Imperial Preference and British Trade
Imperial preference was the explicit rejection of the free-trade settlement that had defined the British Empire from 1846 to 1914. The 1846 repeal of the Corn Laws, followed by the abolition of sugar duties in 1874, had turned Britain into the world’s first free-trade empire. By 1903, however, the Colonial Secretary Joseph Chamberlain was publicly arguing that the United Kingdom had “lost something” by abandoning protection, and that the empire should reconstruct a customs union of its own. The campaign for imperial preference culminated in the Ottawa Agreements of 1932, and the system survived, in attenuated form, until Britain’s accession to the European Economic Community in 1973.
Imperial preference matters because it tells us when, and on what terms, Britain accepted that the economic logic of empire had changed. P. J. Cain and A. G. Hopkins, in British Imperialism: 1688–2015 (2016), treat the turn to protection as a reaction to the relative decline of British manufacturing competitiveness after 1870 and to the perceived threat of American and German industrial challenge. Barry Eichengreen, in The European Economy Since 1945 (2007), reads Ottawa as a desperate response to the slump. Both readings are correct, but neither is sufficient on its own.
The Free-Trade Empire: 1846–1902
The repeal of the Corn Laws in 1846 was the political work of the Anti-Corn Law League, founded in Manchester in 1838 and led by Richard Cobden and John Bright. The settlement that followed was not simple free trade. The Navigation Acts, which required colonial produce to be shipped in British vessels, remained until 1849. The sugar duties that protected West Indian planters were abolished in stages between 1846 and 1874. India was forced open by the terms of the Charter Acts of 1813, 1833, and 1853, and by the destruction of its textile industry under the pressure of Lancashire competition — Sven Beckert’s Empire of Cotton (2014) treats this deindustrialisation as one of the founding acts of European global economic dominance.
By 1870 Britain was the workshop, the banker, and the carrier of the world economy. As Kenneth Pomeranz argued in The Great Divergence (2000), this position rested on imperial trade, but the trade was conducted under free-trade rather than preferential tariffs. The first Colonial Conference of 1887, convened by Lord Salisbury to coincide with Queen Victoria’s Golden Jubilee, marked a new departure. The conference discussed the possibility of a “federation” of the empire and a “preferential” trade relationship, but reached no agreement. Ten years later, at the 1897 Colonial Conference on the occasion of the Diamond Jubilee, Chamberlain — by now Colonial Secretary — pressed the case for a customs union of the empire. The conference again declined to act.
The 1902 Conference and the Chamberlain Campaign
The 1902 Colonial Conference, held in London between June and August, was the first to consider imperial preference in concrete terms. The conference resolved that “the further development of the principle of preferential trade” should be considered at a future meeting. Chamberlain returned from the conference converted, and in May 1903 he launched the Tariff Reform League, advocating a system of imperial preferences financed by duties on foreign foodstuffs and manufactured goods. The campaign split the Conservative Party, destroyed the political fortunes of the Balfour government, and returned the Liberals to office in 1906 under Campbell-Bannerman.
Chamberlain’s campaign failed. The 1906 general election returned 401 Liberals to 156 Conservatives, and free trade remained the operative policy. As Susan Strange argued in Sterling and British Policy (1971), free trade was the price of London’s role as the world’s banker: any move towards protection would have risked retaliatory tariffs against British service exports, which were invisible but enormous. The City of London, in this reading, vetoed Chamberlain.
The 1932 Ottawa Agreements
The Ottawa Agreements of 1932 were signed on 21 August 1932, the product of the first Imperial Economic Conference. The conference had been called by the National Government of Ramsay MacDonald in July 1932, in conditions of acute economic distress. The British economy was contracting, world trade had collapsed by perhaps a third since 1929, and the Empire had become, in the language of the day, the natural “home market” for British exports. The Ottawa Agreements established a complex set of preferences: British exports to the dominions and colonies received preferential access in exchange for similar preferences on Dominion exports to Britain.
The effect was modest in strictly economic terms. Marcello de Cecco, in The International Gold Standard: Money and Empire (1984), has calculated that the preferences granted at Ottawa were narrow — covering perhaps 15 per cent of the trade between Britain and the dominions, and leaving the bulk of trade to the existing most-favoured-nation schedules. But the political significance was greater. Imperial preference was the institutional expression of the “economic federation” of the empire that the 1926 Balfour Declaration had proclaimed. As Charles Kindleberger put it in The World in Depression, 1929–1939 (1973), Ottawa marked the moment when Britain accepted the regional principle — the idea that the empire could be defended as a regional bloc — and the moment when the post-1945 American-led liberal order was first foreshadowed.
The Decolonisation of Imperial Preference
The General Agreement on Tariffs and Trade (GATT) of 1947, and the British commitment to multilateral tariff reduction that followed, slowly dismantled the Ottawa system. Britain negotiated a series of “Kennedy Round” and “Tokyo Round” tariff reductions through the 1960s. The 1971 White Paper on the European Communities — “Britain’s New Approach to Europe” — accepted that the future lay with Europe rather than the Commonwealth. The Treaty of Accession was signed on 22 January 1972, and the European Communities Act received the Royal Assent on 17 October that year. The Ottawa system was, formally, over.
Yet the imperial preference system was not nothing. Lance Davis and Robert Huttenback, in Mammon and the Pursuit of Empire (1986), showed that the dominions’ tariffs were a substantial revenue source for the British Treasury in the early twentieth century. Branko Milanovic, in Capitalism, Alone (2019), has more recently argued that the imperial preference system was the institutional template for the regional trade blocs — the European Economic Community, the North American Free Trade Agreement, MERCOSUR — that have, since 1945, structured the global trading system. The empire is gone, but the regionalism it pioneered is everywhere.
A Primary Source: The 1932 Ottawa Resolution
The opening resolution of the 1932 Imperial Economic Conference is one of the founding documents of the modern imperial economy. The conference declared that the governments of the Commonwealth “are agreed that the best means of promoting the interests of the British Commonwealth as a whole is to give mutual preference to the products of the member countries of the Commonwealth, and to accord to the trade of the United Kingdom in particular the most favourable treatment that can be provided.” The phrase “most favourable treatment” was a direct challenge to the most-favoured-nation principle of multilateral trade, and the British government’s later commitment to GATT would require the slow dismantling of exactly this kind of preference.
Historiographical Note
The historiography of imperial preference has been shaped by the larger debate over the meaning of British economic decline. Cain and Hopkins treat Ottawa as the political moment when gentlemanly capitalism reasserted its imperial commitments against the threat of industrial decline. Eichengreen and de Cecco read the system as a regional stop-gap, a defensive response to a global slump that the gold standard had failed to manage. Kindleberger is more sympathetic to the regional case. The unresolved question is whether the system slowed or accelerated the relative decline of British industry; the consensus, as Forrest Capie has argued in The British Economy in the Twentieth Century (1986), is that the answer depends on the time horizon chosen.