This post will deal mainly with the European context of free trade, conditions for free trade in 19th century Norway, and the French treaty system. Following a section on this, we’ll turn to the effect of free trade on Norwegian industries, and to how the free trade regime came under press at the end of the century.

The post will most certainly contain several repetitions from earlier posts from this course.

Great Britain.
The main breakthrough for free trade in the 19th century came around 1850. The earlier trend of mercantilism was primarily focused on developing domestic industry as a means to reducing imports and thus improving the trade balance. Privileges, export prohibitions and navigation acts were some of the tools utilized by governments under this regime.

But in the 18th century, a free trade ideology begins to emerge. in his 1776 book “The Wealth of Nations“, the Scottish economist Adam Smith (shorter biography than the Wikipedia ones I’ve previously linked to) examined the causes of economic growth. He ended up with arguing for states to buy goods from wherever they could get them as cheap as possible, and sell their own goods to those who were willing to pay the most. This were to take place in a system of free trade where every state, region or individual produced the products they had the best qualifications to produce. In his theories, both trade and the markets in which trade takes place develop best on their own, without any government interference — a so-called laissez faire system. A division of labour would create and incite economic growth in all states.

This was further built on by David Ricardo. He claimed that free trade would help increase the total production of the world, as each state specialized on the goods they were best qualified to produce, importing what they needed from other states and exporting their own products to others.

The theories of both Smith and Ricardo were later followed up in practical politics, primarily by the Manchester Liberalists. This was originally a group of industrialists from the industrialised north of England, who united during the struggle against the Corn Laws. The Corn Laws laid a tax on imported corn, in order to support English/British farmers. This tax made corn prices unnaturally high, which in turn provided an incentive for the cultivation of marginal land areas. These marginal lands were harder and thus also more expensive to till, and so the corn prices rose additionally. Corn was the most common food of the working classes, so when the prices of corn rose, their wages were worth less, and they demanded higher wages. Thus, the industrialists started advocating the abolishment of the Corn Laws. In 1846 the anti-Corn Laws agitators succeed. Corn tariffs are remove, corn becomes cheaper, and the famers get in trouble. The abolishment of the Corn Laws was made primarily through a series of political reforms in the elective system of England in 1834-36. Previous to this, landed gentry had dominated Parliament, often through rotten boroughs. This reform awards more power to the cities, on the expense of the rural areas.

Free trade in Great Britain was further promoted by the reduction in mercantilist arrangements. The British East India Company lost its Indian privileges in 1813, and in 1842 a massive reduction of tariffs took place. This reduction in tariffs had almost as much importance to Norway as the abolishment of the Navigaton Acts in 1849. In 1851, the tariff on timber trade is removed, making it easier for Norwegian timber to compete with the Canadian. In 1860, free trade can be said to have been fully implemented in Great Britain.

Why did this happen? Part of the explanation can be found in the ideological convictions of English politicians, but the introduction of direct taxes also helped, by making the state less dependent upon income from tariffs.

France.
France had traditionally been a very closed market for outsiders. High tariffs and massive protectionism reduced the accessibility of the French market, even (or perhaps “especially”) after the removal of the internal toll barriers during the Revolution. But Napoleon III’s rise to power in the third quarter of the 19th century was about to change this. He’d lived in Great Britain for quite a long time, and there he’d become an advocate of free trade. Early in his regin he wanted to sign a free trade treaty with Belgium, but internal French opposition to the treaty stopped it. However, after a while, Anglo-French relations began to tense, and Napoleon decides to mend this by offering a free trade treaty to Great Britain. France offered a mutual lowering of tariffs, which essentially meant that the French offered to open their market for British goods, seeing as the British didn’t have many tariffs to reduce. This treaty is important for the international free trade regime, as it included the first most-favoured nation clause. This meant that Great Britan would enjoy the same concessions of tariffs as other states France made agreements with, and that further bilateral free trade treaties signed by France would also apply to those states France already had such treaties with. Thus, if France were to sign a free trade treaty with, say, Holland, Great Britain would gain access to Dutch markets, and vice versa. This web of treaties would help bind Europe together. (The original treaty between France and Great Britain is called the Cobden-Chevalier treaty of 1860, named after the British and French ministers of finance. Cobden, I might add, was a former leader of the Anti-Corn Laws League.)
In this way, both states increased their degree of free trade following a shift in the economic balance.

