l:iJ-MFNT5n Tin: [ iSCAL^^ PROBLF3M ^^^ LG.CmoZZA MONFY ELEMENTS OF THE FISCAL PROBLEM. BRITISH IMPORTS AND EXPORTS IN 1902, IN MILLIONS STERLING. IMPORTS. Visible Imports: — (ii) Gold and Silver ... 31 {b) Food and Liquor 223 (c) Raw Materials ... 160 (d) Manufactures ... 132 (e) Miscellaneous ... 13 Invisible Imports: — [These are of precisely the same nature as the invisible exports detailed opposite, but for obvious reasons their value is comparatively small, and certainly amounts to less than the item (e).] Total Imports 559+ EXPORTS. Visible Exports: — {a) Gold and Silver ... (6) Food and Liquor (c) Raw Materials ... (d) Manufactures {e) Miscellaneous (/) Goods Previously Imported (^) Old Ships (not re- corded) ... Invisible Exports : — (a) Net Freight and In- surance Earnings of British Ships, say (b) Interest earned on British Invest- ments abroad, say (c) The Indian "Home Charges" {d) Interest on Suez Canal Shares ... {e) Banking Services, Com missions, Remittances of Pay, &c. 26 16 32 222 13 66 90 90 17 1 Total Exports 573+ ELEMENTS OF THE FISCAL PROBLEM. BY L. G. CHIOZZA MONEY, Fellow of the Royal Statistical Society, Author of " British Trade and the Zollverein Issue," etc. LONDON : P. S. KING & SON, ORCHARD HOUSE, WESTMINSTER 1903. Hr PREFACE. ilj These pages are offered to the public as an elementary CO >. treatise upon a very difficult and complex subject. In en writing them, I had to assume either acquaintance or "^ want of acquaintance, on the part of the average reader, with the meaning of such terms as tonnage, wages, draw- backs, imports. I have decided to treat the subject ah ^ initio, in the hope that those who are intimate with the a terminology of economics and commerce will forgive the ' passages of elementary exposition for the sake of the value of the collection of facts which accompanies them. o L. G. C. M. a ^ November, 1903. H71)75 CONTENTS FRONTISPIECE — BRITISH IMPORTS AND EXPORTS IN I902. CHAP. I. INTRODUCTORY II. WHY WE IMPORT III. OUR IMPORTS OF FOOD .... IV. OUR IMPORTS OF RAW AND CRUDE MATERIALS V. OUR IMPORTS OF MANUFACTURED MATERIALS AND ARTICLES OF PERSONAL USE . VI. OUR IMPORTS OF LUXURIES — A SUMMARY VII. OUR EXPORTS OF GOODS .... VIII. OUR EXPORTS OF SERVICES .... IX. THE GROWTH OF AN IDEA .... X. THE TAXATION OF FOOD AND MATERIALS XI. THE DIRECTION OF BRITISH TRADE XII. COLONIAL IMPORTS FROM FOREIGN COUNTRIES XIII. INDIA XIV. THE SPECIAL CASE OF AMERICA . XV. THE POPULATION OF THE BRITISH EMPIRE . XVI. "dumping" . XVII. " MOST FAVOURED NATION " . XVIII. SHIPS AND SHIPPING ..... XIX. WAGES ........ XX. THE PAST, THE PRESENT, AND THE FUTURE 4 8 20 26 34 41 62 72 81 97 III 121 128 135 140 148 162 169 178 INDEX 231 ELEMENTS OF THE FISCAL PROBLEM. CHAPTER I. INTRODUCTORY. A WISE fiscal policy can, at best, enable a nation to make the most of its natural advantages. In the long run, industries must come to be carried on in those parts of the world best suited to them, and commerce must flow chiefly in the great highways which Nature has fashioned. But, of the factors of material prosperity which are under human control, fiscal policy is not the least, and while the judgment of the nation upon the question which has arisen through Mr. Chamberlain's conversion to Protection can- not ensure commercial supremacy to these islands for ever, it may lead to the loss of the solid substance of British prosperity in the vain imagination that a poor copy of the Dingley tariff will arm us at all points even as America is armed. The end is not ours finally to shape, but the manner of our rough hewing of it will be fraught with momentous consequences to our teeming population in the near future. The true claim for Free Trade is not that it has given us y^'the wealth we enjoy, but that, by favouring no private interest at the expense of the State, it has given the nation free play for its energies. No unsuitable industry has been artificially fostered. The consumer has been left free to exchange the products of his labours for F.P \*^ """ ""'""'""' ""* B 2 ELEMENTS OF THE FISCAL PROBLEM. the best value the world has to offer. Monopoly has not been suffered to raise its head. The processes of natural selection have guided the activities of our people into those channels where most profitably they can be employed. As a result we have taken full advantage of our geographical position and resources. Indeed, in some respects, we have prospered even to a greater extent than our resources would warrant, because other nations have chosen in part to waste their gifts by the tariff modi- fication of their natural development. Thus, there can be no question that our shipping has gained by the tariff policy of the United States. When the inherent advantages of a country are con- sidered, it must be remembered that these are not only its fields, forests, quarries, and mines, but its position on the globe and the extent of its seaboard. Sea carriage is cheaper than land carriage, and will probably remain so. That being the case, an island nation, placed in an advantageous geographical position, should count its sea- board, and the opportunities which it affords for com- mercial intercourse, [amongst its greatest gifts. That which a nation lacks may be brought into it, and the ease with which, under a wise fiscal policy, supplies can be procured from oversea, may in great part, or altogether, atone for native insufficiency. We have, then, to consider a problem in connection with which it is not always an easy thing to trace causation, to differentiate between the gifts of Nature and the modifications to which those gifts have been subjected by individual enterprise and acts of legislation. To make comparisons, therefore, between British Custom House figures and those of any other nation or nations, and to draw, from such comparisons alone, inferences as to the wisdom or unwisdom of a particular pohcy, is an utterly illogical proceeding. Mr. Chamberlain appears to believe that, in considering the position and prospects of British trade and industry, INTRODUCTORY. 3 it is sufficient to turn to the record of the declared values of the goods which we ship to places oversea. That is to say, he does not consider our resources, production and commerce, but our exports. Moreover, he does not even consider the whole of our exports, but a part of them, forgetting that we export services as well as goods, and that we are not only manufacturers, but engineers, merchants, shipbuilders, shipowners, and bankers also. Again, he does not consider our exports of goods fully, but confines his observations to the movement in their value. Finally, he passes to a comparison of the progress of British exports, as measured in this incomplete and unsatisfactory manner, with those of certain foreign countries, without reference to the fact that the United Kingdom, the United States, and Germany differ so widely in area, population, geographical position, natural advantages, and relative stage of development, that fiscal policy is but one of the factors which must be considered in connection with their comparative progress. If the nation is to arrive at a wise judgment upon the fiscal question, it is above all things necessary that those who place the issues before it should submit the whole of the available evidence. Our small area, large population, and limited natural resources combine to make our position a peculiar one, and it is idle to discuss our out- ward shipments as though they afforded the sole test of our prosperity. My purpose in these pages will be, there- fore, to place before the reader a general survey of the present conditions of British trade, a survey which, while it cannot, in the nature of the case, be complete, will aim at giving a broad view of the subject, and above all endeavour to avoid the fallacy of drawing general con- clusions from exceptional instances. B 2 CHAPTER II. WHY WE IMPORT. The United Kingdom has an area of but 120,000 square miles, and a population of over 42,000,000 people, or about 350 persons to the square mile. The true function of our external commerce — the gaining of imports — is best realized by consideration of what the position would be if we shut every port, burnt our ships, and resolved to live upon what we could produce by work done upon our 77,000,000 acres. Let us take stock of what we have at disposal. There are about 700,000 acres of inland waters ; 3,000,000 acres of woods and plantations ; 13,000,000 acres of mountain and heath land ; 48,000,000 acres under crops and grass ; 1,600,000 acres of Irish bog and marsh; and a balance of 11,000,000 acres or there- abouts, which is, as to a part, barren, and, as to the remainder, used for roads, towns, pleasure grounds, &c. On this land we raise a great quantity of food, valued approximately at ^^300,000,000 per annum. If we cared to, we could sustain a certain population upon this food. We could elect to have more bread and less meat by devoting more acres to wheat and less to pasture, but if we raised less sheep and cattle, we should have not only less meat, but less wool and hides. We have little native timber, but by cutting down rations a little further we could devote so many more acres to afforestation. Climate would prevent our indulging in wine, or sugar, or tea, or coffee, or cocoa, or tobacco, but none of these things is absolutely necessary, though all of them are mightily convenient. We should be badly off for manure, but perhaps could make up for that by using all odd corners WHY WE IMPORT. 