Globalization revisited: Market integration and the wheat trade betweenNorth America and Britain from the eighteenth century☆

Paul Sharp a,⁎, Jacob Weisdorf a,b

a Department of Business and Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmarkb Centre of Economic Policy Research (CEPR), 77 Bastwick Street, London EC1V 3PZ, United Kingdom

a r t i c l e i n f o a b s t r a c t

Article history:Received 24 March 2011Available online 27 August 2012

We take up again the famous case of the trade in wheat between the United States and theUnited Kingdom. This is often used to illustrate the so-called first era of globalization at the endof the nineteenth century. This study, however, finds evidence of transatlantic commoditymarket integration already during the eighteenth century. Using price data for wheat inAmerica and Britain, our findings support both that price differentials were quite small formany years, and that prices adjusted to the law-of-one-price equilibrium. This process was,however, continuously being interrupted by ‘exogenous’ events, such as trade policy, war andpolitics. In particular, the French and Napoleonic wars and the subsequent high levels ofprotection in the UK meant that markets were almost always disintegrated until the repeal ofthe British Corn Laws in 1846.

© 2012 Elsevier Inc. All rights reserved.

JEL classification:N7F1F5N4N5O1

Keywords:Grain invasionWheatGlobalizationAmerican colonial trade

1. Introduction

‘Sire, have you not taken away the only remedy for this scarcity; the only relief to which we can now look under a bad harvest –by closing the corn market of America.’– Brougham, Parliamentary Debate, 18121

This paper provides evidence of commoditymarket integration between the US and the UK in the case of wheat even before themassive grain invasion of the last decades of the nineteenth century. It raises the point that these markets may have beenintegrated even in the absence of regular large-scale trade or falling transport costs between the two countries: the crucial factorwas the possibility of trade. As we demonstrate, this possibility, often seen as a threat by eighteenth century farmers, was very real.

Explorations in Economic History 50 (2013) 88–98

☆ Paul Sharp would like to thank the European Commission for financial support through the Marie Curie Research Training Network ‘Unifying the EuropeanExperience’. Jacob Weisdorf thanks the Robert Schuman Centre for Advanced Studies at the European University Institute in Florence for its financial supportthrough a Jean Monnet Fellowship. In addition, we would like to thank Giovanni Federico, Markus Lampe, Heino Bohn Nielsen, Karl Gunnar Persson, JeffreyWilliamson and seminar and conference participants for their advice and suggestions.⁎ Corresponding author.

E-mail addresses: pauls@sam.sdu.dk (P. Sharp), jacobw@sam.sdu.dk (J. Weisdorf).1 Quoted by Galpin (1922, p. 24).

0014-4983/$ – see front matter © 2012 Elsevier Inc. All rights reserved.http://dx.doi.org/10.1016/j.eeh.2012.08.002

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We are not the first to recognize this. Although most scholars have focused on Europe,2 Jacks (2005, 2006) was one of the firstto note that transatlantic market integration began prior to the second half of the nineteenth century.3 Next to no attention hashowever been paid to the discussion as to whether markets were integrated across the Atlantic in the eighteenth century,although recent work has documented this for various products other than wheat (Rönnbäck, 2009).4 This is perhaps surprisinggiven the huge literature on the US–UK wheat trade in the late nineteenth century, when trade volumes boomed and prices wereconverging (see for example O'Rourke and Williamson, 1999). Here we take an unabashedly ‘Anglo-centric’ stance, and focus onthe early Atlantic economy, even for a time when Britain mostly imported foodstuffs from Europe. In doing so, we uncoverevidence that the Atlantic economy in wheat had a history stretching back long before the ‘first era of globalization’.

Usually, economic historians have been content to accept the view of politicians and farmers of the mid- to late nineteenthcentury who were clearly under the impression that the importance of grain imports from North America started in their time.This is despite the finding long ago by Shepherd and Walton (1972) that wheat and flour exports were one of the major exportcommodities of the colonies, only exceeded in importance by tobacco. Even Galpin (1922, 1925), who painstakingly establishedthe importance of the American supply of grain for Britons at home and to British forces stationed in Spain and Portugal duringthe French and Napoleonic Wars, was under the impression that the ‘importance… of American grain in English history presenteditself for the first time during the Napoleonic era’.

In fact, although the levels of trade in wheat between America and Britain in the eighteenth century were relatively small, theywere not insignificant for many years. The French and Napoleonic Wars and the subsequent high levels of protection in the UKmeant, however, that markets were for most years almost completely disintegrated until the repeal of the Corn Laws in the 1840s(Sharp, 2010). In fact, as we discuss below, before the second half of the nineteenth century trade was continuously being cut offby various ‘exogenous’ events, such as biological phenomena, war and politics. These correspond to those identified by O'Rourke(2006) and Findlay and O'Rourke (2007) who note the possibility that ‘globalization’ might have started earlier if it had not beenfor the impact of such shocks. Note that globalization follows the limited sense common in the economic history literature, andsimply refers to any form of intercontinental market integration in products with a low value to weight ratio.

