594. Importance of commercial policy in this period.—The two preceding chapters have described the conditions of commerce in the United States about 1789, with but an occasional reference to the influence which governments exercised in directing and restricting the movement of wares. In every period governments interfere with the free exchange of commodities, that the interests of the people as a whole may not suffer from the selfishness of individual merchants. In the period under consideration, lasting through the second war with England, the influence of governments on the fortunes of our foreign trade was more pronounced than it has ever been in later times; and the topic of commercial policy must occupy the leading place in this present chapter.

595. Questions of policy.—The Revolution of 1776, by which a group of English colonies was transformed into an independent state, claiming to rank as England’s equal, shocked the ideas of European statesmen to an extent which we can hardly conceive. There was no place in the political system of the time for an independent American state. For centuries the states of Europe had been the sole source of active political and commercial power; in other continents were to be found only semi-civilized states, subject to European influence, and colonies, under the complete control of the mother countries. Each European state had regulated as it pleased the commercial relations of its colonies with the mother country, with other European countries, and with their colonies. Now that the United States had won its political independence, was it to be treated by England as though it was still an English colony, and given its former privileges though it was no longer subject to the former restrictions? Were other European states to welcome its commerce, now that England could no longer prevent, or were they to treat it like a European state, and restrict its trade with themselves and with their colonies? Finally, what attitude was the United States itself to adopt, now that it could frame its policy as it pleased? These were among the serious problems that perplexed the statesmen of the Old and New Worlds, as the success of the American Revolution became assured.

596. Policy of England.—Reference has been made in a previous paragraph to the striking fact that the colonists had no sooner won the war of independence than they returned to an active commerce with the country against which they had been fighting. Comparing the six years preceding the Revolution with the six years following the treaty of peace (1783), we find that the volume of trade between the United States and England was substantially the same. The American people suffered during the war for lack of the manufactures which they had been accustomed to purchase from England, and which they found then could be purchased to such advantage nowhere else; and as soon as peace permitted they began eagerly to buy English products again. For a moment it appeared that England was ready to welcome this trade; the English statesman, Pitt, introduced a bill which aimed to encourage the American trade not only with England but also with her colonies. Such a policy implied too serious a breach in the old system, and was not carried into effect. The Americans were, indeed, permitted and encouraged to trade still with England; that country could not afford to give up the growing market for its manufactures which the United States afforded. The ports of the West Indies, however, were closed to American merchants; the Americans were to be punished for their insubordination by exclusion from a branch of commerce which was to them of the first importance.

597. Policy of France and other states.—The Americans learned, not only from England but also from other European powers, that an independent state must shift for itself and could hope for no commercial favors. They might fairly suppose that the countries which had joined in their war against England (France, Spain, the Netherlands) would take advantage of the successful issue of the conflict to seek to secure the American trade which England had hitherto monopolized. They found, indeed, that these and other countries were willing to sell their goods to the United States; but still these countries were reluctant to take in exchange American wares for which they felt no special need, and were most reluctant to open the trade of their colonies to people of any nationality but their own. John Adams might say of France in 1780, “All the world will allow the flourishing state of her marine and commerce, and the decisive influence of her councils and negotiations, to be owing to her new connections with the United States”; whatever truth there might be in the statement, France certainly refused to express her gratitude by the grant of commercial privileges. France found, actually, that after the return of peace the Americans ceased to buy her manufactures, and flocked for trade to the English markets. French merchants complained that none of them ever gained in commerce with the United States: when all the best part of the American custom went to English merchants, why should France or any other country on the Continent relax the restrictions which were designed to protect the home market and the colonial market for the benefit of natives?

598. Conditions of American trade with Europe in 1789.—In spite of the unfavorable attitude of the powers which controlled the great markets of the world, the United States maintained a considerable commerce, as was shown by the descriptions of previous chapters. This commerce was, however, carried on under serious disadvantages. Reviewing the staple exports of the country we find that breadstuffs were generally subject to prohibitory duties in England, and that fish and salt provisions were actually prohibited in England, and were heavily dutied in France. The southern staples fared little better, for they competed with the products of European colonies even though they did not threaten European industries. Tobacco and rice were subject either to actual prohibitions or to heavy duties in most of the important European markets.

