THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES TARIFF REFORM TARIFF REFORM BY CAPTAIN G. C. TRYON LONDON THE NATIONAL REVIEW OFFICE 23 RYDER STREET, ST. JAMES'S 1909 i Printed by Ballantyne <£h Co., Limited Tavistock Street, Coveut Garden, London HF INTRODUCTION The line of thought which runs through this book is as follows : Our trade is not flowing now in those "natural channels" that Free Traders desire ; it is checked, controlled, or changed in character by the tariffs of our neighbours, who have rejected Free Trade ; not because they are foolish, but because they find a National and Protectionist system suits them better. Our industrial and shipping supremacy was won centuries ago under our old national policy of Protection. Some examples of this policy, such as the Navi- gation Acts, are given in order to show that there are cases, far removed from the 7 133344 8 INTRODUCTION prejudice of recent controversy, where even the strongest Free Trader of to-day must see national advantage in a Protectionist policy. As we acted then to win our supremacy, so are our rivals acting to-day. Cobden, forgetting the lessons of our own history, expected the general adoption of Free Trade throughout the world, but our neighbours rejected it on account of certain faults inherent in general Free Trade ; notable among them is the difficulty of starting young industries without Protection. We are losing the old markets, and the once neutral markets are being fenced off for the privileged trading of our rivals. In the interests of the United Kingdom alone we must in any case change our fiscal policy. Fortunate are we that the Colonial offer of Preference, coming at this time, will enable us to build up our new system on the foundation not of an Island but of an Empire. CONTENTS CHAP. PAGB I. British Trade and Foreign Inter- ference i i II. Historical Facts and Free Trade Theories 2 1 III. Cobden's Miscalculations 39 IV. Free Trade v. Nationalism 53 V. The Great Free Trade Experiment 59 VI. Tariff Negotiation 69 VII. The Advantage of the Double Market 81 VIII. The Loss of the Neutral Markets 93 IX. The Colonial Offer 99 X. The Opposition to Tariff Reform 115 XI. Defence and Commercial Strategy 129 XII. Imperial Preference as a Bond of Union 135 CHAPTER I BRITISH TRADE AND FOREIGN INTERFERENCE The so-called "Fiscal" question that the people of the United Kingdom have to con- sider, is not merely, as its name implies, a matter of revenue, still less is it a question as to whether food is to be taxed or not, for every " Free Trade " budget of the last sixty years has taxed food heavily. The real question to be decided is this : ought our Government any longer to stand aside, as the Cobdenites wish, leave trade absolutely alone, and make no attempt to influence its course, in a world where every other great nation uses all the various weapons of tariffs, bounties, and the like, to divert trade into channels advanta- geous to its people ? 12 TARIFF REFORM This is the real issue that we have to decide to-day ; but we are usually asked to choose between the rival policies of " Free Trade " and " Protection." The rival advocates claim for their systems certain definite advantages, and they warn us most earnestly against the dangers of any other course. Meanwhile the United King- dom pursues a policy under which we do not get the advantages claimed for either system. Let us contrast the rival policies as put forward by those who believe in them. One school tells us that we ought to adopt a national constructive policy under which the State uses its influence to develop and strengthen the trade of its citizens, by such measures as the fostering of young industries, by discrimination in its import duties, admit- ting free those indispensable raw materials that feed the local production, and imposing duties on competitive imports that come in the form of finished manufactured goods ; by FOREIGN INTERFERENCE 13 the granting of special privileges to help trade that may not be naturally indigenous, but that may be essential for the nation's defence or helpful for its ultimate develop- ment ; and by similar State action for the conscious deliberate development of its trade, of its resources, and of its distant oversea dominions. The British opponents of this policy urge upon us, as a rule, the advantages, not of our present system, but of Free Trade. This really means free exchange between the nations. This we have never obtained. This was what Cobden hoped to get. He argued that it is best for Governments to leave the world's trade to take such course as may result from the action of the various individuals in the world, each acting in his own interest. We were told that under this plan each industry would be carried on in the position most favourable to effective produc- tion, and by the people most suited for the i 4 TARIFF REFORM work, and the highest results for the human race would be obtained and a great waste of effort avoided. Any Government inter- ference, so he thought, was a wasteful diversion of human energy from " the natural channels " in which it was held to produce the best results for mankind as a whole. Such is the choice of policies usually put before us ; but at the present time we have not got either of those plans in operation. We have given up Protection, and we have failed to 2fet Free Trade. Free Traders declare on the platform that they will " never tax the food of the people " and enlarge on the merits of "trade flowing in natural channels." But in their Free Trade budgets, food is heavily taxed now in such a way that the whole burden falls directly on the people, and we find by experience that our trade does not take a natural course simply because our Government FOREIGN INTERFERENCE 15 alone refuses to influence trade, and lays aside weapons that no other great nation thinks it wise to dispense with. This can be seen from some simple examples of what is happening to our trade now. We build no ships to sail for commercial purposes under the Stars and Stripes, and British ships have no share in carrying goods between the ports of the United States. We have natural advantages that entitle us to a profitable share in both cases, but the American Government forbids. We the " Free Trade nation " do not " compete under more favourable conditions," we are in these two cases not allowed to compete at all. In a great number of cases our trade is changed in character by the action of foreign tariffs and is diverted into channels less profitable to us. For example, we have a natural advantage in the possession of a clay so valuable for the making of china that the 16 TARIFF REFORM Americans still buy it from us as a raw material that they cannot dispense with. They used to buy large quantities of it in the form of finished china made in England. That no doubt is the "natural channel" for the trade to flow in, but to get this advantage and employment for our people we need a Free Trade policy, not here, but in America. As it is, the United States tariff discriminates in favour of the importation of the raw material, and so our exports of china are reduced by an amount that the sales of raw material do not make good. We meekly ship off the clay intead of our china ; and mean- while our " Free Trade " politicians rejoice that our trade is free from Government interference, and wonder why there is so much unemployment here. It is remarkable that English Free Traders who fear the control of Westminster should cheerfully accept the dictation of Washington. As a matter of fact our trade is in this way con- FOREIGN INTERFERENCE 17 stantly diverted, changed in character, or in some classes stopped altogether, just as foreign Governments may dictate. This simple example of china clay shows the modification of our trade by foreign tariffs in a case where we ought to be in a particularly strong position, as we hold in our hands the raw material. It is notice- able that it is not the owner of the clay, but the workmen in these islands who suffer by the American tariff; for as far as the American market is concerned, they lose their chances of employment as skilled workers, and have either to take to other less suitable trades into which they are diverted artificially by the American Government, or be reduced to the inferior occupation of digging out the clay. While in America, the protected country, it is the workers who get the advantage from Protection in the form of additional opportunities of employment. Here is a far more important and more B 18 TARIFF REFORM complicated case. The German tariff is deliberately designed throughout the great textile industries to admit the raw material free, while the duties rise steadily the more finished the imported article may be. Thus the wool that comes to England to be sent on to Germany as finished cloth is gradually under pressure of this discriminating tariff being sent on by us in less and less finished forms to avoid the highest duties, which are designed to take away the employment from our people and transfer it to the German workers. When, under this tariff, the German industry is developed in all its branches the time arrives when the raw wool begins to go direct to Germany, and enters untaxed, to be made into cloth that has paid no duty ; leaving our British workmen unemployed, but our professors very busy indeed discussing who pays the import duty on finished goods. In this way foreign Governments are con- FOREIGN INTERFERENCE 19 tinually making artificial modifications in our export trade. But even our imports are affected. The fact that we are the one great open market in the world for fully manu- factured goods causes an unnaturally large proportion of our imports to take this form at all times, and in periods of world-wide over-production, foreign firms, anxious to keep their works going, naturally think first of the open market of the United Kingdom when anxious to get rid of their surplus products. Politicians may dispute about the supposed advantages to us of this con- centrated dumping, but no one can truly say that such trade is flowing in natural channels. These are only a few examples of the general effect of foreign tariffs and British inaction. We are asked to submit to it all because " Governments should not interfere in trade." The supposed advantages of trade flowing in natural channels are put 20 TARIFF REFORM forward as a reason for maintaining our present system, under which our trade is regulated, diverted and controlled by every Government but our own. " Free Traders " tell us that Government interference will produce diversion of trade and waste of effort. The fact that the use of the rudder does for a moment check the speed of the ship is not as a rule held to justify the abandonment of all attempts to steer, but it is in any case no argument in favour of allowing foreign Governments to seize the helm. Let us resume control. CHAPTER II HISTORICAL FACTS AND FREE TRADE THEORIES As general Free Trade throughout the world does not exist, and seems never likely to be realised, a consideration of its merits and faults may seem, at first, to be of very little practical importance. But we are continually urged to maintain our present system of "free imports" in a Protectionist world for the sake of the advantages which we do not get, and never can obtain till Free Trade becomes universal. It is well, therefore, to clear the ground and ascertain what these advantages may be that are so great in the eyes of the Cobden Club that even the faintest hope of getting them must influence our whole policy, and yet so small in the eyes 22 TARIFF REFORM of the rest of the world that the policy of all the other great nations is strongly and increasingly — Protectionist. In order to find out if there is any chance of their being generally adopted, let us test these " Free Trade " theories in the light of events in our own history, far removed by time from the party prejudices of the present day. Before we condemn Protection and expect other nations to abandon it, let us take a few events in our own history and consider how we, as a nation, should have fared in the past if we had allowed trade to "flow in natural channels," and had always refrained from Government action. The commercial history of England must be very painful reading to those sincere Free Traders to whom the interests of the world as a whole are far more important than the welfare of any particular part of it. But at one time there could be seen an admirable example of individual action that would have HISTORICAL FACTS 23 caused them great satisfaction. The cloth worn by Europe was principally made by the people who had the most skill at the time, the Flemish weavers, and England, a country in which sheep prospered, grew the wool. The people of Flanders, like good Free Traders, did not attempt to develop alternative sources of supply within their own control, and the international division of labour was carried out so completely that the English obtained practically a monopoly of the raw material. Then it was that the English, forgetting all about the interests of the world as a whole, prohibited the export of wool, the raw material : an extreme measure, for which an export duty was substituted later on. They did not care to be content that England's only share of the industry should be to have a few shepherds and a great many sheep. The result was that the Flemish weavers, having no sufficient alternative supply, found that their raw material was most 24 TARIFF REFORM difficult to get ; and it cost them far more than the free and ample supply enjoyed by their English competitors. It became, through English Government action, cheaper to make cloth in England than in Flanders. In this way our