The Zollverein: from 1818 to 1862

Course: Germany 1806-1918

            Generally speaking, Zollverein, the German term for customs union, refers to the treaty signed by the majority of German states in 1833. In that treaty, all members agreed to abolish almost all customs barriers that existed amongst practically all the states. The real achievement of this union, however, was much more than simply the creation of a free trade region. And, in order to understand the true significance of the Zollverein, it is necessary to first study the German world before the treaty was signed.

Situation Before 1833

As late as the beginning of the nineteenth century, Germany was at most a ‘geographical expression’. Within the area of what is known as Germany nowadays, there existed some 314 states and 1475 Reich Ritter. Although these political units were in principle all under the reign of the Emperor of the Holy Roman Empire, it is more appropriate to say that they were rather a bunch of tiny independent states, given the following facts.

First, there existed a wide variety of currency within the German area. Unlike England or France, which both had “one coinage [and] one unit of account expressed in three or four levels,” (Documents of European Economic History (DEEH) 450) at least four different systems of coinage were in circulation in Germany. For example, Hanover used the heavy Leipzig 18-fl system; Saxony and Brunswick used the Specie-Thaler, heavy Thaler and heavy Gulden; Prussia used a system a system that mint the same quantity of silver into 21-fl or 14 Thaler; and the southern states used the so-called ‘light’ or 24-system of the Frankfurt currency. (DEEH 451) Needless to say, such chaotic situation cannot possibly exist in a unified state.

The situation was only worse in units of measures. Not only were they different between each state, but sometimes even within each state. To name just a few, there were “Rhenish, Bavarian, Saxon, Hessian, Badish, Wurttemberg, etc., feet, ells, fathoms, rods, hides, furlongs and miles.” (DEEH 451) One can easily imagine a scenario in which a merchant spent his entire day in the endless and boring calculation on unit conversion.

Transportation in Germany was equally difficult. In 1816, it took a traveler “no less than five hours to go by coach from Weimar to Erfurt, a distance of about twelve miles.” (Henderson 19) A few years later, it cost as much as 12 thalers and took forty hours to travel in a post-coach from Berlin to Breslau. (Henderson 19) It is as if the various states were not interested to encourage communication with each others.

Nonetheless, by far the biggest obstacle in inter-state communication was the customs barriers that existed in every single state. To make the matter worse, before the turn of the eighteenth century, duties were not collected at the political frontier but “on the roads and rivers, at town gates and at markets.” (Henderson 21) In 1790, it was estimated that some eighteen hundred customs frontiers existed in Germany (Henderson 21), and in 1722 Bavaria alone had “over four hundred customs houses.” (Henderson 21) As a consequence, “in order to trade from Hamburg to Austria, […] it is necessary to cross ten countries, to study ten tariff systems, and to pay ten sets of transit duties.” (DEEH 366-367) The situation was no better on rivers. For instance, a portion of the river Leine that connects Bremen and Hanover is only “about sixty miles apart, and there are no less than five tolls in this distance.” (DEEH 100)

The gild system added further obstacles in communication and trading. For example, woollen weavers may only “sell in their own town […] and at fair and annual markets.” (DEEH 46) In places like Salzwedel, the gild went so far that the woollen weavers “may not sell cloths produced by themselves […] even in their own town, because the local cutters’ and tailors’ gild enjoys […] the sole right of cutting up woollen and similar cloth for sale.” (DEEH 46) And, this was because of an ancient gild regulation that could be dated back to year 1233! (DEEH 46) Apparently, the rigid and clearly out-fashioned gild system was doing nothing but impeding all progresses in trade.

Such was the situation of Germany before 1833. The variety of currencies and units of measure, the poor road condition, and the omnipresent customs houses together helped to divide Germany into an untold number of isolated and tiny markets. It is more than evident that as long as such economic severance continues, the backwardness of German economy would persist. Some sort of economic unification was unquestionably needed.

