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Something rational in the state of Denmark? The case of an outsider in the Cobden-Chevalier network, 1860–1875

2011; Taylor & Francis; Volume: 59; Issue: 2 Linguagem: Inglês

10.1080/03585522.2011.572584

1750-2837

Markus Lampe, Paul Sharp,

Scottish History and National Identity

Abstract We examine the case of an important outsider to the Cobden-Chevalier network of bilateral treaties in the second half of the nineteenth century. We attempt to explain this through a study of the structure of Danish trade and protection. We demonstrate, in contrast to previous accounts that have considered Danish trade policy somewhat irrational, that Denmark was right to remain outside. She had little to gain from concluding treaties, since her main trading partners offered free trade for her exports, agricultural goods, and she needed her own tariffs for revenue purposes. Keywords: bilateral treatiesCobden-Chevalier networkDenmark Acknowledgements The authors would like to thank Ingrid Henriksen, Karl Gunnar Persson, the two anonymous referees of the SEHR and seminar participants for valuable comments and suggestions. Paul Sharp would also like to thank the Carlsberg Foundation for their financial support, while Markus Lampe is grateful to Fritz Thyssen Stiftung, the Economics Department at the University of Copenhagen and Spain's Ministerio de Ciencia e Innovación for support at various stages. Notes 1. Robert Pahre, 'Divided government and international cooperation in Austria-Hungary, Sweden–Norway, and the European Union', European Union Politics 2, no. 2 (2001): 131–62; Robert Pahre, Politics and Trade Cooperation in the Nineteenth Century: The 'Agreeable Customs' of 1815–1914 (New York: Cambridge University Press, 2008), 16–17, 261–74. There is a relatively rich historiography on Swedish treaty-making mainly after the dissolution of the Union in 1905, to which Pahre repeatedly refers. See for example Yvonne Maria Werner, Svensk-tyska förbindelser kring Sekelskiftet 1900. Politik och ekonomi tid tillkomsten av 1906 års svensk-tyska handels- och sjöfartstraktat, Bibliotheca Historica Lundensis, vol. 65 (Lund: Lund University Press, 1989), but also Rolf Weitowitz, Deutsche Politik und Handelspolitik unter Reichskanzler Leo von Caprivi 1890–1894 (Düsseldorf: Droste, 1978) and Pontus Fahlbeck, 'Die Handelspolitik Schwedens und Norwegens', in Die Handelspolitik der wichtigeren Kulturstaaten in den letzten Jahrzehnten, vol. 1. Schriften des Vereins für Socialpolitik, vol. 49, ed. Verein für Socialpolitik (Leipzig: Duncker & Humblot, 1892), 303–60. 2. All of these points will be discussed below. Pahre, Politics, 58–64, 120–2, 146–53, offers comparative discussions of some of them. Sweden and Norway did conclude a trade treaty with France, see Fahlbeck, Handelspolitik, 307–18 and our conclusions below. 3. According to Statistisk Bureau, Tabeller over Kongeriget Danmarks, Hertugdømmet Slesvigs og Hertugdømmet Holsteens Vare-Indførsel og Udførsel, Skibsfart og Brændeviinsproduktion m. m. for Aaret 1859, Statistisk Tabelværk, vol. II, 21 (Copenhagen: Bianco Lunos, 1860), XXV, of the total trade value for the Kingdom of Denmark proper in 1859: Belgium 1.4%, Spain 0.6%, European Ports on the Mediterranean and the Black Sea: 0.5%, Switzerland not listed. Statistisk Bureau, Tabeller over Kongeriget Danmarks, Hertugdømmet Slesvigs og Hertugdømmet Holsteens Vare-Indførsel og Udførsel, Skibsfart og Brændeviinsproduktion m. m. for Aaret 1861, Statistisk Tabelværk vol. II, 23 (Copenhagen: Bianco Lunos, 1862), XXV, reports for the shares in the total trade value of the Kingdom of Denmark proper in 1861: Belgium 1.8%, Spain 0.3%, European Ports on the Mediterranean and the Black Sea: 0.3%, Switzerland not listed. See also Table 1. For later years, values of total imports and exports by trade partner were not reported any more in the trade statistics. 4. Ingrid Henriksen, 'The Transformation of Danish Agriculture 1870–1914', in The Economic Development of Denmark and Norway since 1870, ed. Karl Gunnar Persson (Aldershot: Edward Elgar, 1993), 153–78, here: 156. 