A network analysis of preferential trade agreements: 1815

A network analysis of preferential trade agreements:1815 - 1914

Luca De Benedictis1 Silvia Nenci2

1University of Macerata (Italy)2University of Roma Tre (Italy)

[email protected]

Valencia FRESH meeting 2013Frontier Research in Economic and Social History

Valencia, 13-14 June 2013

Luca De Benedictis, Silvia Nenci 1 / 34

mailto:[email protected]

Outline of the presentation

1 Aims

2 Why using Network Analysis?

3 Background: Trade policy in the period 1815 - 1914

4 Focus: The ”‘network”’ of Cobden-Chevalier Treaties

5 Network Analysis: basics

6 Data sources and Stylized facts

7 First remarks


Aims

The aim of this introductory work is twofold:

First: a) to describe and analyse the stucture of internationalpreferential trading relations (i.e. PTAs) from 1815 to 1913 and itsevolution over time by applying NA; b) to investigate in historicalperspective if trade relations and PTAs are strongly heterogeneousamong countries, and if specific countries play different roles overtime, by calculating some network statistics.

Second: to apply NA to the analysis of a debated issue in theeconomic history literature to show how this approach allows to getnew insights. The issue is: Can the Cobden-Chevalier Treaty beconsidered as a real turning point in the trade policy of the 19thcentury?


Motivation: the interdependence issue

Economic history literature as well as trade literature generallyunderestimate the systematic ways in which one countrys choicesaffect the choices of others.

Trade integration is not a characteristic of a single country, but is theresult of the relations that every single country has with the economicsystem.

Interdependence between countries is a key factor in their choice tojoin a PTA (Egger and Larch, 2008; the Baldwin’s domino effect,1995).

Our presumption: international context has strong and systematiceffects on trade policy and therefore should not be ignored (see alsoAlapuro 1988; Lindberg 1983; Y. M. Werner 1989; Phare, 2008).


Why using Network Analysis?

Interdependence is the essence of networks

Network Analysis focuses more on the properties of the system (i.e.structural dimension) rather than on individual characteristics.

NA is well-fitted to analyze the characteristics of single countries intheir relative position in the whole system of relations.

The algoritm: countries which are connected tend to stay close, whilecountries which are not connected tend to be placed far apart. But,the position of each country does not depend only on its link withanother country but also on the indirect effect of others: the partnersof its partners will contribute to the determination of the country’sposition in the network.


A short review of the literature

Our work is not the first one on the application of NA to trade issues:Smith and White (Social Forces,1992)Serrano and Bogua (Phys. Rev., 2003)Garlaschelli and Loffredo (Physica A, 2005)Fagiolo, Reyez and Schiavo (S.Anna WP, 2007)Kali and Reyes (J. Intern. Bus. Studies, 2007)De Benedictis and Tajoli (World Economy, 2011)De Benedictis, Nenci, Santoni, Tajoli, Vicarelli (CEPII Working Paper,fortcoming)

If the application of NA to the study of trade relations is quite recent,its application to the same relation but in historical perspective is ararity (Flandreau and Clemens, 2005 apply NA to identify the coreand the periphery of the international monetary system).

The present study is a first attempt to analyse trade integration inhistorical perspective using NA.


Background: Trade policy during the 19th century and thebeginning of the 20th

Since the end of the Napoleonic Wars, there has been an increasingnumber of PTAs aimed at reducing tariff protection between two ormore countries on selected traded products (Jacks, 2005; Shiue, 2005;Kaukiainen, 2001; Ejrns and Persson, 2000)

The liberalization process of the nineteenth century started verygradually and spread unevenly among Europe and outside.

The second half of the 19th century, especially the first twenty-fiveyears, can be described as a period of increasing tradeliberalization(Foreman-Peck, 1999). During this period the diffusionof free trade doctrine occurred in Europe and (partially) in the UnitedStates, and interested their partners as well (Colonial nations).


