Imperial Preference

Rooted in a geopolitical vision of enduring maritime Empire, the proposal that Britain and its dependencies should form a single autarkic economy, raising tariffs against the rest of the world but extending preferential rates to one another, attracted considerable support once it was clear, in the 1890s, that the British economy was failing to keep pace with Germany. The persistent British attachment to free trade survived the First World War but was finally overcome 1931 as steeply declining relative competitiveness of British manufacturing industry coupled with more autarkic trade policies in the United States and elsewhere coincided with an unprecedentedly sharp cyclical downturn in world demand and trade after 1929. The system of imperial preference was partially applied to the self-governing dominions following the Ottawa Conference of 1932 and was underpinned by formalization of a largely coextensive sterling area, especially after the imposition of exchange controls in 1939. The system gradually withered after 1945 as changing trade patterns diminished the importance of intra-Commonwealth commerce while margins of preference were eroded by inflation and British membership of the European Free Trade Association (EFTA). The end, effectively, came with the twin blows of sterling devaluation 1967 followed by British entry to the European Economic Community (now the European Union) in 1973.

— Charles Jones

This was a favourite nostrum of late 19th- and early 20th-cent. imperialists to bind the empire together by levying lower tariffs on colonial imports than on others. Joseph Chamberlain championed it from 1903. But there was a snag. Britain still adhered to free trade. You cannot grant more preferential tariffs than none at all. Chamberlain wanted a tax on imported corn, to make this possible, but that was rejected at the election of 1906 because it would mean dearer bread. So the imperialists had to wait until 1932, when food import tariffs were introduced generally again. Imperial trade increased thereafter, though that may not have been wholly due to this. After the Second World War the policy slowly declined, as a result of American pressure, the General Agreement on Tariffs and Trade (1947), and Britain's adhesion to a rival trading unit—the European Economic Community—in 1973.

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Imperial Preference (later Commonwealth Preference) was a proposed system of reciprocally-levelled tariffs or free trade agreements between different Dominions and Colonies within the British Commonwealth of Nations. The purpose of such practices was to promote the mutual prosperity, and thus unity, of allied imperial nations. While the idea of Imperial Preference is as old as colonialism itself, it:

• was a practice that was not necessarily used all the time;
• did not necessarily include every nation in the British Empire, and
• did not necessarily apply to every commodity.

The idea was fleetingly popular around the turn of the 20th century, as advocated by the tariff reformist Joseph Chamberlain. Problematically for Chamberlain, the new Chancellor of the Exchequer, C. T. Ritchie, was vigorously opposed to any scheme of Imperial Preference. (Ritchie was guided by the free-trade ideas of the leading economists of the time, such as Sir William Ashley.) This ultimately led to a damaging rift within the Conservative Party under Arthur Balfour.

During the 1920s, Imperial Preference became popular once more. Prime Minister Baldwin (1924-29) was a tepid supporter. His Colonial and Dominions Secretary, Amery, was one of its strongest supporters and in 1926 established the Empire Marketing Board to encourage Britons to 'buy Empire'. But Churchill, Chancellor of the Exchequer in the Baldwin government, and always a free trader, was an opponent.

In 1932, representatives of Britain, the Dominions, and the Colonies held the Commonwealth Conference on Economic Consultation and Co-operation in Ottawa, Canada. There was initial agreement on Imperial Preference. But the incompetence and tactless manner of British Dominions Secretary J. H. Thomas so alienated Dominion prime ministers that an opportunity was missed.

In 1935, the Canadian P.M., R. B. Bennett, a Conservative who supported Imperial Preference, was replaced by a Liberal, W. L. M. King. King responded to pressure from U.S. Secretary of State, Hull and abandoned Imperial Preference. The United States was determined to maintain its tariff protections and access to markets, but was vociferously opposed to any such preferences enjoyed by other countries. In the case of the Commonwealth, the U.S. was hostile to it from its inceptions, notwithstanding the fact that in the cases of Canada, Australia, New Zealand and South Africa, there was overwhelmingly preference for a system anchored by the United Kingdom rather than the U.S.

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