woollen industry was given a valuable help to its development. Some of the most skilled Flemish workers were en- couraged to come over and settle in England to impart their skill to others ; the English workers were not diverted — as Free Traders pretend — to inferior trades, but superior skill was transferred to British soil and taught to our people. Thus was the cloth- making industry fostered in England, whose states- men, untrained by learned professors, actually desired to see this addition to the productive powers of their own country. If only the Cobden Club had been in existence then, the trade might have stopped in Flanders : it would have paid the people of Bruges to send heavy subscriptions to that active organisation. HISTORICAL FACTS 25 Later on military reverses and religious persecution drove additional Flemish workers to our shores to join their compatriots, and still further develop a great industry whose foundations had been already laid in this country by Protection. For a time, however, a few of their selfish neighbours profited by the misfortunes of the workers of Bruges, for a limited number of distributors and middlemen in Antwerp made large profits by the sale to Europe of the new English-made cloth. There was im- mense loss of employment to the Flemish cloth-makers, the working classes suffered heavily, but a few merchants in Antwerp grew rich on the misfortunes of their neigh- bours. Possibly they tried to comfort them by pointing out the great volume of the statistics of foreign trade, swollen as they wonld be with the importation and subsequent re-export to Europe of the new English manufactures. The reading of similar trade 26 TARIFF REFORM returns is supposed to be very consoling to our own unemployed to-day. We have distributors and middlemen now in England making profits in the same way ; some of them are most devout Free Traders. In time the distributors of Antwerp learnt from the ruin of their trade and the closing of their river that distribution is but the servant of production, for the nation that wins supremacy in manufacture does not allow her defeated rival to retain the dis- tributing trade, but in the end employs her own people to do this most profitable work. Here is a clear case where reliance on the free action of the individual, though it might possibly have coincided with the interest of the whole world, would have unquestionably delayed the development of our nation ; for the individual producer of wool in England, consulting his own selfish interest of the moment, would just as soon have sold his wool to the Flemish weaver as to the HISTORICAL FACTS 27 English. It was through the action of such pressure as only a Government could bring to bear that we gained this important development of national productive powers, and additional employment was found for our people. The new channels for trade may have been "artificial" at the moment, but they were English and enduring. In the actual world of competing nations, whenever a case like this occurs, where Protectionist action will add to the produc- tive power of a nation, it is folly to expect its statesmen to sacrifice the prospect of real national advantage simply because the unrealised policy of Free Trade is expected, by a questionable theory, to confer advantages that are doubtful on a cosmopolitan world that unquestionably does not exist. These actions of our predecessors afford much amusement to Free Trade writers of modern history, who pityingly refer to them as though they were due to the partial 28 TARIFF REFORM development of the intellects of our ances- tors. It seems strange that people of different periods should take such dia- metrically opposite views of what ought to be clone under circumstances where the situation is quite clear and only the policy is in dispute. So great is the difference between the two policies that it is clear that one of them must be absolutely wrong. How is it that some of the modern historians so confidently condemn the action of the statesmen of other times ? The reason is that the extreme " Free Trade " writers, in considering our commercial policy, refuse to take into account the existence of commer- cial rivalry between competing nations and ignore the vital considerations of national defence ; whereas the Protectionist states- men of the past, in close contact with the pressure of actual events, had these great factors ever in their thoughts. In the case of wool we have seen the HISTORICAL FACTS 29 conflict between Free Trade ideals and national interests in an example which is mainly industrial. Now we come to a case where the question of national defence was taken into account by English statesmen in framing our com- mercial policy, with the result that they put into force the famous " Navigation Acts," which are a direct violation of all the vital principles of the theory of Free Trade. At one time the sea-carrying trade of the world was in the hands of the Dutch. Their ships could carry goods more cheaply than English ships, and by all the laws of the Cobden Club we ought not to have interfered with an arrangement so clearly advantageous to the world as a whole. But in the days of the Commonwealth our rulers, inspired by Stuart legislation, passed the famous Naviga- tion Act of 1 65 1 ; by this law the British Government took action which should cause the greatest distress to all whole-hearted 30 TARIFF REFORM Free Traders. Instead of allowing trade to flow in natural and Dutch channels, they took advantage of the power we gained from our oversea possessions to favour British shipping and penalise the Dutch carrying trade. Moreover, they went so far as to take into account the composition of the crews and demanded that the ships enjoying these privileges should have a large pro- portion of Englishmen among their crews. In the absence of any professorial instructions, we find writers of the day actually rejoicing later on that the carrying trade was being gradually transferred to us. These laws, as a prominent Cobdenite puts it, "crushed the Dutch carrying trade." The true Free Trader should surely have pointed out that these Englishmen were being artificially diverted from some more profitable occupation and ought never to have been thus induced to go to sea in defiance of the interests of the world as a whole. The HISTORICAL FACTS 31 Dutch, having attained to supremacy in shipping through success in war, had adopted a Free Trade policy, but they do not seem to have had much confidence in its unaided virtue, for within two weeks of our Naviga- tion Act coming into force, a Dutch deputa- tion was sent to England to beg for its withdrawal. The eagerness of the Dutch in subsequent treaties to try and get these laws repealed, shows that they had no doubt what- ever as to the transfer of trade that was going on. Under the influence of this and the subsequent Navigation Acts, extending over about two hundred years, we won and maintained the absolute supremacy of the world's shipping trade, which was transferred from Free Trade Holland to Protectionist England, a fact which shows that the eminent politician who recently declared that Free Trade was "the father of" our shipping supremacy has evidently discovered a rather 32 TARIFF REFORM remarkable case where the father is younger than the son. It is a genealogical inex- actitude to declare that the supremacy we have maintained for two hundred years had its origin in our unsuccessful attempt to get Free Trade with the rest of the world sixty- six years ago. It can be seen from our own history that Free Trade would not have suited us in certain critical periods ; such cases will always occur in one nation or another, and so world-wide Free Trade will never be realised. This is the situation which we must keep in mind. We have examined the Free Trade policy in two aspects. In the first case, that of wool, the control of the raw material enabled us through the essential action of the State to cripple a rival and develop the home industry. In the second case, that of the Naviga- tion Acts, the control we gained through oversea possessions enabled us artificially to encourage English shipping ; a measure HISTORICAL FACTS 33 adopted to provide for the safety of the nation. Now we come to a case where defence was not the issue and all the raw material came to us from oversea, a case where the fact that the State exercised a deliberate national choice in favour of the goods made at home, a case where Protection in its simplest form — the reservation of the home market — fostered a young industry which soon grew able to export on a vast scale and defeat the rivals from whose competition it had needed Protection even in its own home market. Although the Manchester school of econo- mists preach Free Trade to the rest of England, as though it were a sacred duty and an immutable law, the Lancashire cotton industry as a matter of fact rose to greatness under strong Protection, and Manchester stoutly opposed Free Trade when she saw it did not suit her interests. The gain to c 34 TARIFF REFORM the whole world never entered into her calculations nor did she allow a thought to the interests of the English consumer. A little more than a hundred years ago, when England found the calico of India cheaper and better, Lancashire demanded Protection for the development of her " infant industry." The importation of Indian-made cotton goods was prohibited. Fostered by bounties and guarded from foreign competition the manufacture of cotton goods in Lancashire made marvellous strides. Between 1780 and 181 2, our export of cotton goods rose from £350,000 to ^"16,500,000 ; # and, to follow up the pro- gress, between Waterloo and the passing of the Reform Bill the power-looms in Man- chester had increased from 2000 to 80,000. As Mr. Cobden's biographer puts it, such was * See Mr. L. S. Amery's " Fundamental Fallacies of Free Trade," p. 105. HISTORICAL FACTS 35 the "portentous expansion of our industrial system," a development which occurred under our national protective system. By similar Protectionist measures was the great iron industry developed in England ; fostered and guarded by protective measures we had gained, before Cobden's day, the world's supremacy in the manufacture of iron. It may be urged that these cases from our history do not prove that Free Trade is bad now. The point is that they do show that there have been clear cases where the interests of a particular country were best served by Protectionist action, and we need not take into account a situation so improb- able as that in which all the world shall be so equally developed and its industries so well distributed that not one single nation will desire to take Protectionist action in one direction or another. We can be certain that the moment a nation is con- 36 TARIFF REFORM vinced that it will gain by Protection, the thought of the interest of the world as a whole will not for one single instant delay its abandonment of Free Trade. These cases are quoted to show that Free Trade does not suit every nation " all the time." Therefore our theory has reached this point that we can confidently expect that Free Trade will not become general, and that Protection will be practised, at all events by some of the nations of the world, for a length of time so great as to include all the period that should be taken into con- sideration in framing the present policy of a British Government. An examination of Cobden's failure to foresee that other nations would take Pro- tectionist action will reveal both the errors of his calculations and the causes of our present troubles. When he induced us to adopt Free Trade HISTORICAL FACTS 37 Cobden's greatest miscalculation was his failure to foresee that other nations would raise their tariffs against our manufactures. He ignored the reasons for our Protectionist action in earlier days, and not understanding the past, misled us as to the future. 433344 CHAPTER III COBDEN'S MISCALCULATIONS It was undoubtedly under a national system of Protection and colonial preference that the United Kingdom had attained a position of practically unrivalled supremacy in finance, in commerce, in manufacture, in ship-building, and in the carrying trade. This was the position sixty years ago when Cobden per- suaded our leaders to abandon the national system under which we had attained our pre- eminence and embarkon a cosmopolitan" Free Trade " policy which he expected would soon become general throughout the world. England was undoubtedly induced to abandon her national policy of Protection by perfectly sincere but mistaken promises that Free Trade would soon be generally adopted 39 4 o TARIFF REFORM throughout the world. Subscribers to the cause " looked forward to the opening " of foreign markets, manufacturers expected all the world to become our customers, and Mr. Cobden himself argued that we ought to let our Empire break up since we should, he honestly believed, be able to trade with its various parts just as well when they were no longer under our flag. We were to abandon " the thankless and impossible task of at- tempting to govern India," a country in which he thought we were "transient in- truders." " It will be a happy day when England has not an acre of territory in continental Asia," he wrote to Mr. Bright. "If France," he said, "took the whole of Africa, I do not see what harm she would do us or anybody save herself"; with Canada we were to "as soon as possible sever the political thread." # * See "Morley's Life of Cobden," pp. 250, 572, 671, 677. 