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I.Introduction
During the last quarter of the 19th century, the economic scene of the industrial countries was
characterized by the return to protectionism.
The growing nationalism ideologies, directed at an unconditional fervour towards the patriotic
principles were directly transmuted in an economic policy aimed at protecting national needs.
Tariffs, restrictive quotas and trade barriers were the main measures implemented by the
European governments to contrast the free trade system.
Thence, the Liberal economic and social thought, firstly theorised by Adam Smith in the late
700, was anachronistically overcome by the new inclination to an international trade war.
I.

Return to protectionism

After a period of rising trade treaties and after the establishment of liberal market in 1879,
the chancellor of the new German Empire, Otto Von Bismark, stronger thanks to a new
coalition with the Conservative and Centre Party, abandoned every single relationship with
the National Liberals, approving a new tariff law and triggering a comeback to protectionism.
Various factors were responsible for this decision. The so called great depression is for sure the
most important.
The Napoleonic wars, with their high financing demand and real shortages, contributed to the
creation of a bubble of floating prices in the after-war period. Gold discoveries in California
(1850) and Australia (1851) guaranteed the constant rise of prices until 1873, when the
inflation bubble burst, immediately giving rise to a deflationary path.
Even if industrialists incorrectly blamed it on the formed trade treaties, some monetary
economists sustain that deflation was triggered by the struggling US attempt to establish the
gold standard after the civil wars. Monetary expansionary policies could have affected
production to the point of creating at first an inflationary trend, then an opposite one.

Consequent to this deflation tendency, as Lipsey (1963) explains, the falling transportation
costs and the production of new prairies gave birth to what has been defined as United states
Commercial Invasion. Manufactured goods jumped from 20 percent of U.S. exports in 1890
to 35 percent by 1900 and nearly 50 percent by 1913. Vanek (1963) also stresses the
importance of natural resource abundance in shaping U.S. trade during this period.
The threaten of US cheap grain scared the German industrialists and the landed gentry who
immediately demanded for Bismarks intervention. This act had profound social consequences:
it legitimated the power of industrialists and conservative parties. Therefore, the middle
classes increasingly became more susceptible to nationalism.
It did not take too much time for the other European countries to follow the German move,
making trade wars a common aspect of the Old Continent economy of that period.
In Italy, as well as in Germany, the return to protectionism was a matter of protecting
industrial interests. Salvadori (1990) explains that it was a great contradiction to enact the
protection of textile industries (which was one of the leaders in French markets) in a country
where agriculture was the biggest deal. Persson (2010) explains this phenomenon by arguing
that loosing interests can have an impact on trade policy disproportionate to their size. In
fact, the producers, threatened by the trade liberalization, do organize themselves in lobbies,
setting high prices and convincing consumers (who are marginally touched by the
liberalization) to push governments to protect them.
However, from 1887 to 1898, Italy raised tariffs against French exporters. France resisted to
raising barriers until 1882, when the tariff reform was launched. Initially French government
was able to maintain vivid the old Cobdain-Chevalier agreement by renewing it with Britain
and Belgium in December 1873. It was just matter of time that the protectionist parties
started to grow and obtained consensus in parliament after the defeat of the Franco-Prussian
war. The Meline-tariff of 1892 was the perfect representation of Frances attitude towards the
protectionism backlash. The tariff defended both agricultural and industrial interests. As
described by Frank Trentmann, contrary to Britain, free trade ideology never succeeded in
convincing totally the French public opinion during the 19th Century. On the contrary, as the
suffrage was extended, trade protectionism, advocated by the political industrial, bourgeoisie
became progressively part and parcel of the national compact. Although demands for tariff
reform became extremely popular and spread throughout French society, the relative density
of the agricultural population across departments must have affected the determination of
representatives vote on the tariff issue.

