Britain’s Grand Strategy of Restrained Punishment
opinion, a small minority, no longer very vocal, who deprecated, whatever the emergency, any departure from the principles of Insular Free Trade, and a large majority in favour of the use of tariffs” (1931, 221).
In August 1932, at the Ottawa Conference, Britain formally adopted a commercial policy of imperial preferences.26 In 1931, Neville Chamber- lain, with support from the Conservative Party, introduced the Import Duties Bill calling for (1) imposition of a general customs duty of 10 per- cent on almost all imports, (2) the exemption from the duty of goods from within the empire, pending the Imperial Economic Conference to be held in Ottawa, and (3) the exemption of certain other goods, which were placed on a free list.27 The Ottawa Conference produced a network of twelve bilateral agreements among the commonwealth countries, granting special trading privileges to British Commonwealth countries. Britain offered imperial preferences in return for concessions by the Dominions for British manufactured goods (the exchange was primarily foodstuffs from the Dominions for British manufactured goods).28 In addition, the British colonies of Sierra Leone, Nigeria, Gold Coast, and Gambia put tariffs on foreign imported goods while giving preference to British cottons. In 1934, Britain abrogated the Indo-Japanese commercial treaty (1904) in order to stem the ›ow of Japanese cotton textiles.
Members of the free-trade faction responded to these external pressures by pushing for economic cooperation with imperial Japan, Italy, and Ger- many. The City had an interest in restraining the scope of the economic nationalists’ trade and ‹nancial punishment of these states. Free traders advocated extending credits, loans, and trade concessions rather than tar- iffs, quotas, and imperial preferences in order to moderate Berlin and Tokyo’s foreign policies. Invisible exports, banking, the City, shipping, and insurance recognized that the bene‹ts would accrue to the trading community.
The goal of the free traders was threefold. First, free traders feared that punishing these imperial contenders risked exacerbating Britain’s ‹nan- cial dif‹culties and the contenders’. As Germany had been Britain’s best customer before the war, the governor of the Bank of England believed that Britain’s economic well-being and the cure to its unemployment and stagnant economy depended on returning Germany to the liberal fold and on restoring German economic health (Coghlan 1972, 208). The City of London and British banks continued to maintain extensive credit lines to