The the Cobden-Chevalier Treaty and the Network ofPTAs of the 1860s

The most important initiative in the diffusion of trade liberalizationpolicy in the second half of the century was the Cobden-ChevalierTreaty signed by France and the UK in 1860 (Bairoch, 1976, 1989)

Following this treaty, which included the ”most favoured nation”(MFN) clause, most European countries, through treaties signed withFrance or the UK, became part of a network of more than 50 bilateraltreaties, known as ”the network of Cobden-Chevalier Treaties”.

The main focus of the bilateral treaties was on reducing tariffs onmanufactured articles, such as textiles, ironware, articles of leatherand rubber, and especially on wines and stronger alcoholic beverages.

This network guaranteed the development of free trade among themain trading powers in Europe for around 20 years, lowering averagetariffs to a degree unmatched in international trade until the GATTera.


The network of Cobden-Chevalier Treaties

Experts in nineteenth century trade policy (Bairoch, 1977, 1989; Nye,1991, 2007; Irwin, 1993; and ORourke and Williamson, 1999) arguethat the Cobden-Chevalier treaty was decisive in reducing tariffprotection by spreading bilateral agreements containing the MFNclause.

For these authors, the Cobden-Chevalier agreement has beenconventionally portrayed as a milestone in 19th century liberalisationin effect as the mother of all free trade.

A growing research activity has been devoted recently to the analysisof the Cobden-Chevalier network ’s impact on trade growth of theEuropean countries during the nineteenth century (Bairoch, 1976,1989, 1993; Pahre, 2008; Accominotti and Flandreau, 2005; Irwin,1993; Stein, 1984; Lazer, 1999; Lampe, 2009).


Was the Cobden-Chevalier Treaty a real turning point inthe trade policy of the 19th century?

This work aims at analysing the importance of this Agreement not interms of trade growth but in terms of its impact on:

The structural dimension of trade preferential relations in the secondhalf of the 19th century;

The role and centrality of countries in the trade integration process ofthe 19th century and their evolution over time.

To do this we apply the NA’s standard tools: graphs and indicators


Network Analysis: Graph

G = (V ,L)

unit: vertex , node ∈ Vlink: line ∈ L

directed (arc) ∈ A;undirected (edge) ∈ E ;L = A∪ EL is a binary set [0,1]

In this work, unit is the countryand link is the PTA

In this work:

undirected network;

unweighted network.


Structural properties of network: Degree Centrality

Degree centrality is the simplest measure of the position of a node ina network. If the network is unweighted, it measures the centrality ofa node by the number of connections the node has.

This indicator ranges from 0 to 1; the more it’s degree is close to 1,the more a country is connected in the network.

The degree centrality is essentially a local centrality measure. It takesinto consideration only the direct links of a node, its nearestneighborhood, respectless to the position of the node in the network’sstructure.


Structural properties of network: Eigenvector Centrality

Eigenvector centrality index measures a country’s centrality lookingat the importance of its neighbors (what really matters is thecentrality of the countries linked to him)

In general, countries with a high value of eigenvector centrality arethe ones which are connected to many other countries which are, inturn, connected to many others.

The Eigenvector centrality is essentially a global centrality measure.


Data: the Phare’s database

Comprehensive data on preferential agreements all starts around 1950(data prior to this date are scattered and fragmented).

We use historical data on PTAs arising from the Pahre s (2008)database that includes intra-European, intra-American, andinterregional agreements signed from 1815 to 1914.

The database contains a wide range of agreements; the main typesare conventions and treaties.

Units included in the database are 92 territories (48 current states).

Some territorial divisions (such as the German Zollverein, Modenaand Parma before the Italys unification) or special forms ofintegration (such as the German Tax Union or the North GermanConfederation) are treated as separate States in the Phare’s database(since they had the power to negotiate commercial treaties on behalfof their members).


Annual Treaties in Effect: European Great Powers, 18151913

The Figure suggests a steadily expanding network of cooperation. Thisvisual continuity reflects the expansion of the network to include mostcountries by century s end.