The current study proceeds to test for market integration of transatlantic wheat markets from the 1700s using a couple offormal statistical tests, namely variance analysis (to test for price level convergence) and the cointegrated VAR model (to test forprice co-movement). We do indeed find evidence for both in the eighteenth century.

2. Transatlantic wheat market integration in the long run

Our first aim is to demonstrate that there is evidence of market integration between America and Britain in the years beforethe ‘first era of globalization’ at the end of the nineteenth century. Fig. 1 illustrates prices in America and Britain for the twocenturies 1700–1900.

What can we learn from this simple illustration? Certainly, prices seem to have followed each other surprisingly closely priorto around 1780. There then follows a long period until perhaps the 1840s when this is not the case, before prices again seem toconverge during the late nineteenth century.

To analyze this more formally, we perform a variance analysis as described in Federico (2010).5 Here we look at theproportions of total variance between four towns in the UK (London, Exeter, Cambridge and Newcastle), and four Americancolonies/states (Massachusetts, New York, Pennsylvania, and Virginia6). Data are available for many more markets, but thepresent ones are chosen because fairly consistent series are available for the entire period.7

Fig. 2 illustrates the total variance due to price differentials between the UK and America, as well as the residual variance,which is due to price dispersion between UK towns, and American states.

Clearly, the French and Napoleonic Wars and the ensuing period of high British protection (Sharp, 2010) cast a long shadowover the story of market integration in this period. From the 1760s and into the 1790s, price dispersion was generally lowbetween the UK and America (with an obvious break during the American RevolutionaryWar 1775–83). From the late 1790s untilthe repeal of the Corn Laws in 1846, price dispersion between the US and the UK was on the other hand generally high. In the finalperiod we see the well-known story from the ‘first era of globalization’.

In the following sections we perform a two-pronged analysis of the history of market integration between the US and the UK.First, we pursue a narrative approach. As previously noted, market integration was severely hampered for many years by‘exogenous’ events. We document these, as well as the contemporary reaction to them, through a variety of primary andsecondary sources. Second, we perform a more formal test of market integration. Here we follow Federico (2010) in looking toCournot's division of market integration into (i) an equilibrium concept, i.e. the law of one price; and (ii) rapid adjustment back to

2 See Bateman (2011) and Federico (2010). Other recent work has stressed the importance of the eighteenth century for the transition to globalization(O'Rourke and Williamson, 2005; O'Rourke, 2006; Findlay and O'Rourke, 2007). On the export trade from Britain, see Ormrod (1985).

3 This point has more recently been underlined by Williamson (2008), although the extent and importance of it is disputed by Federico (2010) and Uebele(2011).

4 And even in preliminary work for wheat itself (Dobado et al., 2011).5 Much of the data used for this analysis was provided by Giovanni Federico, for which we wish to thank him. For details of how to perform such an analysis, see

the appendix to Federico (2010).6 These are averages of data taken from Carter et al. (2006), Jacks (2005), Crandall (1934), Cole (1938), Bezanson et al. (1937), Mortensen et al. (1933), Ronk

(1935), and Williamson (1974). The data was kindly supplied by Giovanni Federico, and is documented in Federico and Persson (2007).7 Including the other markets makes no qualitative difference to the results.

89P. Sharp, J. Weisdorf / Explorations in Economic History 50 (2013) 88–98

this equilibrium after a shock. A common way of testing for this is to look for cointegration between the series (see forexample Ejrnæs et al., 2008).

More precisely, we make use of the cointegrated VAR model and the methodology suggested by Juselius (2006).8 With theavailable statistical evidence we cannot, however, hope to fulfill the stringent conditions for testing market integration describedfor example by Persson (2004). For instance, there is no record of grain qualities, the only price information being for ‘wheat’ invarious markets. Moreover, our limitation to annual data might bias our findings (Taylor, 2001). Nevertheless, we proceed toanalyze the information we have available.

Based on the evidence given in Fig. 2, as well as our understanding of the history, we divide our analysis into three periods. Thefirst covers the entire eighteenth century, during which trade was relatively free (Sharp, 2010). The second runs from 1800 to1847, during which time first the Napoleonic War and then the subsequent high level of protection of the British marketsinterrupted trade for most years. The third runs from 1848 to 1900, stretching from the phasing out of the Corn Laws after 1846until the end of the nineteenth century.

3. Early market integration, 1700–1799

It is useful to start a discussion of this period with a look at the level of imports for these years. Data on wheat imports from theNorth American Colonies and the United States from 1750 is illustrated in Fig. 6. Data is actually available from 1697, when theoffice of Inspector General of Imports and Exports was established, with the first imports of wheat from North America recordedin the 1720s, but before the 1750s levels are negligible.

