A Workers’ Vision of Free Trade? British Free Trade Debates at the Dawn of International Organization

Abstract

This article explores the debates concerning ‘free trade’ in Britain and the British Empire in the early twentieth century. After many decades of commitment to a broad, laissez-faire understanding of the concept, the First World War years lent strength to calls for a stronger state hand in international trade management, which took limited but concrete form through the passage of various protective laws. A new labour vision of free trade developed in the period as well, however, which emphasized the necessity of transnational solidarity for the wellbeing of all workers. This vision played an important role in holding back the tide of protectionism in Britain for a time, helping to enable the space for the 1927 World Economic Conference to take place. While contributing a degree of support to the idea of free trade in general, the labour vision did not have a major policy impact on the international level, and following the outbreak of the Great Depression, Britain followed the rest of the world in erecting high tariff barriers. Despite the limitations it faced in its time, the early twentieth-century British labour vision of free trade is valuable to recover, offering an alternative image of global trade freedom.

Introduction

British economic policy in the nineteenth century achieved a high degree of theoretical purity: laissez faire at home and free trade internationally. Nineteenth-century Cobdenite free trade theory encompassed other goods as well, including an ever popular, progressive emphasis on cheap food and a resistance to corruption, autocracy and monopoly, all of which were understood to benefit from and grow under protectionist regimes. ¹ On the international level, free trade was upheld as a means of eliminating barriers between nations, fostering interdependence, facilitating communication, promoting international understanding, and thereby preventing militarism and bringing prosperity to all participating societies. ²

Relative to much of the world, this latter presentation constituted only a thin ideological veneer, and British ‘free trade’ in practice took a very different form, as gunboats, wars, colonization and other forms of coercion were used to force states around the world to open their markets to British trade and investment. ³ The abundantly apparent alternate reality of ‘free trade’ for much of the rest of the world, however, did not mean belief in the concept was entirely without significance. Contestations over Britain's colonial policy often pitted believers in a more open field of contestation between British companies (and others) around the world against those who supported more unvarnished forms of state support to favoured commercial ventures, via the granting of monopolies to concessionary companies, for instance. ⁴ The Cobdenite vision was expressed in this context too, and remained powerful from its initial articulation in the early nineteenth century into the early twentieth century, as expressed principally in forceful resistance to tariff barriers.

The anti-tariff barrier vision of free trade was never an entirely untroubled policy, however. Already in the mid-nineteenth century, British free trade policies were challenged by steps such as Canada's 1858 Cayley-Galt Tariff. By the 1880s, the British world economic dominance was threatened by the rise of new powers, principally Germany and the United States. ⁵ These challenges led to increased reflection and proposals as to the manner in which the British Empire might be strengthened in response. ⁶ Thus, for example, in March 1903, Charles McArthur moved a resolution suggesting that while Britain should, in general, maintain a free trade policy, that policy should be supported by ‘some counteracting measures … to prevent measures restrictive of Free Trade’ where necessary, and should, in general, begin to take measures in the direction of a future policy of ‘Free Trade within the Empire’. ⁷ Others resisted the resolution, however, and no action was taken. ⁸

Despite these developments, free trade remained the British orthodoxy, and attempts to adopt a system of imperial preference were roundly defeated at the ballot box. ⁹ The First World War represented a major moment of change, however. First, the idea of laissez faire as a general philosophy of domestic governance crumbled, as the government took control of the economy to an unprecedented degree during the war. While the post-war period saw the degree of government control gradually rolled back, it never again returned to the minimal level that was the norm for the nineteenth century.

The war dramatically disrupted the international trade and financial orders as well. It also shook the belief in free trade of some previously committed advocates: Trentmann, for instance, quotes the chairman of the Bradford Dyers’ Association in 1916, who observed that whereas before the war he had been ‘an out and out unrepentant Free Trader, today I have no view at all … after the war I am going to try and be a little child again and learn my lessons anew’. ¹⁰ A new sort of pro-free trade position, as taken up by the Labour Party in particular, remained dominant in Britain for more than a decade after the war; however, even as a few small steps away from that posture were taken.

Britain's almost unique ongoing commitment to the ‘free trade’ idea in the post-war years helped enable the 1927 International Economic Conference's adoption of a strong pro-free trade position. The labour vision of free trade was important in maintaining the space for this conference. The outbreak of the Great Depression a couple of years thereafter meant the recommendations of the conference would not be accepted; moreover, even Britain turned to protective measures.

In addition, while the 1927 International Economic Conference positively recognized the relationship between trade and peace, delegates stopped far short of the Labour Party vision, which would have linked free trade and labour standards. The rise of such a vision in the period in question, therefore, has largely been forgotten. While doubtless perennially contentious, that vision is worth recovering today, due to its potential to better address some of the tensions at the heart of global trade and labour policy.