Figure : Annual Treaties, European Great Powers, 1815 - 1913

Source:Phare (2008)Luca De Benedictis, Silvia Nenci 15 / 34

Stylized facts: the evolution of PTAs’ network

Figure : PTAs, 1815

ARG

COL

HZH

HZS

PRS

PRT

SWD

UK

US

WRT

Source: Authors’ elaboration on Phare’s data (2008)


Stylized facts: PTAs in 1850

Figure : PTAs, 1850

BAD CR

HZS

ICE

PRT PRU

SWZ

URG

VEN

WRT




Figure : PTAs, 1855

AH ARG

BAD

BLGBOL

BRMBRW

BRZ

CAN

CHLCOL

CR

DENDR

ECU

ELS

FRK

FRN

GRC

GUA

HAMHAN

HSC

ITL

LIE

LIP

LUB

LUX

MCS

MEC

MEX

MOD

NAS

NICNTH OLD

PAR

PRG

PRS

PRT

PRU

RUS

SCGSPN

SRD

SWD

SWZ

SXH

SXWTCU

TUR

UK

URG

US

VEN

WLD




Figure : PTAs, 1861

ADS

AH

ANB

ANH

ANKARG

BAD

BAV

BLG

BOL

BRM

BRN

BRW

BRZ

CAN

CHL

COLCR

DEN

DR

ECU

ELS

FRK

FRN

GRC

GUA

HAM

HAN

HOH

HOM

HON

HSC

HSE

HSG

ITL

LIE

LIP

LUB

LUX

MCS

MEC

MEX

NAS

NIC

NTH

OLD

PRG

PRS

PRT

PRU

RUS

SBRSBS

SCG

SPN

SWD

SWZ

SXC

SXHSXWTCU

TUR

UK

URG

US

VENWLD




Figure : PTAs, 1865

ADS

AH

ANB

ANH

ANK

ARG

BAD

BAV

BLG

BOL

BRM

BRN

BRW

BRZ

CAN

CHL

COL

CR

DENDR

ECU

ELS

FRK

FRN

GRC

GUA

HAI

HAM

HAN

HOH

HOM

HON

HSC

HSE

HSG

ITL

LIE LIP

LUB

LUX

MCS

MEC

MEX

NAS

NIC

NOR

NTH OLDPRG

PRS

PRT

PRU

RUS

SBR

SBS

SCG

SPN

SWDSWZ

SXC

SXH

SXW

TCU

TUR

UKURGUS

VEN

WLD




Figure : PTAs, 1880

AH

ARGBLGBOL

BRZCHL

COLCR

DEN

DRECU

ELS

FRN

GRC

GUA

HAI

HAW

HON

ITL

JPN

LIE

LUX

MEC

MEX

NIC

NOR

NTH

OFS

OLD

PRG

PRS

PRT

PRU

ROM

RUS

SPN

SRB

SWD

SWZ

TRV

TURUK

URG

US

VEN




Figure : PTAs, 1913

AH

ARG

BLG

BOL

BRZ

BUL

CAN

CHL

CHN

COL

CRCUB

DEN

DR

ECU

ELS

FRN

GRC

HAI

HAW

HON

ICE

IRN

ITL

JPN

LIE

LUX

MEC

MEX

MNT

NIC

NOR

NTH

OFS

OLD

PRG

PRS

PRT

PRU

ROMRUS

SPNSRB

SWD

SWZ

TUR

UK

URG

US

VEN



Stylized facts: PTAs Network density 1815-1913

Figure : Density

Fundamental years

Den

sity

0.00

0.01

0.02

0.03

0.04

1815 1850 1855 1861 1865 1880 1901 1913



Stylized facts: PTAs and degree centrality of countries in1861

Figure : degree centrality, 1861

ADS

AH

ANB ANH

ANK

ARG

BAD

BAV

BLG

BOL

BRM

BRN BRW

BRZ

CAN

CHL

COLCR DENDR

ECU

ELS

FRK

FRN

GRC

GUA

HAM

HAN

HOHHOM

HON

HSC

HSE

HSG

ITL

LIE

LIP

LUB

LUX

MCS

MEC

MEX

NAS

NIC

NTHOLD PRG

PRS

PRT

PRU RUS

SBR

SBS

SCG

SPN

SWDSWZ

SXC

SXH

SXWTCU

TUR

UKURG

US

VEN

WLD



Stylized facts: Degree centrality for UK and France

Figure : Degree centrality

Fundamental years

UK

and

Fra

nce

degr

ee c

entr

ality

010

2030

4050

60

1815 1850 1855 1861 1865 1880 1901 1913



Stylized facts: Eigenvector centrality vs degree centralityfor UK and France

Figure : Eigenvector centrality vs degree centrality

Fundamental years

Deg

ree

and

eige

nvec

tor

cent

ralit

y F

