Customs war

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A Customs war, also known as a toll war or tariff war, is a type of economic conflict between two or more states. In order to pressure one of the states, the other raises taxes or tariffs for some of the products of that state. As a reprisal, the latter state may also increase the tariffs.

A tariff is a tax on imports or exports between sovereign states. It is a form of regulation of foreign trade and a policy that taxes foreign products to encourage or safeguard domestic industry. Traditionally, states have used them as a source of income. Now, they are among the most widely used instruments of protectionism, along with import and export quotas.

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One example of a modern tariff war occurred in the 1920s and 1930s between the Weimar Republic and Poland, in the German–Polish customs war. The Weimar Republic, led by Gustav Stresemann wanted to force Poland, by creating an economic crisis by increasing the tolls for coal and steel products developed there, to give up its territory. As a reprisal, the Poles increased toll rates for many German products. This led to fast development of the port of Gdynia, which was the only way Poland could export its goods to Western Europe without having to transport them through Germany.

Weimar Republic Germany state in the years 1918/1919–1933

The Weimar Republic is an unofficial historical designation for the German state from 1918 to 1933. The name derives from the city of Weimar, where its constitutional assembly first took place. The official name of the republic remained Deutsches Reich unchanged from 1871, because of the German tradition of substates. Although commonly translated as "German Empire", the word Reich here better translates as "realm", in that the term does not have monarchical connotations in itself. The Reich was changed from a constitutional monarchy into a republic. In English, the country was usually known simply as Germany.

Second Polish Republic 1918-1939 republic in Eastern Europe

The Second Polish Republic, commonly known as interwar Poland, refers to the country of Poland in the period between the First and Second World Wars (1918–1939). Officially known as the Republic of Poland, the state was re-established in 1918, in the aftermath of World War I. The Second Republic ceased to exist in 1939, when Poland was invaded by Nazi Germany, the Soviet Union and the Slovak Republic, marking the beginning of the European theatre of World War II.

German–Polish customs war Economic war of early 20th century

The German–Polish customs war was a political and economic conflict between the Second Polish Republic and the Weimar Republic, which began in June 1925 and ended officially in March 1934. The conflict began when Poland's status expired as one of the Entente's most favoured nations in trade with Germany. Berlin then decided to raise customs duty, which primarily affected the Polish coal industry, Poland's main export to Germany. In return, Warsaw also raised duty on German goods. Germany's purpose in the war was to cause a breakdown of Poland's economy and gain political concessions. They included revanchist claims to Polish territories.

In September 1922 the Fordney–McCumber Tariff (named after Joseph Fordney, chair of the House Ways and Means Committee, and Porter McCumber, chair of the Senate Finance Committee) was signed by U.S. President Warren G. Harding. [1] In the end, the tariff law raised the average American ad valorem tariff rate to 38 percent.

Fordney–McCumber Tariff Historical United States tariff

The Fordney–McCumber Tariff of 1922 was a law that raised American tariffs on many imported goods to protect factories and farms. The US Congress displayed a pro-business attitude in passing the tariff and in promoting foreign trade by providing huge loans to Europe. That, in turn, bought more US goods. However, five years after the passage of the tariff, American trading partners had raised their own tariffs by a significant degree. France raised its tariffs on automobiles from 45% to 100%, Spain raised its tariffs on American goods by 40%, and Germany and Italy raised their tariffs on wheat. According to the American Farm Bureau, farmers lost more than $300 million annually as a result of the tariff.

Warren G. Harding 29th president of the United States

Warren Gamaliel Harding was the 29th president of the United States from 1921 until his death in 1923. A member of the Republican Party, he was one of the most popular U.S. presidents to that point. After his death, a number of scandals—including Teapot Dome—came to light, as did his extramarital affair with Nan Britton; each eroded his popular regard. Harding is often rated as one of the worst presidents in historical rankings.

Trading partners complained immediately. Those injured by World War I said that, without access by their exports to the American market, they would not be able to make payments to America on war loans. But others saw that this tariff increase would have broader deleterious effects. Democratic Representative Cordell Hull said, "Our foreign markets depend both on the efficiency of our production and the tariffs of countries in which we would sell. Our own [high] tariffs are an important factor in each. They injure the former and invite the latter."

Cordell Hull American politician, U.S. Secretary of State from 1933 to 1944

Cordell Hull was an American politician from Tennessee best known as the longest-serving U.S. Secretary of State, holding the position for 11 years (1933–1944) in the administration of President Franklin Delano Roosevelt during most of World War II. Hull received the Nobel Peace Prize in 1945 for his role in establishing the United Nations, and was referred to by President Roosevelt as the "Father of the United Nations".

Five years after the passage of the tariff, American trading partners had raised their own tariffs by a significant degree. France raised its tariffs on automobiles from 45% to 100%, Spain raised tariffs on American goods by 40%, and Germany and Italy raised tariffs on wheat. [2] This customs war is often cited as one of the main causes of the Great Depression.

France Republic in Europe with several non-European regions

France, officially the French Republic, is a country whose territory consists of metropolitan France in Western Europe and several overseas regions and territories. The metropolitan area of France extends from the Mediterranean Sea to the English Channel and the North Sea, and from the Rhine to the Atlantic Ocean. It is bordered by Belgium, Luxembourg and Germany to the northeast, Switzerland and Italy to the east, and Andorra and Spain to the south. The overseas territories include French Guiana in South America and several islands in the Atlantic, Pacific and Indian oceans. The country's 18 integral regions span a combined area of 643,801 square kilometres (248,573 sq mi) and a total population of 67.02 million. France is a unitary semi-presidential republic with its capital in Paris, the country's largest city and main cultural and commercial centre. Other major urban areas include Lyon, Marseille, Toulouse, Bordeaux, Lille and Nice.

Spain Kingdom in Southwest Europe

Spain, officially the Kingdom of Spain, is a European country located in Southwestern Europe with some pockets of Spanish territory across the Strait of Gibraltar and the Atlantic Ocean. Its continental European territory is situated on the Iberian Peninsula. Its territory also includes two archipelagoes: the Canary Islands off the coast of Africa, and the Balearic Islands in the Mediterranean Sea. The African enclaves of Ceuta, Melilla, and Peñón de Vélez de la Gomera make Spain the only European country to have a physical border with an African country (Morocco). Several small islands in the Alboran Sea are also part of Spanish territory. The country's mainland is bordered to the south and east by the Mediterranean Sea except for a small land boundary with Gibraltar; to the north and northeast by France, Andorra, and the Bay of Biscay; and to the west and northwest by Portugal and the Atlantic Ocean.

Kingdom of Italy kingdom on the Appenine Peninsula between 1861 and 1946

The Kingdom of Italy was a state which existed from 1861—when King Victor Emmanuel II of Sardinia was proclaimed King of Italy—until 1946—when civil discontent led an institutional referendum to abandon the monarchy and form the modern Italian Republic. The state was founded as a result of the unification of Italy under the influence of the Kingdom of Sardinia, which can be considered its legal predecessor state.

The World Trade Organization was created to avoid customs wars, which are considered to be harmful to the world's economy.

World Trade Organization Intergovernmental trade organization

The World Trade Organization (WTO) is an intergovernmental organization that is concerned with the regulation of international trade between nations. The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. It is the largest international economic organization in the world.

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References

  1. Rothgeb, 2001, 30-32
  2. Rothgeb, 2001, 32-33

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