Protection and the British rayon industry during the 1920s

The Finance Act of 1925 imposed upon rayon yarn an excise duty of 1 s. per lb. and an import duty of 2 s. per lb. This article argues that the difference between the excise and import duties was not intended as classic protection. Rather, the difference was intended only to indemnify British producers for the excise-wrought decline in domestic consumption by means of an offsetting reduction of imports. This article then estimates that, had the rayon duties been removed in 1926, the share of imports in Britain’s growing consumption of rayon yarn would have increased from one-tenth to at least one-quarter. Trade policy had secured the domestic market for British rayon firms prior to the formation of an international cartel in 1927. More broadly, this article instantiates that trade policy was considerably distorting the British market for manufactured goods well before the landmark Import Duties Act of 1932.