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Journal of Interdisciplinary History 37.3 (2007) 341-369


The Importance of Being British?
Imperial Factors and the Growth of British Imports, 1870–1960
Gary B. Magee

Empirical studies reveal that international trade flows do not conform to the expectations of traditional theory. Some nations trade "too much" with each other and others "too little." High-income, capital-rich countries tend to trade more with each other and less with low-income, labor-abundant countries than might be expected. National boundaries seem to matter, as does the "psychic distance," or cultural affinity, between potential trading partners. One explanation for this phenomenon is that transnational, co-ethnic networks can be crucial in shaping trade patterns. Drawing upon the experience of Maghribi traders of the eleventh-century Mediterranean, Greif, for example, demonstrated how these networks can both facilitate trade by deterring opportunistic behavior and hinder it by being too exclusive in their membership. One clear implication of this research is that trade can often develop more readily among people sharing a common ethnic, religious, or political identity.1 [End Page 341]

Such considerations are also often said to underpin the strengthening of Britain's trading relations with its colonies from the latter half of the nineteenth century. The extent of this imperial reorientation is readily apparent in the export data. Between 1871 and 1938, the proportion of all British exports to the Empire rose from 26.8 percent to 41.3 percent, whereas the share that went to the developed countries of industrial Europe and the United States was shrinking. Not all parts of the Empire, however, benefited equally as a market for British goods. In fact, the main recipients of the increased flow of British exports to the Empire were the neo-European colonies, later Dominions—Australia, New Zealand, Canada, and South Africa. By the 1930s, these markets alone, with a combined population of around 30 million, accounted for more than one quarter of Britain's total exports.2

The question of why these markets proved to be more accessible to imports from Britain than the often geographically closer United States has attracted scholarly attention since the trend first became apparent at the end of the nineteenth century. The reasons given for their special economic relationship with Britain range far and wide. The most common are their shared language, currencies, tastes, institutions, and expectations; their use of preferential tariffs; their governments' preference for British goods when available; their absolute dependence on British investment for continued development; and the density of their transport, distribution, and communication networks with Britain. Taken together, these interrelated considerations are thought to have afforded British exporters unique market advantages in Britain's formal and informal Empire.3 [End Page 342]

Although many scholars have speculated about the likely effects that these imperial advantages had on Britain's industrial competitiveness, few have studied their exact impact on Britain's trading patterns. O'Rourke and Williamson's account of the development of the Atlantic economy, for example, makes no mention of imperial factors. Indeed, more often than not, the effects of Empire—one way or the other—have simply been assumed. Given the centrality of the Empire to both the British and global experience for much of the nineteenth and twentieth centuries, as well as the extent to which the net effect of imperial factors on British investment has been subjected to quantitative scrutiny, this gap in knowledge is surprising. Part of its explanation undoubtedly lies in the inherent difficulty of capturing such non-market effects within traditional trade theory. This article follows Eichengreen and Irwin in contending that an empirical, gravity-influenced approach offers more scope.4 [End Page 343]

Did these oft-cited advantages of Empire really open markets for British exporters, or were other more prosaic considerations, such as price and income, chiefly responsible for Britain's imperial drift? This article proposes a gravity-inspired import demand function for British products and develops an index that permits the net effect of Britain...

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