The general public seemed to be aware of this situation as well. In 14 April 1819, a group of German merchants gathered together in Frankfurt-am-Main and petitioned for the creation of a pan-German customs union. (DEEH 365) Professor List who was the plenipotentiary of the petitioners demanded that “all customs and tariffs inside Germany be abolished […] and a customs system be set up against foreign nations based on retaliation.” (DEEH 369)

The Zollverein Treaty

            List’s dream finally came true when Prussia and seventeen other German states[1] signed the Zollverein treaty in 1833, marking an end to the chaos depicted above. The contracting parties all agreed to do the following:

            First, in the 4^th article of the treaty, it was agreed that “within the territories of the contracting powers there shall be similar laws relative to duties of import, export, and transit.” (DEEH 370) And in the 7^th article, it was agreed that “all import, export, and transit duties shall cease to be levied on the common frontiers of the associated custom-houses.” (DEEH 371) These two articles together created a huge common market of “eighteen states with an area of 162 870 square miles, and a population of nearly 23½ millions.” (Henderson 94) The economic barriers that separated those eighteen states were finally broken.

            Secondly, the treaty also put an end to the ancient gild system that was really designed for the middle age. As described earlier, this out-dated system posed some deadly restrictions on German business that severely limited their lebensraum. The Zollverein Treaty finally brought a period to this situation. In the 18^th article of the treaty, it was agreed that “the contracting states shall continue to employ their efforts to facilitate […] and to give the greatest latitude to the right which all subjects of each possess to seek for work […] in the other states of the association.” (DEEH 373) In the meantime, it was also agreed that “subjects of one of the contracting states, who seek for work […] in the territory of another state, shall pay no greater duties than are paid by native subjects exercising the same trade.” (DEEH 373) This really can be seen as a type of economic emancipation for the entire German population, or, to say the least, an extension of the Prussian reform edict of 1807.[2] No longer were people tied to a town. No longer were people tied to one and only one profession. Now with the treaty, they were permitted to engage into any type of job in any part of the union.

            The merchants received similar freedom as well. Article 18 also agreed that “those subjects of the contracting states who visit the fairs and markets which are held in each of the said states for the purpose of following their trade, or selling the productions of their labour, shall be treated everywhere as natives of [their] country.” (DEEH 373) Hence, the merchants were granted the freedom to do business anywhere in the union without being treated as a foreigner.

            The abolition of internal tariffs and the economic emancipation of both the labour and merchants were the two most important points of the treaty. There were, still, other clauses in the treaty that dealt with the administration of the union. For instance, it was agreed in the 21^st article that “the produce of the duties […] shall be divided amongst the contracting states in proportion to their population.” (DEEH 374) Also, it was agreed that the portion of the revenue that each state was entitled to was sent directly to the central government of each party member, as shown in the 21^st article, that “community shall be excluded and reserved for the individual benefit of the respective government.” (DEEH 374) Hence, the mechanism of which the tariff revenue was to be divided was settled.

            Other important clauses in that treaty included the agreement to “co-operate in the establishment in their respective countries of a uniform system of weights and measures.” (DEEH 372) Although this article didn’t immediately unify all the system of measurement for the entire Germany, it at least unified the system of each country.

            The contracting parties also agreed to hold a congress every year. In the 33^rd article, it was written that “a congress, at which each of the governments of the union shall appoint a plenipotentiary, shall be held annually about the beginning of June, for the purpose of general discussion.” (House of Commons Parliamentary Papers, Volume XLV p.259) This congress was no doubt designed to solve potential conflicts among the members and henceforth ensuring the smoothness of the union.

            The treaty also contained an article which laid down the framework for future expansion of the union. In article 38, it was mentioned that “in the event of other German states manifesting a wish to be admitted to the association, the high contracting powers declare themselves ready to comply with such wish.” (DEEH 374) This was an important clause because it made it clear that any other German states that didn’t join the union in 1833 could join the union later on.

            The above are the main focuses of the treaty. It created a huge common market, established an effective mechanism to distribute revenues amongst the member states, and opened up the door for other German states to join. It is as if List’s demands were all fulfilled with this treaty.

