Defying Gravity: The 1932 Imperial Economic Conference and the Reorientation of Canadian Trade

Abstract

In the wake of the Great Depression, the Canadian government embarked on a stunning reversal in its commercial policy. A key element of its response was the promotion of intra-imperial trade at the Imperial Economic Conference of 1932. This paper addresses whether or not Canadian trade was able to defy gravity and divert trade flows towards other signatories at Ottawa. The results strongly suggest that the conference was a failure from the Canadian perspective. Potential sources of this failure include unreasonable expectations about the likely reductions in trade costs and a neglect of key considerations related to certainty and credibility.

Politics, Institutions, and Trade: Lessons of the Interwar Era

“… 30 Jacks 2011, 10. About 7 percent of sterling-bloc country-pairs are IPS members; about 60 percent of IPS member countries also belong to the sterling bloc.…”

Trade Blocs and Trade Wars During the Interwar Period

“…For some countries, the response to Smoot-Hawley was nearly immediate and, in at least one instance, more than just immediate: in anticipation of the bill's final passage in June 1930, Canada announced changes to its tariff schedule a full month beforehand (Jacks, 2014). However, while the trade wars of the 1930s have often been characterized…”

Trade Blocs and Trade Wars during the Interwar Period

“…For some countries, the response to Smoot-Hawley was nearly immediate and, in at least one instance, more than just immediate: in anticipation of the bill's final passage in June 1930, Canada announced changes to its tariff schedule a full month beforehand (Jacks, 2014). However, while the trade wars of the 1930s have often been characterized as direct retaliation in response to Smoot-Hawley (e.g., Jones, 1934), the reality is that relatively few countries engaged in explicit tit-for-tat behavior in setting their commercial policy in the period from 1930 (Irwin, 2011).…”

“…However, an earlier example is perhaps even more telling. The Imperial Economic (or Ottawa) Conference of 1932 had as its purpose the promotion of intraimperial trade, primarily through preferential concessions to members rather than common protectionist policy against others (Jacks, 2014). Thus, the UK managed to negotiate seven agreements on a strictly bilateral basis with Australia, Canada, India, Newfoundland, New Zealand, South Africa, and Southern Rhodesia as well as grant substantial tariff concessions to a number of non-self-governing colonies (Lattimer, 1934).…”