5 of ground, cutting down pleasure grounds and reducing the width of roads. Our fisheries do well, and land some 3^10,000,000 worth of fish per annum. Turning to the mineral world, we are very well off when our small area is considered. Of coal we have enough to use profusely for centuries. We have also a great deal of iron ore — although some of the best supplies have given out — and of that important mineral, limestone, which, with iron ore and coal, goes to the making of pig-iron. Then we have good supplies of potters' clay, sandstone, slate, granite, and the chalk which rejoices the eye of the returning son of Albion. We have also small supplies of tin, lead, copper, zinc, and pyrites, invaluable to the chemical industry. We have more native gold than most people know of, raising some thousands of pounds' worth per annum. Such, speaking broadly, are the natural resources of the United Kingdom. Applying ourselves to them, and to them alone, we could live, doubtless, in fair content — if we knew of nothing better. But Britons are a roving race, and long years ago sailed away to lands near and far, and brought back samples not only of a thousand covetable articles which Providence has not bestowed upon these islands, but of wonderful stuffs and devices which no one here had ever happened to make or think of. From those early years until now we have sent our ships to every clime, and they have ever been pouring upon our shores the wealth of the world, until, throughout the kingdom, in palace and mansion and cottage, are to be found foreign products. If we had confined ourselves to the use of what our own land produced, or could be made by human skill to produce, we should have been a poor race. Cribbed, cabined, and confined in our 120,000 square miles, under skies not always bright, never sure of a bountiful harvest, denied every product that needs a tropical sun, our wits unsharpened by contact with other races, our industries 6 ELEMENTS OF THE FISCAL PROBLEM. unstimulated by foreign example and unfed by foreign materials, we should have reached but a low degree of attainment in every department of human effort. By availing ourselves of the riches of the entire globe, by bringing goods from the three corners of the world, by seeking and finding and shipping, we have attained the commercial supremacy of a world of 1,500,000,000 people. Let me sum all this in a few words. Our native resources are barely sufficient to give plain fare, poor housing and few comforts. Our imports have made us a rich people. In spite of the facts I have briefly detailed, however, there are not wanting those who urge that we should aim at " self-containment," and who appear to believe it possible that we could attain that aim by means of import duties.^ Perhaps the best comment upon the ideal of economic self-containment for our 120,000 square miles is to point out that the United States of America, which has an area of 3,000,000 square miles, or twenty-five times that of this country, imported in the twelve months ended June, 1903, in spite of the Dingley tariff, and although she is so largely indebted to other countries for shipping services and interest on borrowed capital, 1,025,751,538 dollars' worth of foreign produce, which as to 218,319,765 dollars consisted of food, and as to 375,150,947 dollars of quite raw materials. If economic self-containment is not possible to America it is clear that for ourselves it is an unattainable ideal, unless we consider- ably reduce our population and are content that the remainder should have a much lower standard of comfort than at present. Not to flog a dead horse, however, it is only fair to say that economic self-containment for the United Kingdom is a chimera cherished by few Protec- ' Vide Mr. Ernest E. Williams in " Free Trade v. Protection," p. 34 : " Economic self-containment, particularly in the matter of food supply, is a necessity to the well-being of any country, and can in this country only be secured by a return to Protection." WHY WE IMPORT. 7 tionists. With the greater breadth of view which has in some respects accompanied the growth of the Imperial spirit, a few, at least, of the false ideals of the old Protec- tionists have faded. It is no longer urged that all the ships that bring commodities to our shores are inimical to our welfare. It is admitted that imports from one-fourth of the human race, the inhabitants of the British Empire, are consistent with the prosperity of the United Kingdom. A larger ideal, that of a self-sufficient Empire, has happily served to widen the insular horizon of many Protec- tionists. It is to be feared, however, that it merely presents attractions to some of them because it is a patent fact that imports from our self-governing Colonies, especially of manufactured articles, are comparatively small. Indeed, Mr. Chamberlain's proposals found little support so long as they were confined to the encourage- ment of imports from our Colonies. It was the addition to his programme of a campaign against foreign importa- tions that filled the average Protectionist with enthusiasm. If our Colonies were large exporters of manufactured articles, the opinion of many of our tariff reformers, it is to be feared, would be found closely to resemble that of the famous resolution of the Canadian Manufacturers' Association on a preference for British manufactures.^ It is the ancient fear of imports which is the basis of the New Protectionism, even as it was the basis of the Old. ' In August, igo2, the Canadian Manufacturers' Association passed the following resolution on the Canadian Tariff: "That while such tariff should be primarily framed for Canadian interests, it should nevertheless give substantial preference to the mother country, and also to any other part of the British Empire with which reciprocal preferential trade can be arranged to mutual advantage, recognising always that the minimum tariff must afford adequate protection to all Canadian producers." In other words, the tariff is to be so arranged that the duties, with the reduction, shall sufhce to afford " adequate protection." CHAPTER III. OUR IMPORTS OF FOOD. The fear of imports is the beginning of " Protection." It is an unworthy and illogical fear, for if thought be taken it will be seen that to import or receive is to gain. We live on an island, and, to state an elementary fact in simple terms, an island is richer when goods are brought into it and poorer when goods are taken out of it. This sounds very like expounding the obvious, but it is really necessary to refer to it at a time when our ability to buy what we want cheaply from the foreigner is treated as a national misfortune. It is strange that civilised statesmen should fail to comprehend the commerce of an island, when even a savage knows that if he takes a laden canoe across the sea he loses unless he can bring it back containing as good or better value than that with which he set out. Because the ships of the Islanders have returned well laden they have made their owners the richest people in the world. We shall return to this point presently, when we come to consider what it is we exchange or our magnificent imports. My immediate purpose is to examine them in detail, that we may be quite sure whether they are harmful or not. In the first place, as most people know, we import a large quantity of food. I have already stated that our home-grown food (for both man and beast) is valued at about 5^300,000,000 per annum. In addition w^e import ^215,000,000 worth more, making a total of, say, £500,000,000 of food and fodder. The fodder, so far as it is consumed by cattle, sheep, and pigs, is also ultimately food for man in the form of meat, milk, butter or cheese. OUR IMPORTS OF FOOD. 9 Discussions as to our food imports usually centre round wheat, but the value of our wheat and wheat flour imports only accounts for £36,000,000 out of the ;^2i5, 000,000. Meat imports amount to ^^46,000, 000, and those of butter to 3^20,500,000. Other big items are cheese, 3r6,ooo,ooo ; barley, £"7,000,000; oats, £5,000,000; maize, £12,000,000; fruit, £13,000,000 ; sugar, £18,000,000 ; tea, £9,000,000 ; eggs, £6,000,000. There is a widespead impression that, if we increased our production of wheat, we should be less dependent on foreign food. The fallacy of this is apparent from the consideration that increased wheat production would mean the sacrifice of some part of our meat and milk production. Our imports of wheat and wheat flour amount to about 100,000,000 cwt. per annum. Even if we returned to the wheat acreage of 1870 we should only grow an additional 30,000,000 cwt., and require a balance of 70,000,000 cwt. from oversea. To devote 2,000,000 more acres to wheat to produce this result would mean that there would be a reduced production of other foods, which would have to be imported in their turn. I have dwelt upon this point because it is sometimes represented that protection for agriculture would make us independent of food shipments. I say " sometimes " advisedly, for it is as often found convenient to represent that our Colonies could easily supply us with all the food we now obtain from foreign countries. I need hardly point out that, if the latter contention were true, it would not matter whether the sea-borne food were derived from the foreigner or from our Colonies — the result would be the same to the British farmer. Another important consideration is that the wheat we grow, even on our best wheat lands, is not so nutritious, not so well ripened, as that imported from America. This is an effect of climate which it would pass the wit of man to alter, and should always be taken into account when it is represented that by stimulating the production of wheat lo ELEMENTS OF THE FISCAL PROBLEM. on unsuitable soils the nation as a whole would benefit. No policy could extend our fields or give us the boundless prairies of America, but our open ports give us all the advantages of possessing the best soils and the best climates for the production of any and every description of food. In effect we are not islanders with only the resources of an island at our disposal. We draw upon the world for our supplies, using its best and most plenteous stores, whether of grain, or meat, or fruit, or wine. We have not merely to depend upon the uncertain harvests of a northern clime — our food supply is safe, for it comes from many countries, and we rule the seas which bear the ships that bring our harvests home. The importance of availing ourselves freely of every possible source of food supply is shown by a consideration of the figures relating to our imports of wheat during the past seven years : — United Kingdom Imports of Wheat and Flour in Equivalent Weight of Grain. In Millions of cwts. — 1895- 1896. 17-2 1-3 24 19 54 19 10 52-8 5-0 i-g 6-3 21 1897. 1898. 1899. 1900. igoi. igo2. Russia Germany France Austria Roumania Turkey Bulgaria 23 II 1-6 1-8 20 1-3 453 II-4 10 5'i 8-8 30 151 1-4 23 1-6 I '2 1-8 II 54-1 0-9 10 69 06 64 08 06 10 02 0-3 620 40 0-8 77 95 02 25 05 09 14 602 "■5 03 8-7 8-2 30 07 4-5 1-8 10 1-6 07 o-i 01 57-4 187 80 2-9 I-I 2-6 06 07 i-i 0-5 0-4 0-2 66-8 8-3 8-6 3-3 G-2 1-4 6-6 03 10 o-g 24 03 08 U.S. A Argentina Chile Canada India Australia 64-9 4-5 03 12-2 8-8 4-2 O-I New Zealand ... Total of above and other countries 1072 99-5 887 94 4 985 986 lOI 107 9 OUR IMPORTS OF FOOD. ii It will be seen that the North American supplies are the steadiest, and that no reliance can be placed upon wheat imports from any British possession except Canada. In igo2 the quantity imported from British North America amounted to only one-fifth of the American supply. Nevertheless, it is only fair to say that Canada as a food supplier is a considerable asset, and if Australia, New Zealand, and South Africa could be depended on for similar shipments, which unfortunately is not the case, the discouragement of foreign supplies, although unwise, would not be such an act of supreme folly as the above figures show it to be at present. The detailed analysis of our imports in 1902, which begins on page 13, divides the items into eight great classes or groups. The first class is " Food and Fodder," and it shows the value of the food we imported in 1902 and the proportions of each item purchased from foreign countries and British possessions respectively. These figures establish the remarkable fact that as much as four-fifths of our imports of food, purchased in the cheapest and best markets, are derived from foreign countries. The foods which are derived more largely from British posses- sions than from foreign countries are few in number. The only ones of importance are cheese, tea, rice, and mutton, and, with regard to the last-named, Argentina is rapidly overhauling New Zealand as a supplier. The table shows not merely how much food we import, but how much we retain for home consumption. Our trade in foreign and colonial merchandise is a very profitable part of our commerce, but the re-exports are not stated with any desire to minimise our imports. It would be better still if we retained the whole of the 3^215,000,000 worth of food in the United Kingdom instead of reselling ;;^9, 000,000 worth to places oversea. It would mean the consumption of so much more good food in our own country. The amount of imported food retained for home consumption in 1902 is seen to be ;/r2o6,ooo,ooo. 12 ELEMENTS OF THE FISCAL PROBLEM. I need not dwell upon Table B., which records our importations of wines, spirits, and mineral waters in igo2. It will be seen that, deducting re-exports, the amount retained for home consumption was valued at nearly 3^7,000,000. Before proceeding further I would like to make it clear to the reader how the values in the import list are recorded by our customs officials. Goods imported into the United Kingdom are usually entered at our Custom Houses at "c.i.f." values, as they are termed, the " c." standing for cost, the " i." for insurance, and the " f." for freight. That is to say, the goods arc enhanced in value by the addition to the actual price of the commodities themselves of the cost of insuring them on their sea voyage, and the cost of the carriage from their port of origin. I shall return to this point hereafter, when we come to consider what is sometimes called the " balance of trade." ANALYSIS OF IMPORTS. 13 AN ANALYSIS OF THE IMPORTS INTO THE UNITED KINGDOM IN igo2. [Tlic Values are c.i.f.) Distinguishing Foreign from Colonial Supplies and showing Re-Exports and Values retained for Home Consumption. From Foreign Countries. From British Possessions. Total. Re-Exports of Goods Previously Imported. Retained for Home Con- sumption. A. Food and Fodder. Animals, living, for food Butter Cheese Cocoa Coffee Corn, grain, meal, and Flour- Wheat Wheatmeal and flour Barley Oats Rye Buckwheat Peas, beans, and lentils Maize Oatmeal and groats Miscellaneous Eggs Farinaceous sub- stances — Rice, ricemeal and Hour Other farinaceous substances Fish Fruit Lard and imitation of lard Margarine Meat- Bacon Beef £ 6,554,020 17,992,500 r, 979, 000 1,840,000 2,116,000 19,411,000 8,042,000 7,107,000 4,857,000 205,000 24,000 1,038,000 11,607,000 285,000 715,400 6,099,000 666,000 1,050,000 2,792,500 11,571,000 4,163,000 2,571,000 12,224,000 7.553.000 £ 1,760,900 2.534.500 4,433,000 750,130 500,000 7,669,000 884,000 25,000 185,000 107,000 160 531,000 106,000 34,000 338,030 .i 10,000 1,348,000 541,000 1,316,500 1,34, 00 o 241,000 400 1,203,000 596,000 £ 8,314,920 20,527,000 6,412,000 2,590,130 2,616,000 27,080,000 8,926,000 7,132,000 5,042,000 312,000 24,160 1,569,000 11, 713, Of o 319,000 1,053,430 6,309,000 2,014,000 1,591,000 4,iog,oco 12,919,000 4,404,000 2,571,400 i3,427,cxx) 8,149,000 11,210 228,000 157,000 447,000 1,051,000 59,000 33.000 2,000 6,000 400 14,000 25,000 7,000 7,000 25,000 488,000 66,000 808,000 1,019,000 162,000 46,000 317,000 107,000 8,303,710 20,299,000 6,255,000 2,143,130 1,565,000 27,021,000 8,893,000 7,130,000 5,036,000 311,600 24,160 1,555.000 11,688,000 312,000 1,046,430 6,284,000 1,526,000 1,525,000 3,301,000 11,900,000 4,242,000 2,525,400 13,110,000 8,042,000 H ELEMENTS OF THE FISCAL PROBLEM. A. Food and Fodder — continued. Meat — contimud. Hams Mutton, fresh Pork Rabbits Other meats Milk Oilseed cake Poultry and game Spices Vegetables Sugar Articles containing sugar Tea Miscellaneous Total of Food and Fodder B. LiguoR. Beer and ale Cider and perry Mineral water Spirits Wine Total of Liquor C. Raw Materials. Asbestos Asphalte or bitumen ... Bladders, casings, &c. Bones (except whale- bone) Bristles Canes and sticks Caoutchouc Cork Cotton Cotton waste Dyestuffs and woods... Feathers and down ... From Foreign Countries. £ 3,438,500 3,152,000 1,728,500 314,000 3.430,000 124,000 2,313,000 1,035,000 177,000 3,299,000 13,791,000 3,174,000 810,000 3,326,000 172,574.420 From British Possessions. 