Work on the nineteenth century globalization has focused to a great extent on the role of falling transportation costs, includingdomestic transportation costs, which allowed grain to be shipped more easily from new production areas as the center ofAmerican agriculture moved westward (O'Rourke and Williamson, 1999). However, we note here that the role of domestictransportation costs must have been negligible for the early days of the Atlantic wheat economy, since the vast majority ofAmerican wheat was grown near the East Coast. Indeed, even as late as 1839, the geographic center of production was east ofWheeling, (West) Virginia, with cultivation concentrated in Ohio and upstate New York and relatively little grown as far west asIllinois (Olmstead and Rhode, 2002, p. 936). Perhaps surprisingly, in evidence before a select committee in 1821, one witnessdescribes the difficulty of Irish competing with American flour due to the cheapness of freight. It was actually cheaper to ship flourfrom America to Liverpool than from Ireland through Dublin to Liverpool, which required the use of expensive canal transport(BPP, 1821, p. 319). In short, it seems that at no time were transportation costs an important barrier to trade. Indeed, this was thepoint made long ago by Ellis (1750) — as quoted above.

8 The results were obtained using CATS in RATS, version 2 (Dennis et al., 2005) and OxMetrics 6.20 (Jurgen A. Doornik 1994–2011).

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Fig. 1. Price of wheat in the UK and America, 1700–1900. Sources: the data for Britain is taken fromMitchell and Deane (1953) and is the ‘Winchester’ series until1770, and thereafter the Gazette series. The American data is taken from Carter et al. (2006). Until 1775 the prices are taken from series Eg252 converted fromPennsylvania shillings to UK currency using the exchange rates given in series Eg318. From 1776 to 83 they are the average of the prices in Virginia given in seriesEg292–298, converted from Virginian currency using the exchange rates in Eg321. From 1784 to 1792 they are the prices for Philadelphia from Besanzon et al.(1937) converted using the exchange rates in series Eg318. From 1793 to 1900 they are the New York City prices used by Jacks (2005). Prices in dollars areconverted to British shillings using the exchange rates given in Officer (2008). In all cases, volumes are converted to imperial quarters using the fact that there are8.256 American bushels to the imperial quarter.

90 P. Sharp, J. Weisdorf / Explorations in Economic History 50 (2013) 88–98

The sporadic imports of wheat in the first half of the eighteenth century are easily explained by harvest failure in Britain. This canbe seen by comparing the years inwhich imports are presentwith the annual evidence on English harvests collected by Jones (1964).So, for example, Jones records that 1728 and 1729 (the first years for which he collects evidence) weremarked by ‘great dearth’.9 Andindeed, we find that American imports are first present in 1729. 1730 to 1739 was, however, a decade of ‘good harvests’ and we findthat American imports are entirely absent until 1740, following a ‘wet, late harvest’ in 1739 and ‘extraordinary scarcity’ in 1740. Jonesthen records that harvests were generally excellent until 1755, when the harvest was late, and 1756, ‘a year of scarcity’. And of coursewe then find that imports from America appear in 1756 and 1757. The success of American exporters in these years provoked anembargo on ‘all American vessels ladenwith corn, flour, &c’ in 1757 (Pitt, 1792, p. 266). Harvests are then recorded as being good until1766, 1767 and 1768 which were all marked by food riots. This resulted in an embargo on the exportation of corn from England.Imports from America were then again welcome (Pitt, 1792, p. 368), indeed, an ‘Act for allowing the Importation of Wheat andWheat-flour from His Majesty's Colonies in America, into this Kingdom, for a Time to be limited, free of Duty’ was passed in 1766(BPP, 1766, p. 29) and was continued the following year (BPP, 1767, p. 429).

Until this point we have learned nothing new: imports were largely the consequence of scarcity at home, a point well knownfrom previous studies. However, it might be noted that American farmers were clearly looked to as a source of supply after a badharvest, and were also obviously able to react. Every year there was a bad harvest the American colonies stepped in to help meetthe deficit — this is clearly some form of proto-market integration.

During this period, however, America was mostly seen as competition for British producers, and Britain was of course still at thistime a net-exporter of grain. As early as 1713 a parliamentary committee heard of the quality of American wheat, superior to thatBritain was able to export to the continent (BPP, 1713, p. 368) and similar concerns were expressed in 1737 (BPP, 1737, p. 116).

Already in 1740 a bill was read in parliament which proposed to prohibit the exportation of grain from North America, whichmet with condemnation by traders in the colonies themselves, as well as merchants involved in the trade in London (BPP, 1740).In 1742, a petition was sent to Parliament on ‘Behalf [of]… all the Farmers in Great-Britain’ in which the petitioners made cleartheir fear that ‘great Quantities of Corn Land’ were to be brought into production, and that wheat would be exported into Europe‘at those Places, which always have been the British Farmers Markets’, and requesting that Parliament ‘prohibit the Exportation ofCorn from America into Europe, and other Things that may prejudice the British Farmer and Tradesman’. A petition from ‘severalMerchants of London’ also makes the point that they are unable to compete with the Americans on exports of wheat to theContinent (BPP, 1749, p. 1032).

