encouraging for the Leave campaign.

For in the 1870s in the face of an influx of cheap grain from North America, under pressure from its farmers, most European states (Britain being the outstanding exception), resorted to protective tariffs to keep out competing cheap agricultural imports. And as Europe entered its first ‘Great Depression’ during this same period, so, too, did industrialists seek tariff protection as prices fell and global competition increased.

As a result, the free trade treaties of the 1860s were not renewed, tariff walls rose across Europe, and tariff wars were not infrequent in the coming decades. This spiral of economic nationalism was in turn a vital conditioning factor in the diplomacy that preceded the outbreak of the First World War.

Nor did the years after the First World War prove favourable to the restoration of a free trade Europe. Rather in the ‘new Europe’ based on self-determination, states (new and old) sought to protect agriculture and industry, create employment, and use tariffs to raise revenue.

Attempts to counter this were largely unsuccessful. John Maynard Keynes, for example, put forward a great scheme for a European free trade area, but it fell on deaf ears. The newly created League of Nations sought rather limply to promote economic internationalism, but the best it could manage to negotiate were tariff truces, halting temporarily the rising tariff walls that protected Europe’s national economies. Once more Europe entered a spiral of nationalism and economic competition which hastened the rise of the dictators and the coming of another world war.

After 1945, what were the prospects for a new European economic order, offering free trade and hopefully peace?

Two ways emerged.

On the one hand, although the International Trade Organisation proved stillborn, from 1947 the General Agreements on Tariffs and Trade offered a model of trade liberalisation which gradually extended the world’s markets through its successive bargaining rounds, culminating in the formation of the World Trade Organisation (WTO) in 1995. This was more than a ‘rich man’s club’ and offered a global route to freer trade embraced by many developed and developing economies. Its agreements were in theory binding, but their strength was often undermined by escape clauses and violations.

On the other hand, a desire for stronger unity bound together ‘the Six’ states who in 1957 formed the (second) European common market, which was a free trade area. But it sought to avoid the frailty of the first by ensuring that its treaties were permanent and enforceable; for many, including Friedrich von Hayek, the appeal of a federal Europe was to ensure that free trade was protected from the vagaries of nation states, liable to be swayed by either democratic mood swings or powerful vested interests (seeking, let’s say, to exclude cheap Chinese steel?).

Here, then, was the old model of the 1860s recreated in a design meant to last. But the price of permanence (and the guarantee against a relapse into competitive economic warfare) was a sacrifice of national sovereignty to a more federal Europe.

The best model for the ‘Brexit’ camp therefore remains that of the 1860s, a loosely bound free trade treaty area with no political strings attached. But it is those same political strings that also offer a measure of permanence for free trade; we might say—as did the rosy-eyed free traders of the 1860s—that it’s in nobody’s interest to resort to protection or abandon trade treaties, but such reassurances in the past have proved worthless.

Logically, the only real guarantee against a resort to protectionism and the possibility of future tariff wars would be to make such free trade treaties enforceable under the WTO. Of course this would then raise the spectre of a ‘World State’, something even more distasteful to the ‘Leave’ camp.

Anthony Howe is Professor of Modern History at the University of East Anglia, and has written extensively on the history of free trade, including Free Trade and Liberal England, 1846-1946 (Oxford, 1997), and has edited The Letters of Richard Cobden (4 volumes, Oxford, 2007-15).

———-

[1] Et al., ‘Boris Johnson on Brexit: “We Can be Like Canada,”’ Guardian (11 March 2016); Andrew Smith, ‘What is the Canada Trade Model and Could it Work for a Post-Brexit UK?’ Conversation (20 April 2016); Jonas Helseth, ‘Think a Post-Brexit “Norway Style” EU Deal Would Work?” Independent (2 June 2016); David Williamson, ‘Are Switzerland and Norway Models for a Post-Brexit UK?’ Wales Online (31 May 2016); Ralph Atkins, ‘Brexit Debate Resonates across Alps as Swiss Question EU Ties,’ Financial Times (18 April 2016).

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