The War

A Brief Background to Wartime and Postwar Developments

The repeal of the Corn Laws in 1846, together with the repeal of the Navigation Acts in 1849, were key moments in the development of ‘free trade’ ideas within Britain. ¹¹ On the international level, these developments had minimal impact; however, as Lacher and Germann have noted, ‘the very fact that Britain's turn toward unilateral free trade was unconditional’ following the repeal of the Corn Laws, ‘and retaliation therefore precluded, meant that there were few reasons for European governments to follow suit with similar arrangements’. ¹² To the extent Britain was opening its market to cheap agricultural goods and the like, moreover, the benefit came not only in terms of popular appreciation, but also a more easily maintained working class, potentially helping to delay the emergence of rival industrial powers. ¹³

The 1860 Cobden-Chevalier Treaty between Britain and France, by contrast, has more often been taken as a key moment in the extension of free trade across Europe. ¹⁴ While this too has been questioned by some, ¹⁵ Coutain has compellingly suggested that it was the ‘unprecedented institutional form/design of the French-initiated and led conventional tariff system regime, not British hegemony, that through institutionalized interstate practices autonomously maintained the world trading system amid multiple shocks’ as the nineteenth century progressed. ¹⁶ On the international level, meanwhile, Most-Favoured-Nation clauses were used to help open up markets in states such as China and Japan, at least prior to the latter managing to renegotiate some of its treaties in the late nineteenth century. ¹⁷

Whatever the precise sources of (what has across time generally been perceived to be) the relatively open nineteenth-century international trading order, that order was understood as under threat at the turn of the century period. As noted above, from Britain's perspective, this involved the rise of new industrial powers, Germany and the United States in particular. ¹⁸ For all the leading powers of the period, the increasing extent and intensity of empire was both spurred by and added to the sense of rising competition for resources and markets. Britain's rivals, moreover, were not reluctant to use tariffs, including the 1879 ‘Iron and Rye’ Tariff in Germany, the 1890 McKinley Tariff in the United States and the 1892 Méline Tariff in France. ¹⁹ Despite such developments, while calls for protectionism increased in Britain, the strength of the Cobdenite vision domestically saw those calls repeatedly defeated at the ballot box. Britain went into the First World War, therefore, as a major global financial centre with an ongoing strong commitment to laissez faire ideas and free trade policies.

Wartime Impacts on International Political Economy

Britain's global economic position shifted dramatically during the First World War. In August 1915, Britain, France and Russia agreed to pool gold reserves to underwrite the pound and franc in New York, enhancing their ability to borrow. ²⁰ Over the course of 1915 and 1916, the British borrowed massive sums from the United States, through J. P. Morgan Bank in particular. ²¹ This shift of the centre of gravity in the global financial system from London to New York doubtless helped generate insecurity and open up terrain for new sorts of reflections on trade policy in Britain. 1915 also saw an important precedent away from free trade in Britain, when the first import duties, often referred to as the McKenna duties, were imposed on certain luxury items, a policy step principally justified on revenue grounds. ²² 1916 also saw the formation of the Federation of British Industries and the British Commonwealth Union, both of which supported protectionist policies, as well as opposing worker freedoms to organize and strike. ²³

Allied coordination on several key fronts developed over this period as well. The Inter-Allied Wheat Executive coordinated allied wheat purchases and shipping from 1916 onwards, and the Allied Maritime Transport Council, ²⁴ formed in November 1917, coordinated shipping more generally. In 1918, the Inter-Allied Food Council saw the Americans take over the project of overseeing the transnational food supply. ²⁵ Such initiatives constituted functional precedents for the dramatic development of global governance that was shortly to come, and, while dictated by the wartime alliances, embodied a more positive vision of the potential for international economic cooperation. In addition, experience in these organizations led some to come to see the potential downsides of international free trade, in terms of ‘wasteful fluctuations and international trusts’, and to recognize in contrast the value and need for ‘international rationing and regulation of key resources’. ²⁶

A third important wartime development was the Allies’ adoption of increasingly harsh approaches to economic warfare as the First World War progressed. ²⁷ In August 1916, Asquith observed in the House of Commons that it was only when ‘the War broke out’ that British officials realized ‘how we have allowed ourselves to become dependent with regard to … essential ingredients for the prosecution of some of our most important industries on sources of supply that were not only not within our own control, but that could be absolutely controlled by the enemy’. ²⁸ For some, the aim was to continue this approach after the war, and this was agreed at the 1916 Paris Economic Conference, where the Allied powers envisioned ongoing sanctions on the Central Powers after the war. In January 1917, the Reconstruction Committee endorsed the imperial preference policy, and in July 1918, the War Cabinet adopted that position as well, albeit without taking any immediate policy steps. ²⁹

At the same time, there was increasing recognition that a different approach would eventually be required. In December 1917, for instance, James Lowther, the Conservative speaker of Parliament, suggested that to ‘cut [Germany] off altogether [economically] and treat her as though she were a leper … would be a way of carrying on the war, and although it would not be with the weapons we were now using, there would be the same hatred and struggle between one combination of nations and another, and it would leave the world divided’. ³⁰ Others, such as Robert Cecil, the Under-Secretary for Foreign Affairs, pressed forcefully for an ongoing boycott after the war's end; however, that position had some support in the United States as well. ³¹

