JOHN V.C. NYE
War, Wine, and Taxes: The Political Economy of Anglo-French Trade 1689-1900
Princeton University Press,
Princeton and Oxford, 2007, 174 pp.
Reviewer: James Shepherd
In this excellent research monograph, John Nye challenges the conventional belief that Great Britain was transformed into a free trading-nation beginning in the nineteenth cen- tury with the repeal of the Corn Laws in 1846. It is the culmination of his research into Anglo-French trade from the late seventeenth century through the nineteenth. Some of this research previously has appeared in journal articles, but it is most conveniently combined in this book. Of most interest to readers of this journal perhaps will be the author’s emphasis upon the trade in French wine, and the protectionist actions of Britain against French wine, even through much of the nineteenth century.
The author surveys British trade policy from the Glorious Revolution to 1900. Until the end of the seventeenth century, Britain imported substantial amounts wine, mostly from France, and such wine formed the greatest part of Britain’s large trade deficit with France. (The author uses the term “Britain” and “British” before the union of England and Scotland in 1707, though “England” and “English” might have been more appropriate.) Early in the seventeenth century, wine was nearly a fifth of all imports into Britain by value. Old political and religious animosities between Britain and France, mercantilist economic poli- cies, and domestic economic interests all combined to play a role in British trade policy after 1689. Britain increased tariffs to levels that basically eliminated the importation of the cheaper classes of French wine in the eighteenth century. This increase in tariffs benefited the brewing and distilling industries (whiskey, gin, and rum). These interests were protected in exchange for submitting to effective and enforced domestic excise taxes on beer and distilled spirits which came to be a very important source of revenue to the British government. Their cooperation was secured by the possibility of lowering tariffs any time on foreign alcoholic beverages, including French wine. The author also notes the lower duties on Portuguese wine that prevailed because of British interests there. Some movement toward trade liberalization in the later eighteenth century was cut off by the French Revolution and the Napoleonic Wars. After peace came in 1815, a movement toward freer trade was supported by the relative decline of agriculture and the growth of industrialization along with changing ideologies expounded by Adam Smith and others. Tariffs on wine, brandy, coffee, tea, sugar, and rum remained essentially unchanged, however, and continued to prohibit the cheapest classes of French wines from entering Britain. Only after 1860 did an agreement with France cause Britain to modify her tariffs on French goods, including those on wine, in exchange for France lowering her duties while removing all prohibitions on British products. The opening of the British market for French wine, however, was set back by the outbreaks of the blight of oidium in the 1860s, and the more famous scourge of phylloxera in the 1880s.
In a discussion of the brewing industry and British fiscal policy, Nye examines the reasons for the British government to rely upon indirect taxes. Modern economic theory would suggest that direct taxes upon income and wealth would be more efficient because indirect taxes distort consumer choice. His answer is that the ease and cost of collecting taxes on customs and excises make these more practical to collect (transaction costs of collection were lower). Also, the British squire was well represented in Parliament by the eighteenth century, and landowners wished to avoid higher property taxes and put the bur- den upon consumers.
Though an unrealistic alternative in the world of mercantilism, the author considers what might have happened in the British-French wine trade had free trade existed. He suggests that consumption of French wine in Great Britain might have been forty times greater than it was in the absence of any discouragement of alcohol consumption, in gen- eral, and of French wine, in particular. In the appendix, he also attempts to estimate the effect of British tariffs on national income with detailed statistical analysis. The results of static models suggest a fairly small impact on British economic welfare. The many caveats to these speculations are carefully considered by the author, however. It is, of course, impossible to measure the loss of satisfaction to those British consumers who might have preferred wine to beer and distilled spirits.
The major contention of the book remains that Great Britain did not become the great bastion of free trade in the nineteenth century that conventional wisdom suggests. The story goes that in the eighteenth century Britain was a major European power with colonial ambitions that followed mercantilist policies of trade protection. In the 1830s, however, new interests rooted in growing industrialization, and supported by the ideology of the classical economists and groups like the Anti-Corn Law League, led to the elimination of tariffs and the rise of free-trade policies. The repeal of the Corn Laws in 1846 is a central part of this story. This view persists today (see the announcement for a session at the North American Conference of British Studies in 2008 which states: “From the repeal of the Corn Laws in 1846 through the First World War, free trade served as a cornerstone of Britain’s economic, colonial, and foreign policies. Britain’s unilateral adoption of free trade and its subsequent agreements with other European powers quickly extended free trade not only across Europe, but also throughout the rapidly expanding colonial empires.” This is quoted from an online announcement of Eh.News, January 18, 2008.) Nye’s estimates of the degree of trade protection (as evidenced by average tariff rates) were greater for Great Britain than for France until about 1880. However, one must note that it is also clear from the author’s data that there was a trend toward freer trade in the nineteenth century on the part of both nations, even if a world of completely free trade did not come into being.
In the end, Britain became a nation of beer drinkers while French consumers remained attached to wine. John Nye has written a superb tale of the economic policies that shaped this story, as well as the tastes of consumers in the respective countries. It is one that will serve to correct old views and greatly improve our understanding of the forces responsible.