706, 935- COBDEN'S MISCALCULATIONS 41 All this advice is clearly based on Cobden's absolute confidence in the world-wide and permanent adoption of Free Trade. For in a Protectionist world the break up of our Empire would be followed in some cases by the formation of independent and highly Protectionist States, in other places we should simply have allowed valuable tropical markets, which our rule keeps open for our trade, to pass under the control of our commercial rivals, who would have fenced them off by tariffs, excluding our manufactures and ad- mitting their own. Manchester would have been ruined by her own policy of abandon- ment. Cobden's biographer admits that he only " avowed " indifference (p. 310) as to whether the other nations copied our example as a piece of "tactics" lest British eagerness should arouse suspicion abroad ; and it is clear that the international division of labour, which was held out as the most attractive 42 TARIFF REFORM result of Free Trade, can only be realised if the other nations think it will be to their advantage and adopt Cobden's policy. Thus only could trade " flow in natural channels." Cobden believed that under his new Free Trade policy we should retain the supremacy in manufacture that we had won under Protection, he thought Great Britain would continue to be the workshop of the world ; and in that expectation he urged that the free admission of foreign food into this country was indispensable to enable other nations to buy the largest possible amount of finished manufactured goods in return. How could other nations take our goods — so he argued — if we did not take their produce in return ? This argument shows he never expected that foreign nations would raise their tariffs and shut out our manu- factured goods. For if his words are true we may well now ask in our turn how can our workmen import foreign food in sufficient COBDEN'S MISCALCULATIONS 43 quantities if other countries will not take our manufactured goods in exchange ? Cobden, when urging us to adopt Free Trade, made a prophecy : " I believe," he said, "that if you abolish the Corn Law honestly and adopt Free Trade in its simplicity, there will not be a tariff in Europe that will not be changed in less than five years to follow your example." (Manchester, January 15, 1846.) There is no doubt that these words ex- pressed his sincere opinion ; indeed, general Free Trade was a condition essential for the realisation of some of the most important of the results that he hoped for and promised. Sixty years later we find ourselves sur- rounded by hostile tariffs. Evidently there has been a serious miscalculation, and if we learn from our failures, then Cobden's false prophecies should be the most instructive portion of his work, for they not only show that he was mistaken but, if we follow up the 44 TARIFF REFORM course of subsequent events, they also show why he was wrong, and that is more im- portant. His great miscalculation was as to the course that other nations would take, and an examination of the reasons that made them refuse our offer will reveal the fact that there are faults in the principle of world-wide Free Trade that proved fatal to its general adoption. He expected other nations to follow our example within five years ; why did they all decline ? They must have seen some very serious disadvantages in Cobden's whole scheme, for we offered them some* thing far nearer real Free Trade than the free imports which are all that we now obtain. Each country had only itself to please and by its own action it could have at once got free exchange both ways with the United Kingdom, then the richest country in the world ; and with a large part of the British Empire as well. To get this great advance towards general Free Trade they COBDEN'S MISCALCULATIONS 45 had only to abandon their tariffs, our barriers were down already. Not one single great nation has perma- nently availed itself of this chance, and the few that have tried the plan have given it up. Here, in the refusal of other nations, is to be sought and found the fundamental errors of Cobden's calculations. Evidently there must be serious drawbacks to his ideal of a Free Trade world. Bismarck's phrase " Free Trade is the weapon of the strongest " sums up the world's reply to England's offer. The power of a great centre of manufacture to crush its smaller rivals and check the development of new centres of production elsewhere, is a fatal obstacle to the adoption of world-wide Free Trade. This force tends to retard un- naturally the development of manufacture in new countries. It is true that Cobden said his scheme would benefit the whole world, but he 46 TARIFF REFORM thought that we should retain our manu- facturing supremacy ; he declared that it was best to run the race even and without handicap, but he actually wished to start it at a moment when England was well ahead. It is not to be wondered at that the other nations viewed the English arguments with grave suspicion. Here was a nation which had attained a position of absolute commercial and manu- facturing and shipping supremacy under a system of rigid Protection suddenly inviting the world to throw down all barriers just at the moment when she was far ahead ; Cob- den had generously allotted to other nations the task of tributary producers of food and raw material for Great Britain, the workshop of the world. It is not astonishing that our neighbours refused to play the part assigned them. The refusal of other countries to adopt Cobden's policy is due to faults that are inherent in the COBDEN'S MISCALCULATIONS 47 whole theory of general Free Trade. A serious disadvantage that has proved fatal to the adoption of Free Trade throughout the world is to be found in this fact, that the power and momentum of an existing industry already working on a vast scale, and gaining from the magnitude of its operations a decisive superiority over its smaller rivals, who are trying to struggle into prosperity, makes it very difficult to start fresh industries in new or partially developed territories, however great their natural advantages of position and supplies may be. Certainly where the advantages are in other ways equal, the well established industry would have a great advantage that would long retard its rival. In this case the practice of uni- versal Free Trade does not give the greatest good for the whole world, but actually tends to check the development of manu- facture in new countries. The use of Pro- tection to foster infant industries is admitted 48 TARIFF REFORM to be wise by many prominent Free Traders ; but far more conclusive is the contrast in manufacturing development between the young countries that have adopted Protec- tionist tariffs for this purpose and the back- ward state of their rivals who have not. Many countries that have tried both policies date their development in manufacture from the beginning of their protective policy. General Free Trade has another serious fault. By its very nature it leads to the excessive concentration of industries into certain great centres ; not only would this give insufficient variety of employment in each district to give full play to individuals with varying aptitude, but a more important consideration is that the disasters falling on one special industry, through over-production, or the failure of the supply of raw material, and similar vicissitudes would, in such a world, fall with concentrated force on certain portions of the human race. The blow would COBDEN'S MISCALCULATIONS 49 fall on some individual nation instead of being distributed over small sections of many other- wise prosperous communities where help could come, as in the Lancashire cotton famine, from other trades that were prospering and ready to give help with offers of relief, whether in the form of charity or of alternative occupations. Such a system too, if carried out completely, would hand over to certain nations a pre- ponderating share of certain important forms of production, whether of food, of some essential raw material or of some industry, such as iron and steel production, necessary for national defence ; and this in some cases would make one nation so dangerously dependent on another as to endanger its liberty, and would form so powerful a lever in diplomatic negotiations that the most peaceful and confiding of nations may well hesitate to run the risk of offering so strong a temptation to some grasping neighbour D 50 TARIFF REFORM For instance, the Cobdenites now urge that Great Britain has under "free imports" become so dependent on the United States of America for her supplies of raw cotton that we dare not change our fiscal policy for fear that the Americans may cut off our supplies of raw cotton by an export tax. If the argument is sound then it only shows that Pitt's policy of preference for British- grown cotton might — by developing our imperial supplies — have saved us from a dangerous situation for which we have to thank the Cobdenite policy of the last sixty years. But in this particular case it seems incredible that the United States, who have used the most violent tariff measures against us whenever they saw it was to their advan- tage, can have deliberately allowed us to keep this vast trade on sufferance. It seems certain that they would have captured it long ago if they could. But it is something that Free Traders acknowledge that such dangers COBDEN'S MISCALCULATIONS 51 may arise, although their illustration seems to be the exception, yet by putting it forward they have admitted the rule. The policy of world-wide Free Trade may therefore be seen to have certain grave disadvantages, and it is beyond dispute that these faults have been sufficient to bring about the rejection of Cobden's policy by all the other great nations but our own. Its failure to appeal to the people of the great self-governing nations has been conspicuous. The temporary Free Trade revival in France fifty years ago was due to the personal view of Napoleon III. : he was converted, but not the French nation. In Turkey it lingered on under the Government of Abdul Hamid, but will not survive the victory of the people. Even in our own Empire overseas it is now only maintained where it can be enforced by the administrative act of British Home Governments. It has never permanently survived the grant of self-government to any portion of the Empire. CHAPTER IV FREE TRADE v. NATIONALISM To most human beings, if not to all pro- fessors, the prosperity of some other part of the world is less important than the progress and advantage of their own country, whose power is their defence, whose revenue is expended in their interests, whose advances in commercial prosperity lighten the whole burden of debt and of taxation. If a young nation rightly or wrongly believes that a tariff will foster its infant industries and desires that result, the duties will be out on at once if the State has self- government. If some older and independent nation believes that it can secure advantage for its 53 54 TARIFF REFORM shipping by some navigation act, that act will be passed without a thought for the interests of the world as a whole. The nation, just because it is a nation, will reserve valuable oversea markets, impose tariffs, and grant bounties, whenever it sees a prospect of benefit thereby. When a community passes laws artificially regulating competition by such methods as the restriction of the hours of labour, the enforcing of a minimum wage, the regulation of the conditions of employment in the factory, the mine, or the ship, these regulations can only be enforced within the national boundaries. Its action will be stultified if it leaves open its ports to the free entry of goods, or the competition of shipping, whose cheapness is due to the absence of such restrictive laws in some foreign country. The extreme Free-Traders and Radicals of Cobden's day foresaw this difficulty, and putting Free Trade above everything, even FREE TRADE v. NATIONALISM 55 the health of the workers, denounced and opposed factory legislation. The inherent defects of universal Free Trade make its realisation impossible in a world organised into nations. It could only become general by being enforced on the communities that did not believe in it by the central power of a government represent- ing the human race. This conflict between Free Trade ideals and the fact that the world is organised into nations seems to have been the one point on which Cobden realised that his proposals were not altogether suited to the world of his day. He did not, however, for that reason modify his policy ; but he expected the Empires to be dissolved. [National divisions were to be weakened, and Free Trade was to triumph in a cosmopolitan world whose proposed organisation was always vague but whose non-existence at all events is now clear. 