The advantages enjoyed by American farmers were concisely summarized by William Ellis, a farmer, in a letter from 1742. Heexpresses concern that Americans ‘by their great Increase of Land… have been tempted… to carry on the Cultivation of Corn, andhave made such Progress in its Improvements, that they are become Masters of prodigious Crops of Grain, especially the finest ofWheat, by enjoying, perhaps, one of the best Opportunities theWorld affords’ and that ‘they have the richest of Land both dry andwet, a very potent Influence from the Sun's Heat, their Acknowledgement or Rent, little or nothing, their Slaves labour for a TrifleCharge, and withal the great Cheapness and Conveniency of Water Carriage for transporting their Corn into Europe, to the infiniteprejudice of Great-Britain.’ (Ellis, 1750, emphasis added). The last point he makes is one that has sometimes been neglected byeconomic historians who emphasize transoceanic transport costs to the exclusion of all other arguments: the fact that seatransport is relatively cheap compared to land or canal transport, meaning that the considerable distance between Britain andAmerica need not necessarily imply large barriers to trade.

9 The same years have been identified by Klemp and Weisdorf (2012) as being years of severe famine in England.

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91P. Sharp, J. Weisdorf / Explorations in Economic History 50 (2013) 88–98

What is clear, however, is that the importance of American wheat during these years was only apparent during times ofharvest failure and contemporary comment focused for most years on the problems of competing with this supply for foreignmarkets.

As was apparent from Fig. 3 above, however, something changes from the 1770s, perhaps not coincidentally at the same time asBritain industrialized, experienced a population boom and started to become a permanent net importer of wheat. The years 1771 and1772 are recorded by Jones as being years of poor harvests, and American supply seems to respond in the usual way. Harvests arehowever recorded as being ‘fine’ in 1773, unremarkable but not bad in 1774 and even ‘plentiful’ in 1775, and yet these years see thebeginning of large-scale imports from America. Although imports continue to fluctuate greatly after this date, there is no longer theclear correspondence between imports and scarcity that there was in the earlier period. It is probably no coincidence that largevolumes of American grain started to arrive in British ports after the enactment of the Corn Law of 1774, which ushered in a period of‘practically free’ trade in grain, as stated in a report of an 1821 Parliamentary Select Committee (BPP, 1821, p. 15).

The boom in imports from the 1770s was short-lived, however. This turns out to be rather easy to explain. First, there was theAmerican War of Independence from 1775 to 1783 which of course had some impact on wheat and flour production in America.Hunter (2005) notes three phases of the impact of the war: the first until 1777, which saw an increase in demand. Then, with theBritish invasion of the Philadelphia region in 1777, there was difficulty until 1779. For example, General George Washingtonordered the removal of millstones to prevent the British from acquiring flour and the British targeted merchant mills. In addition,throughout the war, the British intermittently from 1776 tried to mount a blockade and in 1778 Congress imposed its ownembargo, prohibiting the export of grain and flour, although some illegal exports were possible. The overseas trade was reopenedin 1780 and, combined with good harvests, this marked the beginning of the final phase, one of recovery.

Perhaps more important, however, was the impact of the Hessian fly invasion from 1776 which decimated wheat crops.Unfortunately, we have been unable to locate data for wheat imports from America for the years 1787–1791. It is known,however, that in 1788 Philadelphia merchants were planning to ship large amounts of wheat to England, and that this resulted ina total ban on wheat imports from the United States from June 25 that year. How much this ban was attributable to a fear ofintroducing the fly to England and causing ‘a Calamity of much more extensive and fatal Consequences than the Admission of thePlague’, and howmuch was due to an antagonism towards the newly independent United States is unclear, although Pauly (2002)notes that the Privy Council Committee for Trade were favorable towards ideas that would realign imperial trade and allow theAmericans to suffer the consequences of independence. They also favored policies that would stimulate home production at atime when higher general tariffs were not politically feasible.

The ban led to a considerable amount of debate and the publication by Parliament in March 1789 of a pamphlet, Proceedings ofHis Majesty's Most Honourable Privy Council, and Information Received, Respecting an Insect, Supposed to Infest the Wheat of theTerritories of the United States of America, which attempted to justify the ban to the world.10 The ban was poorly timed, however,because harvest failures in 1788 and 1789 made Britain's dependence on imports only too clear. The ban was reversed, and HMSEcho arrived in New York in February 1790 with the news (Pauly, 2002). It appears likely that British leaders decided in 1789 thatthe United States would in the future be an important reserve food supply, and that the risk posed by French-style revolution wasgreater than that posed by the fly (Ritcheson, 1969, cited by Pauly).