420,500 3,763,000 23.500 424,000 555.000 1,850 160,000 24,000 688,000 777,000 941,000 280,000 7,980,000 464,500 Total. i 3,859,000 6,915,000 1,752,000 734,000 3,985,000 125,850 2,473,000 1,059,000 865,000 4,076,000 14,732,000 3,454,000 8,790,000 3,790,500 43, I59>970 215,734,390 Re-Kxports of Goods Previously Imported. Retained for Home Con- sumption. i 121,000 9,OGO 29,000 50 314,000 62,000 18,000 22,000 530,000 251,000 74,000 311,000 1,827,000 235.000 8,888,660 £ 3,738,000 6,906,000 1,723,000 733.950 3,671,000 63,830 2,455,000 1,037,000 335000 3,825,000 14,658,000 3,143,000 6,963,000 3.555.500 206,845,730 £ 156,000 7.500 270,000 1,744,500 4,778,000 6,956,000 900 10 400 454.500 164,000 6ig,8io £ 156,900 7.510 270,400 2,199,000 4,942,000 7,575,810 400 10 16,000 271,000 541,000 £ 156.500 7.500 254,400 1,928,000 4,401,0 JO 828,410 6,747,400 £ 54,000 134,000 139,000 54,000 574,000 91,000 4,908,000 962,000 40.565.000 88,500 2,551,000 76,500 £ 18,000 30,000 75,000 1,500 52,000 Oo.ooo 272,000 6,ooo 584,000 31.500 1,257,000 14,000 £ 72,000 164,000 214,000 55.500 626,000 151,000 5,180000 968,000 41,149,000 120,000 3,808,000 90,500 £ 9,000 8,000 89,000 1,000 230,000 18,000 3,552,000 2o5 000 6,323,000 441,000 592,000 31.500 £ 63,000 156,000 125,000 54.500 396,000 133,000 1,628,000 762,000 34,826,000 -321,000 3,216,000 59.000 ANALYSIS OF IMPORTS. 15 C. Raw Materials— continued. Feathers, ornamental Flax and tow Furs Galls Gum Gutta percha Hair Hemp Hides and pieces thereof Horns and hoofs Ivory Jute Metals and ores — Copper ore Copper scrap Gold ore and leaves Iron ore ,. old Lead ore Manganese ore Pyrites Quicksilver Silver ore Tin ore Zinc ore ,, crude Miscellaneous ores. . . Unenumerated old... Mica Moss litter Nuts and kernels for oil Papermaking materials Paraffin and paraffin wax Piassava fibre Plumbago Sand Seeds (chiefly for oil) Shells Silk knubs and waste Silk, raw ,, thrown Skins Slates for roofing pur- poses Sponge Stone, marble, &c Straw From Foreign Countries. 440,000 2,921,500 1,468,000 27,000 416,700 158,500 546,000 3,113,000 1,943,000 104,000 219,000 46,000 612,000 87,000 195,000 4,886,000 102,000 29,000 374,000 947,000 291,000 764,000 638,000 192,000 1,520,000 296,000 133.000 9.500 123,000 269,000 3,127,000 906,000 147,000 75.500 63.450 6,676,000 105,000 290,000 562,000 678,000 996,000 271,000 228,000 1,172,000 206,650 From British Possessions. £ 952.000 22,900 904,000 700 1,000,700 992,400 44,000 892,000 498,000 89 000 182,000 5,255,000 354,000 9,000 461,000 93 000 11,000 152,000 103,000 50,000 120 313.000 11,000 14,000 9,000 29,000 15,000 65,100 609,000 260,000 98,000 55,000 154.500 380 3,209,000 405,000 188,000 166,000 15,000 5.500 204,000 Total. £ 1,392,000 2,944,400 2,372,000 27,700 1,417,400 1,150,900 590,000 4,005,000 2,441,000 193,000 401,000 5,301,000 966,000 96,000 656,000 4,979,000 113 000 181,000 477,000 997,000 291,120 1,077,000 649,000 206,000 1,529.000 325,000 146,000 74,600 123,000 878,000 3,387,000 1,004,000 202,000 230,000 63.S30 9,885,000 510,000 478,000 728,000 678,000 3,206,000 286,000 233.500 1,376,000 206,650 Re-Exports of Goods Previously Imported. £ 626,000 162,000 1,863,000 20,000 976,000 135.000 100 000 1,782,000 802,000 46,000 228,000 1,630,000 62,000 7,000 3,000 49,000 9,000 100, OQO 400 200 168,000 17,000 65,000 17,000 5,000 32,000 3,000 56,000 245,000 116,000 16,000 40 000 46,000 730 920000 488,000 48,000 84,000 86,000 2,020,000 300 92,500 47,000 1,000 Retained for Home Con- sumption. £ 766,000 2,782,400 509,000 1,700 441,400 1,015,900 490 000 2,223,000 1,639,000 147.000 173,000 3,671,000 904,000 89,000 653,000 4,930,000 104,000 81,000 476,600 996,800 123,120 1, 060,000 584,000 189,000 1,524,000 293,000 145,000 i8,( 00 123,000 633,000 3,271,000 988,000 162,000 184,000 63,100 8.965,000 22,000 430,000 644,000 592,000 1,186,000 285,700 141,000 1,329,000 205,650 1 6 ELEMENTS OF THE EISCAL PROBLEM. C. Raw Materials — continued. Talc, &c Whalebone Willows and rods Wood and timber Woollen rags Wool Miscellaneous Total of Raw Ma- terials From Foreign Countries. 26,300 48,000 27, coo 18,859,000 616,500 4,469,000 235.100 112,871,700 From British Possessions. £ 3,600 5,000 i.Soo 6,328,000 17,500 17.757.000 41,000 46,656,200 Tot.il. £ 29,900 53.000 48,800 25,187,000 634,000 22,226,000 276,100 159,527.900 Re-E.\ports of Ljoods Previously Imported. 4,000 12,000 500 647,000 12,000 10,298,000 54.500 35,748,630 Retained for Home Con- sumption. £ 25,900 41,000 48,300 24,540,000 622,000 11,928,000 221,600 123,779,270 D. Partly Manufac- tured Materl\ls. Cotton yarn Glue stock Jute yarn Linen yarn Manures Metals.crude forms of — Copper (regulus and precipitate) Copper, unwrought part wrought Iron, pig and puddled ,, and steel, un- wrought Lead, pig and sheet Platinum Tin, blocks, ingots, &c Unwrought, unenu- merated Oils Pitch Plaiting of straw, &c. Rosin Silk yarn Tallow and stearine ... Tar Wax, ozokerit, &c. ... Woollen yarn Total of Partly Manu- factured Materials £ 236,000 48,000 51,000 968,000 2,068,500 2,072,000 3,983,000 18,000 682,000 1,415,000 1,923,500 140,700 300,000 178,500 3,422,000 42,300 742,000 492,260 30,000 1,322,000 81,700 152,700 2,259,000 22,628,160 1,000 18,000 19,000 150,500 434,000 921,000 116,000 400 661,500 1,600 3,854,000 15.500 2,174,000 1,400 5,000 180 1,387,000 2,600 28,650 9,791,330 £ 237,000 66,000 70,000 968,000 2,219,000 2,506,000 4.904,000 18,000 798,000 1,415,400 2,585,000 142,300 4,154,000 194,000 5,596,000 43.700 747,000 492,440 30,000 2,709,000 84,300 181,350 2,259,000 32,419,490 £ 1,000 16,000 2,000 4,000 113,000 40,000 1,122,000 68,000 14,000 12,000 104,000 63,000 2,737,000 77,000 1,408,000 5,000 279,000 14,000 2,000 1,180,000 12, coo 63,000 12,000 £ 236,000 50,000 68,000 964,000 ,106,000 2,466,000 3,782,000 - 50,000 784,000 1,403,400 2,481,000 79.300 1,417,000 117,000 4,188,000 38,700 468,000 478,440 28,000 1,529,000 72,300 118,350 2,247,000 7,348,000 25,071,490 ANALYSIS OF IMPORTS. 17 From Foreign From British Total. Re-Exports of Goods Retained for Home Con- Countries. Possessions. Previously Imported. sumption. E. Manufactured Materi als and Plant. I £ L £ £ Brass, bronze, &c 290 ,600 4,600 295,200 9,000 286,200 Cement 392,500 — 392,500 2,000 390,500 Chemical manufac- tures 2,144,200 153.500 2,297,700 336,000 1,961,700 Copper manufactures 854,500 980 855,480 8,000 847,480 Cordage, cables, &c.... 672,000 262,500 934.500 112,000 822,500 Drugs 1,392,000 687,300 289,000 170 i,6Si,ooo 687,470 668,000 37.000 1,013,000 Electrical goods 650,470 Glass — sheet and plate, and bottles 2,080,000 477,700 50 900 2,080,050 478,600 41.350 59,000 2,038,700 Glue, size, and gelatine 419,600 Hardware (part only) 683,500 I.OCO 684,500 79,000 605,500 Implements and tools 374,000 7,000 381,003 125,000 256,000 Iron — bar, angle, &c. 1,083,500 1,000 1,084,500 73,000 1,011,500 Girders, joists, &c. 820,500 — 820,500 6,000 814,500 Nails, screws, rivets 537,000 800 537, 8co 39,000 498,800 Steel rails 333.000 35.000 170 333.000 35.170 37,000 2,000 296,000 Tyres and axles 33,170 Unenumerated 2,879,000 5.500 2,884,500 177,000 2,707,500 153,000 1,842,000 1,995.000 1,589,000 406,000 Leather 5.471.500 4,196,000 2,624,500 64,000 8,096,000 1,307,000 6,789,000 Machinery 4,260,000 610,000 3,650,000 Steam engines 499,000 1.700 500,700 40,000 460,700 wrought 712,000 900 712,900 16,000 696,900 Mouldings for picture frames 232,000 — 232,000 3,000 229,000 Painters' colours 1,267.000 6,000 1,273,000 27,000 1,246,000 Paper, unprinted 2,957,000 83,000 3,040,000 75.000 2.965,000 pulp board 927,000 25,000 952 ,000 18,000 934.000 Petroleum for lubricat- ing 1,161,000 2, coo 1,163,000 68,000 1,095,000 Scientific instruments 949,000 600 949,600 66,000 883,600 Straw envelopes for bottles 64,000 54.000 50 6 000 54.050 100 1,000 63,900 Varnish 53.050 Wood, manufactures of 2,352,000 114,000 2,466,000 188,000 2,278,000 Zinc, manufactures of 489,000 1,000 490,000 10,000 480,000 Miscellaneous 808,000 13,000 821,000 52,000 769,000 Total of Manufac- tured Materials and Plant 38,027,800 5,504,920 43,532,720 5,880,450 37,652,270 p.p. i8 ELEMENTS OF THE FISCAL PROBLEM. F'rom Foreign Countries. From British Possessions. Tot.il. Re-Exports of Goods Previously Imported. Retained for Home Con- sumption. F. Domestic Mate- rials and Personal Necessaries. i i i i / Baskets and basketware 261,000 1,000 262,000 5,000 257,000 Blacking and polishes 156,000 1,800 157,800 2,000 155,800 Brooms and brushes... 316,000 2,000 318,000 13,000 305,000 Buttons and studs 265,000 — 265,000 11,000 254,000 Candles 18,000 — 18.000 7,000 11,000 Caoutchouc — Manu- factures of 759.000 20,000 779,000 34,000 745.000 Chinaware and earthenware 976,000 6,000 982,000 238,000 744.000 Clocks and parts thereof 450,000 60 450,060 22,000 428,060 Cotton manufactures... 5,716,000 55.000 5.771.000 517,000 5,254,000 Cutlery 34,000 QO 34.090 13.000 21,090 Floorcloth, linoleum, j^ &c 71,000 — 71,000 6,000 65,000 Glass manufactures ... 