ranc

e an

d U

K

01

23

45

1815 1850 1855 1861 1865 1880 1901 1913



Stylized facts: Centralities, 1855

Figure : Local and global centralities, 1855

0.0 0.2 0.4 0.6 0.8 1.0

0.0

0.2

0.4

0.6

0.8

1.0

Degrees − 1855

Eig

enve

ctor

s −

185

5

Anhalt−Dessau

Austria Hungary

Anhalt−BernburgAnhaltAnhalt−K.then

Argentina

Baden

Bavaria

BelgiumBolivia

Bremen

Brunswick

BrunswickBrazil

Bulgaria

Canada

Chile

China

ColumbiaCosta Rica

Cuba

Denmark

Dominican Republic

Ecuador

El Salvador

Frankfurt

France

Greece

Guatamala

Haiti

HamburgHannover

HawaiiHohenzollernHomburgHonduras

Hesse−Cassel (Electorate)

Hesse−Electoral (looks like a duplicate with Hesse−Cassel)Hesse−Grossherzogtum (Duchy)Hohenzollern−HechingenHohenzollern−SigmaringenIcelandIran

Italy

JapanLiechtenstein

Lippe

L.beck

LuxembourgMecklenburg−Schwerin

MecklenburgMexico

Middle German UnionMontenegroModena

Nassau

North German Confederation

Nicaragua

Norwary

Netherlands

Orange Free State

Oldenburg

Parma

Paraguay

Prussia

Portugal

Peru

Romania

Russia

SaxonySchwarzburg−RudolstadtSchwarzburg−SondershausenSaxe−Coburg−Gotha

Spain

Serbia

Sardinia (before 1860)

SteuervereinSweden

Switzerland

Saxe−HildburghausenSaxony−MeiningenSaxe−Weimar−Eisenbach

Thuringian Custom Union

Transvaal

Turkey

UK

Uruguay

USA

Venice

Waldeck

W.rttemberg

Source: Authors’ elaboration on Phare’s data (2008)Luca De Benedictis, Silvia Nenci 27 / 34

Stylized facts: Centralities, 1865

Figure : Local and global centralities, 1865

0.0 0.2 0.4 0.6 0.8 1.0

0.0

0.2

0.4

0.6

0.8

1.0

Degrees − 1865

Eig

enve

ctor

s −

186

5

Anhalt−Dessau

Austria Hungary

Anhalt−BernburgAnhaltAnhalt−K.then

Argentina

BadenBavaria

Belgium

Bolivia

Bremen

BrunswickBrunswick

Brazil

Bulgaria

Canada

Chile

China

Columbia

Costa Rica

Cuba

Denmark

Dominican Republic

Ecuador

El Salvador

Frankfurt

France

Greece

Guatamala

HaitiHamburg

Hannover

Hawaii

HohenzollernHomburg

Honduras

Hesse−Cassel (Electorate)Hesse−Electoral (looks like a duplicate with Hesse−Cassel)Hesse−Grossherzogtum (Duchy)

Hohenzollern−HechingenHohenzollern−SigmaringenIcelandIran

Italy

JapanLiechtenstein

Lippe

L.beck

LuxembourgMecklenburg−Schwerin

Mecklenburg

Mexico

Middle German UnionMontenegroModena

Nassau

North German Confederation

Nicaragua

Norwary

Netherlands

Orange Free State

Oldenburg

Parma

Paraguay

Prussia

Portugal

Peru

Romania

Russia

Saxony

Schwarzburg−RudolstadtSchwarzburg−Sondershausen

Saxe−Coburg−Gotha

Spain

SerbiaSardinia (before 1860)Steuerverein

Sweden

Switzerland

Saxe−HildburghausenSaxony−Meiningen

Saxe−Weimar−EisenbachThuringian Custom Union

Transvaal

Turkey

UK

Uruguay

USA

Venice

Waldeck

W.rttemberg

Source: Authors’ elaboration on Phare’s data (2008)Luca De Benedictis, Silvia Nenci 28 / 34

