The French (Trade) Revolution of 1860: Intra-Industry Trade and Smooth Adjustment
The Cobden-Chevalier treaty of 1860 eliminated many French import prohibitions and lowered tariffs between France and Britain. Policy change was largely unexpected and unusually free from direct lobbying. A series of commercial treaties with other nations followed because of the use of the unconditional-MFN clause. Post-1860 in France, we find a significant rise in intra-industry trade. On average, rising imports did not prejudice exports. Liberalization allowed for an expansion of two-way trade in differentiated products. The findings are consistent with the “smooth adjustment” hypothesis. Anti-competitive, protectionist lobbying apparent from 1878 was not necessarily a backlash to enhanced international competition.
Previously circulated as "International Competition and Adjustment: Evidence from the First Great Liberalization." Helpful comments from seminar participants at UC Davis and Brian Varian are acknowledged. Yang Gao provided helpful research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
- When tariffs fell, instead of losing market share to Great Britain and becoming a net importer, France was able to sustain global...