Imperial preference before the Ottawa Agreements: Evidence from New Zealand's Preferential and Reciprocal Trade Act of 1903

In the Edwardian era, the British Dominions adopted policies of imperial preference amid a period of rising imports from the United States and industrial continental Europe. Hitherto, there has been no econometric assessment of whether these policies diverted the Dominions’ imports towards the Empire, as was intended. This article focuses on New Zealand's initial policy of imperial preference, codified in the Preferential and Reciprocal Trade Act of 1903. New Zealand's policy was unique insofar as it extended preference to only certain commodities and not others. Using propensity score matching, this study exploits the cross‐commodity variation in the extension of preference and finds that, on the whole, the Preferential and Reciprocal Trade Act did not divert New Zealand's imports towards the Empire. However, for those few commodities receiving very high absolute margins of preference (20 per cent ad valorem), a statistically significant effect of the preferential policy is found. Altogether, this case study of New Zealand reveals a contrast between the Edwardian system of imperial preference and the trade‐diverting system of imperial preference that resulted from the Ottawa Agreements of the interwar era.