Imperial Preference

Imperial Preference was a system of mutual tariff reduction enacted throughout the British Empire as well as the then British Commonwealth (now simply known as Commonwealth of Nations) following the Ottawa Conference of 1932. As Commonwealth Preference, the proposal was later revived in regard to the members of the Commonwealth of Nations. Joseph Chamberlain, the powerful colonial secretary from 1895 until 1903, argued vigorously that Britain could compete with its growing industrial rivals (chiefly the United States and Germany) and thus maintain Great Power status. The best way to do so would be to enhance internal trade inside the worldwide British Empire, with emphasis on the more developed areas — Australia, Canada, New Zealand, and South Africa — that had attracted large numbers of British settlers.

The Dominions enacted policies of imperial preference in the late 19th and early 20th century: Canada (1897), New Zealand (1903), South Africa (1903), and Australia (1907). While Canada's policy of imperial preference had the effect of increasing its imports from Britain (by approximately one-half), the policies of New Zealand and Australia did not. Due to its commitments to free trade, Britain did not reciprocate these trade policies, to an appreciable extent, until the 1932 Ottawa Conference amid the Great Depression.

Pre-20th century
In 1660, the practice of "Old Subsidy" gave certain imported colonial products a virtual monopoly in England, effectively starting a form of colonial preference for sugar. By 1840, this had been extended such that more than eighty commercial goods were protected, as the Corn Laws protected some colonial agricultural goods. Colonial conferences held throughout the late 19th century arranged closer economic unions between Dominions and the mother country, with the Dominions giving preferences in exchange for defence commitments or common commercial, patent, immigration and shipping policies.

20th century
In the late 1800s and especially during the early 1900s, Imperial Preference was considered a method of promoting unity within the British Empire and sustaining Britain's position as a global power as a response to increased competition from the protectionist Germany and United States. In the decades before the First World War, the Dominions enacted policies of imperial preference: Canada (1897), New Zealand (1903), South Africa (1903), and Australia (1907). However, Britain did not reciprocate these trade policies towards the Dominions due to its free trade commitments. It was not until the Great Depression that Britain reciprocated.

The idea was associated particularly with Joseph Chamberlain, who resigned from the government of Arthur Balfour in September 1903 in order to be free to campaign for Tariff Reform. Among those opposing Chamberlain was the Chancellor of the Exchequer, Charles Thomson Ritchie, who, guided by the free-trade ideas of the leading economists of the time, such as Sir William Ashley, was vigorously opposed to any scheme of Imperial Preference. This ultimately resulted in a damaging rift within Balfour's Conservative-Unionist coalition government, contributing to its defeat in the 1906 elections.

During the 1920s, Imperial Preference became popular once more, mostly through the good will of Lord Beaverbrook and his Daily Express, once Lloyd George was ejected from office. Unfortunately for Beaverbrook, Bonar Law preferred Lord Derby and his fear of opposition to a policy of extra-mural Food Tax, and Beaverbrook was unable to adapt his scheme, perhaps because of the economics:

For at that time there could be no advantage to the Dominions unless Empire food was admitted to Britain tax free—and Britain imported more than half of her consumption of food.

Law died in office before his first year in power was complete, and was succeeded by Stanley Baldwin, who was a tepid supporter of the scheme. He called the 1923 elections specifically to introduce protectionist policies and lost, leading to the first minority Labour government. Baldwin's Conservatives came back to power after the 1924 elections without a protectionist policy. His Colonial and Dominions Secretary, Leo Amery, was one of its strongest supporters and in 1926 established the Empire Marketing Board to encourage Britons to 'buy Empire'. But Winston Churchill, Chancellor of the Exchequer of the Baldwin government, a former Liberal and always a no-holds-barred free trader, was an opponent. Public opposition to protectionism contributed to the Conservative loss of power again in the 1929 elections and the creation of the second Labour government.

The 1931 elections supported a National Government nominally led by former Labour prime minister Ramsay MacDonald but with an overwhelming majority of MPs being Conservatives under Baldwin; these largely supported Imperial Preference as a response to the Great Depression. In 1932, representatives of Britain, the Dominions, and the Colonies held the Commonwealth Conference on Economic Consultation and Co-operation in Ottawa, Ontario, Canada. They agreed to implement policies of Imperial Preference for five years. This new policy was based on the principle of "home producers first, empire producers second, and foreign producers last"

In 1935, the Canadian Prime Minister, R. B. Bennett, a Conservative endorsed Imperial Preference.

After World War II and the signing of the General Agreement on Tariffs and Trade in 1947, the extension of preferential tariffs was prohibited and the margins reduced. Inflation, combined with the general liberalisation of trade around the world, ended the formal system of imperial preference.

21st century
Brexit has sparked increased interest in forming trade agreements between the United Kingdom and the Commonwealth.

Preference in other countries
The Italian Empire, Spain, Portugal, France, Japan, and the United States all had varying degrees of preference between their mainland and their colonies.