599. Conditions of trade with the West Indies.—Conditions of trade with the West Indies were even worse. Spain and Portugal absolutely forbade all direct intercourse with their colonial possessions; and wares destined for their colonies had either to be carried by smugglers or else exported to Europe and then re-exported in ships of the mother country. England closed her possessions on the American mainland completely, and while, as a temporary favor, she admitted some wares to her West India colonies, by proclamations renewed from year to year, she prohibited salt provisions and fish, and excluded American ships from the trade. Her vessels alone could take our produce and bring back the molasses, sugar, etc., which formed the objects of the return trade. The French West Indies, also, were open to us only as a temporary concession, and in them and in the colonial possessions of other powers the trade was burdened with duties.

600. Weakness of the United States at this time.—These were by no means all the hardships under which American commerce labored at this time. The government was too young and weak to furnish adequate protection to ships flying the American flag in foreign waters and on the high seas, and it had as yet obtained no guarantee that American fishermen would be allowed to pursue their calling as before the Revolution. Furthermore, the attention of American statesmen was distracted by the need of getting the machinery of the new government in running order, and by the serious fiscal difficulties which pressed for settlement. These were the dark days of American commerce. From the lofty position which the United States has reached to-day, courted for its commerce and its political influence by other great powers of the world, it is hard to realize how humble was our national position in 1789, and how precarious seemed our commercial future.

601. Survey of American commerce, 1789-1815.—Starting from these beginnings we have now to trace the course of our commerce through the period. So sharp were the fluctuations in this early stage that I give the annual statistics, and, for reasons which will be apparent later, call particular attention to the distinction between domestic exports, of articles produced in the United States, and foreign exports, of articles brought from some other country and re-exported. No exact figures for the imports of this period can be given, but it is safe to say that the value of the imports did not diverge greatly from the value of the exports.

602. Fluctuations in the export trade; share of domestic and of foreign exports.—If the reader will cast his eye down the column of totals he will appreciate at once the unsteadiness of our trade during the period under consideration. For a few years the figure of exports was almost constant. Then, in 1793, began a rapid rise; the export trade doubled, tripled, more than quadrupled. A check to this growth was apparent in the few years after 1801, but it began again, and the figures of exports reached their highest point in the years 1806 and 1807. They had grown more than fivefold in fifteen years. The year of 1808 showed a precipitous decline, and, after an interval of partial recovery, the figures reached their lowest point in 1814. At the close of the period prospects seemed brighter.

Returning to the table, to analyze the part borne in the changes by domestic and by foreign exports respectively, we find that the foreign exports were chiefly responsible for the great fluctuations. No figures can be given for the earlier years, but it can be stated with assurance that of the total exports in 1790 only an insignificant fraction, probably much less than one million, was composed of the products of other countries. There had been a tremendous gain, therefore, in this branch of our trade, before 1796, and it proved capable of great expansion afterwards, while, on the other hand, it declined in one year almost to nothing. Domestic exports, also, showed a great increase in the early years of the table, but they soon came near to the limit of their expansion, and hovered generally about the figure of forty millions; the table shows, moreover, that they resisted depressing influences better than the foreign exports.

603. Varying fortunes of foreign trade not explained by conditions at home.—The reasons for the growth of American trade after 1790 are to be sought mainly in conditions abroad. There was no development of resources at home sufficient to account for the great expansion of trade. The United States, it is true, gained a new export product in cotton, which was shipped in rapidly increasing quantities after the invention of the cotton-gin in 1793. Cotton took the first place among southern exports after 1800, and the extension of the cotton culture helps to explain the growth of domestic exports. Still cotton did not rise to the position of king among exports until the following period, and the description of the rise of the cotton trade will be referred to a later chapter.

We cannot give American statesmen the credit for removing the restrictions on our commerce, described above, and so enabling it to expand uncramped. In spite of all their persistence and ingenuity they secured only slight and partial concessions. The treaty with England, negotiated by John Jay in 1794, removed some of our grievances, but proposed to open the West India trade on such humiliating conditions that the offer was indignantly refused. A treaty with Spain gave us merely the right to navigate the lower Mississippi River, without other commercial privileges; and even the acquisition of Louisiana, in 1803, had but an inconsiderable effect on our commerce at the time.