5. David A. Lazer, 'The Free Trade Epidemic of the 1860s and other Outbreaks of Economic Discrimination', World Politics 51, no. 4 (1999): 447–83. 6. S.A. Hansen, Økonomisk vækst i Danmark. Bind I: 1720–1914 (Copenhagen: Akademisk Forlag, 1984), 193. 7. William Scharling, Handels- og Toldpolitik (Copenhagen: G.E.C. Gad's Universitetsboghandel, 1905), 569: 'Der er næppe noget andet Land, der saa bestemt som Danmark har vægret sig ved at afslutte Tariftraktater for a kunne bevare sin Frihed til at forandre sine Toldsatser efter Forgodtbefindende, - og der er næppe noget andet Land, der saa lidet har benyttet sin Frihed til at forandre Toldsatserne.' (cf. William Scharling, 'Die Handelspolitik Dänemarks 1864–1891', Die Handelspolitik der wichtigeren Kulturstaaten in den letzten Jahrzehnten, vol. 1. Schriften des Vereins für Socialpolitik, vol. 49, ed. Verein für Socialpolitik (Leipzig: Duncker & Humblot, 1892), 273–301, here: 275.) 8. Markus Lampe, 'Explaining Nineteenth-century Bilateralism: Economic and Political Determinants of the Cobden-Chevalier Network', Economic History Review, forthcoming (2011). 9. Andrew K. Rose, 'Do We Really Know That the WTO Increases Trade?', American Economic Review 94, no. 1 (2004): 98–114; J. Gowa and S.Y. Kim, 'An Exclusive Country Club: The Effects of GATT on Trade, 1950–92', World Politics 57, no. 4 (2005): 453–78. 10. Olivier Accominotti and Marc Flandreau, 'Bilateral Trade Treaties and the Most-Favored-Nation Clause: The Myth of Trade Liberalization in the Mid-Nineteenth Century', World Politics 60, no. 4 (2008): 147–88; Markus Lampe, 'Effects of Bilateralism and the MFN Clause on International Trade: Evidence for the Cobden-Chevalier Network (1860–1875)', Journal of Economic History 69, no. 4 (2009): 1011–39. 11. Pahre, Politics, 12. 12. Richard E. Baldwin, 'A Domino Theory of Regionalism', in Expanding European Regionalism: The EU's New Members, ed. R.E. Baldwin, P.J. Haaparanta and J. Kiander (Cambridge: Cambridge University Press, 1995), 25–48. 13. Lampe, 'Explaining'. 14. Scharling, 'Handelspolitik', 276; Scharling, Handels- og Toldpolitik, 260; Henrik Becker-Christensen, Dansk Toldhistorie II: Protektionisme og reformer 1660–1814 (Copenhagen: Toldhistorisk Selskab, 1988), 518–20. 15. Henrik Fode, Dansk Toldhistorie III: Liberalisme og frihandel 1814–1914 (Copenhagen: Toldhistorisk Selskab, 1989). 16. Kjeld Winding, Frihandelsproblemet i Danmark 1855–1863: En undersøgelse af 1863-tariffens tilblivelse (Copenhagen: Dansk Videnskabs Forlag, 1959). 17. Hansen, Økonomisk vækst, 193. 18. Scharling, 'Handelspolitik', 277–8. See also Table 3. 19. Ole Hyldtoft, Danmarks Økonomiske Historie 1840–1910 (Århus: Forlaget Systime, 1999), 182. 20. Ibid., 58. 21. Although Ove Hornby, 'Industrialization in Denmark and the Loss of the Duchies', Scandinavian Economic History Review 17, no. 1 (1969): 23–57 argues that industry protection was a liberal myth. 22. Hyldtoft, Danmarks Økonomiske Historie, 183; Scharling, Handels- og Toldpolitik, 571–83. 23. Hansen, Økonomisk vækst, 194. Notable exceptions were the so-called Krigsskat (War Tax) of 5 August 1864 (Scharling, Handels- og Toldpolitik, 570, see below for details), and the Law of 1891 which reduced duties on sugar, chocolate and crude oil (ibid., 583). 24. V. Falbe Hansen, 'De franske Told- og Skibsafgifter i Henseende til deres Forhold til Danmarks Handel og Skibsfart paa Frankrig', Nationaløkonomisk Tidsskrift, Første række 16 (1880): 305–27. Scharling, 'Handelspolitik', 278; Kurt Albert Gerlach, Dänemarks Stellung in der Weltwirtschaft. Unter besonderer Berücksichtigung der Handelsbeziehungen zu Deutschland, England und Skandinavien, Probleme der Weltwirtschaft, vol. 3 (Jena: Gustav Fischer, 1911), 156–62. 25. Jacob Viner, The Customs Union Issue, Studies in the Administration of International Law and Organization, vol. 10 (London: Stevens, 1950). 26. Karl Gunnar Persson, An Economic History of Europe (Cambridge: Cambridge University Press, 2010), 156–7. 