Wartime Debates

The idea of using tariffs to create an imperial economic zone was popularized in late nineteenth- and early twentieth-century Britain. While the idea had limited political success, it was never decisively defeated, and surfaced on several occasions during the war. For some, like Thomas Bell, managing director of John Brown & Co., a large shipbuilding company, protection was important for political reasons, as a means of counteracting German influence. ³² For the majority, however, Trentmann suggests, the primary concern was simply a resumption of competition after the war, in which it was anticipated foreign actors would be able to offer goods for less, thanks to the worsened condition of their economies and hence the lower wages that might be paid to foreign workers. ³³ The war was also important in the discovery of ‘key industries’ and essential ‘raw materials’, for which an additional argument could be made as to the value of protection. ³⁴ In addition, in the context of the war, commercial actors came to view protection ‘as a natural compensation for their investment, enterprise, and collective “sacrifice”’. ³⁵

In July 1916, the government set up the Committee on Commercial and Industrial Policy after the War and charged it with considering British economic policy after the war. The committee was initially chaired by Clarendon Hyde, a strong supporter of free trade; the iron and steel industry, which generally favoured more protectionist policies, successfully lobbied for his removal, however, and he was replaced by Scoby-Smith, a supporter of protectionist policies. ³⁶ While Labour representatives George Wardle and Harry Gosling advocated in support of free trade, emphasizing the negative impact protection would have on food prices in particular, the Conservatives Lord Balfour of Burleigh and W. A. S. Hewins supported tariffs, and the committee's ultimate report took a similar line, as discussed further below. ³⁷ Workers generally argued against protectionism in various industry-specific sub-committees, however, forcefully emphasizing the importance of renewed free trade with Europe. ³⁸ Among other things, workers argued that a better alternative to tariffs would be the reorganization of key industries under public ownership. ³⁹

Following Lloyd George's assumption of the office of Prime Minister in December 1916, the wartime government became more conservative and more imperialist. An Imperial War Conference in April 1917 passed several resolutions in support of an imperial preference policy, including calling, on the basis of ‘the experience obtained in the present War’, and in the interests of ‘the safety of the Empire and the necessary development of its component parts’, for ‘the production of an adequate food supply and arrangements for its transportation when and where required;’ ‘the control of natural resources available within the Empire, especially those that are of an essential character for necessary national purposes, whether in peace or in war'; and ‘specially favourable treatment and facilities’ by ‘each part of the Empire’ ‘to the produce and manufactures of other parts of the Empire’. ⁴⁰ These resolutions were reaffirmed in 1918. ⁴¹

For its part, at its 1917 Party Conference, the Labour Party passed a resolution calling for ‘a policy of free trade for every country, with safeguards for the maintenance of international labour conditions fixed by international trade union agreement’. ⁴² In February 1918, the Inter-Allied Labour and Socialist Conference in London issued what was termed a memorandum on certain objectives relative to the post-war order. ⁴³ Among other things, the conference declared its opposition to ‘the projects now being prepared by Imperialists and capitalists … for an economic war’. ⁴⁴ It stressed that ‘all attempts at economic aggression, whether by protective tariffs or capitalist trusts or monopolies, [would] result in the spoilation of the working classes of the several countries for the profit of the capitalists’. ⁴⁵ As such, the conference urged respect for ‘the principle of the open door … without hostile discrimination against foreign countries’. ⁴⁶ The Conference further urged, relative to global shortages of food, the need to set up ‘systematic arrangements … on an international basis for the allocation and conveyance of the available surpluses of these commodities to the different countries, in proportion … to their … needs’. ⁴⁷ Prominent figures such as the journalist H. N. Brailsford, the Fabian Leonard Woolf and the leading Labour politician Arthur Henderson all argued the League should play a role in supporting free trade in the period too. ⁴⁸ This position had powerful support on the international level as well, as point three of Wilson's Fourteen Points, declared on 8 January 1918, called for ‘the removal, so far as possible, or all economic barriers and the establishment of an equality of trade conditions among all the nations consenting to the peace and associating themselves for its maintenance’.

Commercial interests in general adopted a different position, however. The British Empire Producers Organization, created in 1916 by more than 80 industrial organizations, many of South African background, supported imperial preference, among other pro-‘development’ (through enhanced support to international corporations) policies. ⁴⁹ 1916 also saw the creation of the Empire Resources Development Committee (ERDC), ‘a parliamentary and commercial lobby’ that called for the ‘exploit[ation of] the resources of the Empire in order to pay the British war debt, reduce the level of domestic taxation, and raise British living standards’ ⁵⁰ – in sum, as Buckley puts it, for ‘the development of Empire resources by corporations acting on behalf of, and sharing profits with, the British government’. ⁵¹ In its final report in 1917, the Dominions Royal Commission proposed the creation of an ‘Imperial Development Board’, aimed at the creation of a stronger and more concerted imperial economic sphere, and more broadly autarchy, in future. ⁵² The ERDC strongly supported this proposal. ⁵³ The Colonial Office rejected the proposal, however, ‘on the grounds that [it] failed to take into account th[e] fact that the Empire was not one financial unit and that the British government could not take over for its own benefit the resources of various parts of the Empire’. ⁵⁴

Other private entities supported an anti-free trade position, too. In July 1918, the British Board of Trade opted for a policy of imperial preference following the war. ⁵⁵ This position was also to a degree supported by those concerned with control over key resources, for whom the war had served to emphasize the need for enhanced governmental controls. Thus, at a conference on allied economic problems held at Oxford University in September 1918, the delegates ‘declared it “worth considering whether an international control arranged by the Governments themselves was not better than syndication of international capitalists”’. ⁵⁶ Around the same time, Cecil, ‘the leading Conservative proponent of the inter-allied machinery’ within the government, on the grounds it would serve ‘as an indispensable basis for international organization as well as social peace after the war’, was expressing the hope that ‘some structure of international regulation might be continued after the post-war transition period, especially in crucial raw materials’. ⁵⁷

