The Competitive Advantage of Port Cities: Strategies Used by the Liverpool Timber Cluster to Adjust to the Shift to Free Trade

27 11 2014

Ships Loading Timber in Quebec City in the 1860s

I’m involved in a SSHRC-funded collaborative project Empire, Trees, and Climate in the North Atlantic: Towards Critical Dendro-Provenancing. The PI is Kirsten Greer. More details of the project can be found here.

This is the abstract of the first working paper to come out of the project:
The Competitive Advantage of Port Cities: Strategies Used by the Liverpool Timber Cluster to Adjust to the Shift to Free Trade

During and after the Napoleonic Wars, British trade policy discouraged the importation of wood from the Baltic and encouraged imports from British colonies in North America. Between 1808 and 1842, Britain’s timber merchants developed thriving businesses based on trans-Atlantic supply chains. Some of Liverpool’s timber firms made substantial fixed investments in Canada and other British colonies. The pre-1842 system of discriminatory duties created an artificial cost structure that benefited timber merchants with ties to Canada, many of whom were in Liverpool, over timber merchants with ties to the Baltic, a group disproportionately located in Hull, Newcastle, and the other North Sea ports that faced towards the Baltic. In the 1830s, political pressure for the elimination of the discriminatory duties mounted. The initial strategy adopted by the Liverpool timber-processing cluster was to intensify their political pressure for the retention of the differential duties. The drift of political events, however, forced a shift in strategy. Starting with Sir Robert Peel’s budget in 1842, Britain’s tariff regime began to move in the direction of Free Trade in timber: in the following years, the tariff system’s preference for colonial over Baltic timber was gradually eliminated. At the same time, the development of Britain’s railway network intensified competition among British ports to serve timber consumers in the interior of the country. Liverpool’s timber merchants thus faced a number of strategic threats in the 1850s and 1860s. In response to these challenges, Liverpool’s timber-importing cluster developed a multi-facetted strategy that had four main elements: diversification away from British North America as a source of timber; investments in substantial port infrastructure to reduce the costs of unloading timber; the application of pressure on railway and canals to give Liverpool timber forwarders favourable rates for inland carriage; investments in systems for creating and disseminating commercially-relevant environmental knowledge. These strategies helped the cluster to preserve its competitive advantage. The paper engages with three bodies of theory. First, it draws on the strategic management and economic-geographical literature on the competitive advantages of regional clusters. Second, it applies Chia and Holt’s insights into the benefits of strategy-without-design to the historical experience of an industrial cluster. Third, this paper advances our understanding of how regional clusters can respond to the dramatic shifts in the policy environment associated with economic liberalisation. It is hoped that this paper can shed light on the challenges present-day clusters face in acquiring and maintaining competitive advantages in the face of intensifying competition and globalisation.



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