56 TARIFF REFORM Cobden realised the conflict between Free Trade ideals and the sentiment of nationality, and, with the miscalculation of a fanatic, he prophesied the decay of national feeling ; but it is firmly based on the old and firm foun- dations of racial feelings, common dangers, interests and history. He might have realised that Free Trade was the weaker influence and must give way. He expected and hoped for the break-up of our Empire. But throughout the world the tendency has been towards what is sometimes called Imperialism, a movement towards closer unity, towards the federation of states with common interests, the unification of com- munities too long divided, the binding into great masses of lesser states for more effi- cient co-operation, more effective defence and mutual aid in commerce, in communica- tions and in shipping. The settlement of disputes and the arranging of relations between the various governments then be- FREE TRADE v. NATIONALISM 57 comes a matter of internal adjustment under a common flag, instead of a question between rival foreign offices with war as the court of appeal. On these lines within the British Empire alone about a quarter of the human race are building up a system whose influence for internal peace within its borders is an inestimable, and scarcely noticed, achieve- ment. Break up the British Empire as Cobden wished into hundreds of separate communities and you multiply in proportion the risk of wars, you let loose internal strife in India, you allow great tracts of Africa to slip back into barbarism, but even then you will not achieve Free Trade. CHAPTER V THE GREAT FREE TRADE EXPERIMENT The dream of universal Free Trade in a cosmopolitan world has proved false, and we have to reckon with a world organised into nations, in which Protection is the general rule, and Free Trade the ex- ception. To follow up our theory we therefore now have to consider the position of a nation which, unlike its neighbours, refuses to resort to Government interference in trade and decides " to fight foreign tariffs with free imports." This is evidently a situation far removed from Cobden's original plan of universal Free Trade ; and, before we come to any conclusion as to these new conditions, it is as well to remove a wide- 59 6o TARIFF REFORM spread prejudice in favour of our present system by which it is credited with the sub- sequent increase in our foreign trade, while certain independent causes are utterly ignored. The trial that we gave to the system of free imports was made under conditions giving this policy an exceptionally good chance of proving its merits. For we adopted this plan at a time when, under Protection, we had already achieved undis- puted supremacy in production, in exchange, in finance and in shipping. It was tried in a country with great natural advantages for a distributing trade, in its harbours and geo- graphical position, with special advantages in its coal, with a population already trained and apt for industry, and with the unrivalled opportunities of a great Empire. Industrial production is the great test by which the successs of the experiment must be judged, for it is here that our supremacy was challenged by our rivals, it is mainly FREE TRADE EXPERIMENT 61 against our manufactures that they have raised their tariffs. When we decided to fight foreign tariffs with free imports we were first in production among the manu- facturing nations, we are now third. We are sometimes told that our original lead was so great that we cannot expect to keep up the rate of progress now we are "grown up," and we must expect the manufacturing pro- gress of the younger nations to be more rapid at first, just as a child grows fast when very young : while acknowledging that the lead was very great, it is only fair to add that, obtained under Protection, it has been lost under " free imports." The simile of the child's growth is difficult to apply to such facts as a German steel production nearly twice as great as our own.* It is evident * In 1907, steel production : United Kingdom . 6| ) Germany . . 12 I million tons United States . 23 ) approximately. 62 TARIFF REFORM that our prosperity does not keep pace with the increase of our population, for we see our people emigrating to seek better oppor- tunities elsewhere in protected countries, while our competitor, Germany — with the " scientific tariffs " that Cobdenites laugh at — finds employment for and retains a far larger increase of population on a less naturally endowed territory. But we are told not to consider the total production of our factories, not the great decisive movements of population, but a special test based only upon a fraction of our national interests — the total of our foreign trade returns. These have expanded and therefore we are told that our policy of free imports must be sound. As this argument has prejudiced the judgment of the nation, and gives to the policy of free imports an undeserved credit, the facts about it must be examined before we follow up the general theory of our subject any further. Foreign FREE TRADE EXPERIMENT 63 trade returns are from their nature a very imperfect test of a nation's prosperity, but in this case they are more than usually misleading, because the creation of our railway system and the commercial development of steam- ships both occurred in this country at the time when Cobden's new fiscal system was first tried. The enormous additional facili- ties for land and sea transport that we owe to railways and steamships must, under either fiscal system, have been clearly responsible for a vast increase in our commerce. If the expansion of our trade due to these mechanical developments be deducted, free imports cannot be shown to have produced any acceleration in the expansion which, both before and after their introduction, was taking place in our foreign trade returns. Before any conclusions one way or the other can be made, it must be remembered not only that foreign trade returns ignore all internal trade, but that they may actually 64 TARIFF REFORM be swollen by the decline of some home industry. For instance, the exchange of produce between Great Britain and Ireland does not appear at all in these foreign trade returns ; but if a number of Irishmen emigrate to America and continue to carry on with England a trade exactly the same as before, their trade with us will appear for the first time in our foreign trade returns, and the fact that we have lost a number of workers will produce statistics that will be quoted by the Cobden Club both as an " increase in British trade " and as evidence of added prosperity. If our tin mines become less productive, if we use less British iron ore, and if we replace these deficiencies by oversea supplies of equal amount, our foreign trade returns increase and the Cobden Club calculations would make us out to be more prosperous. According to this extraordinary test, if the Americans grow, manufacture and wear their own cotton, all FREE TRADE EXPERIMENT 65 this does not count as a test of prosperity, for none of it appears in their foreign trade returns ; but if they send their cotton here to be manufactured and reimport it as the finished article for their use, then the fact that they have not employed their own people to do the work causes this cotton to appear twice over in their trade returns, once going out and once returning and, in a case where the Americans have clearly had less employment, the Cobden Club would say they were more prosperous. The farmer who grows wheat for us in England, and buys our manufactures, con- ducts, both as producer and consumer, a business that does not appear in our foreign trade returns. But if, after our abolition of the Corn Laws, he emigrates to America and still does the same amount of business as before, buying our manufactures and selling us his corn, there is a great increase in British trade as measured by Free Trade E 66 TARIFF REFORM writers, for his corn for the first time appears in the British imports and his purchases in our exports. But the production, the popu- lation, the safety in war of the food-supplies of the United Kingdom are all lessened by the change. If we build ships of British plates there is less " British trade," according to these writers, than if we build them of German materials. In short, a simple change to some foreign source of supplies is mistaken for an increase in total consumption ; we get bigger returns both of "trade" and un- employment. But certain points at least are clear. Under free imports British agriculture now employs a million less people than before Cobden's day ; and the abolition of colonial preference has meant that the corresponding development of agriculture has taken place mainly under foreign flags. We have allowed the agriculture that depends on us for a market to develop largely FREE TRADE EXPERIMENT 67 in the U.S.A. We have then after all found that market closed to our manufacturers and are powerless under our present system to protest effectively. As a result, thousands of British workers and highly skilled organisers of labour, finding it difficult to earn their bread here — since their manufactures that enable them to import food in exchange are shut out from America — have emigrated to the United States. Trade, Cobdenites say, is exchange. So it is, but having sacrificed our own agriculture and built up the West of America with our open market, we found the door closed to our manufactures by the American tariff, and that freedom of exchange for which we had made such sacrifices denied to us. Trade can still be free with this market for our workers ; all they have to do is to go to the United States, and they have done so in millions. In manufacturing production Cobden found us first, we are now third among the nations. CHAPTER VI TARIFF NEGOTIATION The great question we now have to con- sider is : not general Free Trade, but the result on the United Kingdom of her policy of refusing in a Protectionist world to allow her Government to interfere in matters of trade. Let us take first the effect of our attitude on the policy of other nations. The refusal of other countries to follow our example is said by a few of the modern Cobdenites to be a matter of indifference to us. They con- demn the idea that a tariff can be used to negotiate for better terms with our neigh- bours. Cobden did not share this belief. For within a few years of the adoption of his policy we find that the failure of other nations 69 70 TARIFF REFORM to follow our example evidently did not leave him indifferent. He must have considered our position unsatisfactory, for he went over to Paris to try and get better terms for our exports, and using for negotiation reductions in our existing tariff, especially in wine duties, which had been left on " as instruments of negotiation " by Sir R. Peel, he brought about after much hard work the French Com- mercial Treaty of i860, which secured far lower duties for our goods in the French tariff. But when in i860 our tariff on manu- factured imports was altogether swept away, and our duties limited to such articles as tea, tobacco and wine, we found that we had very little scope left for bargaining with our neighbours. Still some later treaties with other nations were made, for our neigh- bours were glad at first to do something to confirm us in our free importing policy, but it was noticeable that we got the best results in cases where we still had duties on the TARIFF NEGOTIATION 71 products of the nations with whom we negotiated. Thus we got concessions from Spain and Portugal, for our wine duties affected those countries and gave us some power to bargain with them. When later on it became evident that we were firmly bent upon fighting foreign tariffs with the exceedingly passive resistance of free imports, other nations began to see that in bargaining with each other and in framing their tariffs there was one country whose interests no one need trouble about — Great Britain. The attitude of the United Kingdom in making it quite clear that her market was always open, however badly her produce was treated by foreign tariffs, left her rivals with a free hand. The tendency has been to limit, as far as possible, the concessions granted to each other by foreign countries to those complementary products where the exchange was non-competitive and mutually 72 TARIFF REFORM beneficial, meanwhile the duties have been raised on manufactured goods, the class in which we are vitally interested. Thanks to our passive attitude, our interests are re- ceiving exceptionally bad treatment. The policy of allowing everything to drift, places us in a most dangerous position ; but we are assured by the Cobdenites that the "sheet-anchor of Free Trade" is "the most favoured nation clause," under which they tell us that Great Britain secures all the benefits of any reduction in duties that the other nations may grant to each other when they make tariff bargains among them- selves. Thus we are told to be delighted to have the chance of saving ourselves the trouble of these intricate negotiations. For example, if in a series of international treaties France secures lower duties both for her claret and for dates grown in her Colonies on their entry into the Russian markets, and in return the French duties are reduced on such TARIFF NEGOTIATION 73 Russian products as sables and petroleum, it is quite true that these duties would undoubtedly be extended to similar articles exported from the United Kingdom. In other words we get, thanks to the most favoured nation clause, reductions on a num- ber of things we do not produce. Meanwhile both countries have raised their duties on iron manufactures. The interests of our iron-workers are ignored because we cannot bargain without a tariff. Do Free Traders expect them to abandon the work they understand and bore for imaginary oil, chase sables that are not there, plant date palms or cultivate grapes ? Such are the opportunities we gain. Cobden was never taken in like this, for when he went to bargain with France he fought for lower duties on the goods we could supply, notably iron manufactures. In one recent European case, where there were reductions made on such a thing as coal that did concern 74 TARIFF REFORM us, we were kept out of the benefits by the reductions being restricted to coal arriving by rail, so that only the Protectionist neigh- bour with a common land frontier got the advantages. Moreover, the most favoured clause, such as it is, does not apply everywhere. When the Government of the United States secures some special concessions in a treaty, it limits to the country from whom it receives the advantages the tariff reductions which it grants in return. Thus at this moment (October 1909) British brandy pays high duty and cannot compete on equal terms against certain foreign brandies