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What did the British Empire mean by “Free Trade” in reference to the colonies?

What did the British Empire mean by “Free Trade” in reference to the colonies?


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Background: This feels like sort of a silly question for me to be asking after reading about the Victorian Age and the British Empire for several months, but here goes.

As I've read about the British Empire, a pretty clear tend has emerged; when the British open China to the opium trade, export food out of Ireland during a famine, squelch Indian weavers beneath the weight of British manufacturing, or otherwise exert economic influence and naval muscle abroad, they usually justify their actions, at least in part, as being in the interests of free trade. The same when they repeal the Corn Laws, or otherwise act more beneficently.

I understood Free Trade to mean the idea that trade between nations should not taxed or restricted, and that in the long run free markets operate to the benefit of all. But at the same time, I've read that the British empire was in many ways a closed system, one that restricted and taxed the trade of the colonies, both to weigh the benefits of trade in favor of the mother country, and to prevent them from trading with other European powers.

I don't expect any society to be free of contradiction, but this seems like a big one, and I'd like to understand it better. Was there a more of contest between Free Trade and mercantilism after 1800 then I'd believed? Or does the British regulation of her various overseas possessions represent more of a pragmatic, ad hoc, system of compromise to financial problems? Or have I just completely missed something really basic?

Question: What did the politicians and industrialists of the British Empire, after 1800, mean when they spoke about Free Trade? Especially in reference to the British colonies?


Free trade as viewed in the question (as we understand it today):

I understood Free Trade to mean the idea that trade between nations should not taxed or restricted, and that in the long run free markets operate to the benefit of all.

Free trade in the context of colonisation:

Free trade imperialism was a nineteenth-century English political movement that advocated a primary focus on commercial domination, rather than formal colonization and territorial expansion. Over time, the phrase came to refer to the use of military and diplomatic power to force underdeveloped, or militarily weaker, countries to grant access to their markets to more powerful states.

Under the Wikipedia entry of 'New Imperialism' -- on why Britain needed to do this (emphasis mine):

In historical contexts, New Imperialism characterises a period of colonial expansion by European powers, the United States, and Japan during the late 19th and early 20th centuries. The period featured an unprecedented pursuit of overseas territorial acquisitions. At the time, states focused on building their empires with new technological advances and developments, making their territory bigger through conquest, and exploiting their resources… The American Revolution (1775-83) and the collapse of the Spanish Empire in Latin America around 1820 ended the first era of European imperialism. Especially in Great Britain these revolutions helped show the deficiencies of mercantilism, the doctrine of economic competition for finite wealth which had supported earlier imperial expansion. In 1846, the Corn Laws were repealed and manufacturers gained, as the regulations enforced by the Corn Laws had slowed their businesses. With the repeal in place, the manufacturers were then able to trade more freely. Thus, Britain began to adopt the concept of free trade.

A lot more historical details available in a useful 1999 article on this very point, "British Free Trade, 1850-1914 - Economics and History" (pdf) by the The Economic History Review - http://www.ehs.org.uk/


At page 2, under British free trade, foreign economic policy and imperialism, this would be closer to your question:

The treaty system was always subject to critical attack from a number of quarters. Some politicians and officials stuck to the belief that free imports were the key to prosperity and that negotiation was not only unnecessary but also undignified… A large part of the problem was due to Britain's limited ability to bargain because she had already abolished most of her tariffs. Because the few tariffs retained were designed to raise revenue for the state they could not be cut much without seriously threatening the state's income and raising the spectre of increased domestic taxation.


On page 4 of article, relevant passage is (the impetus for expansion):

Free trade imperialism remained an important element in British imperial expansion in the 1880s and 1890s. As tariffs rose on the continent, British businessmen became increasingly interested in compensating themselves for lost European markets by vigorously supporting imperial expansion in Africa and Asia, thus preventing France and Germany from establishing protectionist regimes in those places where future economic prospects looked most favourable.


From a political-economic perspective (of why one state might colonise another), the answers are essentially more manpower and international market access. Here's an explanation:

For over two millennia, historians and philosophers have asked why some nations have expanded, why others have contracted, and what is the optimal size of a polity (Plato, for example, said that the optimal size was 5,040 families)… The most important are economies of scale in production and military power. When barriers to free trade exist between countries, a more populous country achieves greater economies of scale through its larger domestic market. A larger population also allows for greater military power, which may make war against smaller and weaker states more profitable because of the higher probability of success. At the same time greater military power makes predation by other states less profitable to these other states and therefore less likely… When barriers to free trade are reduced (so that economies of scale can be achieved within a small country as long as it has sufficient international sales) and the returns to warfare are decreased, the number of countries will increase and the average country size will decrease. The returns to warfare depend greatly on the nature of the victim country's wealth. If the wealth is in oil, the predating county can expropriate most of the wealth…

Source: The Oxford Handbook of Political Economy (2006), pp.39-40.


Britain adopted the economic systems that were the most favorable to its own interests. In the 19th century (and part of the 20th), this was free trade, as the term is generally understood. But in the 17th and 18th centuries, the British practiced Mercantilism, which was the opposite of free trade. Basically, their position on free trade depended on which side of the "fence" they were on.

The reason Britain adopted free trade in the 19th century was because it was then the most economically advanced country in the world. Such countries (like the U.S. of the 20th century) benefit most from free trade because they are the most competitive.

Free trade, at least in its most unbridled form, was a huge negative for less developed parts of the British empire, which have benefited from some measures of protection. The Irish were a case it point; they were so far behind England economically that opening grain trade would send grain from Irish farms to British manufacturing towns. In the 19th century, the British flooded the Indian market with manufactured goods, but only after using Mercantile policy in the 18th century to curb the imports of what were then superior Indian artisan goods. And shipping opium to China was "free trade" run amok, conducted at the point of a gun as part of a quasi colonialist policy. That's basically illegal except for the fact that Britain had gunboats, and China didn't.



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