European strategic trade policy and Brazilian export growth during the nineteenth century

Abstract

Until the Amazonian rubber boom, cane sugar and coffee were the two most important export commodities for Brazil during the nineteenth century. Despite inherent differences in methods of cultivation, both sugar and coffee at once benefitted and suffered from the characteristics of Brazil’s factor endowment in land, labour and capital. Yet these two export commodities demonstrated divergent growth patterns across the nineteenth century. The difference was not one of relative productivity and thus price competitiveness disadvantage, but of the imperfectly competitive nature of the international market for each commodity. European governments actively practised strategic trade policy to transfer profits from foreign to domestic or colonial firms. These market distortions were exogenous, imposed by consumer markets, and took the form of European colonial tariff preferences and subsidies to domestic production. Coffee suffered less from imperfect competition, thus remaining more profitable to Brazilian agricultural producers in the long run.