Significance for Norway.
In Denmark-Norway, tariffs served three purposes. First, it provided income for the King. Second, it helped protect domestic industry. And third, it was supposed to secure the moral conduct of the people. After Norway obtained its semi-independence in 1814, the protectionist purpose was done away with. Because of Norway’s dependence upon imported goods, Norwegian politicians were early to pay attention to the benefits of free trade. Additionally, there was little export industry to protect, so no remarkable resistance was made, and Norway predominantly followed Great Britain’s free trade reforms, until the Norwegian economy gained full openness in 1873. However, because the farmer opposition in the Storting had abolished the direct taxes, the import of some consumer goods were taxed, and this kind of tax represented the main source of income to the Norwegian state up until 1890.

In 1814, King Charles XIV John of Sweden claimed Norway as a spoil of war after the defeat of Napoleon and his Danish allies, thus ending the four hundred years long “union” between Denmark and Norway, and commencing the 91 years long union between Sweden and Norway. However, in spite of the union, Sweden and Norway consisted of two separate markets, and two separate economies. Swedish goods imported to Norway were taxed, and vice versa.

But in 1827 a trade agreement was signed, stating that goods transported across land between Norway and Sweden wouldn’t be taxed, and that goods transported between the two countries by sea would only be taxed half of what the goods of other states were taxed. But the two states still had separate toll systems.

Despite the fact that Sweden traditionally and on other fields was a more protectionist state, they later offered a free trade treaty to Norway. But the Storting turned it down in 1857, after 20 years of negotiations, because they in part feared Swedish dominance, in part because of a generally crappy relationship between the two states.

In 1865 Norway and Sweden are included in the French system, when signing a free trade treaty with France. Later we were further embedded in the international free trade system when signing more treaties of this sort, most of them with a mot-favoured nation clause. This was beneficial for many sectors of the Norwegian economy.

Norwegian fish gain better access to European markets, which was of huge importance, seeing as 10-12 % of the population in some way was involved in the fish industry. The population along Norway’s 57,000 kilometers long coastline benefited from this.

In shipping the abolishment of the Navigation Acts were the most significant, as it opened up transport between states. Norway becomes the world’s third largest seafaring nation, with its access to cheap labour that’s used to the sea. Norwegian shipping also applied the second best technology, allowing them to offer favourable terms. These conditions made Norwegian ships dominate the tramp transport. But poor working conditions and many shipwrecks make Norwegian ships less attractive to work on, and many sailors run away from Norwegian ships in port, to sign on to another ship.
The Norwegian shipping industry was based on an expertise on sailing ships, and Norwegian shipowners deal badly with the transition to steam engines, as this kind of shipping requires more capital and a different kind of organization. Along the south coast of Norway these changes bring with them economic recession, while the shipowners of Bergen actually copes with the transition and takes over the hegemony of Norwegian shipping.

Free trade incited growth in the timber trade as well. Combined with new steam technology which made it possible to cut the timber at the export port, Norwegian timber enhanced it competetive ability on the European market. At the same time, mechanized production of paper was introduced, an introduction that came simultaneously with an upsurge in reading skills in continental Europe.

Some other free trade induced legislative changes:
1854: Restrictions on domestic movements of labour are lifted, making it easier to travel in search of work. Previously, if you were found in a town other then your hometown, without any papers confirming that you were there to work, you risked being imprisoned. Naturally, the removal of such a regulation improved mobility.
1839: The guild restrictions in towns are lifted. Artisans no longer need to be a member of a guild in order to work within the limits of a city.
1842: “Citizen letter terms” for trading in cities are removed. (Apparently, you needed a letter proving your citizenship in order to trade in cities. Or something like that.)

All in all, the free trade regime resulted in a massive increase in world trade.

