Globalisation — lessons from George Canning on how to remake trade
- April 14, 2022
- David Cowan
The current reaction against free trade is a result of a blind faith in the market, but retreat into economic isolation is not a solution either. The policies of George Canning, a nineteenth century British Foreign Secretary, can offer a useful lesson in the values of following the middle way.
The rules-based order is facing its most dramatic and violent challenge since the end of the Cold War. Russia’s decision to break international law and violate the independence of a peaceful neighbour will have long lasting consequences for the world. The economic consequences are already becoming clear. The British economy could lose as much as £90 billion as energy prices skyrocket, fuelling already rising inflation. As western nations begin to move toward living without dependency on Russian oil and gas, serious questions need to be addressed about the future of global trade.
During the 1990s and 2000s, it was taken for granted that global trade would become increasingly open. But since the 2008 financial crisis, the presidency of Donald Trump, and the COVID-19 pandemic, a backlash against trade liberalisation has swept across western nations as concerns around national security and sovereignty start to dominate economic debate. This threatens to restore protectionist policies and reverse the progress made in liberalising trade over the past thirty years. Maintaining popular consent and addressing economic vulnerabilities will have to be secured without closing trade between nations.
A successful role model to emulate is George Canning, the British Foreign Secretary from 1822 to 1827. In the face of assertive authoritarian powers, Canning pursued a foreign policy that would strive for balance in the global order with trade liberalisation as a significant tool. In an era of renewed great power competition two hundred years later, western nations face a similar challenge. Canning developed an approach that balanced economic growth with national interest and can now help navigate Britain through the choppy waters of the post-pandemic future.
Free Trade Nationalism
Alongside being Foreign Secretary, Canning was responsible for managing the government’s legislative agenda as Leader of the House of Commons. This meant handling economic and fiscal policies that would be the foundation for his political partnership with William Huskisson, President of the Board of Trade between 1823 and 1827. Huskisson served with Canning in William Pitt the Younger’s governments and developed his policy expertise carefully, gaining a strong reputation for financial knowledge. When Canning returned to government in 1822, he pushed the Prime Minister, Lord Liverpool, to give Huskisson a Cabinet level position, which eventually happened in 1823, despite opposition from George IV.
Although he was far better versed in matters of foreign policy, economics had an important part to play in Canning’s political thought, which was firmly rooted in the ideas of Adam Smith and his admiration for Pitt’s trade policies of the 1780s. He shared Huskisson’s assessment that freer trade was ‘only the following up of those principles of good-will and liberal commercial policy between nations, which Mr. Pitt inculcated, and, as far as possible acted upon, from 1786, till he was forced into war by the progress of the French Revolution.’ However, neither Smith nor Pitt proposed unilateral free trade. They held that some restraints on trade were still necessary, including the Navigation Laws that protected the British shipping industry. This provided Canning and Huskisson with a distinctively nationalist view of free trade.
Under Huskisson’s leadership, stamp duties were cut, duties on trade between Britain and Ireland were repealed, and duties on wool, coal, rum, and services to the shipping industry were reduced or scrapped. The abolition of Silk Duties was particularly controversial. Tariffs on Canadian timber were lowered in 1821 to help Britain build more ships and decrease its dependency on the Baltic nations. Liberalisation of trade had begun prior to Canning and Huskisson entering government, but this acceleration of reform would make their names synonymous with free trade after their deaths.
This also shaped Canning’s work in the Foreign Office as he worked with Huskisson to promote reciprocity in global trade. Under the Reciprocity of Duties Act 1823, foreign ships could transport goods to Britain on the same basis as British ships provided British ships received the same treatment. Unilateral or universal free trade was not their ambition. Opening trade and negotiating reciprocity with Britain’s European neighbours was designed to avoid retaliatory tariffs that could damage British industry. As the nation with the world’s largest merchant fleet, it could not afford a trade war.
Canning and Huskisson, as Tories, were also committed nationalists. They did not share the doctrinal purism of the political economists like David Ricardo or later generations of radical free traders. The Corn Laws, Navigation Laws, and imperial preference could be amended but never abolished because of their importance for holding the empire together and supporting national power. These adjustments led to greater trade between the colonies and foreign nations, relaxed duties on imported colonial products, extended warehouse facilities, and even admitted Canadian wheat into Britain at a lower duty level. The key lesson from history that motivated Canning and Huskisson was the loss of the American colonies. That experience proved to them that a more flexible approach was needed for the growth of colonial trade.
