Tit for tat?

1. Tit for tat? The German 1879 and French 1892 tariffs compared

2. Continental brand of capitalism

3. The “bad reputation” of French and German protectionism

4. 1.1 Tariff here, tariff there, tariffs everywhere And it is only the first round (of three) + piece-meal measures

6. 1.2 Bismarck’s “iron and rye” tariff

7. 1.3 1881: France misses the step The aggregate duty rate, in percent 1870-1900 Pierre-Emmanuel Tirard

8. Free-trade by any other name?

9. 2. Causes and determinants of policy change: similarities and some differences 2.1 Nationalist economic policy 2.2 Public finances and nation-building Taxingpowers 2.3 Trade diplomacy 2.4 Interest groups influence Verdier

10. The twilight of the liberals Otto von Camphausen Rudolph von Delbrück

11. Gerschenkron (1943): Protectionism as “the fulcrum of nazism”

12. The price of isolation

13. W. T. Mulvany (1806-1885): the Irishman who founded the Union for the Promotion of Common Economic Interests of Rhineland and Westphalia (the “Langnam-Verein”) 1871

14. Building of protectionist “bloc” Mode of action: just about the same

15. 3. Political process, scope and design of the tariff 3.1 Passing the tariff bill • duration Reichstag: fast track (6 months) French chamber: 24 months • F : legislature imposed and steered reform • D : the chancellor’s change of mind; legislature rubber-stamped decision

16. Bismarck, with friends and allies

17. Working with a majority

18. The implications ofthe two round majority system Pressure vs. party politics

19. Scramble for protection

20. 3.2 Scope, range and design

21. Simplicity: apparent and real French tariff (as of 1892) German 1879 tariff (as of 1890)

22. Cotton yarn: French 152 categories; German: 18 And there is more: inputs taxed more than finished products; spurious precision; A net that stops mouses and let in elephants Sometimes grotesque, arbitrary, and/or perfunctory

23. 4. Results (5 points) • Aggregate deadweight loss: likely to be small (i.e. renounce aggregate measures of protection) • Taxation more or less efficient, more or less well designed; tariffs in part perfunctory; camouflage operation (to conceal favouritism) 3. Transfers and redistribution

24. Everybody knew what was going on..

25. The “protectionist oligarchy” • Germany: Junkertum, Krupp & Co., “fulcrum of monopolization” Small farmers opposed duties (Lehmann, Schonhardt-Bailey) • France: Employed population in industry: 6.4 million (beneficiaries: 3%) Agriculture: 1.3% of farms exceeded 40 ha (100 acres) but 14% could hope to benefit (possibly); Bismarck’s prediction

26. 4. The devil in the details: impact on industrial structure/performance • Bonus for declining, mature industries (textile spinning, pig iron smelting) • Industrial systems moving towards end-of-line products hampered by taxation of semi-finished inputs • Industries using imported inputs at a disadvantage • Interdependence rising despite claims to greater self-sufficiency • Breakdown of trade flows by product/industry • Bilateral trade flows (“mirror flows”) M/X valuation : margin of error ±15% (X undervalued, M overvalued)

27. Relation between the rate of protection and structural change: Germany 1895-1907

29. 5. Rhetoric and reality, fact and fiction (“Much ado…”)French/German protectionists and the Board of Trade “Nearly everyone who is trying to get taxes on imports lowered on behalf of his own country, is likely to be working for England’s good under the MFN clause… England’s masterly policy of quiescence is rewarded by her reaping the fruits of other people’s excitements, quarrels and worries.” Alfred Marshall, “Memorandum on fiscal policy,” in F. W. Taussig (ed.), Selected Readings in International Trade and Tariff Problems (Boston, Ginn & Co. 1921, p. 445). Irwin