However, in the decades following 1870 the free trade regime came under pressure. because of recession. The transport revolution reduced the cost of moving goods across great distances, and this resulted in a flooding of European markets by cheap cereals from Russia, the USA and Argentina. European farmers didn’t exactly benefit from this. Additionally, the development of mass production techniques boosted production until it surpassed the demand of the goods produced.

Thus, farmers and industrialists demanded protection from cheaper foreign goods. Germany is perhaps the most central case. From 1879 and onwards Germany introduced severe protectionist measures. To strengthen their own industry, they attempted to close the door for their foreign competitors. [I believe this has been handled more thoroughly in an earlier post.]

The French treaty system, though, was a hinder to real protectionism. But from 1880 many of these treaties began to expire. However, several states are depending on free trade to satisfy their demand for goods, so the system doesn’t collapse. Some states attempt to speculate in toll barriers, raising tariffs to ridiculous heights just before entering into another treaty, in which they agree at toll rates at a higher level than before the speculative raise. The effects of this speculation was limited, though, because other states usually saw through the speculators, and then answered by raising their own tariffs. One important result, however, is that in becomes harder to enter into free trade agreements, and that the new agreements are less durable.

Thus, from 1890 and onwards, the winds of protectionism increases. Many free trade agreements are cancelled, and toll wars are waged between states.

This created problems for Norway. Our industry was very export centred, and shipping was also dependent on a high level of international trade. Because of this, Norway sought to maintain and renew its free trade agreements. This would prove hard, as the following example will show.

In 1892 Norway wished to enter into a bilateral free trade agreement with Spain, our fourth largest trade partner. There was one problem, tough: Sweden. Up until now Norway and Sweden had entered into free trade agreements together, but from 1890 the Swedes follow the Germans into protectionism. The background for this was a mobilization before the elections of 1887, where supporters of free trade and those of protectionism were the main contenders for winning the election. The friends of free trade wins, but because one of them, a certain Olof Larsson, had failed to pay SEK 11,58 in communal taxes, every ballot paper with his name on it was destroyed. With it, the free traders lost their 22 mandates from Stockholm to the protectionists. (If this sounds interesting, you can read more about it in this article, provided you understand Swedish.)

However, the protectionists were unable to introduce a new protectionist reform because of the already existing free trade treaty Norway and Sweden have with Spain, a treaty that expired in 1892. So the protectionists seek to find a way to cancel this treaty, a treaty whose continued existence Norway depends upon. But in 1891, the Spanish solves the problem by cancelling the treaty unilaterally. While it’s important for Norway to sign a new treaty with Spain, Sweden fails to care much. Unlike Norway, Sweden didn’t export much to Spain, and was thus little concerned with whether or not they had free access to Spanish markets.

Meanwhile, the conflict surrounding the union intensifies, and although the Swedes are reluctant to compromise, they allow Norway to negotiate a treaty with Spain on their own, in order to keep Norwegian malcontents from getting out of control. So Norway initiates negotiations with Spain with the purpose of lowering Spanish toll on split cod. But Spain’s more interested in a treaty with France, as their exports to Norway are limited, so they played for time, stalling negotiations as long as possible. But after a toll war breaks out between Spain and France, the Spanish agree to lower their split cod tariffs. The new tariff was higher than the old one, but it was better than nothing. However, Norway pays a high price for the access to Spanish split cod markets. Norway has to reduce its alcohol tariffs, and subsidize a steam ship route between Norway and Spain.

..

In 1895 Sweden cancels the law that eliminated tariffs on goods sold between Norway and Sweden. This hit the Norwegian textile industry the hardest, and was an expression of the tension between the two states during these years; War between the neighbouring states had never been closer after 1814.

On a more general note, Norway increases its tolls, too, in this period, but only because all the other states do so. After 1905 the protectionist trend continued and increased in strength, but this wasn’t because the number of convinced protectionists in the Storting increased, it was merely an expression of international trends. Norway still continued to expand its exporting industries.

The concession acts (the “Panic Act” of 1906 and the Concession Act of 1917) were protectionist measures, of course, but it differed from most other protectonist measures in that it wasn’t introduced to protect Norwegian industry from foreign competition. At least not directly.