From1791 the Corn Laws becamemore protectionist, but the onset of the French andNapoleonicWars drove prices so high thatonly nominal duties were payable on imports (Sharp, 2010). The considerable swings in imports from the US we see during thisperiod do, therefore, not seem to be principally related to trade policy. Neither can they be explained by harvest failure in the UK.

The years from 1792 are of course marked by war. Generally imports from the United States continued their upwards trend,although some years stand out for having no imports or particularly high levels of imports. Wheat exports from America to all

10 This useful publication furnished the statistical information on early wheat imports from America used in this paper.

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92 P. Sharp, J. Weisdorf / Explorations in Economic History 50 (2013) 88–98

destinations started dropping from 1792 when the Hessian fly arrived in Delaware and Maryland, at that time the centers ofproduction. From 1795 to 1799 America virtually ceased exporting wheat, the recovery only coming in the first years of thenineteenth century (Matson, 2006, p. 253). In vain successive Committees of the British Privy Council asked witnesses about thepossibility of imports from the United States (BPP, 1795a).

Hunter (2005) notes that ‘wheat and flour together served as a cornerstone of America's newly independent transatlanticcommerce’ and from an early date, wheat enjoyed a special status, Revolutionaries considering it to be the ‘ideal republican crop’in contrast to tobacco, with its association with ‘royal government, debt, slavery and poor agricultural practices’ (Matson, 2006,p. 246). The Hessian fly itself might even have contributed to the long-run success of American wheat production, since it helpedspur agricultural improvement, through for example experiments in diversification (Matson, 2006, chapter eight). A similar pointis made by Hunter (2005), who suggests that the French Revolutionary and Napoleonic Wars helped to ensure America's latersuccess in wheat and flour exports by stimulating the adoption of new milling technologies and regional specialization.

However, even in the second half of the eighteenth century, levels of trade were not large and were completely absent formany years. Nevertheless, as argued in the Introduction, this does not necessarily imply that there was no market integration —

and we have already documented a period of price convergence. Even with little or no trade, there can be price arbitrage. Trade isdone by wholesalers who have inventories. If they learn about falling prices in foreign ports they will be quick to sell, and thuspress down prices. Likewise, if they see that price differences exceed transport costs from exporters they will stop buying inanticipation of falling prices. So all that is needed for prices to move together is reasonably regular information.11

We thus proceed to look for evidence of co-movement in terms of a cointegration relationship between British and Americanprices. The variables used are pus and puk, which are the natural logarithm to the American and British prices illustrated in Fig. 1.A cointegrating relationship between these variables can be interpreted as evidence that the law of one price holds, although inpractice it need not, due to transaction costs and the fact that the types of wheat are not strictly comparable over time. Tocompensate for this to some extent, we also include a trend,12 and we expect only that prices follow each other—which is exactlywhat a cointegrating relationship implies.

More specifically, in order to model the long-run relationship between the variables, the following model is estimated:

ΔXt ¼ tβ′Xt−1 þ ΓΔXt−1 þ β′0t þ εt ; ð1Þ

where Xt=(pukt,pust) ′ and t is the trend.This model assumes that the p=2 variables in Xt are related through r equilibrium relationships with deviation from

equilibrium (Cournot's first condition) ut=β ′Zt, and α characterizes the equilibrium correction (Cournot's second condition). Itholds that α and β are pxr matrices and the rank of Π=αβ ′ is r≤p. The autoregressive parameter, Γ, models the short-rundynamics (which we ignore here), and throughout it is assumed that εt~ iidNp(0,Ω). Our sample runs from 1700 until 1799.

Imposing r=1 (i.e. just one cointegrating relationship), we get the estimated equation below, where bold typeface impliesthat the coefficient is significant at the 5% level:

ΔpuktΔpust

� �¼ �0:3650:160½ � puk−0:733pus−0:004tf gt−1

� �þ…

The model is surprisingly well specified: the standard tests for the independence of the residuals (for no autocorrelation andnormality) are accepted with high p-values.13 We do indeed identify an equilibrium relationship. Although the UK price onlyadjusts by 0.733% given a 1% change in the US price, it should be recalled that this period includes years when trade wasimpossible, thus biasing the estimates downwards.

The adjustment coefficient to puk, α1, suggests that it took more than one period – over a year – for the system to return to thisequilibrium after a shock. This is not particularly a rapid adjustment compared to the late nineteenth century, where pricesbetween Liverpool and Chicago adjusted within a few weeks even before the introduction of the telegraph (Ejrnæs and Persson,2010). Nevertheless, this is evidence of market integration, in particular noting the downward bias noted above.

It should also be noted that the adjustment coefficient to pus, α2 is also borderline significant (the t-value is 1.82). This is inline with our hypothesis that harvest failures in the UK impacted on the American market. In fact, shortening the period to lateryears decreases the significance of α2 significantly, implying that the American market became a more and more important driverof the British market.