604. Conditions abroad; effect of the European wars on domestic exports.—We owed our rapid commercial growth not to our own strength, and not to the favor of European states; we owed it to the necessities of the position in which the countries of Europe found themselves after the outbreak of the wars following the French Revolution. These wars were of decisive importance to our commerce in two ways. In the first place they caused an immense increase in the demand for our foodstuffs. When the states of Europe were fighting for their very existence they could not afford to uphold the principles of their former protective policy, and welcomed the means of subsistence, from whatever source they might come. The withdrawal of men from agriculture to serve in the armies diminished the supply of food in Europe and called for large exports from the United States, for which high prices were paid. Taking for illustration the little country of Portugal, we find that our exports to that country increased about ten-fold in the course of the period, being especially large in the years from 1810 to 1813. These years mark the time when the Peninsular War was at its height, and when the large armies quartered in the country demanded a supply of food which could not possibly be met from native sources.

605. Effect on foreign exports and the carrying trade.—The European wars were not only responsible for a great gain in our domestic exports; they were the sole cause of the tremendous increase in the foreign exports, which figured so largely in our commerce at this period. The wars involved most of the important states of Europe. A ship flying the flag of France or of any of her allies was constantly exposed to capture by British cruisers; a ship flying the flag of Great Britain or of one of her allies was a fair prize for the French privateers which swarmed over the seas. In the great conflict there was but one country, with an extensive merchant marine, which managed to maintain neutrality, and this was the United States. The carrying trade of the world fell into our hands. The countries of Europe, forced by the exigencies of war, gave up the cherished principles of their colonial policy, and threw open the trade with their colonies and themselves. The rights of neutral states in time of war were, it is true, still unsettled. American ship captains and merchants were subject to arbitrary and humiliating interference on the part of the belligerents. In the early part of the war, however, the results of this interference were of sentimental rather than of practical importance, and means were found to evade the restrictions which the belligerents imposed. When England forbade all trade between her enemies (France, Spain, the Netherlands) and their colonies, American skippers did not sail direct from the West Indies to Europe, but touched at some port of the United States, entered the cargo for import, and sometimes actually landed it. It was not meant for consumption in this country and was soon withdrawn and exported to its destination in Europe, as though it were composed of domestic products.

606. Prosperity of American commerce and shipping.—The European wars, therefore, introduced American commerce to a new era of prosperity. “No one was limited to any one branch of trade; the same individual was concerned in voyages to Asia, South America, the West Indies, and Europe.” Our ships gathered the products of distant countries, coffee, sugar, tea, pepper, etc., and purveyed them to the people of Europe. In many years the value of foreign exports exceeded that of domestic exports; in 1806 it was half as large again. The reader will better appreciate the contrast with present conditions when he learns that in 1914 the foreign exports of the country amounted only to one sixty-seventh part of the domestic.

The merchant marine of the United States grew rapidly under these favoring conditions, and in spite of complaints that former conditions had been reversed, and that ships could be built cheaper abroad than at home. The national tonnage engaged in foreign trade, which in 1789 appeared to be not much in excess of 100,000, exceeded 500,000 in 1795, and 900,000 in 1810. The proportion of American ships in the total of those entering the ports of the United States grew correspondingly; and the merchant tonnage of the United States was second only to that of Great Britain and superior to that of any other country in the world.

607. Checks to prosperity after 1800.—The check on the growth of our commerce apparent in the figures for the few years after 1801 is explained by the conclusion of a peace between the states of Europe, which lasted from 1801 to 1803. Had the peace proved permanent there would have been, without doubt, a further decline in American commerce, as the European countries resumed their former commercial relations. With the reopening of war, however, the Americans enjoyed the advantages of their previous position; the exports of 1806 and 1807 exceeded a hundred millions in value, and marked a height which exports did not again reach for nearly twenty years. Our commercial prosperity at this time was very precarious. It was the period in which Napoleon and England were waging war over the Continental System, as described in a previous chapter. Each belligerent looked on the neutral carrier now not as a source of gain to itself so much as a source of help to the enemy, and determined to restrict neutral trade, even though it were necessary to destroy it. In the period between 1803 and 1812 some 1,500 American ships were seized in Europe, and the greater part of them condemned, for violating the restrictions then carried into effect. The best sailors were impressed from American ships to fight the battles of England. American shipping was involved in an unequal struggle.