Commercial reform also rationalised the system of tariffs and trade protections established in previous centuries. Huskisson succeeded in reducing 1,000 customs acts to eight categories, but this did not cause a significant reduction in the amount of revenue raised by duties. This was partly to continue Pitt’s strategy of tariff simplification as a means of tackling smuggling, but it was also about turning Britain into a general depot for global trade. For example, the Warehousing Act 1823 allowed foreign goods to be exported duty free after passing through British warehouses. The result was a programme of freer trade that charted a middle course between old mercantilist practice and purist free trade doctrine.
Opening the Americas to Britain
The role of freer trade in Canning’s foreign policy was central to the formation of his South America policy. Recognising the independence of the former Spanish and Portuguese colonies was the crowning achievement of Canning’s time as Foreign Secretary between 1822 and 1827. It was also rooted in years of British engagement in the region dating back to the Napoleonic Wars when the Royal Navy escorted the Portuguese royal court and fleet to Rio de Janeiro following the French invasion of Portugal. Britain established a naval station in May 1808, allowing the Royal Navy to patrol South Atlantic waters and protect Brazil from falling into the hands of Napoleonic France. Protecting the region from French expansionism would continue to be a priority under successive British Foreign Secretaries, including Canning.
After the outbreak of the Peninsular War in 1807, Britain also sought to act as mediator between Spain and its colonies. Again, Britain’s priority was to stop the South American colonies from falling into French hands, just as the Spanish Louisiana territory had done in 1800 before being sold to the United States. Britain also wanted to open the region commercially. Canning recognised this during his first period as Foreign Secretary between 1807 and 1809 and would seek ‘most favoured nation’ status for Britain at the Congress of Verona when he returned to the Foreign Office in 1822. British policy under Canning’s predecessor as Foreign Secretary, Lord Castlereagh, had already prepared the ground by allowing the recognition of the flags of South American vassals. The goal was not to replace Spanish monopoly over trade with a British one, but to open these markets to the world.
British exports to South America, besides Brazil, grew fivefold between 1821 and 1826 when it reached a value of £4.5 million out of the total £55.6 million of British exports across the world. British exports to Brazil doubled between 1821 and 1826, reaching a value of £4.2 million. By 1826, 16 percent of British exports went to South America. These exports were mostly made up of manufactured goods such as cottons, woollens, linens, hardware, glassware, and china. In 1823, 80 British commercial houses spread across South America. British soldiers and sailors even went on to serve in the revolutionary forces against Spanish rule.
But so long as the Spanish republics went on unrecognised, British citizens and property would go unprotected and the Royal Navy would be unable to crackdown on piracy in the region. The United States had begun to extend its reach into the region, recognising the independence of the South American republics in 1822, causing rising tensions with Britain as they began to compete. The situation in South America was also intwined with events in Europe. After the 1823 crisis in Spain, when the French intervened to restore the Bourbon monarch Ferdinand VII who had been overthrown by republicans in 1820, Canning put his energies into ensuring the French could not claim Spain’s colonies.
Canning started by sending commercial consuls to the region in October 1823 alongside commissioners of enquiry to Mexico and Colombia to gather more information about what was happening on the ground. He also reached out to the United States, suggesting that they issue a joint warning to France against intervening in South America. But President Monroe declined and instead put forward his now famous doctrine against European interference in the western hemisphere. This did not stop Canning from producing the Polignac memorandum, stating that Britain had no hostile intent towards the South American republics, and circulating it publicly. In truth, the Monroe Doctrine could only be fully realised with the power of the Royal Navy to stop other European powers from intervening.
Pressure on the British government to recognise the independence of South America continued to grow from domestic commercial interests. As the MP for Liverpool between 1812 and 1823, Canning had acquired a strong awareness of the desires and opinions of urbanised Britain, and this was reflected in his support for freer trade abroad. By contrast, George IV and the High Tories in government were firmly opposed to recognition due to the impact it might have on domestic politics and the situation in Ireland where Catholics were becoming increasingly vocal and organised in their campaign for equal civil and religious rights. But, with the support of the Prime Minister, Canning was able to secure Cabinet authorisation for Woodbine Parish, the British Consul-General, to negotiate a commercial treaty with the republic of Buenos Aires on the 23rd of July 1824 ahead of political recognition in December followed by recognition of Colombia and Mexico in 1825.
