Was Federation Uniting or Dividing? The Impact of the Customs Union of 1901 on Australian Trade Relationships

In 1901 Australia abolished six internal, state-based tariff walls, and replaced them with a common external tariff. What was the impact of this establishment of a custom union (CU) of the six newly federated states? The presumption then, and today, is that it would have fostered intra-Australian trade, while inhibiting Australian international trade. The paper seeks to scrutinise this presumption through using previously unutilised quantitative evidence, deployed in the form of various analytical measures of the strength of trade relationships. In doing so the paper contributes to a topic that has been left relatively unexamined. Although there exists a literature that draws near the question of the impact of the Federation customs union on Australia’s trade relations (Patterson 1968; Lloyd 2008, 2015, 2016), with one prominent exception (Irwin 2006), the topic itself has not been directly addressed. In some respects the results of the present paper’s investigation are mildly corroborative of the presumption that Federation customs union ‘nationalised’ trade: in the decade subsequent to the formation of the Australian customs union in 1901 the export ties of the larger states with the rest of Australia strengthened, while their trade with the rest of the world tended to stagnate. In the same vein, the export relations of the rest of the world to Australia also tended to falter. But, pointing to a conclusion of a very different character, the export orientation of the three smaller states to the rest of the world actually increased in the wake of Federation, and the exports of most of the smaller states to the larger states actually waned. The impacts of the Federation Customs union, then, seem to present a fractured picture rather than a simple one.