Section 1: The Development of Imperialism c1857-c1890 Chapter 3: Trade and Commerce
Chapter 3: Trade and Commerce
Free Trade
• Trade- the buying and selling of goods e.g. raw materials
• Commerce – Activities that help facilitate the exchange of goods from products or manufacture to markets.
Commerce included transporting, banking, insurance and warehousing
• Mercantilism – a system of regulations governing trade whereby colonies had ben obliged to send most of
their produce to Britain, to buy British manufactured good and use British ships both for imports and exports.
It was a highly regulated protectionist system using tariffs to regulate trade
• Free Trade- trade left to its natural course without tariffs, quotas or other restrictions
Why did free trade come to dominate economic thinking?
• In the first half of the 19th century, the highly regulated protectionist system of mercantilism had been
dismantled, under the influence of new theories of ‘free trade’ advocated in Adam Smith’s book, The Wealth of
Nations. It was arguing that wealth was indefinitely expandable and freedom from commercial restrictions was
the only way to maximise prosperity. It was regarded as the vital ingredient for British prosperity
• Britain was the worlds foremost trading nation and so it benefited from free trade and was active in supporting
free trade agreements around the world, even ready to resort to threats to achieve them
• Some other nations were willing to grant them; when they were reluctant the navy enforced the British terms
e.g. in China with the Opium Wars in the mid-19th century
• Economic dominance was sustained by a limited application of force
• The idea of free trade was closely linked to the other humanist ideas of free labour and the attack in the slave
trade and slavery. It encouraged the British to see themselves as liberators
What were the consequences of free trade?
• Many colonies continued trading with Britain, party out of loyalty, partly out of ease. Trading patterns were
already well established and the Empire used a common language, currency and commercial law
• Borrowing in London capital markets was also cheaper because British possessions were trusted
• Free trade saw imperial trade and investment grow enormously creating an ‘industrial empire’. Britain
imported foodstuffs and raw materials (approx. 20% came from British colonies), and manufactured goods
were exported back out (approx. 1/3 of British exports went to its Empire)
• London became the world’s financial capital and sterling became the main currency of international trade
• Technological improvements supported the growth in trade: there was innovation in banking and company
organisation; improvements in shipbuilding made it quicker to sail; telegraph lines and underwater cables
improved communications; railways allowed for the quick transportation of goods; improved refrigeration
enabled meat and dairy products to be imported from Australia and New Zealand and new armaments made it
easier to deal with hostile forces
• The economic benefit of Britain enforcing free trade could have been as high as 6.5% of gross national product
How did the ‘Infrastructure of Trade’ Support the Development of the Empire?
Ships and Shipping
• Sailing ships reached the highest state of efficiency in the 1860s
• Clipper ships sailed all over the world. These fast ships were ideally suited to low-volume high-profit goods
such as tea, opium and spices. The times of the ships were recorded in newspapers and competition was fierce.
However, the ships usually had to be broken up after just 20 years
• Steamships were used to carry bulky, heavy goods. British iron-hulled ocean-going ships were more efficient
with the new compound steam engine which enabled them to trade economically with distant possessions.
From the 1850s, steamships increased their cargo capacity and could travel between Britain and West Africa in
less than three weeks. Steamships were more effective as they didn’t rely on the wind or currents and they also
extended Britain’s reach up rivers and therefore into previously inaccessible countries e.g. up the Niger
Chapter 3: Trade and Commerce
Free Trade
• Trade- the buying and selling of goods e.g. raw materials
• Commerce – Activities that help facilitate the exchange of goods from products or manufacture to markets.
Commerce included transporting, banking, insurance and warehousing
• Mercantilism – a system of regulations governing trade whereby colonies had ben obliged to send most of
their produce to Britain, to buy British manufactured good and use British ships both for imports and exports.
It was a highly regulated protectionist system using tariffs to regulate trade
• Free Trade- trade left to its natural course without tariffs, quotas or other restrictions
Why did free trade come to dominate economic thinking?
• In the first half of the 19th century, the highly regulated protectionist system of mercantilism had been
dismantled, under the influence of new theories of ‘free trade’ advocated in Adam Smith’s book, The Wealth of
Nations. It was arguing that wealth was indefinitely expandable and freedom from commercial restrictions was
the only way to maximise prosperity. It was regarded as the vital ingredient for British prosperity
• Britain was the worlds foremost trading nation and so it benefited from free trade and was active in supporting
free trade agreements around the world, even ready to resort to threats to achieve them
• Some other nations were willing to grant them; when they were reluctant the navy enforced the British terms
e.g. in China with the Opium Wars in the mid-19th century
• Economic dominance was sustained by a limited application of force
• The idea of free trade was closely linked to the other humanist ideas of free labour and the attack in the slave
trade and slavery. It encouraged the British to see themselves as liberators
What were the consequences of free trade?
• Many colonies continued trading with Britain, party out of loyalty, partly out of ease. Trading patterns were
already well established and the Empire used a common language, currency and commercial law
• Borrowing in London capital markets was also cheaper because British possessions were trusted
• Free trade saw imperial trade and investment grow enormously creating an ‘industrial empire’. Britain
imported foodstuffs and raw materials (approx. 20% came from British colonies), and manufactured goods
were exported back out (approx. 1/3 of British exports went to its Empire)
• London became the world’s financial capital and sterling became the main currency of international trade
• Technological improvements supported the growth in trade: there was innovation in banking and company
organisation; improvements in shipbuilding made it quicker to sail; telegraph lines and underwater cables
improved communications; railways allowed for the quick transportation of goods; improved refrigeration
enabled meat and dairy products to be imported from Australia and New Zealand and new armaments made it
easier to deal with hostile forces
• The economic benefit of Britain enforcing free trade could have been as high as 6.5% of gross national product
How did the ‘Infrastructure of Trade’ Support the Development of the Empire?
Ships and Shipping
• Sailing ships reached the highest state of efficiency in the 1860s
• Clipper ships sailed all over the world. These fast ships were ideally suited to low-volume high-profit goods
such as tea, opium and spices. The times of the ships were recorded in newspapers and competition was fierce.
However, the ships usually had to be broken up after just 20 years
• Steamships were used to carry bulky, heavy goods. British iron-hulled ocean-going ships were more efficient
with the new compound steam engine which enabled them to trade economically with distant possessions.
From the 1850s, steamships increased their cargo capacity and could travel between Britain and West Africa in
less than three weeks. Steamships were more effective as they didn’t rely on the wind or currents and they also
extended Britain’s reach up rivers and therefore into previously inaccessible countries e.g. up the Niger