The Real Implication of Zollverein

            However, the treaty could be interpreted in a more sophisticated manner that would unveil some of its fundamental impacts on Germany.

            First, the treaty as a whole can be regarded as the first real triumph of enlightened ideology that based on rationality and fairness. The way the revenue was to be distributed was no doubt a product of rationality. As described in the previous section, the distribution was based on the population of each member states. Needless to say, this approach depends on facts and precise calculation — two fundamental characteristics of the enlightened ideology.

            The Zollverein was also the first effective inter-states union in Germany. Until 1833, there never existed an inter-states organization in which effective administration could be carried out. The Holy Roman Empire that collapsed in 1806, the Rhine Confederation during the Napoleon Wars, as well as the Germanic Confederation created by the Congress of Vienna all proved to be ineffective union that helped little to promote German interests. The Zollverein, for this matter, was really the first German organization that could exercise true power on each of its member states. The fact that the treaty forced all member states to adopt the same tariffs policy, to share the revenue according to a commonly accepted method, and to obey to the decision formulated in the annual congress were all evidences of an effective modern organization.

            Another important contribution of the treaty was that it provided each of its members with a valuable tool to administer their internal affairs in a modern fashion. This tool is the tariffs revenue that the government of each state received in each year. As mentioned in the 21^st article described in the previous section, it was the government instead of the municipalities of the state who would receive that sum of money and that local governments were no longer allowed to set up their own custom houses. Now with the treaty, the central government could firmly control local affairs since it was the central government instead of the local governments that has the money — another characteristic of a modern capitalist-type administration. Hence, the shift of authority from local to central government helped to strengthen the power of the central authority.

Another contribution of the Zollverein was that it provided the Germanic world with more bargaining power when negotiating treaties with foreign powers. With the formation of the Zollverein, the German world now has one big voice instead of many weak voices in international convention. In the Austro-Zollverein February Treaty in 1853, in the Franco-Zollverein Treaty in 1862 as well as in the Anglo-Zollverein Treaty in 1865, the German world concluded a treaty in which both contracting parties agreed to adopt the same set of new foreign trade policy to each other. Needless to say, this is something that could not happen if the some 1,800 German states were to negotiate separately with those great powers.

To sum up, the real significance of Zollverein was far from limited only to the abolition of inter-state tariff and some other obvious features of the treaty. The much more profound meanings of the unions were that it was the first triumph of enlightened ideas, the first voluntary and effective pan-German administrative unit and the first time Germany could negotiate equally with foreign powers.

The Struggle for Economic Supremacy

            The membership of Zollverein steadily increased from eighteen in 1833 since many other German states decided to join the union. However, from the beginning to the end, Austria, one of the most influential players in the German world, has been excluded from this supposed pan-German union. The commercial relationship between the Zollverein and Austria was, meanwhile, far from a total blank. In 19 February 1853 Prussia signed the February Treaty with Austria.

            However, this Austro-Zollverein union was far from being a honeymoon, as conflicts concerning the appropriate tariffs level often arose. This could be shown in an Austria Memorandum to Prussia in 1862: “[the] Austrian government [was unable] t see why […] Prussia has always firmly rejected the repeated offers and urgent requests of Austria that the two Powers should cooperate to revise [upwardly] their duties on non-German goods.” (DEEH 402) The fact that Prussian kept discarding Austria’s demands suggested that Prussia was not too interested to strengthen the commercial relationship with Austria.

            This struggle reached its zenith in 1862 when the Franco-Prussian Treaty was signed. In that treaty, both parties agreed to substantially reduce the import tariffs.[3] Austria was enraged, as revealed in a Memorandum to Prussia where she wrote “the great majority of the tariff rates fixed by Prussia in the French treaty […] are so low that Austria could not follow […] without bringing about the ruin of many branches of her industry.” (DEEH 403) This was because this new tariffs concession granted to France made Austrians products less competitive in the German market.

