chapter  7
28 Pages

International competition and industrial performance

Allocative efficiency, productive efficiency and turbulence

The year 1846 saw the repeal of the Corn Laws, which imposed a variable levy designed to support the domestic price of grain whenever the world price fell below 72 shillings per quarter. Although Britain once again embraced a variable levy on grain by acceding to the European Union’s Common Agricultural Policy, the 1846 spirit of free trade enjoyed greater success in non-agricultural commerce, where most tariffs of the industrial countries have been negotiated down to low levels. Governments have bought off the ever-present interests seeking protection by managing trade through ‘voluntary’ export restraints, international quota systems such as the Multifibre Agreement, and the like. Although the management of trade gets no respect from most economists, its consequence has been more to limit the growth of trade and distort its pattern than to raise the (static) marginal incidence of trade restrictions.