The Immediate Post-War Years

The Committee on Commercial and Industrial Policy issued its final report, aimed at defining British economic policy after the war, in December 1918. ⁵⁸ The Committee's mandate included four key questions: it was charged with determining the ‘industries … essential to the future safety of the nation’ and the ‘steps [necessary] to maintain or establish them'; the ‘steps [needed] to recover home and foreign trade lost during the War’; the ‘means’ to ‘develo[p]’ ‘the resources of the Empire’; and the means to ensure control over ‘the sources of supply within the Empire’. ⁵⁹

While slightly outside its mandate, the committee urged that ‘reparation [be] exacted … from enemy countries … as fully as may be practicable’. ⁶⁰ The committee further recommended, during the post-war transitional period, the continued prohibition on the importation of enemy goods, prohibitions on exports of certain important goods, international cooperation relative to key commodities and reconstruction, and the development of further policy aimed at ‘assuring to the British Empire and the Allies adequate supplies of essential raw materials’. ⁶¹ Relative to ‘raw materials’ in particular, the committee observed ‘the experience of the war has shown that the United Kingdom and the British Empire as a whole are dependent upon foreign countries’, while suggesting the proposal for a ‘Development Board’ to deal with this issue was not ‘immediately practicable’. ⁶² While the committee called for ‘the restoration of normal industrial conditions within the shortest possible time’ in general, and called for greater intelligence efforts to address the issue, to be conducted in coordination with the Imperial Institute. ⁶³ With a slightly longer timespan in view, the committee also called for ‘industrial and commercial organisation’ efforts aimed at greater ‘co-operation and co-ordination in respect of (1) the securing of supplies of materials, (2) production … and (3) marketing’. ⁶⁴

On the commercial front in particular, the committee began by noting it had ‘reconsider[ed the] problem as a whole in light of the experience of the War’. ⁶⁵ It called for ‘some Governmental action … to promote and safeguard the development in the United Kingdom of industries of a special or “pivotal” character’. ⁶⁶ While ‘a comprehensive tariff scheme’ was rejected, the committee supported measures of ‘protect[ion] … against “dumping” … and against the introduction of “sweated” goods’. ⁶⁷ The committee voiced support for an imperial trade sphere in this context as well, calling for ‘preferential treatment [for] the British Oversea Dominions and Possessions in respect of any Customs duties now or hereafter to be imposed in the United Kingdom’, as well as ‘consideration … to other forms of Imperial preference’. ⁶⁸

The Labour Party commissioned J. A. Hobson to fashion their stance on such issues, which ultimately appeared as a pamphlet, Economic War After the War. ⁶⁹ In typical form, Hobson adopted a strong stance. His pamphlet slammed ‘capitalists in most … industries[’] … conspir[acy] with Unionist and sham-Liberal politicians to secure protection tariffs after the war that will give them a monopoly of the home markets and increased power to plunder the consumer’. ⁷⁰ In particular, the pamphlet criticized the Allied powers’ aim, declared at their 1916 Economic Conference in Paris, of ‘“render[ing] themselves independent of the enemy countries in so far as regards the raw materials and manufactured articles essential to the normal development of their economic activities” – “not only so far as concerns their sources of supply but also as regards their financial, commercial and maritime organization”’. ⁷¹ The pamphlet noted ‘the path of post-war Protection ha[d] been prepared’ by various measures taken during the war. ⁷² The proposed tariff policies, the pamphlet declared, were fundamentally contrary to ‘the principle of “the Open Door”’. ⁷³ They would ‘raise the costs and prices to our consumers, and … cripple our export trade’, ‘mean economic war with the Central Powers’, ‘preclude a lasting peace’, ‘weaken the bonds of Internationalism’ and be ‘utterly subversive of any real League of Nations’. ⁷⁴

Hobson's case drew on and was closely aligned with the position the Independent Labour Party (ILP) had been developing as well. While many Conservatives supported reparations, ILP members recognized that maintaining poor conditions in other countries would deprive British exporters of a market, and would reduce the wages of English workers too due to the lower standard abroad. ⁷⁵

Between 18 January and 28 June 1919, delegates from 27 nations met to deliberate on what would become the Treaty of Versailles. Various meetings took place in the shadow of Versailles, aimed at influencing the shape of the order that was forming. For their part, delegates at the Berne Conference on International Socialism and World Peace, held in February 1919, emphasized the importance of the League of Nations ensuring ‘the establishment of free trade’ and of League authority over tariffs, as well as over ‘the production and distribution of foodstuffs and raw materials’. ⁷⁶

A substantial portion of the Treaty of Versailles was concerned with the economic conditions imposed on Germany. Much literature, including Keynes’ influential Economic Consequences of the Peace, published at the time, has criticized the failures of the treaty to establish Europe on a level footing. ⁷⁷ As Glaser notes, however, the treaty ‘preserved the essence of Germany's industrial potential’, and while it ‘aimed to give Germany's neighbors a head start in postwar reconstruction, [it also] laid out the machinery for a gradual revision of its economic provisions’. ⁷⁸

