Globalization revisited: Market integration and the wheat trade between North America and Britain from the eighteenth century

Abstract

We take up again the famous case of the trade in wheat between the United States and the United Kingdom. This is often used to illustrate the so-called first era of globalization at the end of the nineteenth century. This study, however, finds evidence of transatlantic commodity market integration already during the eighteenth century. Using price data for wheat in America and Britain, our findings support both that price differentials were quite small for many years, and that prices adjusted to the law-of-one-price equilibrium. This process was, however, continuously being interrupted by ‘exogenous’ events, such as trade policy, war and politics. In particular, the French and Napoleonic wars and the subsequent high levels of protection in the UK meant that markets were almost always disintegrated until the repeal of the British Corn Laws in 1846.