            Another reason that explained the anger of the Austrian government was the attitude of the Prussian government. It was mentioned in the above Memorandum that “the Prussian government itself admits that this memorandum (this refers to an earlier Austria Memo made to Prussia, in which Austria protested against the negotiation between Prussia and France) was received at a time when the French treaty was far from ready for signature” (DEEH 401) and that “nevertheless the Austrian Cabinet received no answer to this memorandum […] until it was informed of the agreements initialled on 29 March 1862.” (DEEH 401)

            Several explanations were offered by Austria to explain Prussia’s intention to secure such a libertarian treaty with France. The Austrian Memorandum itself included two such attempts. First, it was because Prussia overestimated “the necessity and advantage of free trade [… and] the extent of the market to be gained in France.” (DEEH 402) Second, it was because “Prussia intends […] to make the economic severance of Austria from the rest of Germany an accomplished and enduring fact.” (DEEH 402)

            Both explanations possess some truth in it. First, the principle of free-trade was no doubt the fashionable word in the middle of the nineteenth century. The Zollverein itself was already a major success of free-trade theory. The Anglo-French Commercial treaty of 1860 was another free-trade agreement in which both parties agreed to significantly reduce, if not completely abolish, the tariffs of a long list of produces, as suggested in article 1, 2, 5, 6, 7, 8 and 15 of that treaty. (DEEH 389-395) Added to the list was the Anglo-Zollverein Treaty in 1865 in which both sides agreed to grant the Most Favoured Nation status to the other party concerning trades. [4] Thus, the Franco-Zollverein Treaty could be seen a follow-up of the trend.

            The Prussian conspiracy to sever Austria from Germany was equally valid. By signing the Franco-Zollverein Treaty, Prussia made it sure that there would be no chance for Austria to join the Zollverein since Austria could by no means accept the terms of that Treaty, thus securing Prussia’s supreme position in the union. This was perfectly understandable. German’s experience with the Holy Roman Empire, the Rhine Confederation and the Germanic Confederation sent too clear a message to the Prussian statesmen that an inter-state union without a clear and powerful leader will no doubt end up with a fiasco.

Since the beginning, the Zollverein has been under the effective leadership of Prussia, and it gave Prussia two advantages by acting as the leader. First, Prussia gained status in international affairs by representing the Zollverein in various occasions.[5] Second, it provided Prussia with an effective means to exercise certain level of control on other member states.

Suppose, for the moment, that Austria was allowed to join the Zollverein. The most predictable consequence of it was that the conservative Southern states will move closer to Austria and urged together to increase the import tariffs. If Prussia ever refused such request, the Southern states would most likely leave the Zollverein and create a new custom union with Austria. The fact that these Southern states fought Prussia with Austria during the Austro-Prussian War in 1866-67 confirmed the above supposition.

In short, by signing the Franco-Prussian Treaty of 1862, Prussia made sure that she would continue to the sole leader in the Zollverein, thus securing the sustainability of the union and its influence on other German states.

Conclusion

            The Zollverein Treaty of 1833 was no doubt one of the most important achievements in German history. The effect of this customs union was far-reaching. Not only did the treaty abolish all internal tariff, the treaty also established an effective inter-states administration that possessed many of the characteristics of a modern organization. For example, it distributed the revenue in a fair manner and it was a centralized governing unit. Moreover, it gave the German world more bargaining power when negotiating with foreign powers. Later on, Prussia signed the Franco-Zollverein Treaty to guarantee the exclusion of Austria from the union, thereby ensuring the unity of the Verein. To sum up, the treaty brought the German world from a feudal, separate and chaotic status into a modern, centralized and orderly fashion.

Reference:

Great Britain. House of Commons. House of Commons Parliamentary Papers. Microfiche edition.

Holmes, C., S. Pollard. Documents of European Economic History. Vol 1. London: Edward Arnold, 1968

Henderson, W. O. The Zollverein. Great Britain: Cambridge, 1939

Snyder, Louis. Basic History of Modern Germany. United States: Van Nostrand, 1957