While the Treaty of Versailles devoted substantial attention to the economic relationship between the formerly warring powers, the Covenant of the League of Nations devoted little attention to general matters of trade and the economy. The principal exception was Article 23(e), which committed members of the League to ‘make provision to secure and maintain freedom of communications and of transit and equitable treatment for the commerce of all Members of the League’. ⁷⁹ Exactly what this obligation implied was left vague, however. ⁸⁰

In other ways, the League represented a position that stood at some distance from traditional free trade perspectives. The war made clear to many that ‘free trade’ would not guarantee international peace, that economic warfare might be quite effective, and that attention to the global supply of raw materials was crucial in a world of potentially hostile state competition. ⁸¹ At least in part the League of Nations was a response to these recognitions, not only in that it emphasized the need for cooperation and globally centralized planning, but also in that, at least in theory, it might deploy sanctions in support of its key goals – representing, that is, a more centrally planned system, not one in which free exchange ruled above all. ⁸²

The new emphasis on better conditions through a stronger central government, including at the international level, was reflected by the creation of the International Labour Organization (‘ILO’) as well. Earl Curzon of Kedleston's praise for the ILO in Parliament captured the manner in which many thought about it at that time. First, he observed: ‘It is generally recognized that economic and labour causes contribute materially towards wars; they arouse jealousies; they create competitions and rivalries which inflame national passions’. ⁸³ However, thanks to the ILO this problem would be addressed in the post-war world by annual meetings of an organization in which states, capital and labour would have a chance to ‘ventilate in the full light of day … their injustices or grievances’ and to ‘have brought home to [them] the effects of [their] own action on the economic life of every other nation’. ⁸⁴ This would allow ‘labour in all countries … to combine in pressing for those vital reforms in regard to hours of labour, wages, women's labour, children's labour, housing, safety, and so forth which are vital to the progress of humanity’, while ‘employers will be able to bring out the difficulties under which they labour owing to competition, sweated labour, unfair subsidies, and so on’. ⁸⁵

The limited protection of free trade on the international level through the League was mirrored on the domestic level in Britain, where at least some steps in a protectionist direction continued to be taken in the immediate postwar years. An export credits scheme was established in Britain in September 1919, which was overseen by a new department, the Export Credits Guarantee Department. ⁸⁶ In 1920, another protective measure was put in place, the Dyestuff Act, which imposed duties on certain chemicals. ⁸⁷ Several further attempts to implement policies aimed at protection were defeated, however. ⁸⁸

For their part, the Labour Party generally adopted a pro-free trade position in the immediate post-war years. Hobson's 1918 Richard Cobden: The International Man helped to advance the understanding that Cobden, free trade, progressive politics and global governance were all in close alignment – a skillful reweaving and subtle evolution of the traditional essentials of the free trade position. ⁸⁹ Sometime between late 1919 and early 1920, a report by Woolf, entitled The Labour Party: International Economic Policy, appeared, which sharply criticized tariffs. The report was reviewed and supported by the Labour Party's Advisory Committee on International Questions. ⁹⁰ In general, the Labour Party focused more on issues pertaining to employment than trade as such, however. Prefiguring Keynes’ later theories, Labour Party members argued the government should implement countercyclical public works programs, which they suggested would enhance demand by putting more money in the hands of the population at large. ⁹¹ Such policies were seen, at the time at least, as an alternative to the idea of bolstering the domestic economy through tariff barriers. ⁹²

In March 1920, the Supreme Economic Council—created by the Allied powers at the Peace Conference in 1919 – issued a memorandum that recognized the need for continued cooperation between the Allies and demanded an international conference to examine the world economy. ⁹³ Based on this memorandum, the International Financial Conference was called by the Council of the League of Nations and prepared by the Secretariat of the Economic and Financial Section of the League of Nations, which largely consisted of British officials with experience in the British Civil Service. The conference was attended by delegates from 39 nations. These delegates were leading bankers and treasury officials who attended as experts, not as spokesmen for national policy. ⁹⁴

The Brussels International Financial Conference took place in September and October 1920. It produced perhaps the most prominent international statement on trade of the period, advancing a weak but normatively pro-free trade stance. In particular, the report of the conference, submitted to the League of Nations, recommended that ‘commerce should as soon as possible be freed from control, and impediments to international trade removed’, and ‘that, within such limits and at such time as may appear possible, each country should aim at the progressive restoration of that freedom of commerce which prevailed before the war, including the withdrawal of artificial restrictions on, and discrimination of price against, external trade’. ⁹⁵ The cautious nature of this statement reflected, as Fakhri notes, the fact that ‘the theory of free trade was so contentious’ in the post-World War I period ‘that many felt it wise [to] avoi[d] the issue’, replacing references to ‘free trade’ with calls for ‘freer trade’, ‘defined as policies geared towards reducing, and maybe eventually removing, tariffs’. ⁹⁶

The 1920s

Recession and diminishing trade in 1920 and 1921 helped slowly begin to win more converts to protectionism in Britain. Growing support for protectionism took concrete form through the 1920 Dyestuffs Act, ⁹⁷ which aimed to protect the domestic dye-making industry from stiff international competition from Germany in particular. In addition, the British government suggested colonial governments provide preference to British goods in June 1920, and 26 responded positively. ⁹⁸