1,617,000 50 1.617,050 28,000 1.589,050 Hair manufactures ... 8,000 70 8.070 1.000 7.070 Hardware (other than cutlery) part only 683,500 1,000 684,500 79,000 605.500 Hats and bonnets 409,500 12,500 422,000 70,000 352,000 Lamps and lanterns ... 46,000 30 46,030 7,000 39.030 Leather manufactures 3,244.000 7,000 3,251,000 280.000 2,971,000 Linen manufactures ... 683,000 360 683,360 52,000 631,360 Matches 419,000 — 419,000 98,000 321,000 Mats and matting 94,000 17,000 111,000 10,000 101,000 Soap and soap powder 427,000 2,000 429,000 19,000 410,000 Woollen manufactures 10.655,500 96.500 10.752.000 S97.OOO 9,855,000 Total of Domestic Materials and Per- sonal Necessaries 27,308,500 £222,460 27.530,960 2,409,000 25,121,960 G. ^Manufactured " Luxuries." Beads and bead trim- mings Books Carriages and carts and parts thereof Curios Cycles and parts (not motors) Embroidery and needlework Fancy goods I 260,000 256,000 144,000 176,000 141,000 1.151,00 ol 1.295,00 o' i 50 6.000 1,500 19,000 3.000 6,000 1.000 £ 260,050 262.000 145.500 195.000 144.000 1. 157.000 1,296,000 I 46,000 20,000 11,000 32,000 35.000 133,000 39.000 ANALYSIS OF IMPORTS. 19 From Foreign Countries. From British Possessions. Total. Re-Exports of Goods Previously Imported. Retained for Home Con- sumption. G. Manufactured " Luxuries " — cont. Flowers, artificial Jewellery £ 642,000 227,000 2,493,000 I,I02,0CC 1,362,000 543,000 55.000 926,000 305,000 35,000 20,000 13.385.000 1,221,000 288,500 1,238,000 1,240,000 £ 6,000 100 1,000 7,000 2,000 6,000 6,000 60 60 30 32,000 5.500 500 2,000 160 £ 642,000 233,000 2,493,100 1,103,000 1,369,000 545,000 61,000 932,000 305,060 35,060 20,030 13,417,000 1,226,500 289,000 1,240,000 1.240,160 £ 101,000 23,000 1,005,000 58.000 68,000 9,000 18,000 207,000 104,000 5,000 1,000 1,072,000 233,000 67,000 51,000 76,000 £ 541,000 210,000 Lace and articles of lace Motor cars and cycles and parts thereof Musical instruments... Paper, printed 1,488,100 1,045,000 1,301,000 536,000 Perfumery 43,000 Pictures and other works of art Pipes (for tobacco) ... Plate 725,000 201,060 30,060 Playing cards 19,030 Silk manufactures Skins and furs (manu- factures 12,345,000 993.500 222,000 Stationery (other than paper) Toys and games Watches and parts ... 1,189,000 1,164,160 Total of Manufac- tured " Luxuries." 28,505,500 104,960 28,610,460 3,414,000 25,196,460 H. Miscellaneous. Arms, ammunition, and stores Flowers, fresh Horses Ice Petroleum for illumi- nating £ 384,000 167,000 779,000 203,000 4,030,000 471,000 95.500 3,891,000 1,814,000 888,000 £ 17,000 100,000 57,000 260 28,000 9.500 T.OOO 86,000 438,000 £ 401,000 267,000 836,000 203,000 4,030,260 499,000 105,000 3,892,000 1, 900,000 1,326,000 £ 95.000 197,000 100 59,000 14,000 472,000 236,900 202,000 £ 306,000 267,000 639,000 202,900 3,971,260 485,000 - 367,000 3,656,000 1,698,000 1,326,000 Plants, shrubs. trees,&c. Precious stones, unset Tobacco — unmanufac- tured Parcels post Total of Miscel- laneous Items... 12,722,500 736,760 13,459,260 1,275,100 12,184,160 Totals of all classes 421,594,580 106,796,410 528,390,990 65.792,250 462,598,740 C 2 CHAPTER IV. OUR IMPORTS OF RAW AND CRUDE MATERIALS. We pass from food, the raw material of men, to the consideration of the materials used in British industry. We are fully equipped as an industrial and commercial nation so far as population, climate, seaboard, and the skill and industry of our people are concerned ; but, as we have seen, our native supplies of timber, ores, hides, and wool are insufficient, while of cotton and indiarubber, gutta percha and asbestos, not to mention a host of other things, we have not a trace. We have, then, to import these things, and it is to our best interests to purchase them in the cheapest markets, not merely that we may manufacture them into goods for export — that is the least part of it — but to build and furnish our houses, clothe our bodies, construct our ships and railways, and generally add to the wealth and happiness of our people. To this end we ransack the world for materials and spend upon raw products alone £"120,000,000 per annum. As will be seen by Table C. of the analysis, the bulk of these materials comes to us from foreign countries, the figures being: From foreign countries, ;^i 12,871,000 ; from British possessions, ^46,656,000 — total, ;£"i 59,527,000. The re-exports were valued at £35,748,000, leaving a balance for home consumption of £123,779,000. Of the materials which go to make up this enormous sum — sixty in number — only twelve are derived in greater quantity from British possessions than from foreign countries. Jute comes almost entirely from Bengal, and wool chiefly from Australasia. Our chief industry, the IMPORTS OF RAW AND CRUDE MATERIALS. 21 cotton trade, obtains ^^40,000,000 per annum of raw cotton from foreign countries, almost exclusively from America, and a mere ^^584, 000 worth from British possessions. It is of interest to note that this ^^40, 000,000 of foreign cotton is manufactured b}' Lancashire into some £■90,000,000 worth of cotton goods, -^20,000,000 of which — half the value of the import of raw cotton — is con- sumed in this country, while ^£70, 000, 000 is exported to places oversea. Of timber, again, we buy from foreign countries nearly ^^ig, 000,000 per annum, as against only £6,000,000 from British possessions. Does the foreigner " invade " us with this wood and timber to our hurt ? I trow not. We build it into our houses and make millions of pounds' worth of furniture of it. The timber trade is but one of many which, because they do not figure on the export side of our oversea trade returns, are usually neglected in discussions upon our fiscal policy. Yet timber once occupied a place of great honour in our customs tariff, and as far back as the reign of Charles II. we have the record of a duty varying from 2s. to 12s. per 100, according to size, on imported balks. The great navigation law of Charles II. also governed the importa- tion of wood from 1660, and provided for a differential tariff against timber not imported in British ships manned by British subjects. Wood brought here in foreign ships had to pay higher duties, known as Alien's Rates. So ancient is the curious theory that a nation benefits itself by punishing foreigners who endeavour to trade with it. The 2.S. to I2S. duties of 1660 were trebled in i6go, and again increased in 1703 and 1714. The duties of 1660 were followed in 1661 by an Act of absolute prohibition against the timber of Germany and the Netherlands. The prohibition against Germany was removed early in the reign of George I., but it was not until 1821 that timber from Holland was admitted to our ports. During this lengthy period we denied ourselves the timber of the Baltic, and the Act slumbered in the Statute-book until ?? KT.F.IMENTS OF TTTF. FISCAL PROBLEM. the crying need for wood for the Royal Navy tardily led to its repeal. Practical prohibition also existed for a long period against North American timber, for the high duty made it impossible for our Colonists to ship wood in competition with Europe. Heavy freights and heavy duties combined to deny us the magnificent supplies of America, just as prohibition denied usithose of North Germany. In 1721 Parliament passed an Act allowing the importation of lumber from British America free of duty for twenty-one years, a permission which was subsequently extended to 1809, when fresh duties were imposed for war purposes. At the same time the duties on Baltic timber, which had not long been admitted to our ports, were increased. Further additions to the duties followed in 1810 to 1813, all of which were arranged to give a substantial Colonial Preference. As a result, Canadian shipments increased at the expense of Baltic supplies and at the expense of this country. In 1820 a Select Committee of the House of Lords reported, after investigation, that the Canadian timber was not so durable as the European, Of twenty- six frigates built of Canadian and Baltic wood, those built of European timber lasted more than twice as long as those built of Canadian material. The result of this report was that while the Canadian Preference was con- tinued it was reduced to such an amount as would merely suffice to countervail the difference of freight, and our Navy ceased to suffer from the use of unsuitable material at a long price. In 1866 the timber duties were finall)' repealed, and after thirty-seven years we are asking our- selves, Is it possible that they will ever be re-enacted ? In connection with his proposals for Imperial recipro- city, Mr. Chamberlain has disclaimed any intention of taxing raw materials, although it is b}' no means clear where he thinks of drawing the line between a raw material and a manufactured article. In the recent " Inquiry " Blue-book sawn timber is included in our imports of IMPORTS OF RAW AND CRUDE MATERIALS. 