Austria in the Dual Monarchy: Her Trade Within and Without the Customs Union*

SCOTT M. EDDIE (Toronto, Ont., Canada)

The House of Habsburg had long sought. the greatest possible degree of self-sufficiency for the lands under their rule, and at least from the time of the Empress Maria Theresa had actively fostered regional specialization as a means to this end. Within a strongly mercantilist-at times even prohibition- istl-system of trade restrictions erected against the outside world, internal trade on the basis of regional economic complementarity was generally en- couraged. Maria Theresa removed all internal tariff barriers in Austria2 (save _ those of the Tirol and Vorarlberg) in 1775, and her son Joseph II abolished all internal Hungarian tariffs in 1784. He retained, however, the so-called "intermediate customs line" (Zwischenzolllinie) between Austria and Hun- gary, which had been introduced as punishment for the Hungarian Diet's failure to raise taxes to Austrian levels, and which was used to discriminate against Hungarian exports of all kinds, especially agricultural goods.3 Even this, the only major artificial barrier to free trade within the Habsburg Empire, seems not to have been a serious impediment to that trade, at least by -the time it was struck down in 1850.4

*This article was originally presented to the Eleventh National Convention of the American Association for the Advancement of Slavic Studies in New Haven, October 1979. In it I have borrowed liberally-both for data and for arguments-from my forth- coming chapter entitled, "Economic Policy and Economic Development in Austria-Hun- gary, 1867-1913," to appear in volume 8 of The CambridgeEconomic History of Europe. The Cambridge UniversityPress has kindly permitted me to publish those borrowings. 1. Karl Heinz Werner, "Osterreichs Industrie- und Aussenhandelspoliti7c1848 bis 1948," in HansMeyer, ed., Hundert Jahre dsterreichischer Wirtschaftsentwicklung(Wien: Springer, 1949), p. 363. 2. "Austria" is taken here to be "The KW gdomsand Lands Represented in the Reichsrat" in their 1914 configuration. 3. Krisztina Maria Fink, Die (5sterreichisch-ungarischeMonarchie als Wirtschafts- gemeinschaft :Ein historischer Beitrag zu aktuellen Integrationsproblemen (München: Rudolph Trofenik, 1968), pp. 7-12. 4. Thomas Huertas, "Economic Growth and Economic Policy in a Multinational Setting: The HabsburgMonarchy, 1841-1865," unpublished Ph.D. dissertation, University of Chicago, 1977, esp. ch. 2. John Komlos also concludes that the benefit of lifting the customs barrier between Austria and Hungary was small. See his "The Habsburg Mon- archy as a Customs Union: Economic Development in Austria-Hungaryin the Nineteenth Century," unpublished Ph.D. dissertation, University of Chicago 1978, esp. ch. 1... 226

The Habsburgs assigned very clear economic roles to the territories under their rule. The "hereditary lands" (essentially present-day Austria plus Bo- hemia and Moravia) were to be the manufactory, and Hungary and the eastern and southern Austrian lands the granary, of the empire. While clearly based on natural complementarities arising from differential factor endowments, this geographic specialization was reinforced by a tariff and trade policy which consistently "aimed at ... consolidating and conserving the economic and cultural supremacy of the western, 'hereditary' Austro-Bohemian prov- inces."55 Some Austrian supremacy had to be sacrificed when defeat at the hands of Prussia in the Seven Weeks' War in 1866 forced Emperor Franz Joseph I to seek an accommodation with the Hungarians to insure the internal sta- bility of his Empire, which was a prerequisite to the complete redirection of foreign policy that had to take place. The "Compromise of 1867" established the Austro-Hungarian Dual Monarchy, giving Hungary its primary demand, internal self-government, in return for agreement to a common foreign policy and a single Imperial Army and Navy using German as the language of com- mand. A separate "tariff and trade alliance" (Zoll- und Handelsbundnis), which was to be renewed or renegotiated every ten years, regulated the economic relationships between the two partners. Popularly called the "economic compromise," this agreement required inter alia that the tariff be enacted and modified by identical laws passed separately in the parliaments of the two countries.6 . Thus Hungary gained a measure of influence over the structure of the tariff which it had not previously enjoyed. Although initially content to leave things as they were, but opposing any increases in tariffs on manufactured goods, the Hungarians gradually came to see eye-to-eye with Austrian manu- facturing interests in support of protection, as traditional Hungarian exports- particularly grain and flour-began to lose their former markets outside the Habsburg lands. As a result of this alliance, successive tariff laws raised duties on both agricultural produce and manufactured goods, when traditional pro- ducer interests on both sides of the Leitha River sought to reserve the monarchy's market ever more exclusively for themselves.

5. Nachum T. Gross, "The Industrial Revolution in the Habsburg Monarchy, 1750- 1914," in Carlo Cipolla, ed., The Fontana Economic History of Europe (n.p.: Collins/ Fontana, 1973), IV, pt. 1, p. 242. 6. For a summary of the provisionsof the "economic compromise," see Akos Paulin- yi, "Die sogenannte gemeinsame Wirtschaftspolitik Osterreich-Ungarns," in A. Wandrus- zka and P. Urbanitsch, eds., Die Habsburgermonarchie, 1848-1918, vol. I, Die wirt- schaftliche Entwicklung (Wien: t5sterreichische Akademie der Wissenschaften, 1975), pp. 567-604. 7. The Leitha River was the border between Austria and Hungary on the road between Vienna and Budapest. Hence the reference to Austria as "Cisleithania" and Hungary as "Transleithania."