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Published online by Cambridge University Press: 07 November 2014
In spite of the relatively small share of agriculture in the economies of the industrialized nations, national agricultural policies continue to provide a major source of domestic and international friction. A special interest attaches to Britain's policies towards agriculture because of her great dependence upon imported food. Since the diversity of British farm output makes generalization hazardous, attention will here be focused upon one major commodity only, wheat.
This paper enquires as to the effectiveness of protection for the domestic wheat grower and of tariff preference for the Commonwealth exporter, as indicated by the shares of the home and overseas suppliers in the domestic market from 1925 to 1960. An estimate of the level of protection is introduced into the discussion largely with the idea of throwing some light upon the achievements, as distinct from the intentions, of the policy-makers for the years subsequent to the return of the wheat trade to private hands, i.e., after 1953.
Before commenting upon the efficacy of protection, some explanation ought to be offered as to why it was introduced when it was. It might be more illuminating, however, to ask the question in another way: viz., why was protection not maintained after the First World War?
1 For a review of agricultural policy in general since the Second World War consult Mollet, J. A., “Britain's Postwar Agricultural Expansion: Some Economic Problems and Relationships Involved,” Journal of Farm Economics, 41, no. 1 (02 1959), 3–15.CrossRefGoogle Scholar
2 Germany had had wheat tariffs since 1879 (though with a break from 1914 to 1925), France since 1885 and Italy since 1887; Belgium and the Netherlands anticipated Britain by a year or so. By the time the Great Depression arrived the Continental “Big Three” also had statutory obligations to use varying proportions of domestic wheat in their grists. The explanation advanced by McCrone is that “the British position was not really comparable with that of the Continent. Britain had the advantage of being the first nation to industrialize; this meant that she established trade links which were much stronger than those of any other European nation. She was able to conduct a very large part of her trade with her own Dominions and with countries which spoke a common language. In such a situation, Britain, the United States, Canada and Australasia can for some purposes be regarded rather as one economic unit than several.” McCrone, G.: The Economics of Subsidising Agriculture—A Study of British Policy (Toronto, 1962), 41–2.Google Scholar
3 The Prime Minister, Lloyd George, was in this matter his own prisoner, having in the 1918 general election asked of, and received from, his Conservative coalitionists a pledge to repudiate subsidies and tariffs (the “stomach tax”)—a pledge the more remarkable in that Bonar Law, and the party he led, in principle favoured a policy of Empire tariffs.
4 No payments were made under either the Com Production Act 1917 (which introduced the principle of subsidies) or the Agriculture Act 1920 (which introduced the cost/price “parity” principle). Further, the existence in these Acts of a price ceiling actually deprived the producers of income.
5 Corn Production Acts (Repeal) Act, 1921.
6 Indeed that lifelong Fabian, Sidney Webb, as President of the Board of Trade said, in a surprisingly frank reply to an oral question in the House of Commons: “In answer to the honourable Member who asked me whether the Government would take steps to interfere with the law of supply and demand [in relation to agriculture] I should say, certainly, with all my heart, if only I knew how to do it.” House of Commons Debates, vol. 176, 07 29, 1924.Google Scholar
7 Thus the Minister of Agriculture, in an oral answer, was able to say: “There was … no expressed intention of Parliament when the Wheat Act 1932 was passed, nor is there any intention on the part of the Government, to limit the operation of the Act to the period ending 1935.” Ibid., vol. 291, June 25, 1934.
8 It would be wrong to view the pursuit of national interest after 1932 as having been to the total exclusion of international co-operation. Even at the very moment of reluctantly introducing a measure of protection, Britain signed the first International Wheat Agreement 1933. This accord, engendered primarily by the needs of the major exporters and concluded under the auspices of the League of Nations, required in principle a reduction of wheat exports by the “Big Four” exporters (the United States, Canada, Argentina, and Australia) together with a holding operation on the part of the Eastern European (“Danubian”) exporters, while the importers were to discourage further increases in domestic outputs, encourage consumption and, as world wheat prices rose, to lower their tariffs and quotas. The expected rise in prices was smaller, and came later, than had been hoped, tariffs were rarely reduced and, in general, importers did not effectively discourage their own producers. The Agreement died.
9 The percentage share of the domestic wheat growers in the domestic wheat market in each year was as follows:
Sources: Annual Abstract of Statistics (HMSO, London); Annual Statement of the Trade of the United Kingdom (HMSO, London).
