The political economy of trade liberalization: the East India Company Charter Act of 1813

Abstract

T East India Company Charter Act of 1813, which ended the East India Company's monopoly of trade with India, has been viewed by historians as a significant event in the emergence of British commitment to free trade. The act opened trade between Britain, India, and south-east Asia to merchants outside London and the E.I.C., provided that such trade was conducted by ships of 350 tons and above. Trade was restricted to the main E.I.C. settlements, and the Company China trade monopoly was preserved. In order to defend northern textile manufacturers from competition, various clauses restricted to London the importation of Indian cotton manufactures, and then only for the purpose of re-exportation. In the long term, British cotton manufacturers took full advantage of the new eastern markets, resulting in the elimination of the Indian cotton industry. Historians have seen the act as a victory for the emergent class of merchants and manufacturers who, in 1812, lobbied against the retention of the E.I.C. monopoly. For Moss, this success symbolized the arrival of the provincial cities as centres of political influence, challenging the traditional dominance of London. The E.LC. monopoly had long been criticized by manufacturers and private merchants in Britain, and the right of individual traders to engage in the country trade of India and south-east Asia had long been conceded. Further pressure forced the surrender of limited concessions in the 1793 Charter Act, which allowed private traders in Britain to utilize 3,000 tons of E.I.C. shipping to engage in private trade between Britain and India, subject to Company control of shipping and sales. Nevertheless, before 1813 the Company monopoly of trade between Britain and the east remained largely intact, and the concessions of 1793 did not satisfy the aspirations of non-Company interests in Britain. Recent contributions have challenged the longstanding view that the E.I.C. monopoly was inefficient, and have suggested that the system was effective in exploiting commercial opportunities.^ The main concern of this article, however, is the reasoning behind the government decision to end monopoly in 1813, rather than the wider question of the efficiency of the E.I.C. It seeks to examine government motives