27. See for example the credit program and the large industrial inquiry Napoleon III offered to French industry in the context of the Cobden-Chevalier treaty of 1860. A.L. Dunham, The Anglo-French Treaty of Commerce of 1860 and the Progress of the Industrial Revolution in France, History and Political Science, vol. 10 (Ann Arbor: University of Michigan, 1930), 123–60. 28. Lampe, 'Explaining', elaborates on this based on Pahre, Politics, Henrik Horn and Petros C. Mavroidis, 'Economic and Legal Aspects of the Most-Favored-Nation Clause', European Journal of Political Economy 17, no. 2 (2001): 233–79, and others. 29. Also, an important amount of trade was with Germany, but most of it was with free ports that serve mostly as points of transshipment. 30. See, for example, Accominotti and Flandreau, 'Bilateral Trade Treaties', 152. 31. Additionally, except for the Danish Virgin Islands (St. Thomas, St. John, and St. Croix), the Americas were completely unimportant in Danish foreign trade, according to Danish trade statistics for the 1860s. 32. In addition, trade with England and Schleswig-Holstein might include flows of commodities traded through their ports (London, Liverpool, Altona, etc.). 33. This preference was formally revoked on January 1, 1896 (Gerlach, Dänemarks Stellung, 157). 34. The tariff rates given in Table 3 are not identical to the ones used in the calculations reported in Tables 5 and 6, for two reasons: Lampe, 'Explaining', uses French benchmark prices, not Hamburg prices as done here, and the rates calculated here weight items in a category by Danish import shares, not by uniform 'average' trade shares in Europe, as done by Lampe. For example, raw silk has a far lower weight in the silk and silk wares aggregate using Danish data, because Denmark seems to be a final product importer to a higher extent than other European countries. The 1864–65 and the 1865–66 tables both only report total imports of 2 pounds, i.e. 1 kg, of raw silk. 35. Wood is a heterogeneous category, in which oak, boxwood, pockwood, black popular and firewood were admitted free of duty, while other sorts were subject to duty per commerce load or cubic foot. 36. Markus Lampe, 'Bilateral Trade Flows in Europe, 1857–1875. A New Dataset', Research in Economic History 26 (2008), 81–155, Table 13. 37. Kriegssteuer auf den Brennereibetrieb und die Waaren-Einfuhr in Dänemark, Preußisches Handels-ArchivPreußisches Handels-Archiv, vol. 1864: I, 187–188. Scharling, 'Handelspolitik', 276. 38. Lampe, 'Effects'; John V.C. Nye, War, Wine, and Taxes. The Political Economy of Anglo-French Trade, 1689–1900 (Princeton: Princeton University Press, 2007), 100–5; Peter T. Marsh, Bargaining on Europe. Britain and the First Common Market, 1860–1892 (New Haven: Yale University Press, 1999). 39. C. Smit, De Handelspolitieke Betrekkingen tusschen Nederland en Frankrijk 1814–1914, Economisch- en Sociaal-Historische Onderzoekingen, vol. 1 (s'-Gravenhage: Martinus Nijhoff, 1923); Urs Brand, Die schweizerisch-französischen Unterhandlungen über einen Handelsvertrag und der Abschluss des Vertragswerkes von 1864 (Bern: Herbert Lang, 1968). Fahlbeck, 'Handelspolitik'. 40. Statistisk Bureau, Tabeller over Kongeriget Danmarks Vare-Införsel og Udförsel samt Skibsfart og Brændeviinsproduktion m. m. i Finantsaaret 1866–67, Statistisk Tabelværk, vol. III, 9 (Copenhagen: Bianco Lunos, 1867). 41. Falbe Hansen, 'Told- og Skibsafgifter'; Gerlach, Dänemarks Stellung, 156–62. 42. Note, however, that Sweden introduced customs duties equivalent to 20–25% ad valorem on cereals and other animal products such as pork and meat in 1888, which more or less endured until 1914; Jan Bohlin, 'Tariff Protection in Sweden, 1885–1914', Scandinavian Economic History Review 53, no. 1 (2005): 7–29. 43. Dekret vom 12. Juli, betreffend die Einführung eines neuen Zolltarifs in Spanien (Gaceta de Madrid No. 208), Preußisches Handels-Archiv, vol. 1869: II, Beilage zu Nr. 43, 14. 