11 See Coleman (2009) for a more formalized exposition of the role of inventory management for market integration.12 As a robustness exercise, we also experimented with including Harley's (1988) freight index as an additional explanatory variable for the years after 1741, butit was insignificant. Harley's freight rates refer to the Tyne-London coal trade, and thus are not wholly representative however, but we are not aware of otherseries of sufficient length for this analysis.13 We have looked for evidence of breaks associated with discontinuities in the data (for the UK in 1771; for the US in 1776, 1784 and 1793) by looking both atthe residuals and through recursive estimation of the coefficients. There is some evidence of a break in the 1770s, but this might for example also be due tochanges in the process of adjustment with the UK becoming a net importer. We have experimented with different periods, and the qualitative results do notchange.

93P. Sharp, J. Weisdorf / Explorations in Economic History 50 (2013) 88–98

4. Barriers to trade, 1800–1847

The war years from 1800 to 1815 and the subsequent high levels of protection through the Corn Laws until the 1840s mark aperiod where there was little opportunity for transatlantic arbitrage, although wheat was fairly continuously imported from theUS as can be seen in Fig. 4.14

Harvests in Europe were poor in 1799, but those of America were abundant and mostly free of the Hessian fly. Parliamentenacted measures for bounties on the import of American wheat (Galpin, 1925, p. 136) and by 1801 very large imports ofAmerican wheat came in. Indeed, in this year ‘the Americans so completely drained themselves of corn for this traffic, that breadbecame as dear, or dearer, at New York, than it was in England’ (Board of Agriculture, 1806, p. 277). Despite this, a combination ofgood harvests in England and poor harvests in the US contributed to the low level of imports from the US in the following years.

The imposition of Napoleon's Continental System from late 1806 presented a great opportunity for American exporters,however, and contributed to the large volume of imports from the US in 1807, the year in which the US consul at Liverpool wasled to declare that ‘such quantities of wheat and flour from the United States have lately poured into this market that prices havedeclined’.15 This encouraged the belief ‘in the permanency of this seemingly inexhaustible granary’ (Galpin, 1925, p. 44).However, in the wake of the Royal Navy's impressment of American citizens on the high seas, the United States itself imposed atrade embargo from 1807, reflected in testimony before a British parliamentary committee that trade in London declined in 1808after the American embargo (Galpin, 1922, p. 24). However, illegal wheat exports continued and Napoleon was quick to concludethat it was impossible to starve Britain, at least in part due to the availability of supplies from the United States. He thus soon, inthe wake of bumper harvests in France, allowed exports of grain to resume (Galpin, 1925, p. 168). There is no doubt, however,that the years of the embargo and the Non-Intercourse Act of 1809 were important dampeners on the level of trade (Galpin, 1925,p. 147).

From this point on relations between the US and the UK gradually deteriorated and this, combined with good harvests inEurope, contributed to the low level of imports from America. The last years of the Napoleonic Wars saw the beginning of a newwar, this time between the United States and the United Kingdom. The war lasted from the summer of 1812 to the beginning of1815 and witnessed a blockade by the British of the American coastline (Galpin, 1925, p. 149).

Although farmers continued to voice predictable concerns,16 what is notable about contemporary comment over this period israther than it changes from being focused on the danger of American competition to a focus on the opportunities the Americansupply presented for meeting the demands of a growing population in Britain. Donaldson (1775), previously of the Jamaicangovernment, wrote in a letter to the king that ‘The lands so liberally granted in America should be cultivated… and the mothercountry supplied from their industry; what magazines of corn might we hope to see from such resources!’ This idea becamemoreand more widely accepted, so that by 1790, a report of the British Privy Council (BPP, 1790) concluded that ‘whenever the cropsfail, in any degree, the deficiency can only be supplied from the harvests of America’ (Glasgow Chamber of Commerce, 1790).Although John Lord Sheffield argues vehemently against this conclusion in his Observations on the Commerce of the United States,other commentators were quick to back it up (Sheffield, 1784; Anon, 1792). A committee ‘on the high price of corn’ looked first tothe United States and the ‘abundant’ supply there as a means of affording relief caused in part by the poor harvest in England(BPP, 1795b, p. 85). By 1800, the British Board of Agriculture stated that ‘America be, or is hereafter to be the granary of Europe’

14 Years of zero imports from 1800 are 1804–5, 1814, 1828, and 1836–7.15 Quoted in Galpin (1922, p. 24).16 For example, ‘A Farmer’ (1773) writes that ‘The only country from whence we can apprehend such an importation [of cheap grain] is America’.