10 The present measure cannot, of course, be applied to the period 1946–53, when wheat was state-traded. A rough measure of protection during this period can be obtained by comparing guaranteed prices with the CIF prices of imported Australian wheat, since the quality is similar. Since the landed price of Australian wheat of “fair average quality” throughout this period was on the average approximately equal to that paid by the British government to the domestic grower, there was probably no significant measure of protection. This conclusion may underestimate the degree of protection, however, since it reflects the fact that freight accounted for a large portion of total costs, that the exporter's profit margin was used to cushion fluctuations in freight rates, and that the Korean War created a major disturbance in rates.
Note further that the market price used in Table II is a world, but not a free market, price since much of the world's wheat trade is non-commercial in character and much of the remainder has been regulated by the successive International Wheat Agreements. However, it has been estimated that if commercial exports were not subsidized, the resulting “import supply price” might not be more than 5 per cent greater than the actual import price. See Hallett, G., “The Economic Position of British Agriculture,” Economic Journal, 09 1959 522–40.CrossRefGoogle Scholar
11 Britain did in fact withdraw from the International Wheat Agreement upon its renewal in 1953, and remained out upon its further renewal in 1956, periods when world wheat prices were declining. As a member of the IWA between 1949 and 1953 Britain had greatly benefited from buying at prices well below the world level.
12 The Agriculture Act, 1947, which put guaranteed prices and markets, and the annual price review, on a permanent basis, though passed by a Labour government, was not opposed in principle by the Conservatives. Further, the Conservatives continued to protest their adherence to the 1947 Act in later years; e.g., “The general philosophy of the 1947 Agriculture Act is, of course, a permanency.” ( Joint Parliamentary Secretary to the Ministry of Agriculture, House of Commons Debates, vol. 518, 07 23, 1953).Google Scholar
13 For an interesting analysis of the politics of British Agriculture since the Second World War, see Self, P. and Storing, H. J., The State and the Farmer: British Agricultural Policies and Politics (London, 1962).Google Scholar A study of the role of the (British) National Farmers' Union was published earlier by the same authors: “The Farmers and the State,” Political Quarterly, 29, no. 1 (January-03 1958), 17–27.CrossRefGoogle Scholar
14 For a number of years the government had included in its agricultural calculations a figure of £25 million as a rough measure of the annual increase in (total) agricultural productivity. As the minister of Agriculture was later to remark: “The National Farmers' Union has never agreed [to] the figure of £ 25 million but it has not been disputed very strongly.” House of Commons Debates, vol. 621, 03 10, 1960.Google Scholar In some years higher costs and lower guaranteed prices all but eliminated the imputed £25 million productivity gain.
15 Agriculture Act, 1957, part I, sees. 2 and 3.
16 Wheat-in-grain from all sources was exempt from duty under the Import Duties Act (February) 1932 as originally passed (section 1 (2b), schedule 1). The decision to impose a duty on non-Imperial wheat resulted from the Ottawa Imperial Economic Conference of August 1932. The duty was imposed under S.R. & O. no. 924 (1932) with effect from November 15, 1932, and removed under S.R. & O. no. 1549 (1938) with effect from the January 1, 1939. The duty on US wheat had, however, been lifted two months previously.
17 With a much-enlarged domestic output of (commercially) soft wheat, Britain was seeking above all to import (commercially) hard wheat—which meant North American wheat in preference to Australian, and even to Argentinian, wheat.
18 Even when the Great Depression was under way, Prime Minister Ramsay MacDonald could say, in the context of the Imperial Economic Conference of that time: “… Empire Free Trade is an absolute fraud … the only tariff that we can propose that is worth anything to the Dominions, is a tariff on food. The very first thing that every [Dominion] Premier says, and in some cases not only the first thing but the last thing, is ‘Tax wheat.’ We cannot do it.” House of Commons Debates, vol. 244, 10 28, 1930.Google Scholar
19 McCrone, , Economics of Subsidizing Agriculture, 83 Google Scholar, gives the share of European suppliers in total British wheat imports for the year 1959 as 1 per cent. That year was not, however, a representative one. As Table III shows, the average for the period 1955–60 was almost 11 per cent.
20 While our statistics have referred to grain to the exclusion of flour, the value and direction of flour imports were not such as seriously to qualify the above conclusions.