In the old great civilizations, as well as in the early Islamic state, trade served economic and non-economic ends. Trade served as a mechanism for economic welfare and social communication. Trade agreements have their resonance in the past. For example, an agreement between king of Egypt and Babylonia held that any traveler passing through Egypt had to pay certain duties, whether voluntarily or otherwise.
The Ottoman Empire adopted a semi-free trade policy by allowing imports into the empire but letting nothing out. This created a persistent balance of trade deficit. To break through the trading wall of Ottomans, reciprocal trade agreements were concluded between the Ottomans, Persians, and the Europeans. The most important of those was the Anglo-Ottoman Convention of 1838 between Britain and the Ottoman Empire. The convention stipulated prohibition of all domestic restrictions in the Ottoman Empire, imposition of 12% ad valorem tariff on export, and 5% ad valorem tariff on import. This treaty was followed by series of trade agreements between Britain, Iran, and Morocco.
Egypt, a state of great importance in the larger Ottoman Empire, rendered itself as a special case in the Ottoman Empire’s trade policy. Since Egypt is state in the empire, any international trade agreement signed by the Ottomans is applied automatically everywhere in the empire. However, Muhammad Ali of Egypt adopted a mercantile policy. He wanted to build up an independent military “Egyptian Empire” from the Ottoman Empire. Thus, it was important for his self-interest to have a favorable balance of trade. In pursuing such a goal, he created monopolies, restricted imports to protect domestic industry, used administrative measures to delay the application of the Anglo-Ottoman Convention in his region, controlled land distribution and crops plantation, controlled prices of raw materials, restricted agricultural and industrial production to military–related activities such as cloth production for military personnel. Thus, Egypt, as an exception, witnessed a favorable balance of trade.
The purpose of the paper is to examine history of trade policies in the Ottoman Empire and the rationale behind such policies. The paper also analyzes trade agreement signed at the time and the main provisions of those agreements. The paper addresses the situation in Egypt, a country of particular importance for Arab countries. Then, the paper highlights how the inheritance of the Ottoman Empire influenced trade policies adopted Arab countries in early 20th century. The paper concludes with a set of conclusions and recommendations.