Abstract
In 1828, an economic negotiator for the German state Hesse-Darmstadt, which was in the midst of a severe recession, met with Prussia’s finance minister to propose a trade treaty. Having been rebuffed two years earlier, he had low expectations for a close relationship with the wealthy Prussia. To his surprise, the finance minister embraced not just a preferential trade treaty but a customs union, a much deeper form of economic integration. There was a catch: as a first step to integration, Prussia alone would set the tariff levels the two states would charge importers. In exchange for a share of the collected tariffs that significantly exceeded what it could have earned on its own, Hesse-Darmstadt readily agreed to this stipulation. Recognizing that the smaller state’s leader faced challenges from political forces at home that favored liberal institutions over monarchies, and wanting to attract an even more important member state, Hesse-Kassel, Prussia agreed that subsequent tariff decisions would be made under rules that gave member states an equal voice in policy making. These same two rules applied to states that subsequently joined the customs union, which eventually became the 1834 Zollverein (literally, toll union). By 1871, when the German Empire was created after the Franco-Prussian War, nearly every German state had joined the Zollverein.
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Notes
On the logic of political survival, see Bruce Bueno de Mesquita et al., The Logic of Political Survival (Cambridge, MA, and London: The MIT Press, 2003).
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© 2009 Kathleen J. Hancock
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Hancock, K.J. (2009). Introduction. In: Regional Integration. Palgrave Macmillan, New York. https://doi.org/10.1057/9780230101913_1
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