23 " manufactured and partly-manufactured goods." That, of course, is strictly accurate, but most people would class the whole of our timber imports, whether hewn, sawn, split or planed, as "raw materials." But we have some- thing more than Mr. Chamberlain's intentions, however sincere they may be, to consider. When a nation embarks on Protection no one can foretell how far it will be carried. Once set in motion the many conflicting interests which go to make up a nation's activities, and no article is safe from duties, whether it be a foodstuff, a raw material, a half-manufactured product, or a finished article. At the present time Germany, for some inscrutable reason, puts a tax of IS. per ton on mahogany, and in the new German tariff the duty has been doubled. The duties on staves, spokes, sleepers, &c., have also been considerably raised. It is difficult to see the national object of such duties as these, and probably the greater number of our own Protectionists would condemn them. We may be quite sure, also, that many Germans object to them. Yet there they are, part of German law. Who shall say, then, what eccentric duties may pass into law at Westminster when once the pretty game of tariffs is played out in our legislature, and a few hundred amiable gentlemen, some with axes to grind and others with steel to make axes of, fight out in Committee the details of duties whose incidence they do not understand and whose results they could not foretell had they the wisdom of Solon ? ^ I have given special attention to the question of timber because it is an article the consumption of which, as Porter long ago pointed out, is a very fair test of national welfare and progress, and because our former experience of the operation of differential duties in regard to it has a most important bearing on the present ^ The IS. corn duty of 1902 was imposed purely for revenue purposes and without intent to injure any manufacturing industry. Yet it was found to tax over 100 different articles and affected trades as widely apart as the paper and cotton industries. 24 ELEMENTS OF THE FISCAL PROBLEM. discussion. But a glance at the table will suggest many other points of interest. We are compelled to go to Spain or Sweden for iron ore ; Canada has a great deal, but she prefers to keep it, and pays a heavy bounty on every ton of pig-iron made from it in the Dominion. We go to Spain and America for copper, to Brazil for caoutchouc, to Germany for zinc, and so on. The general conclusion as to these raw materials is that more than two-thirds are deri\-ed from foreign countries. To that I shall return again when we come to consider in detail how the Colonial Preference would affect our Colonies and ourselves. At this point in our inquiry I am chiefly concerned to combat the fear of imports, and it will be generally agreed that, so far, we have encountered little we need be afraid of. Our only fear need be lest our imports should decline. I pass to the consideration of our imports of crudely- manufactured materials, a group of articles exceedingly diverse in character, and usually classed under the broad heading "manufactures," going to form a considerable part of the bogey of " foreign " invasion which is so constantly held up to affright us. The value in igo2 of this class of imports, as will be seen b}' Table D. in the analysis, amounted to ^32,419,000 ; the amount retained for home consumption was valued at ^£'25, 000, 000. The first thing that strikes us in this list is the fact that British possessions "dump" nearly one-third of the whole upon our shores, so that in regard to half-manufactured materials they serve us much the same as in regard to " raw " materials. It may be noted here that we were sent j^i 16,000 worth of bounty-fed pig-iron by our Colonies last year ; needless to say it came from Canada, and I hope it will not be the last to come from the same quarter. One of the most considerable items in this group is unwrought steel, which we import to use as a material in sheet and wire making, and other higher forms of industry. Under this heading we also find yarns, whether of cotton, wool, or linen, which are but materials ; IMPORTS OF RAW AND CRUDE MATERIALS. 25 and we have also recorded manure, yet another form of material. The closer the list is examined the more clearly it will be realised that one manufacture is but the raw material of another. The importation of this ;£'30,ooo,ooo worth of products, upon which a certain amount of human skill has already been exerted, means that we take up these articles at the rough state to which they have been carried and manufacture them into more highly-finished products. If, through the fear of imports, we shut them out by duties, we should have no more work to do than before. We should be simply refusing to allow other people to hew wood and draw water for us. Consider the case of a bricklayer. Would he be any better off if he insisted upon mixing his own mortar and carrying his own bricks up the ladder ? According to Protectionist theory he would create more work and earn more money by per- forming for himself every operation connected with his calling. According to the dictates of Free Trade and common sense, he lets someone else do the mixing and the carrying, and is content to do the bricklaying alone. As with a bricklayer, so with the 40,000,000 units, brick- layers and others, which constitute the nation. To shut out crudely-manufactured materials in the belief that by so doing we could make more work by performing for ourselves the labour expended upon them, would simply transfer our energies from higher forms to lower forms of industry. CHAPTER V. OUR IMPORTS OF MANUFACTURED MATERIALS AND ARTICLES OF PERSONAL USE. The considerations we have applied to partly-manu- factured products are equally cogent in regard to completely-manufactured articles which are used either as materials or in some of the processes of industry. So that a man be well and profitably employed, it matters little whether he is making a British boot out of foreign leather or making British leather out of a foreign hide. Most people would elect the boot-making rather than the leather-making. And consider the effects of a protective duty upon leather ! It mght be welcomed by some leather-makers, but it would injure the numerous industries which employ leather as a raw material. We have to consider not merely the tanner, but the makers of boots, gloves, saddlery, harness, machine belting, upholstery, bags, trunks, and fancy leather goods. This part of the subject deserves close attention, for when it is once understood the whole of the argument for protective duties goes by the board. A nation could carry on flourishing and successful industries without using a single ton of what are commonly called "raw" materials. Indeed, the more highly developed the skill of a people, the less congenial become the lower forms of industry which employ quite raw materials. Let us take a few illustrations. The reader will agree that bookbinding is an honourable and exceedingly necessary occupation, yet the bookbinder uses not a single raw product ; all his materials are manu- factured — printed paper, machinery, tools, strawboard or IMPORTS OF MANUFACTURED MATERIALS. 27 millboard, cloth, leather, glue, paste, thread, ink and gold leaf. Examine next one of the industries which supplies some of the bookbinder's materials — the printing industry. The printer's materials are machinery, type, ink and paper, all of them manufactured articles. Examine, again, each of the materials which the printer uses. The raw materials used in the production of machinery are other machinery, tools, lubricants, iron, steel and other metals, and driving bands of leather or cotton. The maker of type must emplo}^ machinery, tools and metal. Printer's ink is manu- factured from oil, colours and chemicals, all of which are manufactured. Lastly, paper is produced from partly raw and partly manufactured materials, wood pulp, rags, &c. A moment's thought will show the reader that the industries named are types of scores of others which employ little or no actually "raw" products, but are dependent upon materials which are the finished manufactures of other callings. Table E. of the analysis shows that our imports of manufactured materials and plant were valued at 5^43,500,000 in igo2, of which ^^38, 000,000 worth was derived from foreign countries and £5,500,000 worth from British possessions. The re-exports were valued at £5,900,000, leaving a balance for home consumption of £37,600,000 worth. A considerable amount of machinery, tools, and manufacturing plant is included in the total. Not the least of the benefits of Free