War and post-war reconstruction

The First World War marked the end of an era in the history of commercial relations among countries. New boundaries set in the peace treaties, especially with Austria and Hungary, converted pre-1914 internal trade to international trade. Trade relations interrupted by war could not always be restored. Extended fighting and disruption of peacetime economic intercourse produced substantial changes in the economic capacities and interests of major trading nations. Monetary disturbance evoked responses in trade policy, especially increases in tariffs, to offset effects of exchange depreciation abroad. A loosely concerted attempt was made after the war to patch up the fabric of trade relationships, but with nothing like the fervour exhibited after the Second World War. There was virtually no planning of post-war trade policies, despite President Wilson's third of the fourteen points that called for ‘removal, as far as possible, of all economic barriers and the establishment of an equality of trade conditions among all nations consenting to the peace and associating themselves with its maintenance’.

Exigencies of war led to changes in commercial policy. The McKenna budget in Britain in 1915 imposed duties of 33⅓ per cent on motor cars and parts, musical instruments, clocks, watches, and cinematographic film in an effort to reduce imports of luxuries and to save shipping space – although the point has been made that the shipping space taken by watches is minimal (Kreider, 1943, p. 13). Unlike previous luxury taxes in Britain, these duties on imports were not matched by domestic excises to eliminate the protective effect.