Introduction

The use of the General Tariff in 1932 as a macroeconomic instrument for economic revival remains a controversial historical issue. Problems of interpretation are further compounded by the fact that theoretical analyses of the effects of protection in a flexible exchange rate regime have generated conflicting results. Moreover, in the specific case of the 1930s sterling was devalued in 1931, the same year as the imposition of the Abnormal Importations Act, making it difficult to discern individual policy impacts. The aim of this chapter is to test the hypotheses that discouragement of imports through tariffs was an effective way of reducing the propensity to import and that the effective demand for the products of UK industry was significantly increased as a result. Much of the chapter is taken up with explaining the large fall in the manufacturing sector's import propensity in the 1930s by considering trade policy induced changes and attempting to distinguish the effects of tariffs from those of devaluation. This task is undertaken in three steps; first, we provide a descriptive overview of changes in exchange rates and tariffs, analysing their impact on competitiveness. Secondly, we explain the large fall in the import propensity of manufacturing by estimating a model of manufacturing imports, allowing for policy changes. Finally, we examine the patterns of inter-country trade flows with the aim of further distinguishing the impact of tariffs from that of devaluation.