ABSTRACT
Two months after being forced off the gold standard, Britain abandoned free trade. Even though protection by then could not support the balance of payments and the fixed exchange rate regime, it introduced a general tariff. But, had Britain temporarily adopted protection eighteen months earlier, it might have saved the gold standard, according to the evidence of this chapter. If it had, the world would have been spared a good number of the trade barriers that were raised in response to sterling depreciation. Moderate and temporary British trade restrictions could have enhanced world trade and welfare by two means. Not only would they have avoided trading partners’ policy reactions to the fall of the pound, but also, employed as bargaining counters, they could have reduced foreign tariffs. As it was, for the first half of the interwar period, the world’s largest traders could offer no concessions to countries such as France to offset domestic pressure for protection.