Russia and Germany engaged in a trade war during 1892-1894, and USA reached the largest
extent in protectionist measures in all the national history. The civil war in US played a key

role in influencing the state trade policy. Persson explains that the northern-winner states
imposed the protectionism over the export-oriented tobacco and sugar producers. The
American protectionism in late 19th was extreme and total. William Smart (1904) reports a
brilliant example of an artist protection provision which claimed:
works of art by American artists temporarily residing abroad are admitted free; all other
works of art, including paintings, pastels, pen and ink drawings, and statuary, pay a duty of
20 per cent.".
Protectionist polices mainly differed not by how much they protected, but by what they
protected. Since it is not possible to shield simultaneously both the agricultural and industrial
sector, measures oriented to safeguard one area would improve the other, and vice versa. For
instance, tariffs on rural products may stimulate investment inflows by making capital goods
cheaper in relative terms.
The only vacillating country, hesitant to enforce anti-free-trade policies, was clearly the
homeland of the Liberal thought: Britain. In 1887, the British Parliament approved the
Merchandise Marks Act, which required foreign products to be labelled with the name of the
country of origin. Actually the reverse effect occurred. For instance, the writing Made in
Germany, interpreted as a sign of high-quality goods, was a push and not a slowdown of
German exports.
With England, also Belgium and Denmark, strongly reliant on their export, created the freetrade block.

The last years of 19th century saw Governments facing binary choices in the field of trade
policies. Once the crisis had passed they gradually tried to convince people of the validity of
the free-trade model. Huberman and Lewik report how trade unions were offered pro-labour
policies in exchange for supporting a return to free-trade. The result of this process was a
decline in working hours throughout all Europe.
II.

Conclusion

The return to protectionism nearly touched all the European nations. Liberalism, in certain
countries, was strong enough to outperform the wave of panic taken by the great depression.
This has given credits to view the return to mercantilist policies as an over-reaction. The
Stoppler-Samuelson theorem shows how a free trade policy can be riskier than a protectionist
one. On one side, for its nature, it favours certain producers, creating losses to others.
Moreover, the comparative advantage that a country has in terms of trade, is responsible for
favouring one or the other. This potentially represents a source of internal and external

conflict: between different and between different countries. On the other side, protectionism is
considered to be a less risky zero-sum game.
The last three prior decades to the First World War were characterized by a constant,
although mild, European trade-values growth of 4.1% a year.
To what extent growth trends benefited from protectionism is difficult to answer. USA and
Germany did justify their solution with the argument of the infant-industry protection.
According to the latter, the protection the government offers to domestic industries would
favour large economies of scale and therefore growth. After all, the return to protectionist
policies did not completely nullify the international trade, indeed it created a sort of spring
effect. Obstacles to free trade were so deeply implemented that Europeans countries needed to
improve trade in order to recover the domestic growth from the damages caused by the
protectionist measures. Particularly in 1913, for the largest industrial countries (e.g. UK,
France and Germany) exports still represented from 15 to 20 percent of national incomes.
Finally, the succession between protectionism and free trade (before in 19th century and then
in the interwar periods) gave the chance to amplify knowledge about trade policies and
triggered the process that lead to a world coordinated trade organization.

References
[Lipsey, Robert E. 1963. Price and Quantity Trends in the Foreign Trade of the United
States. Princeton University Press for the National Bureau of Economic
Karl Gunnar Persson,2010, An Economic History Of Europe,Chpt8-12
Massimo L. Salvadori,1990, Storia dell'et contemporanea. Torino, Loescher,
ORourke,KevinH., The Cambridge Economic History Of Modern Europe,Globalization
1870-1914,Cambridge
Research, Princeton.
Rondo Cameron and Larry Neal,2011, A Concise Economic History of the World , Chpt 12 pg
292-299
Todd, David, Lidentit conomique de la France (Paris, Grasset, 2008).

Trentmann, Frank, Free Trade Nation (Oxford, 2008);

Vanek, Jaroslav. 1963. The Natural Resource Content of United States Foreign Trade, 18701955. MIT Press, Cambridge.
William Smart,1904, Return to protection,London, Mcmillan]