Trade is that it allows the purchaser of machinery to buy not merely the best machine in the United Kingdom, but the best machine in the world, at the lowest price. That is great gain, for it reduces his expenditure of capital while giving him command of the best appliances. I have seen, in a London factory, some ingenious American wood- working machinery busily turning out British furniture made of imported wood. It seemed to me that the invasion of the wood and machinery had not robbed 2.9 KLEMKNTS OF THE FISCAL PROBLEM. anyone of work, hut on the other hand was providing profitable cmplc>yment for capital and labour. Amongst the manufactured materials in the list are included manufactures of wood — house frames and joinery of different kinds ^ — to the value of ;£"2, 466,000. I have heard a British carpenter express the belief that such importation " took the bread out of the mouths " of our workmen. Yet, contemporaneously with the increase of the imports of the manufactured material, our imports of wood and timber have also increased rapidly. The following figures illustrate this point : — Imports of Wood and Wood Manufactures. In 1887. In 1902. Wood and timber (loads) Furniture woods (tons) Manufactures of woods (value) 5,654,000 96,000 ;f 500,000 9,608,000 289,000 ;^2,466,ooo The building trade is worth particular attention in connection with this group of manufactured materials. Building is one of our most important industries, and while it obviously has no exports, it means daily bread to ' Mr. Chamberlain spoke with his usual lucidity upon this trade at Birmingham in 1885 as follows : — " Let us take one industry. 1 notice Mr. Dumphreys, in one of his speeches, complained that frame-work — wooden frame-work — was imported into this country from Canada and Norway and Sweden, to the detriment of English carpenters, and he proposed that a duty should be put on that manufacture also. In Germany they followed this recommendation ; they have put a duty on the manufactures of wood, and what do you think the result has been ? Do you think the carpenters and the cabinet-makers have been benefited ? No, not a bit. There are fewer houses built, and there is less work for the working men, and there are less wages paid. From a return which I have got. I find that the averages of 30,000 carpenters and cabinet-makers in Germany are from i8i-. to 19^. a week. The week's work is seventy- two hours, and in many cases eighty-four, because they work on Sundays as well as other days of the week. (' Shame,' and ' We ain't going to have it here.') I hope not. But it is right that you should know these things, and that when these quack remedies are proposed to you, you should understand what is the result of taking them." IMPORTS OF MANUFACTURED MATERIALS. 29 many millions of our people. It has been all for the good of the nation that so much of our wealth during the past generation has been sunk in the building of houses. Twenty years ago the gross yearly income realised from houses was over £100,000,000. To-day it is approaching £200,000,000. Capitalise these sums at twenty years purchase, and one gets some idea of the value of our annual "manufacture" of houses. The following figures are worth examination : — Gross Income from House Properly and Estimated Capital Value of Houses in United Kingdom. In Millions of £. Capitalised Value Annual at 20 years' Income. purchase. 117 2,340 140 2,800 179 3,580 I88I I89I I90I That is to say, the new houses built between 1881 and 1891 were worth £460,000,000, or an average of £46,000,000 per annum, while the new houses built between i8gi and 1901 were worth £780,000,000, or an average of £78,000,000 per annum. Add to this the cost of repairing old houses and we see what a gigantic interest is the building trade, and that its annual output is worth fully £90,000,000, or as much as that of the cotton industry. We all know that the cotton industry is firm for Free Trade, and certain it is that Protection can only work harm to the building and allied trades. Many of the builder's materials are manu- factured or half-manufactured, and the range of them is almost endless. While the bricks and tiles are British, the slates may be native or foreign. The metals, although mostly worked here, are almost entirely of foreign origin. The stoves and fittings are usually of British manufacture, but foreign material. A house is a conglomeration of raw, half-manufactured, and fully-manufactured articles, 30 ELEMENTS OF THE FISCAL PROBLEM. providing work for a great variety of craftsmen, and cheap materials are essential to its welfare. This point is of great importance to every member of the community, whether a house owner or merely the lessee of a house owned by another. The manufacturer, through free imports, is able to build his factory cheaply, thus econo- mising capital. If we levied duties on cement, joinery, glass, iron, steel, glue, paint, and every other manufactured building material, the prime cost of houses and factories would be greatly increased. With that increased cost, not only the building industry would decline, but the timber trade and many other industries which so largely depend upon the building trade would decline also. When once the above points are grasped, suggestions that we should retaliate upon foreign countries by placing duties upon manufactures are seen in their true light. To tax imports of manufactures is to tax materials in as real a sense as if we placed a duty upon raw cotton. Just as a duty on cotton would ruin Lancashire, so a duty on paper would injure the printing industry. Just as a duty on wool would injure Bradford, so the taxation of foreign iron and steel would injure our engineers and millwrights. Just as a duty on hides would injure our leather manu- facturers, so a duty on leather would hurt our boot manufacturers and harness and saddlery makers. Just as a duty on timber would injure our furniture manu- facturers, so a duty on engines and machinery would injure every manufacturer in the country. There is in sober fact no single manufactured article which can be taxed without injury to the manufacturers of other manufactured articles. In discussing any particular trade or industry in relation to fiscal policy, therefore, it is not sufficient merely to consider the effect of protective duties upon that trade or industry alone. Every manufacturer is attracted by the prospect that if his industry is protected by a tariff he will be able to raise prices and increase IMPORTS OF MANUFACTURED MATERIALS. 31 profits. He is apt to forget that one industry alone cannot be protected, and that the attempt to favour all leads to a sensible reduction in the purchasing power of the public at large and a consequent fall in demand, which in turn reacts upon industry and causes its last state to be worse than its first. The industry which presses for Protection thinks only of itself ; the Government which grants it imagines that it will assist a deserving body which represents that it has fallen on evil times (is there any trade at any time in any country under any fiscal system whatever which is perfectly satisfied?) ; and in the end it is found that a dubious advantage, wholly unsatisfactory in its results to the recipients, has been granted at the expense of many people it was never intended to harm. Each manufacturer, in common justice to himself, and those dependent upon him, is compelled to fight for the biggest duty he can get when it comes to the practical arrangement of a tariff. If he does not, others will. And upon what does the final arrange- ment of the tariff depend ? Upon the vote of a legisla- ture, exercised after vested interests have done their best by argument, and their worst by corruption, upon its members. To influence votes the wildest assertions are made. " Our trade is being ruined — give us 20 per cent, or we perish." The tale must be strong, for others have tales to tell. Mr. Chamberlain's suggested duty is an " average " 10 per cent, ad valorem. Then who is to have less than 10 per cent., and who more ? The leather maker will want 10 per cent., but it will be odd if the boot makers, the saddlers, and the trunk makers do not find some representative to remind the tariff committee that if leather has 10 per cent., leather goods must have 20. And if the producers of leather and leather goods are favoured, who in justice can deny protection to those interested in hides ?