First Remarks

This work is a first step to visualize the PTAs network and assesshistorical trade integration emphasizing the importance of thestructural dimension

Preliminary remarks are:

The structure of the PTAss network changes over the timeThe Cobden Chevalier Treaties Network has not a remarkable densitySpecific countries play different roles in the trade integration networkstructure over time (see UK, France, USA, Prussia)Further steps:to extend the analysis to other datato define a research hypothesis and make some inference


Thank you

Thanks!


Data: the Phare’s database

Comprehensive data on preferential agreements all starts around 1950(data prior to this date are scattered and fragmented).

We use historical data on PTAs arising from the Pahres (2008)database that includes intra-European, intra-American, andinterregional agreements signed from 1815 to 1914.

The database contains all agreements by which two states agree tolower trade barriers between them (the number of treaties that eachcountry has in effect at a given moment). The DB codes treaties ineffect by dyad.

The main sources for the Phares database are government documentsand similar compilations (Calvo 1862; Cardoso de Oliveira 1912; First International American

Conference 1889 1890; Hertslet 1875-; Macgregor 1846; Ministerio degli Affari Esteri 1865 1899; Recueil des Traites et

Conventions 1858; Triepel, 1900 1945; U.S. Department of State 1890; U.S. Tariff Commission 1940; Vial Solar 1903).

The secondary literature has been used as well.


Country list

Source: Phare’s data (2008)


Types of trade agreements in 1815 - 1914

Table : Types of trade agreements in 1815-1913

Formal title Uses in this periodConvention on Commerce (and Navigation) Common instrument for long-term agreements, but also used for temporary extensions while negotiating a convention or treatyTreaty of Commerce (and Navigation) Common, though less common than conventions.Treaty of Amity/Friendship and Commerce (and Navigation) (and Establishment) Common for newly independent states or a first treaty between a pair of states.Declaration on Commercial Relations Common during renegotiations, especially for Italy; used very rarely for mutual grant of MFN without making specific tariff concessions.Extension of Treaty (or Convention) Typically short-term extensions of six months to three years while negotiating renewal or a new treaty (convention).Protocol on Extension of Commercial Treaty Often used during renegotiations, especially by Italy.Exchange of Notes on Commercial Relations Unusual; when used, normally grants reciprocal MFN without making additional tariff concessions; sometimes used to extend an earlier convention or treaty, especially during negotiations.Commercial Arrangement Unusual; typically grants MFN provisionally while negotiating over details.Provisional commercial arrangement Unusual; sometimes an extension of an earlier treaty or convention with modifications, sometimes a temporary agreement concerning pecific goods.Commercial Agreement Rare; typically covers trade in specific goods, sometimes used to extend earlier treaties indefinitely, rarely clarifies the position of a colony with respect to existing treaties.Declaration Concerning Treaty (or Convention) (or Provisional Agreement) Less common instrument used to extend previous arrangements during negotiations; also occasionally used to modify or clarify terms of revious treaties.Treaty of Peace (etc.) Rare but often important.Tariff Agreement Rare; all cases involve Ottoman Empire.Commercial Accord RareCustoms Union Rare except in Germany before unification.Customs Treaty RareModus vivendi; Exchange of Notes on modus vivendi Rare; most examples involve Spain or BrazilAgreement on Commercial Relations Only example is Canada-France, 1893.Treaty of Reciprocity RareProvisional Convention Rare.Provisional Commercial Arrangment RareAdditional Convention to Treaty (or Convention) Unusual choice of instruments to modify tariff reductions or add MFN provisions to an earlier treaty.

Source: Phare, 2008


The Zollverein

Figure :

zollverein.png

Source:


Documents

A network analysis of preferential trade agreements: 1815