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Meeting American Economic Association december, 1904 -'>■ -^ ''■..-■ '■i'\' PRKKKRKNTIAL TRADIv BlvTVVKIiX BRITAIN A\l> CAXAIJA AD^M SUOH'n PRia'KRK.VTIAI- TRADI'; HIvT\VKi:X BRITAIN AND CANADA The qUfstiuM of prcfer-jiitial trade as between Kritain anil licr colonies is one into wllicll tlleory enters merely as one of the f.ictors in a con'-rete situation. As every elosc stnilent of practical affairs is aware, in concrete situations, doubtful or false theories often have much more wciuhl and are far iu"re real than true ones, in the sense at least of actually iuflueuciuK actions and prodnciutf results. In dealing with concrete national policies wc have, therefore, to ask such leading questions as the followini; : What do these jjeople imaKiue they are doinj;? What are they actually doing? What can they be persuaded to attempt? ,\nd, if astray, how long will it Ik- before they discover their mistake? .And, very often, what kind of new mistake will be acccpteil as a remedy tor the old ? Now, at first siglit, it u:iglit seem strange that C.in.ada should have any difficulty about preferential trade with Britain, when she apparently originated the scheme, first put it into practice, and still substantially .stands by it, even if in modified form and with growing op- position on the part of special interests. In order, therefore, to .show whence aro.se tlic present situation and wliat are its leading characteristics, it will be ueces.5ary to summarize a little tariff history in connec- tion with the advent to power of the Liberal I'arty in Canada and its policy in dealing with the tariff. The Liberal Parly during its last period in opposition, from 187S to 1896, had steadily opposed the principle ■♦I National Ubrary BbNotMqua of Canada du Canada i of a lii|{li protective tariff. In the interests of the public at larRc, but witliout prejudice to the uianu- .'. ' rers, they advocated such frecduni of trade as was cot" stent with a tariff for revenue only. They par. licnlarly favoured the promotion of trade with Hrilaiu and the United States. Latterly they took comfort and cnconragcinent from Mr. Cleveland's campaiRus for a lower taiifT. As the people of Canada were bejjinniuE to discover that the pro-sperity promised b^ the National Policy was rather slow in arriving, the Liberal policy was rapidly makiuR converts. Kven Conservative leaders talked tariff reform, though the majority still adhered to the principle which had brought them into power and had for some time sustained them. The principle of reciprocal trade, on the basis of treating other countries as they treated Canada, had been fre- quently discussed, bnt came more definitely into view during the Inst years of Conservative rule. Tlie projjo. sition was give lec^al point under the influence of the Dingley tai.a, which greatly cooled tlie ardor of Canadians for better trade relations with the United States, and turned attention towards the value of the British market for Canai'ian goods and the possibility of a more favourable treatment of British imports in return. At the same time the Liberal I'arty, more particularly under the leadership of Mr. — afterwards Sir Wilfrid— Laurier, recognized the impossibility of altogether abandoning the principle of protection with reference to those industries which had been brought into existence through the National Policy, but wliich had never been able to > ..tgrow their infancy. Still, the party continued to advocate a considerable read- justment and modificatiin of the protective principle, in the iiitcrnti of consiiiners and of indnstrics naturnl to the country. I'mlcr such plcdR^,, the L.bcral Party came into rwwcr ill ,896. nnct in ..(fic.-, tlicir view, on tariff reform were still further modified. This was in some measure due to the repre.seutatious of the manufacturers before a tariff comini.«iou which the new government appointed. Resentment at the anti-Cauadian clauses in the Din^ley tariff had been steadily KrowiuR, while the liberality with which llrilain had treated Canadian imports was, hy contrast, being more vividly realized. The liberal Government, therefore, on succeeditiK to office, found itself between two fires. ()„ the one hand It was e.K,«cted to redec.n it, ple 25 per cent. As the device had proved a very popular one, and its limited applica- tion was now well r.'cojjnizcd, the wording of the preference was changed from the Reneral to the par- ticular, and the reduetitui specifically limited to the British Kmpire, allhouKli inipif per cent., no appreciable difference was noted. Canadian imports all round have greatly increased during the preferential period, and British imports among the rest. But the significant fact is that, in spite of the preference, British imports have failed to increase at anything like the same ratio as those from foreign countries, as the fol- lowing table will show. Taking the values of goods entered for home consumption from the leading coun- tries of the world, and also the total imports, and com- paring the year 1896, which was the year before the introduction of the preference, with the year 1903, we have the following results : 8 VALUE OF GOC 1 BNTBREI) FOR HOME CONSUMPTION FROM Percentage 1&96. 1903. of lucttaie. Great Brit«ta 1 32,979,74J $58,896,901 78 United State. 