which have secured far lower duties in the tariff of the United States in return for concessions to American trade. It was a Liberal Cabinet Minister who recently pointed out in defence of Free Trade that when our Colonies granted preference to each other's produce, the United Kingdom TARIFF NEGOTIATION 75 shared the advantages, thanks to the most favoured nation clause ! At the time South Africa had made prefer- ential arrangements, putting lower duties on cane sugar from Australia, and we welcomed the arrangement as a link between the two Colonies. But how can any one believe that this reduction is of commercial value to us in England, where the sugar-cane cannot be grown, and then go on to discredit the ex- isting Canadian preference which so strongly encourages and has developed the export of our British manufactures to Canada. According to this authority colonial pre- ference is only valuable to us when it applies to something that we do not produce. Growth of Protection As soon as we adopted our passive attitude naturally enough other nations began to ignore us in framing their duties. Austria openly told us that without a tariff we had no 76 TARIFF REFORM power to influence her, or to mitigate her new Protectionist tariff. France in the end declined to go on renewing the concessions she had given us under the Cobden treaty. We had sacrificed among other things our silk industry to get her tariff lowered, but we made it quite clear that she could in any case have our market open to her silk and other manufactures, and so she put higher duties once more on our manufactures ; acting quite legitimately throughout. Soon afterwards Germany found that under a practically Free Trade system her industries were developing slowly, being crippled by the competition of the established British manufacturing power. More especiallydid Bismarck warn her against the discouraging effect on German develop- ment of the dumping of cheap goods from Great Britain. Her population was emigrating on a vast scale. Bismarck saw that the time had come for her to adopt a national protec- tive policy. There was a short struggle, in TARIFF NEGOTIATION 77 which his chief opponents were some of the professors : his victory was complete, and the great industrial development of Germany has followed. Germany now leaves her markets open to raw materials like wool and cotton. She imposes graduated duties on manu- factures, so as to encourage her own people to buy German-made goods, and when we see that her people do buy German manu- facture, that her internal production is de- veloped and her imports of raw material are increased, British Cobdenites say that it is not due to Protection, and that the tariff deliberately framed to bring about these results is in no way responsible for their having happened ! Strongest of all has been the Protectionist action of the United States : they sent men over to study our industries and found that only State action was needed to ensure that some of the industries, by which our factories were then supplying their market, should be 78 TARIFF REFORM transferred to America. This was one of the objects of the tariffs subsequently passed. Our sales to America at once fell by millions of pounds, new factories began to spring up across the Atlantic to supply the same goods as before, with identical machinery, and free of all taxation between them and their American market. In many cases our workmen emigrated to pursue their old trade in America, and some of our foremen and industrial leaders were trans- ferred to another country ; additional work was found for Americans over and above (not instead of) their existing opportunities ; and the Cobden Club look quietly on and say that American development has occurred in spite of Protection. These American gains and our losses occurred when the tariff was passed ; its object was to bring them about ; and yet we are told by the Cobden Club that the tariff is in no way responsible for them. TARIFF NEGOTIATION 79 On May 18, 1892, Lord Salisbury de- scribed our position in the following words : "We live in an age of a war of tariffs. Every nation is trying how it can, by agree- ment with its neighbour, get the greatest possible Protection for its own industries, and, at the same time, the greatest possible access to the markets of its neighbours. This kind of negotiation is continually going on. It has been going on for the last year and a half with great activity. I want to point out to you that what I observe is that A is very anxious to get a favour of B, and B is anxious to get a favour of C, but nobody cares two straws about getting the commercial favour of Great Britain. What is the reason of that ? It is that in this great battle Great Britain has deliberately stripped herself of the armour and the weapons by which the battle has to be fought." CHAPTER VII THE ADVANTAGE OF THE DOUBLE MARKET The certainty that our market was in any case open to their manufactures no doubt hastened the extension of Protection among the other countries, and the system has now become general among the great nations. The effect of our policy on our trade has been gradual. It took some time to develop large manufacturing power in some of our competitors after their tariffs were raised ; but as soon as each of our neighbours gained sufficient productive power we began to feel, from our policy of free imports, an influence far more important than our failure to negotiate with foreign powers. There is a vitally important defect in the position of a 81 F 82 TARIFF REFORM free importing country among Protectionist rivals, a handicap so unfair, so crippling a discouragement, that this fault alone is enough to condemn our policy even if we had no Colonies offering preference, and no Empire to unite. This defect is the unfair advantage that our open markets give to every factory that is not situated in the United Kingdom. A German factory, for instance, can obtain from other countries raw materials such as cotton or wool free from all import duties. It can get these supplies just as freely as if it were in England, and it has two free markets, the whole of Germany and the whole of England, open to its unrestricted sales. An exactly similar factory in England would have the market of the United King- dom open to it, but subject to the free competition of the German factory ; while between it and the German market is a tariff carefully designed to favour its foreign rival. This advantage gained by the THE DOUBLE MARKET 83 German factory may be called "the advan- tage of the double market." Taking only the two countries into account, a factory in Germany has free access for its produce to more than twice as large a number of possible customers as its British rival can command. It is our system of free imports which gives to the German factory this advantage. A British tariff would make competition fair once more. The German factories are able, thanks to our policy, to produce on a larger scale ; and so all the fixed debt and manage- ment charges weigh much less heavily on each article produced. This consideration has become far more important with the development of the use in manufacture of very expensive machinery, capable of an enormous output, and dependent for its profit on manufacturing on a very large scale ; this demands above everything a very large market. In the choice of a site for such machinery the size of the available market 84 TARIFF REFORM must often be a decisive factor. A very- large production will often mean both larger profits and cheaper prices. There are other influences in this case also at work against the factory in the British open market. Not only has it to work on a smaller scale, but if there is exceptional demand in Germany, the factories in that country get first chance of all the local orders, and only when they are un- able to meet the demand can the British fac- tories rely on receiving orders from Germany. On the other hand, if there is throughout the world a period of over-production, the German factory may just be able to save its workmen from discharge by getting rid of its surplus into the British market, where the rival factory may have, through this very dumping, to discharge some of its workmen. Thanks to free imports, our workmen share the misfortunes rather than the prosperity of our neighbours. With capital so easily moved about the world, and with the great manu- THE DOUBLE MARKET 85 facturing power that our rivals have de- veloped behind their tariff walls, we can no longer afford to subject our productive powers to this unfair handicap, which not only enables our rivals to beat us in our own country, but strengthens them for competition against us in the oversea markets. At one time this advantage of the double market made the factories spring up in North America, just to the south of the frontier line, in positions where they could not only sell to the United States but where they also had only a low tariff between them and the Canadian market. No wonder that manufacture developed more rapidly south of the frontier line. But when the Canadians raised their tariff new local factories and branch works from American firms began to spring up on Canadian soil within the new Canadian tariff. In this way the Canadian Government made the competition fair for 86 TARIFF REFORM their own people and a great development of Canadian manufacture followed. Free Traders say that competition should be on even terms. Let us make the terms even and take away from our great rivals " the advantage of the double market." Tariffs and Invention There is another important aspect of the effect of our present system on British and foreign development. We are sometimes warned by Free Traders that manufacturing energy is relaxed in the artificial atmosphere of Protection ; under the shelter of a tariff, obsolete methods are retained, so they tell us, and the powers of invention are not called forth. This argument often comes in a speech which has attributed the advance of our Protectionist rivals, Germany and America, to their superior energy and more modern methods of manufacture So that it is evidently a theory not based on any known THE DOUBLE MARKET 87 facts ; indeed, it would require some courage to test the theory by example and quote America, with its high tariff, as showing lack of invention, or to contrast it with the last Free Trade nation left in continental Europe — Turkey in the days of Abdul Hamid. But it is easy to take some examples and see how tariffs do affect this question. There are certain great industries in which we had a lead, our methods and machinery being superior. When our continental neighbours raised their tariff, the effect was not, as Free Traders suggest, to facilitate the survival in those countries of obsolete methods. What did actually happen was that some of the most advanced British firms started branch works, with all the latest British machinery, within the foreign tariff walls to avoid the duties imposed on the importation of the manufactured articles. In this case the local manufacturers got no monopoly ; it was the local workers who got the benefit in the SS TARIFF REFORM form of additional opportunities of employ- ment ; the effect of the tariffs was to attract within their limits — to Germany, to France, to Russia — the very latest machinery of the most powerful and progressive firms in England : firms whose power was due to their industrial efficiency and who would naturally have preferred to have put up the machinery in England had it not been for foreign tariffs. Now there is no monopoly in inventive power, but the unfair combina- tion of tariffs abroad and free imports in the United Kingdom has the effect that foreign tariffs attract within their clutches the latest inventions in British machinery, where they add to the industrial efficiency of our rivals. But the inventions of foreigners are not attracted here to help us. The foreign firm that adopts some new local invention need not start branch works in England to supply our market, for we have no duties on the import of manufactured goods. THE DOUBLE MARKET 89 Another most discouraging effect on our trade is the uncertainty produced by foreign tariffs. When, under free imports, a trade is depressed, we are generally told by the Cobden Club that our losses are due to obsolete methods, and if the industry fails we are told that it is a good thing not to keep alive trades that are not able to flourish on their own merits ; it will, Free Traders say, be a blessing in disguise, and capital and labour will be diverted to some more profitable use. We are also told that we ought to study the wants of our customers and learn their language and their tastes. To examine these two arguments let us suppose an enterprising capitalist puts up elaborate machinery in England, when German duties are low, in order to supply to our neighbours those peculiar stoves with which Germans warm their houses. He spends money on enabling a member of his staff to learn enough German 90 TARIFF REFORM adequately to describe the heating powers of the firm's speciality. He puts up elaborate machinery that is perfect for making these stoves, and useless for all other purposes, and suddenly the Germans put such a duty on imported stoves that it is no longer profitable to supply them from England. What course do Cobdenites suggest? They are quite certain what he ought to do. They tell the workmen to rely on the neutral markets, and assure the capitalist that the only effect will be to divert his capital " into more profitable channels." Is he to send out his commercial traveller to the neutral and tropical markets where, reinforced by the German languagethat he has carefully acquired, he will, in