Teacher Background

Importance of Foreign Trade after the Revolution

The world that the former British colonies entered as the newly independent United States was one in which countries closely controlled their domestic and international economies. European countries had been practicing mercantilism from the 16th century on as each of them worked to become more powerful than its neighbors and competitors. Wealth in the coffers of the government was the source of power, and to insure capturing as much wealth as possible, the nation/kingdom became the center of a fairly closed trading network which included colonies that provided raw materials.

The economy of the American British colonies at the time of the revolution was extractive. Natural materials such as lumber, fish, rum were harvested and traded within the British empire. Manufacturing and other kinds of trade were prohibited by the Navigation Act of 1651 and subsequent legislation. North American British colonials were thus required to purchase Asian goods through England rather than engaging in an independent Asian trade. One of the contributing causes of colonial unrest was the exclusion of Americans from what was seen in the colonies as a very lucrative China trade.

The demand for Chinese products—tea, porcelain, silk, and nankeen (a coarse, strong cotton cloth)—continued after the Revolution. Having seen the British make great profits from the trade when the colonies were prevented from direct trade with China, Americans were eager to secure these profits for themselves. The need to provide employment for people who had depended on the sea for their livelihood, the need to continue importing manufactured goods as yet unavailable from American sources, and the need to generate capital for development stimulated the development of a new kind of foreign trade. Direct trade with China was part of this trade. With the volume of foreign trade relatively small during the early years of the Republic, trade with China played a significant role.

Trading Strategies

Ships from Philadelphia, New York, Boston, and Salem were the most active in the new China trade. The immediate difficulty which all traders faced was to find commodities to sell in China to offset American purchases in China that were mostly paid for in silver shipped from the Americas to China. Traders from these different American ports settled on different commodities and followed different routes to China to obtain these commodities. In general, all traders engaged in the serial trading of goods, buying and selling in all the ports they visited.

Traders from Philadelphia first sent their ships across the Atlantic Ocean to buy and sell goods in Europe. They then traded around Africa and across the Indian Ocean to China. Around 1810, Philadelphia merchants found a source of opium in Smyrna (Turkey) and they began to ship this commodity to China. However, they continued to ship other goods as well. Ships from New York seem to have engaged in a broad range of trade strategies available and in the mid-19th century, New York became the major port involved in the China trade.

By the 1830’s, trade routes were well established between the United States and China, and the names of ports in the Eastern hemisphere, once exotic and mysterious, were becoming increasingly familiar to Americans as places of importance to the United States’ economy.

Commodities of the Trade

Tea was the most important imported commodity Americans obtained from China through the end of the 19th century. Initially, American imports from China largely consisted of cloth (nankeen and silk) as well as tea. Tea became the dominant commodity, expanding from approximately 36% of the total imports from China in 1822 to 65% in 1860.

Textile imports declined during the 1830s. Silk imports declined although the reason is uncertain. As cotton textile manufacturing developed in the 1820s and the quality of domestic cloth rose and the cost decreased, the U.S. stopped importing nankeen and began to export cotton cloth to China. Machine-spun cloth did not have comparable quality to the homespun, hand-woven nankeen which the Chinese continued to prefer for work clothes. It was not until the middle to the end of the 19th century that western-manufactured cloth provided the serviceability for a comparable price as did Chinese-produced cloth. At that time western cloth began to be imported into China in increasing quantities. By the last quarter of the 19th century, cotton cloth and cotton yarn represented a significant portion of the total American exports to China.

Americans initially looked to ginseng as the commodity which would finance trade with China. This market quickly turned out to be very volatile. Furs also held promise, but this market also proved to be undependable. Without a commodity which consistently found a market in China, the Americans had to use specie (metal and coins) to finance the trade. Without a source of gold or silver, Americans had to obtain specie elsewhere. They did this by engaging in a triangular trade. Goods were shipped to Europe, between European ports, or to South America and sold for Mexican dollars. The specie was then shipped to China to purchase tea. By the 1830s, a significant amount of the trade was financed by credit extended by London banks through their representatives in China.

Some Americans also turned to opium as a commodity to finance the China trade. India produced the highest quality opium, but the British East India Company held a monopoly on opium production in India until 1831. Turkey produced opium of lesser quality and on a far smaller scale than India. Americans began shipping opium from Smyrna by 1805. Turkish opium only made up a small part of the total opium imported into China. Opium did not become an important commodity in American trade with China until the 1830s when it made up approximately 1/4 of the total that Americans sold in China. Opium imported by Americans never exceeded 10% of the total opium imported into China.

Despite all these attempts to find a commodity other than specie that could balance the cost of goods imported from China, Americans could not find one.