58,574.024 137,605,195 135 P™"" -- a,8io,94J 6,580,029 134 Germany 5.931,459 12,282,637 107 Si"'" 361.778 823,944 128 P°"°«»' ii6,596 129,192 17S J'"''' 230,917 541.785 135 """I'"* 299,852 1,270.540 314 B=1k'<">' 920,758 2,800,182 200 Newfonndland 551.412 1,197,581 117 West Indies 1,896426 2,379,275 25 Switzerland... 332,120 944,727 182 Total $110,587,480 $233,790,516 III That the preference has not arrested the downward tendency of the share of Britain and tlie rest of the Empire in Canada's imports is further shown when we compare the percentages by decades from 1883 'o 1903 : PERCENTAGE OF CANADIAN IMPORTS OBTAINED FROM 1SS3. 1S93. igo}. Great Britain ....42.27 35.45 25.19 The British Empire 45.3.1 37.75 jj g, Foreign Countries 54.68 62.25 72.19 That the decline is still continuing is shown from the latest statistics. According to the British trade returns for the first nine months of this year, as compared with the first nine months of last year, we have a decline in the British exports to Canada and Newfoundland from S44,io8,2i5 to 842,618,460, or a loss of nearly one and a half millions in the last nine montlis. Taking the percentage of the total Canadian imports obtained from Great Britain and the United States re- spectively, in 1896 and 1903, and also the proportion of duty paid on British and American imports, we have the following : \ ■Ptrcentagtt of Total Canadian Imports " ~ From U. i I 1896. 1903- From G. B, 39.83 35.19 53.91 58.S6 Pirctntagti oj Tutal Duly . Collfcttd On flrtt. Imps- On Ame^. Imps. ,>6 39 36.52 3S.42 46,0 From this we learn that whereas between 1896 and 1903 the percentage of British imports has declined from 29 to 25, the percentage of American imports lias increased from 52 to 58. Bnt on the 25 per cent, of British imports in 1903, notwithstanding the prefer- ence, 26 per cent, of the whole revenue was collected, while on the 58 per cent, of American imports only 46 per cent, of the total levenue was collected. Now what these fignres indicate, and what might be illustrated with mnch greater detail did time permit, is this: In the first place, we obtain from Great Britain mainly mannfactured goods. Such raw materials as she sends us are, as a rule, not her own product. To considerably increase the importation of British maini- factured goods, beyond what we have always taken be- cause we needed them or could not produce them our- selves, would involve cutting in upon our own manu- facturers, as in the case of the textile and metal indus- tries, where under the preference the chief increase in British imports has been secured. Now our Canadian manufacturers strenuously object to sacrificing any part of the home market to competitors in Britain, and that they are quite capable of making their objections felt is evident from the partial repeal of the preference at the last session of the Canadian Parliament. Once assure them adequate protection, however, (and Americans will quite understand what that signifies,) and they have no serious objection to taking as much further protection against the world beyond the empire as the Canadian people may be willing to grant them, under the impres- sion that thereby they are affording a preference on British imports. And if, in retnni for such a prefer- ence, the British public can be persuaded to place a duty upon those articles of food and raw material which we send them, when they come from beyond the Empire, the manufacturers will hold up both hands for it, since it may have a tendency to increase the number of settlers in Canada to become customers for their goods. In other words, if Britain will send us settlers and take their produce under a preference, our manufacturers will gladly supply the wants of the settlers for manufactured goods. It is only fair, however, to many of our more straightforward manufacturers to say that they regard such proposals in their proper light. Having too much respect, alike for themselves and their fellow citizens in Britain, they frankly declare that adequate protection to Canadian industry means the virtual abolition of any real preference to Britain. But Mr. Chamberlain himself, before he started out on his present strategic detour with a view to outflank- ing the colonies, was fully alive to the significance of a preference which involved as a basis adequate protection for the colonial manufacturer. Thus, in his address lo the colonial premiers at the last Imperial Conference in London, hiving the Canadian preference in his . e, he said, " But, so long as a preferential tariff, even a muni- ficent preference, is still suflSciently protective to exclude us altogether, or nearly so, from your markets, it is no satisfaction to us that you have imposed even greater disability upon the same goods if they come from foreign markets, especially u the articles in which the foreigners are interested come in under more favourable conditions." And, with special reference to Canada, " in spite of the preference which Canada has given us, her tariff has pressed and still presses, with tlie greatest severity upon her best customer and has favoured the foreigner, who is constantly doing his best to slnit out her goods." Now this position, in the light of recent movements and discussions on the part of the Canadian manufacturers, is more valid to^ay than it was t.vo years ago. But, say some, when cornered on this point, let