Liberalization: The First Transformation

Abstract

The Industrial Revolution of the late eighteenth century and the Napoleonic Wars were catalysts for an unprecedented upheaval in how and why international trade was conducted and for the diplomacy that would make its expansion possible. This first significant transformation in trade diplomacy meant that, for the first time, diplomats would negotiate about trade for its own sake, rather than using trade as an instrument of war. The process by which trade diplomacy increasingly became distinct from other diplomatic issues and became driven by its own policy imperatives could only get underway in earnest once demand for imports and incentives to export goods and services (and for the funds to pay for them) reached certain threshold levels. The late eighteenth and early nineteenth century economic arguments of Adam Smith and David Ricardo for liberalization of international trade and the political arguments of Alexander Hamilton and Friedrich List in favour of protection of the industrial sectors of developing countries all presuppose the necessity of state actors to take trade policy decisions, which itself was a radically new assumption. Scholars and private businesses began to cast governments of states as critical protagonists in much-needed trade-specific diplomacy for the first time: to negotiate trade and tariff treaties, to implement the treaties fairly by collecting duty revenue, to resolve disputes over international trade as and when they arose.