Recognition would secure British commerce, block French expansion, and restrain American ambitions, leading Canning to declare ‘Spanish America is free, and if we do not mismanage our matters sadly, she is English’. Canning believed that Britain was uniquely placed to integrate South America into the European state system to counteract the influence of the authoritarian powers, such as France. But Canning was not on a mission to impose British constitutionalism or to end colonial power in the region. His objective was to facilitate balance in international politics, avoiding the extremes of both absolutist monarchy and radical republicanism. That is why Brazil would serve as an ideological lynchpin in Canning’s vision for South America, acting as a counterweight to its republican neighbours, and preventing Europe and the Americas from being ideologically opposed to one another.
Again, it would be commercial interests that shaped Canning’s actions. Under the commercial treaty with Portugal, four-fifths of articles were regarding Brazil, and it was due to expire in 1825. Canning wanted to guarantee Britain’s commercial interests in Portugal and was concerned that French influence in Madrid would eventually expand to Lisbon where the regency was corrupt, the monarch was absent in Brazil, and the Peninsular War had shaken national confidence. When Brazil declared independence in 1822, Britain’s policy of non-intervention in the internal affairs of other European states was put to the test.
British military and diplomatic cooperation with Portugal were rooted in an alliance going back to 1373, but it had been strengthened significantly during the Napoleonic Wars. Portugal and its ports held a vital strategic role in the sea routes to India, the Mediterranean, and South America, providing supplies and trading posts for the Royal Navy. By 1824, this was part of a vast Mediterranean network with 110 battalions in Gibraltar, Malta, and the Ionian Islands. Brazilian and Portuguese trade was more vital than Spain and its former colonies, which is why Britain recognised Brazilian independence in 1825, resulting in a new commercial treaty with a large and significant constitutional monarchy in South America.
By the time Canning died in 1827, Britain enjoyed commercial treaties with Buenos Aires, Mexico, Colombia, and Brazil. This is more than the three commercial treaties the United States managed to sign with Brazil, Colombia, and Central America. British loans and merchant houses flooded into South America, contributing to a speculative boom in London, with £25 million of capital raised by 1825. However, this commercial success was dampened when a number of mining companies established in Mexico and Colombia during this time collapsed, contributing to the domestic economic panic in 1825.
Canning believed that the independence and eventual recognition of Spanish America and Brazil was inevitable, and that Britain stood to benefit by acting quickly. Britain also had greater ability to project its naval power in the South Atlantic than on the Peninsular during the Spanish and Portuguese crises of the 1820s. The overarching goal of his push for balance in South America was to prevent a protracted conflict between Europe, already exhausted from war, and the newly independent American states. But Canning’s policy also utilised commerce to expand his country’s influence, instead of territory, raising British prestige and prosperity.
The Future of British Trade
Canning’s career provides a model of how a non-doctrinaire approach to trade can effectively defend liberal trading arrangements through political positioning at home and diplomatic manoeuvring abroad. He pursued a middle way between mercantilism and free trade, agriculture and industry, and the old world and the new world. This pragmatic world view made Canning a supporter of freer trade who understood the limits of what could be achieved and how to find opportunities for Britain to expand its influence whilst containing the ambitions of authoritarian powers.
Since the vote to leave the EU, Britain has maintained a broad commitment to free trade. Free trade agreements have been negotiated with the EU and 70 countries, and talks are ongoing for accession to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Keeping up these efforts will be beneficial to countering the influence of China and Russia in developing regions. As an independent member, of the World Trade Organisation, rather than part of the European bloc, Britain can speak out more clearly when the rules are not being observed.
But more than this, Britain must actively help shape the rules of trade with developing countries in vital geo-economic regions. Just as Canning led efforts to include South America in the global trading system, Britain can work with the United States and European allies to prevent Chinese domination and shut out Russian influence in the Asia Pacific. President Biden’s ‘Build Back Better World’ initiative, announced at last year’s G7 summit, is a promising sign of western efforts to counteract the spread of China’s economic reach. Britain can go further play a creative role in strengthening commercial ties between western nations and the Asia Pacific. One potential Canningite move could be to withdraw from the Asian Infrastructure Investment Bank founded by China, and work with allies and partners to establish an alternative institution or explore reform options for the World Bank and IMF.
For liberal trading arrangements to continue in the world, a conscious effort must be made to ensure trade is fair, reciprocal, and brings prosperity to a nation’s citizens. Blind faith in the market has led to the current reaction against free trade. But retreat into economic isolation is not a solution either. Canning’s middle way should inspire Britain to once again follow a liberal but hard-headed approach that can shore up support for the rules-based order at home and abroad, providing a strong alternative vision for the global order that can withstand and resist the rise of authoritarianism.