The Prussian Customs Union and the ZOLLVEREIN

A brief introduction

By Ben Walters

So, what was this “ZOLLVEREIN”, and what does it mean?

• ZOLLVEREIN is a German word, and like many German words it would be more than one word in English.

• Zoll means “duty” or “customs”

• Verein means “union”

• So basically this word means a customs union.

So, how did this customs union come about?

• After 1815 the 39 German states manages their own economies. There were almost countless customs barriers and international tariffs that heavily restricted trade. Even inside a single state there were a massive amounts of tolls.

• The variation in currency value within the Confederation caused great trade problems.

So what did they do?

• In 1818 many Rhineland manufactures complained to the King of Prussia about this gigantic burden on industry.

• They also complained about the competition from unrestricted foreign imports and the lack of duty being charged on them.

• As a result, the Prussian Tariff Reform Law came created the PRUSSIAN CUSTOMS UNION!!!!!!

• This new law completely got rid of the complex web of internal customs duties and replaced them with a tariff to be charged at the Prussian state frontier.

• However, this was not exactly what the Rhineland industrialists had quite wanted. They hoped for a highly protective tariff particularly against British goods.

• The tariff was low, nothing at all on raw materials and only an average of 10% on manufactured goods and 20% on luxury goods; i.e. sugar or tea.

• Had the tariffs been any higher, then smuggling would have been encouraged, which was already a thorn in their sides.

• Prussia also could not raise the tariff as it was not economically or politically strong enough to compete with other countries in a tariff war, as the other countries would only raise the duty on Prussian goods in return.

• Subsequently Prussia did introduce custom duties on raw materials, namely cotton yarn and iron, to protect their home industry from foreign competition.

• But, at the time it was working to extend free trade within both Prussia and the rest of the Confederation. By removing the internal trade barriers, goods would move around more freely and more importantly, cheaply.

• Some of Prussia’s neighbours were impressed by this new system and the new economic success that they agreed to join a customs union with Prussia, and they even allowed Prussian custom officers into their boundaries to implement the new scheme.

• In 1828 the large Hesse-Darmstadt also signed the customs agreement with Prussia.

• By 1830 the customs unions were rapidly growing. There were numerous unions. i.e. the Bavaria and Württemberg, and the famous Middle German Commercial Union that included many massive states such as Hanover and Saxony, as well as many other smaller states.

• This system used the geographical locations of the states to it’s advantage. Prussia was well placed to control the north-south trade routes through north Germany. The Middle Union worked on the existing roads from the North sea to big German cities.

• They wanted to build roads around the states of the Prussian Customs Union, but the Prussian Finance Minister encourages the building of roads joining Prussia directly with Bavaria and Frankfurt. He also extended Prussian trade along the Rhine through a customs agreement with the Dutch.

The ZOLLVEREIN!!

• In 1830 Hesse-Cassel, a small but very important state in the Middle Union, fell into financial difficulties and revolutionary upheavals. The next year they joined the Prussian Customs Union, to the horror of the Middle Union.

• The Middle Union was already in trouble and collapsed soon after!

• During this the Prussian Customs Union just got stronger.

• In 1834, Bavaria and Wurttemberg joined the Prussians.

• This massive Customs Union was re-named the ZOLLVEREIN!

• It grew rapidly and by 1844 only Hanover, Oldenburg, Mecklenburg and Austria were not members.

• This new ZOLLVEREIN promised all the member states a common system of tariffs and customs. Also all of the internal customs barriers were to be abolished.

• Each state would appoint some officials to the customs departments of other states, and as long as they didn’t break the rules of the ZOLLVEREIN they could negotiate their own trade treaties.

• The implementation and organisation of the ZOLLVEREIN was carried out by the highly elite ZOLLVEREIN CONGRESS.

• It started out unifying both the currency and the weights and measures system in the member states of the ZOLLVEREIN.

• Then railways were extended to make a quick and easy way to trade and also to communicate between the members.

• Despite the typical German precision, there were some difficulties.

• The ZOLLVEREIN administration did not always work in a smooth and effective way. This was partly to do with the fact that any member state could veto a decision at the ZOLLVEREIN CONGRESS and even then some decisions were not upheld at all.

However...

• The ZOLLVEREIN was generally successful, especially from Prussia's point of view.

• The member states worked together on and Prussia achieved a position of economic leadership within the Confederation.

So, why did Prussia set it up in the first place? Did they know that this was going to happen?

• Prussian Finance Ministers realised that by getting rid of internal customs duties, first in Prussia, and then between Prussia and the neighbouring states would increase trade and bring affluence.

• It would also help to unite Prussia with the distant Rhineland territories that Prussia owned.

• By 1830, before the ZOLLVEREIN had even been formed, the Prussian Finance Minister had pointed out to the King that free trade would not just bring prosperity for Prussia and her associates, but would also isolate the Austrians.

• The isolation would be economically damaging and would weaken Austria’s political influence within the Confederation.

• Some historians argue that the Prussians were using the ZOLLVEREIN to solve the German problem in a way that was favourable for Prussia.

• By having lots of states finding financial advantage under Prussian leadership, then a similar political arrangement might come out of it.

• The ZOLLVEREIN was a uniting force and a focal point for nationalist sentiments.

• As a result Prussia, despite having reactionary political sympathies, came to be regarded as the natural leader of a united Germany.

So if the ZOLLVEREIN was so good, why did Austria stay out

of it?

• Austria refused to join in the beginning because it disagreed with the policy of free trade.

• Austria’s policy was protectionist. They already had large markets for home produced goods, and wanted high import duties to protect those industries from cheap foreign imports.

• By joining the ZOLLVEREIN, they would have had to reduce their import duties to the same level as the other states.

• They would have joined only if the ZOLLVEREIN raised the levels of tariffs, but Prussia would not even consider this course of action.

• Prussia took the initiative and joined, established a position of leadership, and made sure that Austria were unable to join.

• Because of this, by 1848 although Austria had political control of the federation, Prussia had the economic leadership.

So, why do we care?

We care because...

• The ZOLLVEREIN helped unify the 39 German states and even put Prussia into a position of power.

• It took some of Austria’s power and influence away.

• People saw it as an idea of unity and were able to draw on it’s successes and take another step towards German UNIFICATION!!!