44. When in 1881 Spain notified the cancellation of the contract at its expiry in 1882, a new commercial treaty was negotiated to substitute it, including specific tariff reductions that failed to become effective because the Danish parliament, after long discussions, declined the ratification of the treaty in 1887. However, the simple most favoured nation treatment convened in the original treaty remained valid. Scharling, 'Handelspolitik', 287–91, gives a more detailed account. 45. Preferences were given to certain imports over land borders with neighbouring Italian places to facilitate exchange between places close to the border. 46. However, discrimination arose from additional duties on imports in non-French ships for non-treaty partners. These are mentioned by as a consequence of Danish non-cooperation by Falbe Hansen, 'Told- og Skibsafgifter'. They were important for the shipping sector and a likely reason for Norwegian participation in the Franco-Swedish treaty of 1865 (Fahlbeck, 'Handelspolitik'). Discrimination at the commodity level became possibly more important afterwards: Gerlach, Dänemarks Stellung, 160, mentions that at one point in time specific duties on salted pork from Denmark were 4.50 Francs per 100 kg higher than for treaty partners. In 1892, Denmark was granted MFN status by France (Gerlach, Dänemarks Stellung, 161). 47. Scharling, Handels- og Toldpolitik, 484–7. 48. However, the much more important items, salted butter and salted and smoked meat, as well as all other products in Table 5 received equal treatment wherever they entered from. 49. Scharling, Handels- og Toldpolitik, 484–7; Scharling, 'Handelspolitik'; Falbe Hansen, 'Told- og Skibsafgifter'. 50. Of course, France could have threatened to impose discriminatory duties especially on Danish products, but this would have involved the enacting of specific rules of origin and certification procedures, which would have caused control costs. 51. Hansen, Økonomisk vækst, 184. 52. Gerlach, Dänemarks Stellung, 158. 53. Lampe, 'Explaining'. 54. Scott L. Baier and Jeffrey H. Bergstrand, 'Economic Determinants of Free Trade Agreements', Journal of International Economics 64, no. 1 (2004): 29–63. 55. Pahre, Politics. 56. Two other important determinants of the domestic and international outcomes are terms of trade and the existence of fiscal constraints, i.e. dependence on tariff revenue for government finance. However, both could not be empirically taken into account because of missing data and conceptual problems with proxy creation (see Lampe, 'Explaining'). 57. Baldwin, 'Domino Theory'. 58. However, the 21 categories of Lampe, 'Explaining' do not include major Danish export products such as butter, bacon and barley: but they do account for others such as wool, raw hides, wheat and rye, which – as Table 4 shows – can be argued to be representative for the Danish export portfolio. 59. Pahre, Politics, 105–31. 60. Note also that the inclusion of MaxExogFiscConstraint leads to a strong reduction in the coefficient of common market size as measured by GDPs. 61. Note, however, that trade volumes or trade shares had no consistent and robust effect on treaty conclusion probability. This suggests that the mechanisms might have been more complex than outlined above. 62. These figures refer to the 21 commodity groups underlying Lampe, 'Explaining'. 63. If instead of the bilateral tariff maximum, the bilateral minimum for each country-pair is used in the analysis, the probability indeed is highest for Belgium, Switzerland and Italy, ahead of Germany and France. This reflects the high importance of Denmark's relatively low tariff. See Markus Lampe and Paul Sharp, Something Rational in the State of Denmark? The Case of an Outsider in the Cobden-Chevalier Network 1860–1875, University of Copenhagen Department of Economics Working Paper 09–20, 2009, the working paper version of the present article. 64. In fact, it was the only one of its kind in the sense that in any other agreement of the Cobden-Chevalier network at least one country granted or transmitted (instantaneously or retroactively) at least one commodity-specific preference. 65. Fahlbeck, 'Handelspolitik', 354–6. 66. Gowa and Kim, 'Exclusive Country Club'; Lampe, 'Explaining'. 67. cf. Pahre, Politics, 293.