BRITAIN AND WORLD TRADE, 1870–1914

Abstract

T HE chief aim of this article is to carry further the analysis of the pre1914 pattern of world trading settlements attempted in the League of Nations study The Network of World Trade.' In order to avoid unreasonable length we have omitted all but the most essential details of the calculations made and it must be freely admitted that the statistics used are subject to a fairly wide margin of error, especially those relating to the export of capital between individual countries.2 Nevertheless, this need not be too serious a disadvantage; all that is required is a reasonable indication of the comparative size and direction of international payments for the purpose of drawing broad conclusions as to the significance of the evolution of the pattern of world trade to Britain in particular.3 The multilateral settlement of world trade-i.e. payments involving a third party or even more-was no new phenomenon of the latter half of the nineteenth century; indeed it had been for centuries a major feature of world economic relations. In its most simple form the transfer of precious metals provided the mechanism of settlement; later the use of bills of exchange greatly reduced the size of these flows and during the last half of the nineteenth century the system worked in a still more simple manner through fluctuations in the size of sterling balances held by foreign banks in London. The most significant of the older settlement patterns are known well enough. The triangle between Britain, Western Europe and the Baltic countries had for long dominated the trade of Northern Europe-Britain settling her deficit on the Baltic trade through her favourable balance with Holland and by the bullion earned from the Portuguese trade. The 'slaving' triangle between Britain, Africa and the West Indies and similar patterns through the American colonies hardly need more elaboration here. Yet we must take care to make the essential distinction between this kind of multilateralism and that which grew up in the years just before the First World War. In the earlier period the patterns were simple and confined to groups of countries where particular economic or political advantages favoured the growth of such a means of settlement. With Europe as a whole, for example, Britain's trade was mainly bilateral although multi-