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

1798

1804

1810

1816

1822

1828

1834

1840

1846

Qu

arte

rs

Fig. 4. UK imports of wheat and wheat flour from the United States, 1798–1847. Sources: from 1792 to 1797 the data are from BPP (1815), from 1800 to 1824 theyare from BPP (1827a), from 1825 to 1828 from BPP (1827b), from 1829 to 1830 from BPP (1832), from 1829 to 1839 from BPP (1843) and from 1840 to 1846 fromthe Annual Statements of Trade 1853–1900. Where this is not already done in the sources, imports of wheat (measured by volume: quarters) is added to imports ofwheat flour (measured by weight: hundredweight, cwt) using the assumption that there are 392 lb (i.e. 3.5 cwt) of flour to a quarter of wheat (the assumptionmade in British Parliamentary Papers).

94 P. Sharp, J. Weisdorf / Explorations in Economic History 50 (2013) 88–98

(Board of Agriculture, 1800, p. 148). A committee to ‘consider of the present high price of provisions’ in 1801 also looked toAmerica (BPP, 1801a, p. 7; BPP, 1801b, p. 8) as did a committee of 1805 (BPP, 1805, p. 13).

Although the available statistics do not discriminate between imports of wheat and imports of wheat flour, it seems that mostimports during these years were in fact of flour, in contrast to the years before the onset of the French Wars, when imports ofwheat were ‘very considerable’ (BPP, 1813, p. 115). This caused millers to complain, and evidence was presented before a selectcommittee in 1813 from a miller to the effect that the imports of flour from the United States in 1806, 1807, 1809 and 1810 werebad for millers (BPP, 1813, p. 99). Indeed, it seems they had good reason to. Select Committees heard that US flour was of veryhigh quality owing to a sophisticated system of inspections and branding, and that it was easy to transport (BPP, 1813; BPP, 1814).

With peace, the Corn Laws soon became protectionist and this is reflected by the decline in American imports after 1818(when prices fell sufficiently from wartime levels for imports to be prohibited under the terms of the Corn Law of 1815). Importsonly really recovered with the introduction of the new Corn Law and the sliding scale of 1828 at which point swings in importsbecame clearly related to swings in import duties, which varied considerably from year to year (Sharp, 2010), although it mightbe noted that during the 1830s America was again suffering from attacks of the Hessian fly.

In general, however, these years see a gradual decline in interest in the supply from America. Mentions in Parliamentaryreports are rare,17 despite the huge volume of material published by Parliament during the debate in the run up to the repeal ofthe Corn Laws. So William Jacob's famous report on the ‘Agriculture and Corn of some of the Continental States of Europe’ (BPP,1827c) was just that, with no mention of America, and before a select committee in 1833 he dismissed the importance of theAmerican supply (BPP, 1833, p. 6).

As was demonstrated in Fig. 3, these years saw a disintegration of the US and UK markets. Performing the same cointegrationanalysis as above, we cannot identify the law of one price relationship here.

With the repeal of the sliding scale in 1849, import duties become insignificant and were eventually abolished, allowing thegreat expansion of trade with America which was to become known as the Grain Invasion.

5. The First Era of Globalization, 1848–1900

Fig. 5 illustrates the remarkable expansion of trade until the end of the nineteenth century. This was indeed unlike anythingseen before.

For the sake of comparison, we perform again the cointegration analysis, this time including freight, which is the naturallogarithm to North's (1958) grain freight rates. This is to capture the effects of changes in transport costs, which are usuallyconsidered to be one of the main factors behind market integration in the late nineteenth century. The results are predictable, andthe causality is clearly from pus to puk — in fact, imposing weak exogeneity of pus and freight is accepted with a p-value of 0.131.The cointegrating relationship is given below (where bold type again indicates that the coefficients are significant at the 5%level):

ΔpuktΔpust

Δf reightt

24

35 ¼ �0:98800½ � puk−0:619pus−0:216f reight þ 0:004tf gt−1

� �þ…

17 Those there are concern rumours of small-scale smuggling of American grain via Canada (BPP, 1820, pp. 18, 30 and 35; BPP, 1821, pp. 277, 314–5 and 320–1;BPP, 1836a, p. 43; BPP, 1836b, pp. 113–4) and a brief mention that the Corn Laws harmed bilateral trade with the United States (BPP, 1840).

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

1848

1854

1860

1866

1872

1878

1884

1890

1896

Qu

arte

rs

Fig. 5. UK imports of wheat and wheat flour from the United States, 1798–1846. Sources: the data are from the Annual Statements of Trade 1853–1900. Where thisis not already done in the sources, imports of wheat (measured by volume: quarters) is added to imports of wheat flour (measured by weight: hundredweight,cwt) using the assumption that there are 392 lb (i.e. 3.5 cwt) of flour to a quarter of wheat (the assumption made in British Parliamentary Papers). For later yearsimports of wheat are also recorded by weight, and for the sake of comparison it is thus assumed that there are 4.4 cwt of wheat to the quarter.

95P. Sharp, J. Weisdorf / Explorations in Economic History 50 (2013) 88–98

The adjustment coefficient, which is insignificantly different from one, shows that prices adjusted within a year for this period,as are well known. The first era of globalization was thus something unlike what we have documented for the end of theeighteenth century. So how important was the early period of integration?

