Could the United States Iron Industry Have Survived Free Trade after the Civil War?

Abstract

An unresolved question concerning post-Civil War U.S. industrialization is the degree to which import tariffs protected domestic manufacturers from foreign competition. This paper considers the impact of import tariffs on the domestic pig iron industry, the basic building block of the entire iron and steel industry. After reviewing the contentious political debate surrounding the pig iron duties and estimating the elasticity of substitution between domestic and imported pig iron, a standard trade model provides estimates of how tariff reductions would affect domestic prices, production, imports, and welfare. The results suggest that, had the tariff been eliminated in 1869, domestic output would have fallen by about 15% and the import market share would have risen from about 7% to nearly 30%. These relatively modest effects suggest that a substantial portion of the domestic industry could have survived a significant tariff reduction. © 2000 Academic Press.