From Empire to Europe: Imperial Preference
From Empire to Europe: Imperial Preference

Imperial Preference: Britannia, at least for a time, ruled the waves.

At her height, the Empire accounted for one-fifth of the world’s population and covered almost a quarter of the Earth’s total land area.


The lifeblood of the Empire was trade, through trade routes stretching from Britain around the world, she imported raw resources from her colonies: wool from Australia, butter from New Zealand, steel from Canada, tea from India, cotton from the Americas, sugar from the Caribbean, Gold from South Africa and so on.

These resources were processed in the nation’s factories and were in turn sold back to the Empire, who were of cause equally prolific at trading amongst themselves.

All of this trading was protected by a system called Imperial preference: A system of preferential trade agreements, tariffs, and the sterling area where the colonies pegged their currencies to the pound sterling.

This reflected the British policy of ‘splendid isolation’ to avoid European alliances and commitments, as Churchill said “If Britain must choose between Europe and the open sea, she must always choose the open sea”.

But at the end of World War Two the United Kingdom’s economy was exhausted.

From Empire to Europe: Imperial Preference

Her coffers were empty, she was, in a word broke, and Britain’s mercantile Empire was trading on borrowed time.

Europe as a whole was in economic ruin.

Seventy 70 percent of Europe’s industrial capacity had been destroyed while the United States had not been exposed to strategic bombings on her continent, and emerged producing approximately half of the world’s industrial output.

The United Kingdom turned to her wartime ally America and a delegation was sent from Westminster to Washington to ask for assistance.

The British had lost three times as many citizens as had America, and they believed that a grant would feasible and appropriate, John Keynes as part of the British delegation even argued they “should not be authorized to agree to anything except an out-and-out grant”!

The Americans, with fresh memories of the Great Depression, were less inclined to simply hand Britain a bailout, but the words of their negotiator, Will Clayton, illuminates the American’s objectives: “if you succeed in doing away with the Empire preference and opening up the Empire to U.S. Commerce, it may well be that we can afford to pay a couple of billion dollars for the privilege.”.
In return for an American loan, on rather favorable terms, Britain would dismantle the imperial preference system, end currency exchange controls, and pass the Bretton Woods proposal, the precursor to the World Trade Organization.

These terms set Britain on a path away from mercantilism and towards free trade, opening the British Empire to American goods.

The following year the US started the European Recovery Program, known as the Mashal Plan, this injected thirteen billion dollars ($130 billion in today’s money) into the economies of Western European Nations.

This lifeline wasn’t just a cheque; it included American exports and so American companies profited.

Rebuilding trade partners was of great importance to the United States and this program cemented America as a trade partner of Europe.

Like the Anglo-American loan, the Mashal Plan, erased trade barriers and tariffs but it also set up institutions to coordinate the economy across Europe.

In doing this it laid the seeds for the European Coal and Steel Community established in 1951 by Belgium, France, West Germany, Italy, the Netherlands, and Luxembourg.

The idea of the founders being that with Europe’s economies integrated, the war between them would be not only undesirable but entirely impractical.

On New Year’s day, 1973 the United Kingdom became a member of the European Economic Community,the successor to the European Coal and Steel Community and precursor of today’s European Union.

Unlike the original members, Britain joined for economic, not political, reasons; it was obvious that the valuable trade was
with Europe.

For the United Kingdom joining the EEC meant signing up to EEC policies and that meant an end to be able to maintain what was left of Imperial Preference. Britain was, for example, no longer able to freely import agricultural products from its former colonies.

Imperial preferential trade agreements gave way to European protectionism.

Particularly in Australasia and New Zealand, Britain’s membership was seen as a betrayal.

Australian butter exports dropped by more than 90 percent, and the apple trade declined by 68 percent.

These former colonies on the other side of the world began a painful process of realigning their economies away from Britain.

Former colonies diversified their trade, including with the new powerhouse economy of the United States.

But, were Britain and Europe stepped out of the South Pacific, China and Asia were eager to step in.

China embarked on its economic liberalization in 1978, and today China is the largest trading partner of both New Zealand and Australia.

Back in Britain, the Economy also shifted, away from being the Industrial heart of an Empire to a service-based economy integrated with its European neighbors, and for the English speaking world, Britain’s membership wasn’t entirely negative, as now the United Kingdom has become the economic gateway to Europe for its former Empire.

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