6. The importance of the early supply of wheat from America reconsidered

The point we most wish to convey is simply the fact that there was an earlier story of integration between the US and the UK. Itis not ‘globalization’ as such, but it shares many of the features of the later ‘first era’, and particularly for short periods there aresolid indicators of what was to come only a century later.

Moreover, in a very practical sense, the imports played an important role. First, since the demand and supply of wheat areusually associated with a rather low short-run price elasticity, small changes in imports could have big impacts on prices, so eventhe relatively low volumes seen here might have had a significant influence on the British market. Second, although levels weretiny compared to later years, population was also rather smaller, so in order to get an idea of the importance of these imports it isuseful to compare the level of imports from America with total imports and estimates of total consumption of wheat in Britain.

Collins (1975) provides a number of estimates of annual wheat consumption per head in the nineteenth century, ranging from6 to nearly 9 bushels. He also shows, however, that this was changing over time, since in 1800 only 66% of grain consumption wasfor wheat, as opposed to 88% in 1850 and 97% in 1900. This means that an assumption of 0.9 quarters (over seven bushels) ofwheat per person per year is almost certainly an overestimate for the eighteenth century. Nevertheless, making this fairly heroicassumption and multiplying it by the population statistics compiled by Wrigley and Schofield (1981) and Mitchell and Deane(1953, pp. 8–9) it is possible to get an idea of the levels of consumption.

As Fig. 6 illustrates, even before the repeal of the Corn Laws, imports from America were often supplying up to about 3 or 4% ofconsumption. They were thus supplying a significant share of the population. Using data on total imports it is also possible to givean impression of the relative importance of US imports compared to those from other countries: for many years they were a largeproportion of total imports. The rest of the imports are predominantly coming from Prussia/‘Germany’, which for most yearssupplied in excess of half of all imports. The lesson is nevertheless clear: the United States' importance as a grain exportingcountry dates back to the eighteenth century.

7. Conclusion

Some degree of long-run market integration was already present in the trade in wheat between the US and the UK from theeighteenth century. We wish to stress again that this was not ‘globalization’, although we find it interesting that so much of theevidence from the late nineteenth century is based on similar analyses. However, this trade was not insignificant, as the wordsand actions of contemporaries confirm. The change in the nineteenth century was not that prices began to follow each other, andneither was it particularly significant that the price gap narrowed (Persson, 2004). The important change was that prices adjustedfaster towards the law of one price equilibrium, as demonstrated by Ejrnæs et al. (2008).

What we find particularly interesting, however, is that trade could and did increase during the periods when exogenousevents did not preclude this from happening. Volumes could not feasibly have been as high as they were by the end of thenineteenth century (when the US was exporting more than she produced in total in the eighteenth century), but they wereindeed significant.18 And importantly this was without the transportation revolution. It is thus certainly an important precursor to

18 There is also some evidence of its importance for other European countries, such as Portugal and Spain (Galpin, 1922) and France (Kaplan, 1976, p. 634).

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1750

1755

1760

1765

1770

1775

1780

1785

1790

1795

1800

1805

1810

1815

1820

1825

1830

1835

1840

1845

1850

1855

1860

% o

f to

tal c

on

sum

ptio

n

Imports from America as % of total consumption Imports from others as % of total consumption

Fig. 6. Imports of wheat to Britain as a percentage of total consumption. Source: see Fig. 2, own calculations.

96 P. Sharp, J. Weisdorf / Explorations in Economic History 50 (2013) 88–98

the globalization story of the nineteenth century, and an illustration of the beginning of the story of the American grain invasionof Britain.

The fact that this was the case is strikingly brought home by the following: in 1791 a petition was presented to the House ofCommons by ‘Merchants of the City of London, concerned in the Commerce with the United States of America’ (BPP, 1791, p. 445)and petitions were received from Norwich, Somerset, and Dorset, making it clear that these areas were unable to supplythemselves with grain (BPP, 1791, pp. 466–467). A petition from Bailiffs and Burgesses of the Borough of Bridport, Dorsetexplicitly requested that Bridport be made a ‘Granary Port’ so that the town might enjoy a ‘greater Connection with America, andthat the Merchants will thereby be enabled to import Wheat, in Part, for their Manufacturies’ (BPP, 1791, p. 469). Even moreexplicitly a ‘Petition from the Mayor, Merchants, and principal Inhabitants, of the City of Bristol’ stated that ‘the Western Part ofthe Kingdom does not grown Corn sufficient for the Consumption of its Inhabitants’ and relied on imports ‘chiefly from America’through the port of Bristol (BPP, 1791, p. 653). If American crops had not have been ruined by the Hessian fly, and war had notintervened, might not the Anti-Corn Law League have emerged at this time? And then quite possibly we would now date the graininvasion – and possibly even the origins of globalization – to the late 1700s, rather than a century later.

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