In 1921, the National Union of Manufacturers urged Baldwin, the President of the Board of Trade, to take legislative action. ⁹⁹ Baldwin took the call seriously, and the result was the 1921 Safeguarding of Industries Act, which imposed duties on thousands of goods deemed of strategic importance. ¹⁰⁰ While the act likely did not have a major impact in practice, it set an important protectionist precedent. ¹⁰¹ ERDC members also attempted to bolster their power through the formation of an informal Parliamentary Committee in July 1920, though the committee did not accomplish much in practice. ¹⁰²

Meanwhile, the Labour Party continued to strongly support their vision of free trade. In November 1921, the progressive MP Shapurki Saklatvala pointed out that while ‘the British worker desires his wages to be increased and safeguarded … he has failed to realize that the product of his toil should also be able to respond to this economic adjustment, and if the Indian workers’ wages do not rise appreciably … the Indian worker cannot be the customer of the British worker’. ¹⁰³ As he summed up, ‘the neglect of effective working-class solidarity abroad has reacted ruinously on the home position of the workers’. ¹⁰⁴ This resonated to an extent with the emphasis various Labour-affiliated figures placed on ensured free trade be tempered by resistance to imports produced by ‘sweated’ labour abroad. ¹⁰⁵ In addition to a recognition of the need for workers abroad to be better off in order that they not undercut the wages of domestic workers, in other words, Saklatvala was also emphasizing that it would only be when those workers enjoyed better wages that they might purchase the goods produced by domestic workers in quantity, thereby creating a virtuous, rather than a vicious, cycle.

Following several postwar years of coalition government the majority Conservative Party withdrew their support from Lloyd George in October 1922, in which Bonar Law initially served as Prime Minister. In May 1923, Law resigned due to cancer and was succeeded by Stanley Balwin. On the colonial front, one of the actions of the Conservative government in 1923 was to establish a Private Enterprise Committee. This was urged, among other things, as a way of confronting ‘the most urgent problem which had to be faced by [Britain:] the development of those territories in which raw materials, now bought from the United States, might be produced and marketed within the British Empire’. ¹⁰⁶ While the Committee's recommendations did not lead to any immediate change in trade policies, the general thrust of the Committee's work, in support of a stronger trade within the Empire, aligned generally with the interests of protectionists.

For his part, Law had been committed to pro-free trade policies. In the Conservative conference held in October 1923, Baldwin suggested a change might be coming, however, observing ‘I have … come to the conclusion that … if we go pottering along as we are we shall have grace unemployment with us to the end of time … the only way of fighting this subject is by protecting the home market’. ¹⁰⁷ Shortly, thereafter, a new election was called, albeit before the Conservative Party had had a chance to clearly determine its policy in such regards. ¹⁰⁸ The Labour Party responded forcefully, with Arthur Henderson, a leader in the party, declaring the following day ‘Mr. Baldwin throws down a challenge of protection as against the Labour policy. That challenge we accept’. ¹⁰⁹

While, as Lyman puts it, the subsequent Conservative campaign attempted to nuance their proposed tariff policy somewhat, to attempt to reassure segments of the voting population, Baldwin still ‘devoted most of his major speeches to general protectionist arguments’, emphasizing that tariffs ‘would save Britain from the competition of European countries with depreciated currencies’ and that they ‘would lead to a better balance of the British economy … by making the country less dependent upon agricultural imports’, with the result that Britain would be ‘less seriously affected by the slump in world trade’. ¹¹⁰ In addition, Baldwin suggested ‘a portion of the new revenue’ would help ‘pus[h] ahead .. development [of cotton-growing in the Empire]’ – forgetting, as pointed out by the Nation at the time, that it was not possible for the tariffs in question both to keep out the goods targeted and to raise substantial state revenues. ¹¹¹

While calls for tariff policy had some support within industry, ¹¹² they were broadly unpopular with the electorate as a whole. Even within the Conservative Party some candidates ran as free traders, while Conservative papers such as the Spectator and The Times expressed unenthusiastic and at times sharply critical views. ¹¹³ The Liberals fought back against the tariff proposal enthusiastically, pleased to have tariff policy as the terrain on which to fight the election. ¹¹⁴ The Labour Party was less ideologically committed to free trade as such, but nonetheless defended a free trade policy ‘not [because] any sacred principle is outraged … by Protection’ but rather because ‘this country, which cannot feed itself and … depends for its living … largely upon the export of manufactures, would find Protection extremely inconvenient’. ¹¹⁵

Alongside this, the Labour Party ran on support for ‘a strengthened and enlarged League of Nations’, ‘the settlement of disputes by conciliation and judicial arbitration’, a revised, less punitive arrangement with Germany and ‘the resumption of economic and diplomatic relations with Russia’. ¹¹⁶ It also ran on ‘public ownership and control’ of the mines, railways and power stations, a capital levy, and improved welfare for children, the sick, the disabled and the elderly, better public education, public housing, and improved electrical and transportation infrastructure. ¹¹⁷