Differing Views of Trade

To understand why Westerners had a difficult time finding goods which the Chinese consistently wanted to buy, it is necessary to look both at the economics and ideas about trade. The Chinese economy at the end of the 18th century was quite well developed. Goods that could not be produced locally were supplied from other sources within China. The size, diversity, and the degree of integration of the Chinese empire provided its inhabitants with necessities and its elite with many luxuries. The goods which the West originally offered the Chinese were luxury items, the market for which was soon oversupplied. At that time, over 90% of the Chinese population lived on the land and most of them lived a hand-to-mouth existence.

The West wanted the tea which China produced and believed that it had the right to trade for it. Trade was seen as the means to expand national and personal wealth, so it was assumed to be natural that every one and every country would take part in trade.

The Chinese, on the other hand, had a traditional theoretical disdain for commerce. In Confucian thought, society was divided into four social classes—ranked from high to low—scholars, peasants, artisans, and merchants. The first three groups were seen to produce something, while merchants were seen as making a profit without producing anything. Nevertheless, commerce developed in China to a high degree, but it was not protected by law and always subjected to governmental demands for “contributions.”

Traditional China did also take part in some foreign trade through its history, but it was cast in terms of largess by the Emperor in return for tribute paid by states or tribes which acknowledged Chinese suzerainty. These ideas were very much a part of the Chinese mind-set when the West approached at the end of the 18th century and remained unchanged for most Chinese into the 20th century.

Given these two very different approaches and ideas about commerce, it is easy to see why conflicts developed.

Ships of the Trade

In the years following the American Revolution, speed was the most important consideration for ships. Sailing ships tended to be small and swift so that they could outrun and outmaneuver the British, French, and pirate vessels that tried to capture American ships. A ship like the Empress of China (the first American ship to trade in China), was only sixty-five feet long and twenty-five feet wide below the deck. Living quarters, the ship’s provisions, ballast, and cargo all shared this space. These small vessels made the trip around the globe with a cargo equivalent to that carried in two or three railroad boxcars. Larger sailing ship in the 1820’s and 1830’s could carry 400 to 500 tons of cargo, equivalent to about eight railroad boxcars, but still very little compared to today’s modern container ships that can carry 50,000 tons.

Sailing ships were built larger through the 1830s, 40s, and 50s, as longer trade routes became routine and the threat of pirates diminished. From 1841 through 1860, “extreme clippers” dominated the trade to Asia. These ships were large, carrying huge, lucrative cargoes of tea, spices, textiles, and chinaware to consumers in America and Europe. In the 1860s, while the United States was embroiled in a civil war, European-manufactured steam-powered ships came to dominate the ocean trade routes.

Changes in the Trade

During the decades preceding and during the Civil War, the United States was largely focused on domestic matters and sectionalism rather than foreign policy. But it was also during this time that Americans, who had spent most of their history looking towards the East Coast and Europe, would begin to see the strategic and economic importance of developing the West Coast and maintaining shipping routes to the Far East.

During the late 1850’s, the United States’ trade with China declined. Domestic manufactures produced in factories in the rapidly industrializing northern states were replacing imports: cotton replaced nankeen, American pottery factories replicated Chinese designs on porcelain, and coffee imported from Central and South America was replacing Chinese tea.

The Civil War consumed the resources of the American economy. Meanwhile, European shipyards surged ahead in the manufacture of steam-powered vessels which quickly came to dominate the ocean trade routes. The United States would not catch up to Europe in this area until the 1880s and 1890s, by which time England, Spain, France, Germany, and Russia had all gained a firm foothold in the China trade.

Despite the great profits that could be made in the China trade, Europe offered a more receptive market for American goods and remained the primary focus of America’s foreign trade. As U.S. foreign trade expanded during the 19th century, trade with Europe grew enormously, while the China trade remained fairly constant and became an even smaller percentage of total U.S. foreign trade.

American interests in the Pacific, however, continued to expand. California, Oregon, and Washington became part of the United States. American missionaries and then businessmen settled in the Hawaiian islands and successfully lobbied for American rule. When the defeat of the Spanish fleet at Manila in 1898 provided the opportunity to take control of the Philippines, American business lobbied for American rule there. They believed that an American presence in the Philippines would help American businessmen compete in China where foreign countries were increasingly carving out areas of economic dominance (spheres of influence). Mounting pressure on the U.S. government eventually resulted in the promulgation of the Open Door Policy in 1899.

With the reopening of China to trade in the last quarter of the 20th century, American businessmen have again approached China as a market with great potential. This time, China is not adverse to trade but two factors – a population with little disposable income and a governement that is protecting the development of its economy – has led again to a significant trade imbalance and to questions of how to deal with this issue.