spite of the heat, endeavour to explain to the natives, in a language they don't understand, the equally incomprehensible advantages of the German type of stove ? Meanwhile the capi- talist can study the problem of converting his capital, which is in the form of a factory THE DOUBLE MARKET 91 and machinery for making stoves, into " more profitable channels," of manufacturing some- thing for which it is absolutely unfitted. Such is the "bracing atmosphere " of free imports. His capital can be partly saved if the capitalist moves his machinery to Germany, but his workmen must find a new trade or emigrate. With the development of machinery, pro- duction on a large scale has become more and more a decisive factor in the competition for the power to produce cheaply. Other countries realised this. They saw that the lead England had obtained under Protection would long be retained, and that it would check their productive power unless they raised protective tariffs and developed their manufacture on the foundation of their home markets. But the moment these tariffs began to take effect, and our rivals began to export manufactures on a considerable scale, the whole position became reversed. Every rival 92 TARIFF REFORM foreign factory had a larger free market than a factory in Great Britain, because it always had all the markets the British factory enjoyed and its own market as well. But the advantage gained, in the numbers of possible customers, depended on the size and purchasing power of the home market. The greater the Empire, the greater the gain. Thus Protection has produced far more important benefits in Germany and in the United States than in small European countries. CHAPTER VIII THE LOSS OF THE NEUTRAL MARKETS It has become evident that the Protectionist policy of our great rivals deprives our growing population of any hope of large increases in our sales of manufactured goods to the markets of Europe and the United States. But we are told that we need not complain, for thanks to "Free Trade" we can easily beat our rivals in the neutral markets ; as a matter of fact, we are handi- capped in this competition by the present situation, for we give the advantage of the "double market" to our rivals, and it is evident that if our neighbours can and do undersell us in our own markets, it is absurd to expect to defeat the same competitors overseas. We still have a large trade to the 93 94 TARIFF REFORM neutral markets that are left us, but now that our rivals have developed their manu- facturing power beyond the needs of their home market, they are increasing their sales to these neutral markets more rapidly than we are, and claiming steadily, as time goes on, a larger share of this trade. But while Cobdenites have been relying on the neutral markets, our foreign rivals have been taking further action that threatens the most serious consequences to our trade. They are gradu- ally reserving the once neutral markets for their own privileged trading. For instance, we had the prospect of considerable and rapidly increasing sales to Madagascar, for its inhabitants bought cotton goods which we were particularly qualified to supply. Our trade was naturally increasing. But in 1896 France annexed the island, and the next year she imposed a tariff which admitted French goods free and imposed on the importation of foreign manufactures a duty THE NEUTRAL MARKETS 95 intended to exclude them. Naturally we lost our opportunity of expansion, indeed our cotton trade to the island was almost de- stroyed.* When Japan took possession of For- mosa, when the Americans took Porto Rico, the same process was repeated. These cases seem trivial to some, but they only illustrate a system under which three countries alone, France, Russia and the United States, have fenced off for their own privileged trading about half of the world's territories that are outside the British Empire. Foreign Pro- tection began by crippling us in our old markets : it has extended its operations and is reserving the new markets beyond the seas. This shows us that the breakdown of our trade would have been far more complete if we had trusted to Cobden's prophecies and allowed our Empire to be broken up as * In 1898 our sales 01 cotton goods to Madagascar were only one- fifth of their value two years earlier in the days before the tariff was put on. 96 TARIFF REFORM he advised. If we had abandoned India, if Africa had passed into the possession of our various commercial rivals, the only effect would have been that the growth of Protec- tion, and the reservation of markets by our rivals, would have shut out our trade from vast areas whose purchases are now a most valuable portion of our exports. That our sales still go on in these British markets is not due to free imports but to the fact that the maintenance of our Empire has kept open these markets. If John Bull had taken Cobden's full prescription as ordered, the patient would have died, but fortunately some of the most poisonous ingredients were omitted, so he may recover. For more than sixty years we have been told to expect the rest of the world to adopt Free Trade. We were recently asked still to hold up the " torch of Free Trade " as a guide to the nations in Protectionist darkness, but the badly made torch is burning low and they only see that it is burning our fingers. THE NEUTRAL MARKETS 97 Thanks to the energy of the Cobden Club we were enabled, in August 1908, to hear from representative Free Traders of other nations the prospects of their cause in other lands. These foreign delegates, with a courage and accuracy of statement greatly to their credit, made it quite clear that the cause of Free Trade was not strong in its hold on public opinion in any of the great nations. Indeed the most noticeable point about the Congress was the striking fact that none of the delegates from the great foreign nations represented anything but hopeless minorities in their own countries ; they had neither Government authority nor public opinion behind them. Only in one thing- did they speak for their whole nations, and that is when they expressed the hope, that is general among all our foreign rivals, that England may long continue her policy of Free Trade. To these delegates the Liberal Government offered a warm wel- 98 TARIFF REFORM come and every encouragement. Only in one section of the human race do we find any anxiety that England shall change her policy, and that is among the self-governing British Colonies, who are widely interested in our welfare. For more than twenty years warn- ings and offers of commercial co-operation have come to us from our own Colonies. The old markets are failing us, the neutral markets are being reserved by our rivals. We must realise, before it is too late, that the great Free Trade experiment has broken down, that the whole tendency of modern trade is towards commercial federation, and commercial spheres of influence. We must hasten, while there is yet time, to build up and develop new markets within the Empire beyond the reach of our rivals' control, where our energy, our capital and our enterprise may develop in peace the great spaces of our heritage. CHAPTER IX THE COLONIAL OFFER We have been slow in realising that our attempt to get Free Trade with the rest of the world has failed. Not only is Protection now the settled policy of our rivals, but the once neutral markets are rapidly being re- served for the privileged trading of one or other of our competitors. It is clear that to provide for the future we must look elsewhere. Surely the time has come when every in- habitant of the United Kingdom should put national interests above party prejudice and give a fair hearing to that persistent advocacy of the closer commercial union of the Empire which has been put before us, not by our foreign rivals who hope we shall long main- tain the " Free Trade " policy that they 99 ioo TARIFF REFORM reject themselves, but by the great self- governing Colonies who are so vitally inter- ested in our welfare. We are indeed fortunate that the time of our local need is also the occasion of an Imperial opportunity. The offer of our Colonies is made to us at a time when we ought in any case to change our policy ; the unfair pressure of foreign tariff is crippling our trade ; we can no longer afford to give our rivals the advantage of an open market that they deny to us ; in the interests of the United Kingdom the time has come for the adoption of Tariff Reform. If we adopt this policy foreign nations will realise that the prospect of their imports to Great Britain will depend on the treatment they give to our goods in their tariffs. Our interests will then be able effectively to claim consideration from our neighbours, for the first time for sixty years. We must resume control of our own destinies. All this the United Kingdom can THE COLONIAL OFFER 101 effect unaided, and it is time the work was begun in order to safeguard our existing foreign trade and develop our home pro- duction. But fortunate indeed are we to have the opportunity of introducing a wider scheme, which will enable us to rebuild our commercial supremacy free from foreign control, not on the narrow limits of an Island, but on the firm and wide foundations of an Empire. For over twenty years, at first with but little encouragement, statesmen of our self- governing Colonies have put forward pro- posals that throughout the Empire the British peoples should recognise their community of interests, and that the various portions of the Empire should foster each other's trade by exercising — through any duties that they may impose — a national choice in favour of the importation of British rather than foreign produce. They will in short prefer each other's trade by the effective influence of 102 TARIFF REFORM tariffs, which would grant to British produce either freedom from, or reduction of, any import duties that may be imposed on the produce of foreign countries. They will prefer to buy British goods because they prefer to promote British prosperity. It is believed that this policy would tend to draw the Empire closer together, not only by developing Imperial communication and enlarging Imperial trade, but also by the political influence involved in the recognition of the principle that to every portion of the Empire the prosperity of every other part is something more important than the de- velopment of any foreign country however friendly. More than twenty years ago, in 1886, the British Government, in summoning represen- tatives of our Colonies to attend a Conference at the forthcoming Jubilee celebration of Queen Victoria, proposed defence and com- munication as subjects for debate and invited THE COLONIAL OFFER 103 Colonial suggestions. In reply came the proposal from Colonial Governments for a discussion of Imperial Preference in trade. Next year, when the Conference met in London, a suggestion was made that through- out the Empire a small duty, averaging 2 per cent., be put on imports from foreign countries, and that the proceeds be devoted to the general defence of the Empire. Under such a scheme the Mother Country would have received valuable financial assistance towards the burden of defence ; and a still more valuable colonial recognition of Imperial partnership was involved. But the idea was out of the question to English Free Traders, as it would have meant a departure from Free Trade principles. Not only did they object under such a scheme to duties at home calculated to hasten the development of our own Colonies — that was bad enough to the Cobdenite mind — but the extra duty on foreign goods entering into our Colonies 104 TARIFF REFORM would have given us an advantage over our foreign rivals — an idea which the Cobden Club found intolerable. A very clear example of the colonial offer of preference is found in a resolution passed on April 28, 1892, in which the Canadian Parliament declared that if the Government of the United King- dom would admit Canadian products on more favourable terms than the produce of foreign countries, Canada was prepared to allow a substantial reduction of her duties on British manufactures. In 1894 another Conference of representa- tives of our Colonies met ; this time on colonial soil, at Ottawa, and the representa- tive of the Mother Country sent out by the Liberal Government from England reported that it was clearly the opinion of all the colonial delegates present that some form of Imperial preference was desirable. In 1897, at the Diamond Jubilee Con- ference, Colonial opinion was again recorded in favour of Imperial preference, and the same THE COLONIAL OFFER 105 year was marked by an Act which makes Canada the pioneer of the new movement, for she introduced the principle into her tariff granting a preference in favour of British goods which in 1898 was increased to 33^ per cent. This means that if the Canadian duty on some imported articles is, let us say, £3, that duty will be reduced to £2 if the imports are British goods and made by British workmen. For some years our sales to Canada had been declining, but from the introduction of this new influence the decline in our trade was stopped and improvement began. Free Traders claim that the duties are intended to keep every one out, British and foreign alike, and that a special reduction in the height of a wall is of no value if it is still unclimbable. The state ment ludicrously ignores the fact that under the Canadian preference our sales to Canada have been more than trebled.