The 1923 election resulted in 258 seats for the Conservatives, 191 for Labour and 115 for the Liberal Party, an outcome that led to the first Labour government in British history, formed with Liberal support. The sharp contrast in policies on tariffs clearly worked strongly in Labour's favour. The election results could also be seen as supportive of the League of Nations in general, which was understood as more of a Liberal and Labour project than a Conservative one. ¹¹⁸ Support for the League, in turn, was based in part on the hard work of the League of Nations Union, which emphasized the importance of the League to the world and Britain to the League, arguing, among other things, that the League represented a new phase in world governance, drawing on the positive work the British Empire had done to promote global civilization. ¹¹⁹

Once in power, in addition to an assertive housing program the Labour Party worked to enhance public welfare by liberalizing the conditions under which individuals might claim an extension of unemployment benefits. ¹²⁰ Their proposed capital levy was promptly dropped, however, and in general the Labour government was reluctant to spend freely, with Keynes’ calls for assertive spending on public works generally unavailing. ¹²¹ On the trade front, the Labour government repealed the duties imposed during the war, though this was reversed when the Conservatives returned to government within the year. ¹²² 1924 also saw the formation of the Empire Industries Association, which would pressure for an imperial trade sphere in the years to come, ultimately helping to produce the protectionist policy implemented in 1932. ¹²³

A new election was held in October 1924, after the Labour government lost a vote of no confidence. The result was a major Conservative majority under Baldwin. While Baldwin himself was a supporter of tariff reform, the new Chancellor of the Exchequer, Winston Churchill, was a staunch free trader. Despite Churchill's general opposition to tariffs, the McKenna duties were reinstated, supported in general by the argument they might serve to combat unemployment. ¹²⁴ While stronger protectionist policies were resisted at the time, the tide had clearly turned in their direction. ¹²⁵ As Hobson recalled from the 1930s, free traders had initially accepted wartime tariffs as an emergency measure, and their post-war extension as a temporary measure necessary in the postwar period. ¹²⁶ These concessions deemed strategic at the time had allowed protectionist precedents to be established, however, helping to allow protectionist sentiment to grow stronger as the decade went on. ¹²⁷

Coda: the 1927 World Economic Conference

On 24 September 1925, the Assembly of the League of Nations issued a resolution calling for work to begin on a major international economic conference, observing that ‘economic peace’ was necessary for ‘security among the nations’, as well as for ensuring ‘general prosperity’. ¹²⁸ Among others, Cecil played an important role in the leadup to the conference, echoing the position of the League in general by emphasizing the ‘danger’ posed by ‘certain states … tendency to insist too strongly upon their economic rights’, a situation which in his view ‘led to situations which paved the way for hostilities’. ¹²⁹ Perhaps the most important background report prepared in the leadup to the conference was the ‘Final Report of the Trade Barriers Committee of the International Chamber of Commerce’, following a process various prominent British figures played a key role in advancing. ¹³⁰ Foremost among British advocates of a different approach was Walter Leaf, appointed by the International Chamber of Commerce to head the work. ¹³¹ Leaf subsequently bemoaned European politicians’ ‘hampering [of] international trade by every means in their power’, and suggested in March 1926 that ‘unemployment, stagnation of industry, and a lamentable waste of potential human energy’ were the end results of the high international tariffs in place. ¹³²

In May 1927, fifty nations assembled in Geneva for the World Economic Conference. The principal output of the Conference was a report. Overarchingly, the report emphasized that ‘the attempts after the war to seek prosperity by a policy of economic isolation have, after an experience of nearly nine years, proved a failure’. ¹³³ While it observed that more ‘extreme forms of obstructions to trade’ imposed after the war had largely been removed, it noted many restrictions remained, with Europe (the primary focus of the conference) in particular in ‘urgen[t] nee[d of] greater liberty for trade and commerce’ through the removal of tariffs which were ‘higher and more complicated, less stable and more numerous than in 1913’. ¹³⁴ This would be a challenge, the report observed, because of the manner in which tariff barriers tended to beget tariff barriers. ¹³⁵

The report recommended several steps to deal with the situation. Most importantly, it called for an end to ‘import and export prohibitions and restrictions’, and recommended adoption of a new convention towards such an end. ¹³⁶ The conference also emphasized the ‘the mutual grant of unconditional most-favoured-nation treatment as regards Customs duties and conditions of trading is an essential condition of the free and healthy development of commerce between States, and … it is highly desirable in the interest of stability and security for trade that this treatment should be guaranteed for a sufficient period’. ¹³⁷ To this the report added a range of further recommendations, including that public enterprises not be given competitive advantages relative to private enterprises; that steps be taken to establish an effective system of international arbitration; that equal treatment of foreign companies be assured; that customs tariffs be simplified, rendered more consistent and stable; and that trade statistics be more extensively comprehensively collected and made available. ¹³⁸ It also delved into some complex issues relating to free trade, ‘direct and indirect subsidies’, ‘dumping and … anti-dumping legislation’ and ‘conditions of transport’, and called on governments ‘as far as possible [to] refrain from’ subsidies, for ‘dumping [to] be reduced to a minimum’, and for an end to ‘conditions and discriminations liable to disturb the normal operation of transports’. ¹³⁹