608. Decline of commerce; embargo and war.—The United States was not prepared to enforce by arms the rights which it claimed for its merchants and sailors. The government shrank from war, and adopted instead the policy of commercial restriction, hoping to bring the European powers to terms by refusing to trade with them until they reformed their conduct. A short trial was made with an act forbidding the importation of English manufactures, and in December, 1807, a general embargo was laid on all vessels, forbidding them to leave port for a foreign country. The embargo was evaded in various ways, but its effect on our foreign commerce and export industries was disastrous, and forced the substitution of milder measures in February, 1809. Our commerce, now suffering both from the attacks of its enemies abroad and the restrictions of its friends at home, could not recover the position which it had reached before the embargo, and declined still further after the declaration of war with England, to which we were finally forced in June, 1812.

609. Effect of the decline of commerce on the development of American manufactures.—While the people maintained an active commerce with Europe they obtained most of their manufactured wares from that source, as they had done in colonial times. The interruptions of commerce due to acts like the embargo and to the war with England cut them off from this source of supply, and home manufactures grew up as commerce declined. The letters of Jefferson, written at this period, contain many references to the growth of manufactures in his State, Virginia, and in other parts of the country, especially in New England, the development of a native manufacturing industry was even more marked. American manufactures began, in this period, to outgrow the simple forms of domestic industry, and to attract the capital necessary for the establishment of regular factories. Many companies were incorporated to manufacture goods by means of power machinery, and industrial methods which had long been practised in England were now first introduced in this country on an extensive scale. The development of the textile industries was especially rapid. It was estimated that in 1800 the cotton factories of the country had consumed only 500 bales of raw material, while in 1810 the number had risen to 10,000 and in 1815 to 90,000. A cotton factory established by Francis C. Lowell at Waltham, Mass., in 1814, is said to have been the first in the world in which all the processes involved in the manufacture of goods, from the raw material to the finished product, were carried on in one establishment, under a carefully studied system.

610. Considerations determining early tariff policy.—The development of manufactures at this time gave rise, in the following period, to a demand for protection which marks a turning-point in the tariff history of the country. When the first national tariff was adopted, at the founding of the Federal government in 1789, the legislators had a difficult problem of policy to solve. They found the commerce of the country fenced in by foreign tariffs composed of high duties and of some actual prohibitions. They desired the reduction of these duties that American commerce might expand. Many of them expressed their belief in a policy of retaliation, if no other means availed to secure the reduction. At this time, however, the commercial position of the country was not strong enough to permit the tariff to be used as a weapon with which to menace foreign states. Other countries showed but a languid desire for the products which were then our staple exports, and we had great need of the foreign wares composing our imports. We could not afford even to discriminate against the importation of manufactured goods, with an idea of protecting native manufactures; our manufactures were then so weak that a policy of high protection, to exclude foreign wares, would have caused serious distress to the consumers at home.

611. Survey of tariff policy.—Barred by these considerations from a tariff of high duties, the legislators framed the first tariff mainly as a revenue measure. Comparatively few articles were placed upon the free list, duties being levied on articles like tea and coffee as well as on manufactured wares, which might possibly be produced at home. The general scale of duties was much lower than in foreign countries at the time, or in the United States later; it was estimated that an assorted cargo paid about 7¹⁄₂ per cent. Of the results of the first tariff a recent investigator says: “The most careful examination fails to show that it affected the volume, variety, or direction of our foreign trade in the slightest degree.” In the course of the period the tariff was frequently amended, and rates were raised considerably; but the tariff continued to be used chiefly as a source of revenue, and was not seriously affected by protectionist ideas until after 1815.

QUESTIONS AND TOPICS

BIBLIOGRAPHY