Why were Latin America's tariffs so much higher than Asia's before 1950?
Summary (2 min read)
1. INTRODUCTION
- While many have compared Latin American and Asian trade policy since 1950, few have extended the comparison to the preceding century.
- The best evidence from the long 19th century through World War (WW) 2 reveals tremendous contrasts between the two regions.
- The Latin American belle époque also boasted some of the highest growth rates, while Asia registered some of the lowest.
- This paper uses the historical record of tariff policy to begin an exploration of all of these questions.
2. THE TARIFF DATA
- A well-developed international literature makes it clear that trade shares are very poor measures of openness, since they are endogenous and can be driven by demand and supply factors within countries that are completely independent of trade policy1.
- Indeed, it appears that totally 67 per cent of the late 20th century Organisation for Economic Cooperation and Development trade boom can be explained by unusually fast income growth, and not by the decline in trade barriers (Baier and Bergstrand 2001).
- This paper uses the computed average tariff rate to explore differences between Asian and Latin American policy experience from shortly after the mid19th century to WW2.
- While making a consistent effort to compare calendar year duties with calendar year import values, in cases where calendar year duties figures are unavailable, fiscal year duties are divided by calendar year imports to calculate average tariff.
3. EXPLORING TARIFF AUTONOMY
- The authors analysis requires formalisation of the concept of tariff autonomy, the freedom to set tariff levels independent of another state’s military and political power.
- Table 1 lists the years in which the authors judge each country to have had tariff autonomy.
- Burma, Ceylon and India were subject to British imperial tariff collection policies, as Cuba was to the Spanish through 1899, Indonesia (Netherlands Indies) was to the Dutch and the Philippines was to both the Spanish up to 1898 and the United States thereafter.
- Norway did not have an independent tariff policy under the Swedish crown through 1905.
- The authors take Turkey to have lost tariff autonomy in the brief years between its defeat in WW1 and Mustafa Kemal’s establishment of the Turkish Republic thereafter.
3.1. Did Asian Colonies Simply Mimic their Masters?
- This is a good place to explore the tariff autonomy issue within the colonies.
- There are five colonies in their sample, all in Asia: Burma, Ceylon, India, Indonesia and the Philippines, although foreign influence was strong enough (including occupation) to make Egypt behave like a colony after 1881 (see, e.g. Owen 1993, p. 122).
- Figure 1 reveals a clear correlation in timing and magnitudes of change in tariff rates between the United Kingdom and her four colonies in the sample (Burma, Ceylon, Egypt and India).
- ASIA’S PRE-1950 Revista de Historia Económica, Journal of lberian and Latin American Economic History 15.
3.2. Gunboat Diplomacy and the Asian «Independents»
- Independence did not necessarily mean tariff autonomy.
- Transport costs dropped very fast before WW1, accounting for approximately two-thirds of the integration of world commodity markets over the century following 1820, and for all of world commodity market integration in the four decades after 1870, when globalisation backlash offset some of it LATIN AMERICA’S TARIFFS VS.
5. CLOSED JAGUAR, OPEN DRAGON?
- Figure 4 reveals the stark difference between Latin American and Asian tariff policy that persisted over the century between the 1860s and the eve of the WW2.
- Black lines show means, while grey bands indicate one standard deviation above and below that mean.
7. WHAT EXPLAINS THE INTERWAR RISE IN ASIAN PROTECTION?
- Note that it was not just one or two Asian countries pushing those tariffs up, since Figure 7 shows that it was ubiquitous across the whole region.
- The authors need to know why their colonial grip weakened in the 1920s, thus allowing the Asian colonies to raise their tariffs to such heights.
- ASIA’S PRE-1950 Revista de Historia Económica, Journal of lberian and Latin American Economic History 35 whole, it appears that differences in the regressors (e.g. autonomy) are not associated with the regional tariff gap any more, but rather that differences in how the regressors are associated with tariffs (the coefficients) matter much more.
8. DID TARIFF POLICY INFLUENCE INDUSTRIALISATION IN LATIN AMERICA AND ASIA?
- In some parts of Latin America and Asia, modern industrialisation started more than a century ago.
- Latin America had two emerging industrial leaders in the late 19th century (Brazil and Mexico), Asia had four (Bengal, Bombay,.
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202 citations
"Why were Latin America's tariffs so..." refers background or methods in this paper
...9 A complete description of the right-hand side variables can be found in appendices to Clemens and Williamson (2004) and Blattman et al. (2002)....
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...While the tariff data used here have already been exploited to help redress this big world research imbalance (O’Rourke and Williamson 2002; Clemens and Williamson 2004; Coatsworth and Williamson 2004a, 2004b; Williamson 2006b), this paper does much more by focusing in depth on the ten Asian and…...
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...…is defined as the ten-country sample consisting of Burma, China, Ceylon, Egypt, India, Indonesia, Japan, the Philippines, Siam and 4 A complete appendix description of the sources and methods surrounding the tariff database can be found in Blattman et al. (2002) and Clemens and Williamson (2004)....
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201 citations
"Why were Latin America's tariffs so..." refers background in this paper
...Finally, there was a huge revenue need to bankroll armed conflict in the United States of the 1860s and the newly independent Latin American republics between the 1820s and the 1870s (see Centeno 1997; Mares 2001; Bates et al. 2007)....
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...Centeno (1997) documents that military expenditures quickly rose to consume over 70 per cent and often more than 90 per cent of all revenues....
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196 citations
"Why were Latin America's tariffs so..." refers background in this paper
...…American tariffs from the late 1860s to the turn of the century was much steeper than was true of Europe, including France and Germany about which so much tariff history has been written by scholars like Gerschenkron (1943), Kindleberger (1951), Bairoch (1989) and, more recently, O’Rourke (2000)....
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185 citations
"Why were Latin America's tariffs so..." refers background in this paper
...…ASIA’S PRE-1950 Revista de Historia Económica, Journal of lberian and Latin American Economic History 21 the region is said to have turned towards protection and de-linked from the world economy for the first time (for three often cited examples, see DiazAlejandro 1984; Corbo 1992; Taylor 1998)....
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163 citations
"Why were Latin America's tariffs so..." refers background or methods in this paper
...…integration in the four decades after 1870, when globalisation backlash offset some of it LATIN AMERICA’S TARIFFS VS. ASIA’S PRE-1950 Revista de Historia Económica, Journal of lberian and Latin American Economic History 19 (see Lindert and Williamson 2002; Williamson 2006a, Ch. 3, 2011a, Ch. 2)....
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...As a result, commodity price convergence and trade creation between Europe and Asia were even more dramatic than within the Atlantic economy as shown by O’Rourke and Williamson (1999) and in greater detail by Williamson (2002, 2006a, 2011a) alone....
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...To cite another example, 50 to 65 per cent of the European overseas trade boom in the three centuries following 1492 were driven by income growth, rather than by any decline in trade barriers (O’Rourke and Williamson 2002, p. 439)....
[...]
...While the tariff data used here have already been exploited to help redress this big world research imbalance (O’Rourke and Williamson 2002; Clemens and Williamson 2004; Coatsworth and Williamson 2004a, 2004b; Williamson 2006b), this paper does much more by focusing in depth on the ten Asian and…...
[...]