As one commentator put it at the time, ‘the briefest summary … of the Report is to say that it is a strong recommendation in favour of “freer trade”’. ¹⁴⁰ Another praised the conference for the work it had done to combat ‘the wave of exaggerated nationalism which has pervaded the nations of the earth generally since the World War’, and the ‘aggravate[ion] of poverty’ which the policies associated with that nationalism had produced. ¹⁴¹ That author, McClure, raised the achievements of the conference to one of fundamental principles, suggesting ‘interdependence’ was the necessary ‘basis of independence’, as it was ‘only through international agreements controlling national action’ that ‘each nation’ could be made ‘independent of the others’ will to monopolize’. ¹⁴²

As the role of Cecil and Leaf indicates, Britain played a crucial role in enabling the 1927 World Economic Conference to take place, and the outcomes of the 1927 World Economic Conference showed that, despite assaults, a more traditional vision of free trade still had some vitality in the period. As laid out above, the Labour Party and the workers’ vision of free trade developed therein clearly played an important role in maintaining that space over the period in question.

At the same time, the vision laid out by the 1927 World Economic Conference was caught between the old and the new. On the one hand, it reflected a new level of commitment to the need to adopt a concerted, international approach, in line with the vision of world order of the League of Nations’ advocates. At the same time, the more radical, integrated vision of international order that the Labourite defenders of free trade had been advancing in Britain—which linked free trade to labour standards – was largely absent from the Conference's approach.

The immediate response to the conference was mixed. In 1927, several treaties reducing trade barriers were concluded, suggesting some hope for change. ¹⁴³ This trend had already begun to weaken the following year, however, ¹⁴⁴ after which the outbreak of the Great Depression decisively turned the tide in the opposite direction, leading even Britain to institute strong protectionist policies. ¹⁴⁵ Despite this, as one of the clearer statements of a free trade vision in the interwar period, the 1927 World Economic Conference has subsequently been seen, by some, as an important precedent for the post-World War II system. ¹⁴⁶ Whatever the truth of this assertion, insofar as it did not adopt a strongly labour-influenced vision, the 1927 World Economic Conference's report did little to advance the workers’ vision of free trade.

Conclusion

This article has explored debates around free trade in Britain and on the international level in the First World War and the postwar period. One thing that attention to these discussions helps to bring out is the great diversity in meanings of ‘free trade’. In the period in question, the broad contours of contestation are clear: on the one hand, there were those who sought to erect tariff barriers to the entry of certain goods; on the other hand, those who resisted the imposition of such barriers. Beneath these general contours, a great deal of diversity of viewpoints, arguments and developments were taking place, however. For much of the Victorian period, free trade had represented a progressive Liberal vision, linked to cheap prices at home, including cheap food prices above all, and a resistance to corruption, monopoly and autocracy. The development of this vision corresponded to a period of global British primacy. By the late nineteenth century that primacy was breaking down, and calls for imperial protection became increasingly forceful. Those calls were deeply unpopular with the public at large, however, helping contribute to the Liberals’ prominence in the pre-war years.

The First World War helped make clear that the Victorian era was well and truly over. It also carried numerous lessons in the eyes of contemporaries. The war made clear that economic competition might lead to conflict, despite British free traders’ best efforts. It also helped underscore the importance of access to key, strategic resources. At the same time, Allied cooperation efforts provided an immediate lesson to many as to the benefits some forms of supranational governance might offer. These lessons helped underpin the new case in support of protection. Commercial interests threatened by international competition had always been at the forefront of the cause. Following the war, it was easier for these interests to present their claims in terms of the broader national interest, as they could point to the need to ensure British national possession of key industries, in the face of potential renewed hostile foreign engagements.

At the same time, the First World War years also coincided with the growing strength of the Labour Party. In the postwar years, the Labour Party took over from the Liberals to a significant extent as the banner bearer of the free trade cause. The post-war Labour vision of free trade was different from the nineteenth-century vision. First, most clearly, the new Labour vision of free trade was not opposed to big government, but rather recognized the need for powerful government in order to ensure free trade, on both the national and international levels. Second, the Labour Party emphasized workers’ wellbeing above all. In the first place, this might be supported through the traditional emphasis free trade supporters had placed on cheap goods. In addition, however, a new, pro-worker international free trade policy required that workers’ wages and conditions be supported internationally, both in order to prevent wages and conditions from being undercut domestically and to ensure as large a market as possible for goods being produced, thus enabling globally expanded wages and conditions of work in the first place.

Against this backdrop of changing ideologies and alignments, the League of Nations’ 1927 World Economic Conference represented an attempt at international order formation that, while well-intentioned, faced limited prospects. On the one hand, the Conference and its outcomes recognized the need for stronger international governance and the linkages between a policy of freer trade, international peace, and wellbeing for the world's populations. The political dynamics of the period, however, were already well beyond a context in which such a new order might have been able to take hold. While a stronger version of the Labourite vision of free trade would have done more to directly address and incorporate workers’ rights into the global trading order, and might have offered a way forward, it was even further beyond the scope of what was politically feasible at the time. The interwar period, of course, is largely the story of a tragedy, but one that may be mined for lessons, with an eye to the challenges of the present. While the rise of the workers’ vision of free trade in the period has largely been forgotten, it is worth remembering today, as offering an alternative path meriting further exploration.