Britain supply the goods now furnished to Canada by other countries, such as tlie United States, Germany, France, etc., and the preference will surely aid her in doing so. The reply to this is twofold. In the first place, if the present preference of one-third has not enabled Britain to even hold her own with foreign countries, she will have still less chance of doing so when the tariff is raised all round. For one of the chief objects of the proposed increase is to shut her out of those lines in which she now has an advantage in the Canadian market. In the second place, a detailed study of Cana- dian trade with Britain and her leading foreign com- petitors, especially the United States, reveals the true reason why neither the present preference nor any other that is at all within the range of practical politics, can greatly increase the proportion of British goods im- ported into Canada. Nearly sixty per cent, of Canada's imports come fro the United States, and when we examine them more closely, we find the great majority to be made up of such goods as coal, raw cotton, corn, wheat, raw tobacco, cattle and other live stock, petroleum, twine, carriages,' machinery, settlers' effects, fish, farm implements, India rubber, coin and bullion, etc. More than one-half of the American imports are free goods, many of them, in consequence, g„,„g,o swell the volnme of onr experts o Britain Of the dutiable go«is a very large proper, tion consist, of materials, implements and articles which are really not produced in Britain, or not in such forms as are at all snited to Canadian needs Canadians and Americans live under similar condi. ions ou this continent, have practically the same fash- .ons, habits standards and methods of life and work They use the same impleuients, machines, means of ransportation, styles, material, and details of buildings together with all their interior fittings. Hence, outside of those hues i„ which Britain already holds most of our trade, when we do not use Canadian, we desire Fr"enor"r":f' ''''"" "^ """'"^ °'- «"-". French and other imports, we find that a large propor! t.on of them represent other phases of specialized traae which cannot be shifted by preferendal arraugemen o her than of the most drastic character. In the case ■ of raw materials and goods of large bulk, where national techuical, aesthetic and other such qualities do not count the trade can be shifted by preferential treatment, bu these a„ either not furnished by Britain or she e joys t4ultd '• '''""• """ "'"^ P^ference'hL s mulated imports, it has been chiefly at the expense of the Canadian manufacturers who live by the tariff and suffer from its reduction. Unless, therefore we sacrifice to Britain bodily those industries in which her goods are capable of supplying our markets, there is httle else that we can put in her way by fiscal arrange- ment. This, then, is the chief e-planation of the im" favourable statistics connected with the preference On the side of Canadian exports to Britain, we cer- '3 tainly hav. nothing of which to complain, for we already find in Britain by far the largest, most natnral, and most accessible market which we have. At present she takes 58 per cent, of our total exports, and that withont any sacrifice on her part, bnt simpl^ because she finds it profitable to do so. This is a market capa- ble of st.ll further expansion if we continue to im- prove the quality of our exports, as indeed we have been doing, and this is surely the only safe basis upon winch any country can hope to expand its trade We have no need, therefore, to clamour that extra burdens shall be laid upon our fellow citizens in Britain for our benefit, especially when these burdens n.nst affect uot the luxuries of the rich but the most ele.neutary ueces- sar.es of the lite and industry of the masses. Further, it is an entirely uncalled for reflection upon our country and our people to represent the one as capable of attracting settlers and capital only on the precarious basis of a bounty obtained from the British tax-payer; or the other as certain to repudiate the British connection and resign their national indepen- deuce to another connection, unless the people of Bri< n bestir themselves to beguile us once more within e leading strings from which we have escaped. The fact is that our owu national future, with its many problems and possibilities, is opening out before us with such attractiveness and with such responsibilities that while it is our obvious policy to maintain good relations with all the world, it would be the height of folly to tie our- selves up under any hard and fast obligation, either commercial or political, for, in view of our constantly changing circumstances, these might prove most en - barrassing within a very short time. A country in - ar position must, in the light of its own experience and that of its neighbours, retain a perfectly flexible com- mand of its policy and relationships. In that position we shall be in line with the very best traditions of Anglo-Saxon freedom. These also are the only terms upon which we shall be able to retain our respect, affection and loyalty towards the mother country, in whose traditions we aie proud to share, but which we can only retain with true British self-respect when they appeal to the obligations of honour, not to the obliga- tions of requisition.