* * British exports to Canada were declining, without preference, and had reached ,£5,172,000, in 1897 ; in 106 TARIFF REFORM The fact that some of the preferential tariffs of our other Colonies have a list of articles which come in free if of British origin, and only pay duty if they are the produce of foreign nations, shows that Colonial preference is not merely a plan intended to shut us out. At the next Colonial Conference in 1902, the Colonial offer was repeated in the most unmistakable terms, and a detailed statement was laid before the Home Government show- ing the great extension of our sales in various classes of goods affected by the Canadian preference. The offer made at this Conference of 1902 by our Colonies was identical in principle with the proposals that had been put forward at the previous Conferences. During these fifteen years no response had come from the this year preference was granted to us, and our sales to Canada rose under its influence to ^17,101,000 in 1907. THE COLONIAL OFFER 107 Mother Country. But now the whole situa- tion was suddenly changed through the fact that the Colonal Secretary was Mr. Chamber- lain. A far-seeing German writer, realising the pressure of foreign tariffs upon British trade, and pointing out that the time had come for a change in our fiscal policy, wrote in 1893 : " lt; remains to be seen whether time will raise up to England a statesman who possesses clear-sightednes, courage, energy, and tact enough to bring this question to a happy issue — a question which is of so much importance for the future of England, as well for her position among nations as for her trade. But it must be soon, or it will be for ever too late." # There are those who wrongly hold that the great changes in the world's history are altogether beyond the control of any one man. These writers preach the fatalistic * " The Trade Policy of Great Britain," by Professor Fuchs. 108 TARIFF REFORM doctrine that events become inevitable through the pressure of great forces that have long been accumulating, and that the individual heroes of such movements are by- no means indispensable. The nation that pursues a wrong policy on a vital issue will often ultimately learn from the disastrous results that it was wrong and change its policy. But its fate may depend on whether it realises its error in time. No doubt opinion was unanimous that boats were desirable when the Flood came, but the decisive factor was that Noah built the Ark in time, and the rest of them did not. A return by Great Britain to an import duty on manu- factured goods was probably inevitable in any case eventually ; the vast additional sums needed for such social reforms as old age pensions demand that some new sources of revenue should be found ; but, from the Imperial point of view, to the British nation time is a vital factor in the problem, and the THE COLONIAL OFFER 109 effect of an individual on a nation's course is strikingly shown by the fact that it is due to the courage of one man — Mr. Chamberlain — that the necessity of a change in the national fiscal policy of the United Kingdom is now the great dominating question of the day in British politics. As the German writer observed in a later edition of his book — 11 The statesman of whom I spoke twelve years ago . . . seems to have come at last." * Let us hope that he is not too late. Every day that we persist in our present policy of free imports our great rivals are increasing their lead in industrial production, and they are extending their hold over the neutral markets ; but more important still is the action of our rivals who are eager to make tariff bargains with the British Colonies whose offers we refused. And while time slips by, and we take no action, these great foreign centres of manufacturing * P. viii. no TARIFF REFORM power are doing their utmost to draw within their commercial spheres of influence the outlying portions of our Empire. Abandoning for the sake of the cause his official position, Mr. Chamberlain made him- self free to embark in a great campaign in favour of the new policy ; he advocated a reform of the British tariff under which all raw materials were to be admitted free and a duty was to be levied on imported manu- factures graduated from a low duty on partly finished goods up to a duty averaging 10 per cent, on fully manufactured articles. In addition to this low duties were proposed on certain foreign importations, such as corn and meat, of which the whole of the Imperial supplies were to come in free. It was felt that if foreign produce was subject to duties from which our own farmers of the Empire were free, the production of Imperial food- supplies, both at home and oversea, within the British Empire, would be encouraged THE COLONIAL OFFER in and developed, and the duties would also have the advantage of being an effective means of granting advantages in our tariff to our Colonies in return for mutual concessions. All possible risk of any additional burden falling upon the poorer classes of the United Kingdom was to be avoided by reducing the existing duties on such imports as tea, coffee, cocoa, and sugar, the old Free Trade food taxes to be thus taken off being greater in amount than the new corn and meat taxes to be imposed. Both old and new systems have food taxes, the only important difference is that the Free Trade food taxes are bound to fall entirely on our own people, since all sources of supply are taxed by Free Traders, whereas under Mr. Chamberlain's scheme vast untaxed sources of food-supply from within the empire would be free, and the foreign producer anxious to sell to us would often have to cut his prices and so pay the duty or risk losing his market altogether to ii2 TARIFF REFORM his more favourably placed British rivals at home and in the Colonies. At first an attempt was made to suggest that there was no existing Colonial offer of preference, but the contention soon became ridiculous, for Canada's action was followed by the granting of preferential advantages to the exports of the United Kingdom by Australia, New Zealand and South Africa, and the principle was extended by our Colonies beginning to make similar arrange- ments with each other. The next Colonial Conference occurred in 1907, and thanks to Mr. Chamberlain's cam- paign, public attention was concentrated on to the views officially put forward by the assem- bled Prime Ministers of all the self-governing Colonies. They all expressed the willingness of the people they represented to enter into arrangements for preferential trade between the various portions of the Empire, placing THE COLONIAL OFFER 113 on record their opinion that it was desirable that the Mother Country should grant pre- ference to the Colonial products and offering preferential advantages for her products in their tariffs. The Home Government, while flatly de- clining the Colonial suggestions, gave some remarkable evidence in favour of accepting them. Mr. Lloyd George's statement was perfectly clear : " Here let me express," he said, " for the Board of Trade, whose duty it is to watch carefully all that effects our trade in all parts of the world, our appreciation of the enormous advantage conferred upon the British manufacturer by the preference given to him in the Colonial markets by recent tariff adjustments." H ii4 TARIFF REFORM He added : "The Canadian preferential tariff has produced a marked effect on our export trade to Canada . . . "it has undoubtedly stimulated trade between the two countries." Mr. Asquith confirmed this statement and said : "As regards the Canadian tariff, I acknowledge that it has been bene- ficial to British trade, and particu- larly, I think, to our textile in- dustries." CHAPTER X THE OPPOSITION TO TARIFF REFORM There are many who, turning from Mr. Chamberlain's arguments, found the strongest possible confirmation of the justice of his views in the extraordinary weakness of the arguments brought against him. Once challenged, the whole structure of the case for free imports has collapsed. At one time we were warned against Protection on the ground that its presence in other countries is due to the greed of a few rich manu- facturers who have corrupted the local poli- ticians. This does not seem a very convincing- explanation of the Protectionist policies and views of Napoleon, Bismarck, Washington, Alexander Hamilton, and Abraham Lincoln. "5 n6 TARIFF REFORM This charge, however, now appears to be withdrawn, for at the recent Free Trade Congress one of the speakers said that he considered it to be a very good test of a man's sanity to see whether he was a Free Trader or not. As this remark was specially selected for publication by the Cobden Club, in a very short report of the speech, we are now able to know that this gentleman thinks Napoleon and Bismarck were Protectionists because they had not got the intellectual capacity of this modest Cobdenite. Another interesting result of this Confer- ence was to dispose of two other arguments frequently brought forward against Mr. Chamberlain's proposals. We are sometimes told that we must not put on any duties because they are always raised higher and higher, and it is also said that it is impossible to distinguish between raw materials, partly finished, and fully manufactured goods ; but the valuable evi- TARIFF REFORM OPPOSITION 117 dence of the Dutch Free Trade representative showed that Holland had a tariff with a moderate duty on the finished manufactures, a lower duty on partly manufactured goods, and no duty on the raw material ; and it was further shown that those low duties had been in force in Holland for forty years, a term long enough to prove that duties can be kept at a low level in countries whose special interests are served by a moderate tariff. It is curious that forty years should elapse before the Cobden Club realised that such a tariff was at work close to our shores, for clearly they cannot declare that a graduated tariff is impossible when it exists. In a confused series of arguments we are told that Free Trade secures a better share of pros- perity for the poor than Protection ; that we must adhere to Free Trade, under which we are "amazingly prosperous," and that it would be wrong to adopt Tariff Reform, for we have one-third of the population on the n8 TARIFF REFORM verge of hunger. In other words, we must not try a new remedy because the patient has been made very ill by the existing treatment. At one moment Cobdenites solemnly warn us not to adopt Protection because, once introduced, it can never be got rid of; the next instant we are told that if we only persevere with our Free Trade policy the other nations will all give up Protection. The new proposals met with opposition from a portion of the Unionist party whose adherence to the doctrines of Mr. Cobden made them object to a tariff being used for any purpose except revenue. Their most prominent financial authority, when Chan- cellor of the Exchequer, had steadily refused to reduce any of the existing British food taxes in favour of Imperial produce. Curiously enough, he had recently put a duty of i^. a quarter on all imported corn ; to this the Free Trade Unionists did not TARIFF REFORM OPPOSITION 119 object, but the idea that this duty should be reduced by the remission of the duty on corn from within the Empire was strongly objected to. Their opposition to such pre- ferential treatment is a most sincere expres- sion of the Free Trade ideal. But when this body proceeded to form themselves into an organisation and assumed the title of the "Free-Food League," it became evident that they were trying to make up for the weakness of their cause by the inaccuracy of their title. Ultimately, and to their credit, the name was withdrawn. The suggestion that a 2s. duty on corn will go on rising to dangerous heights ignores the decisive fact that the agricultural interest alone could possibly desire such a thing, and the urban population of the United Kingdom is in such a vast majority that no such law would ever pass the House of Commons. It is sometimes said that a tariff would create trusts. 120 TARIFF REFORM The fact that we dislike American trusts is no reason for allowing them by our Free Trade policy to get a controlling influence over some of our essential supplies. The fact that we dislike corners is no reason for allowing our dependence on America to increase. To any one who has read the reports of the Conferences of 1887, 1894, 1897 an d 1902, it is simply astounding that an attempt should have been made by politicians in England to discredit the proposal for Imperial preference by denying that there had been any Colonial offer made ; but the influence of such tactics had a considerable effect in retarding the progress of the Tariff Reform movement in the United Kingdom, and the controversy actually lasted till the Colonial Conference of 1907 assembled in London. Then the truth became so evident that the facts appeared even in the Radical papers, and it was found that the assembled Ministers of all the great TARIFF REFORM OPPOSITION 121 self-governing Colonies of the Empire were in favour of Imperial preference. The resolu- tions passed at the 1907 Conference destroyed the possibility of any further pretence as to there being no Colonial offer. Even Liberal evening papers had to admit the facts, though as a matter of fact the resolutions of 1902 and 1907 were identical. As all the self- governing Colonies had preferential tariffs in operation, through the act of their elected representatives in Parliament, it was rapidly becoming difficult to maintain the pretence that they were not in favour of the scheme. It is sometimes said by Free Traders that our former policy of Colonial preference was partly responsible for the loss of our American Colonies. A decisive answer to this charge is found in the "Bill of Rights" drawn up by the Philadephia Congress just before the rebellion. At a time of great hostility to the Mother Country, the Colonists put on record 122 TARIFF REFORM the following emphatic statement of their feelings with regard to Colonial preference : " From the necessity of the case and in regard to the mutual interests of both countries, we cheerfully consent to the operation of such Acts of the British Parliament as are bond fide restrained to the regulation of our external commerce for the purpose of securing the commercial advantages of the whole Empire to the Mother Country and the commercial benefit of its respective members." There are British Free Traders who have warned us to reject Mr. Chamberlain's policy lest we should by its introduction offend our foreign neighbours and run grievous risk of their combined hostility and war. The Cobdenites put forward the idea that an alliance of the great nations would frighten us into maintaining Free Trade for their benefit. Such action would come from TARIFF REFORM OPPOSITION 123 our neighbours, all agreed that Protection was the best policy for themselves, and all united in enforcing Free Trade upon us by the threatening power of their armaments, closing their own oversea possessions to our trade, but compelling us to have no pre- ferential tariffs in our Colonies ; penalising our ships, but forbidding us to favour our mercantile marine ; refusing the freedom of sale to us, but demanding it for themselves : all this is a strange picture. It throws a clear light on the problem of one-sided Free Trade. We were told that free imports gave us an enormous advantage over our poor Pro- tectionist rivals, why then should they mind our giving it up ? There can be only one reason. By using such an argument Cob- denites admit that to our commercial rivals the advent of Tariff Reform appears to be the beginning of a development giving us, in the opinion of foreign governments, so great i2 4 TARIFF REFORM an advantage that they would be prepared to go to all the risk of a great war to enforce Free Trade upon us by arms and not by argument. Cobdenites advocate in this case Free Trade as a price paid for peace. When the Free Traders advance such an argument their case must be making its last stand ; they are occupying a most ignominious last ditch, a forlorn excavation more suitable for the burial of their hopes than for the main- tenance of their policy. It is a position that can only be taken up by abandoning all their original lines of defence. It is but a short time ago that the Free Trader told us, in defiance of easily ascer- tained facts, that we were beating all our Protectionist rivals in the neutral markets through Free Trade. Why should our rivals object to our abandoning this advantage ? We were told that preference would lead to internal dissensions and the break-up of our Empire. Is it that our foreign rivals are TARIFF REFORM OPPOSITION 125 anxious to prevent ? — are they going to make war on us lest we should adopt a policy which Free Traders say would ruin our shipping ? The action of foreign nations would not be the supposed folly of parliaments yielding to the pressure of clamouring manufacturers ; it would be the result of the deliberation of the leading statesmen of the nations considering, apart from all such influences, the probable effect of Tariff Reform on our position in the world, Great, indeed, must our advantage seem to them if they prefer the risk of war. They would — so say the Free Traders — prefer war to peace if it was peace with British preference. We shall always be willing, in friendship, to meet our neighbours with concession for concession ; and we can- not in justice be denied the right to adopt their methods for the peaceful development of our Empire. Curiously enough the Liberal party in England secured a victory for "Free Trade " 126 TARIFF REFORM at the last general election through calling forth all the latent Protectionist instincts of the working classes by the suggestion that their opportunities of employment were being taken away from them in South Africa by the cheaper competition of Chinese labour in the mines. A most striking fact is the failure of the Cobdenite arguments to convince the people of other countries. Free Trade has been occasionally tried by other great nations, but they have always given it up. The power to appreciate Free Trade is said to be an admirable test of intellectual capacity. This lofty ideal, offering the attractive promise of universal peace, was enforced upon China by the bombardment of her ports ; upon France by the personal opinion of Napoleon III., and upon Turkey by the reactionary party whose downfall must be the despair of the Cobden Club. Quite recently the survival of Free Trade in Europe depended on the victory of TARIFF REFORM OPPOSITION 127 Abdul Hamid in Turkey and the Liberal party in England. The republics of France and the United States will have none of it. Even in our Empire beyond the seas Free Trade is only to be found where it can be enforced by administrative action from England, and it has never permanently survived the grant of self-government to any Colony. The theories of Free Trade are not of British origin or due to British statesmen. Other nations have tried it. It was the policy of France before the Revolution, of Germany in the seventies, when her population was pouring out to seek employment elsewhere ; it is well marked in the history of the United States by the financial disasters that followed its introduction. If to-day the great nations are one and all Protectionist it is not because they have not heard of Free Trade in theory ; it is because they have experienced it in practice. CHAPTER XI DEFENCE In his "Life of Cobden," Lord Morley alludes to the fact that a number of great men, Cromwell, Frederick the Great, Louis XIV. and Napoleon were Protectionists, and like a true follower of Mr. Cobden, dismisses them with the remark that " Warriors and despots are generally bad economists." * It is an unconvincing argument that dismisses Napoleon the administrator, the law-maker, the master-mind, as though his capacity were limited to military subjects. There seems no reason to suppose that intellectual supre- macy in one department of human effort implies incapacity in another. The remark- able array cf hostile military opinion in men * " Life of Cobden," p. 460. 129 1 i 3 o TARIFF REFORM of the highest mental capacity ought to have led to an impartial inquiry into the whole question of Free Trade in its relation to defence. It may be that the Free Trade professors were wrong when, in forming their theories, they ignored the vital neces- sities of national defence. In the whole theory of Free Trade we find no recognition of the dangers to a nation of reliance on a possible enemy for its food-sup- plies. Free Trade theorists would have made no effort artificially to divert the world's carry- ing trade from the Dutch to our own ships. To the Free Trade professor the develop- ment of the power of a foreign rival is just as desirable as the increase of the power and commerce of a colony under our own flag, whose whole strength is our aid in war. Even from the narrowest commercial point of view defence is essential ; it is only our flag that keeps great markets like India open to our trade. We live in a world where DEFENCE 131 there is no international police to guard us ; to hold its goods in peace a nation must be armed, and with our great dependence on foreign supplies we must at all cost maintain our command of the sea, and yet that command may some day pass from us, not necessarily because we have forgotten the need for ships, but because in the long-run we cannot under free imports maintain our lead against the overwhelming development of our two great Protectionist rivals, Germany and the United States. Already they are far ahead of us in population, and in the production of iron and steel. Not only does their population grow more rapidly, but Germany finds employment for an annual increase of her population amounting to about double our gain, while of our much smaller increase a vast number have to emi- grate to find opportunity for employment. If the development of all three nations is maintained on the present lines, the time 132 TARIFF REFORM must come when we shall be unable to maintain our naval supremacy against our rivals. In this very year, 1909, the sums voted for naval construction by these three coun- tries are almost equal, and our vote is not the largest. America has the financial power to outbuild us now ; some day it will be Ger- many that can outbuild us. Are we going on along this road seeing the dangers that lie ahead, or are we going to break away from our mistaken policy, and abandoning the guidance of the Free Trade economists, take the vital issue of defence into account in our new national policy ? And if we do, we shall realise that it is only on the wider founda- tions of the Empire that we can maintain our position. We shall then see that it does matter to us whether our food-supplies come from possible enemies, probable friends, or from the safer sources of our own Empire. We shall see that emigration is worth con- DEFENCE 133 trolling, that it is better to keep our people under our own flag and to encourage them to grow food for us. We must develop those British lands whose power is added strength to us ; their development brings advantage to us financially, commercially and for defence. If their revenues increase we do not find new navies springing up to threaten our very existence. CHAPTER XII IMPERIAL PREFERENCE AS A BOND OF UNION Finally, let us consider the influence of Imperial co-operation in trade as a bond of union between the scattered dominions of the Empire. The bond of commercial union is an essential portion of every great federation ; we see it in the Constitution of the United States, it is the foundation of the finances of the Union of the Australian Common- wealth. Its powerful influence, as Cobden foretold, has helped to join the scattered elements of Germany into a solid Empire. Throughout the world we see our great rivals drawing the lesser States around them into their spheres of commercial influence. Cobden's ambition, a cosmopolitan world !35 136 TARIFF REFORM in which all the individuals without distinc- tion of race were to engage in unrestricted competition, has proved to be an idle dream. It seems as though the future will rather give us a competition for the survival of the fittest among the organised nations. The nations and the governments who show the greatest capacity for the development of their resources and the effective organisation of the productive power of their inhabitants, will in the long run tend enormously to increase in power. When Germany was divided and practising Free Trade her in- habitants were emigrating at a rapid rate ; since then, under the unifying influence of commercial union, she has become an Empire Her population find opportunities for success- ful employment, they stop in Germany, her emigration has practically ceased, and the whole level of life among her people has been greatly raised, while the State has been able to develop various systems of insurance, IMPERIAL PREFERENCE 137 saving the workers from some of the evils of old age, accident and sickness. Is it not perhaps best that there should be such com- petition between the nations in organising efficiency ? But we must organise on the new lines if we are to survive. If we do not, the more effective systems of our rivals will gradually place those nations in a position of supremacy, and to the attraction of these larger bodies our scattered possessions will gravitate. By taking thought they have added to their stature, from the less effective system power gradually passes away, but there is probably no country in the world which has such opportunities for the effective employment of her people as the United Kingdom, with her geographical position, her natural resources and her vast oversea possessions crying aloud for development. No other nation has had such an oppor- tunity for successful State action to guide and foster development. After sixty years of the K 138 TARIFF REFORM great Free Trade experiment how shall we judge Cobdenism ? By its fruits. A third of the nation " on the verge of hunger." A trade not flowing in its natural channels (though that would be bad enough) but checked here, diverted there, changed in character or blocked altogether at the dictation of every government except our own ; our iron and steel supremacy gone, our people emigrating to settle beneath other flags, and our chief rivals rapidly outdis- tancing us in population and in power. Cobdenism stands condemned, not only by the verdict of every great self-governing race overseas, but by the disastrous results in our own country, which has suffered as nations always will suffer when they listen to false prophets, when they accept inaccurate cal- culations, when they forget the methods to which they owe their greatness. How far the disease may be cured, the decay stopped, and the damages repaired largely depends IMPERIAL PREFERENCE 139 on the capacity of the people to realise their mistake and demand a return to our old national policy before it is too late. The financial power that dominated Europe, the endurance that crushed Na- poleon, the carrying trade of the world, sea- power itself — all the essential foundations of her Empire were won by England under a national and Protectionist policy. Modern politicians cannot obliterate our past, but if they fail to understand it they may destroy our future. Printed by Ballantvne &* Co. Limited Tavistock Street, Covent Garden, London UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. NOV 23 1 LD-URI AM 7-4 A-9 Form L9 — 15m-10,'48 (B1039) 444 JflOVEMITY af GAW^fej AT LOS ANGELA UBRAir UC SOUTHERN REGIONAL LIBRARY FACILITY AA 001 007 307 o