^ ' In Februriry, 1903, in response to the 15oston Commercial Bulletin, a Republican Protectionist paper, out of 375 boot and shoe 32 ELEMENTS OF THE FISCAL PROBLEM. We next come to a class of imports which may be termed personal or domestic materials and necessaries. The goods grouped under this heading in table " F " are valued at jr27, 500,000, of which nearly the whole came from foreign countries. The re-exports were valued at 3^2,500,000, leaving a balance for home consumption valued at ;r25, 000,000. It is not an easy thing to distin- guish clearly between some of the items in this list and those of the last, and I freely confess that the classification is arbitrary in character. Take the item "Brooms and Brushes," for example. Clearly this includes both articles used in the household and others, such as painters' brushes, used in ordinary industry. The same remark applies to leather manufactures. Hardware is equally divided in the lists between material for manufacturers and materials for the household. Earthenware is classed entirely as a " domestic material," but obviously includes some articles used in manufacturing industry. The list contains several other items similarly open to criticism. Nevertheless, I hope the reader will agree that, in its broad outlines, this attempt at classification is justified, helping us to realise, within a little, how much of our imports is utilised person- ally and in domestic operations. We should not forget that the work carried on in a private dwelling is as important to the nation as the manufacture of worsteds in a Bradford factory. The housewife has as much right as the manufacturer to access to the best goods in the world at the cheapest price. To fine a private individual for buying an American domestic appliance is as senseless and wasteful as to fine a manufacturer for buying foreign material or plant. Above all ranks the consideration that our small importation of domestic articles, although it manufacturers of New England, 311 declared in favour of giving up the tariff on boots if the duty on hides were abolished also. Of the New England tanners, 29 likewise declared in favour of relinquishing the duty on leather if hides were free, while only 1 1 opposed such action. IMPORTS OF MANUFACTURED MATERIALS. 33 only amounts to about los. per head per annum of the population, protects the consumer from the exactions of the home producer. The Germans cannot justly be accused of want of devotion to the Fatherland, but they ruthlessly fleece each other under the wing of the tariff. Let us not expose human nature in this country to similar temptations. F.P. CHAPTER VI. OUR IMPORTS OF LUXURIES— A SUMMARY. Our consideration of the fear of imports brings us next to a group of articles which, in the Hst " G," I have termed luxuries. This attempt at classification serves to accentuate how few of the articles we import can be regarded as other than necessaries. The total value is ^28,610,000, only £105,000 worth of this coming from our Colonies, for the obvious reason that new lands do not produce manufac- tured luxuries. A moment's consideration will show that the reasons which lead us to purchase the larger part of these articles also operate with colonial buyers. Taking the list as a whole, what possible end would be served by levying duties upon these articles ? A nation which has fully £2,000,000,000 invested in foreign lands can surely afford to take £28,000,000 worth of interest in the form of foreign articles of luxury. Nor would a duty serve to shut out many of the goods in the list, such, for instance, as a high-class German pianoforte, bought because it has some peculiar merit of its own. If there were a 20 per cent, duty the piano would cost so much more, but it would be bought nevertheless. The State would fine the buyer for making the purchase, and he would have just so much less to spend with his butcher and baker. This consideration applies, not only to piano- fortes, but to the great majority of the articles in this list, and, in particular, to curios, silks, books, works of art, per- fumery, artificial flowers. Eastern carpets, fancy goods and lace. It will be seen that nearly one-half of the £25,000,000 worth of luxuries retained for home consumption consists of silk, in the production of which France excels. OUR IMPORTS OF LUXURIES— A SUMMARY. 35 In this connection the following figures, taken from the official records of the United States Bureau of Commerce for the years after the Dingley Tariff, are commended to those who fear imports : — American Imports of Manufacttires (as Officially Classified by U.S.A. Bureau). In Millions of £. Values f.o.b. Fiscal Years ended June. Manufac- tures used in Industry. Articles ready for Consump- tion. Articles of Luxury.* •iotal U.S.A. Imports of Manufac- tures. Duty actually Paid. Price of Imports with Duty. 1898... 1899... 1900... I901... 1902.., I903--- II-6 12-0 i6-o 14-8 i8-2 22-9 iS-8 22-0 26-0 27-0 30-1 34-0 II-5 13-9 i6-i i6-8 19-5 2I-0 41-9 47'9 58-1 58-6 67-8 77"9 15-8 18-9 22'3 21-4 24-9 29-0 577 66-8 80-4 80 -o 927 106-9 * To make the figures comparable with ours I have deducted liquors and tobacco from these totals. The remarkable fact is recorded that, in the twelve months ended June, 1903, the United States imported about 5^80,000,000 (400,000,000 dollars) worth of manu- factured articles. Now, this ^£'80,000, 000 is entered at the American Custom Houses, not as we should do it, at c.i.f. values (i.e., values including cost of freight and insurance), but at the values of the goods in the country in which they are bought. Therefore, before the American figures can be compared with ours, we have to add to them the cost of the carriage and insurance of the goods in their transportation to America. It follows that the c.i.f. value of the manufactured goods imported into America in the twelve months to June, 1903, was not ,^80,000,000, but nearly ^90,000,000. That is to say, in spite of the high duties of the Dingley tariff, ,^90,000, 000 worth of manu- factured articles was imported into America in a single year. The figures become still more remarkable when it is remembered that the Americans paid far more than D2 36 ELEMENTS OF THE FISCAL PROBLEM. 3^90,000,000 for these same manufactured goods. The duty actually recorded by the officials as paid under the Dingley tariff came to a further ^^^29, 000, 000, so that the articles cost the Americans about 3^119,000,000, or as much as the United Kingdom pays per annum for imports of manufactures for home consumption. Nor is that all. Under Protection it is not merely a question of paying duty on imports. The amount of the duty, a little more or a little less, is also paid to the private interests which produce articles similar to those charged duty on importation. The annual sum in which the Americans are mulcted through the tariff is simply enormous, and only their great natural wealth and freedom from war taxation enables them to stand the strain of the extortions. Last of all, we come to the miscellaneous imports grouped in list " H " — arms, flowers, horses, ice, petroleum, plants, precious stones, and tobacco. With the exception of the first item, little or none of them could be produced in this country. The largest item is petroleum for illuminating, petroleum for lubricating having already been considered in the group of manufactured materials for industry. We tax tobacco, of course, for revenue purposes, and not through craven fear of imports. Indeed, the most ardent Protectionist must needs admit that little could be done to shut out the 3^13,000,000 of articles in this miscellaneous list. It is often urged against Free Traders that they are content to utter shibboleths, and that they are blind to the needs of the present day. Free Trade, it is said, is old-fashioned — what is wanted is a go-ahead policy suited to modern conditions. There could, I believe, be no more effective answer to such assertions than the detailed consideration of the fear of imports which has been made in the preceding chapters. Facts, and not theories, have been examined. No abstract propositions have been advanced, but a careful analysis of OUR IMPORTS OF LUXURIES— A SUMMARY. 37 u « 00 1 u , rOOC^ a^ Ir^ vOUDO -^ ^ s C t^^N Th M CTi-l-H c^ 1^ -oU-S mir^CTN M 01 HO-t 00 v^ -t- -^ t^ t-^ in , !>, <0 ^^ "^^ '^^ in vo^'vo" ro in i^ in in cj 01 OJ 04 fO ^^i ^ H y) 000 000 c ^ ^ d) vOMTO in 000 in 'O -^0 -^ '-^^ '~L *~L 04 X ^ v^co" 00" co" cxT 0" c?> 'i- in M ^CO Oi -t -rt 00 OMt^ o^ Re-E of G Previ Impc OOCOt^ CO CO '^'l^'^ *^ ocT in t^ in IN ro H in CO MD 000 000 OHO a^ W UDVDO CT> roco CTi -^ !>. CTn "^ M O^ ri -i-int^ CTi (M 00c ■> ^rot^M H 00 rOHU- ) O^ H t^ in in "^ in mo -:f CO in c^ o^ (M 00 t^co .MO fO (M vOOO M ■z; c 0>Z0 01 ro cr\ -}- cr. J> ^ ._. 1-4 -.-1 n 1 c^ 00 H M- c^ '^'-c VO ViinMin o^ ojoo" 1 o> S "^ Mvoo J^ m 04Mt- 4>. ~ (A 2 CO cr^ in fa-^ ■^ ^ M c 000 00c '^ ,A 0100 yo 00c 00 rfot^ M CO inmu- ■> in J; .« ii -i-io M CO t^ 00 in 0; •^ fci n S^t^inc^ 01 04 oooj o> S§ in cr>oo vo CO in t- •, in SO O-I VO 0> 04 CO t^OO M H t-> M 01 CO 04 04 H- 04 H M ^ ... . -M rxj (^ • ^ « c 2i c 0. t; c t: c ^ 4- T3 -t-j ^-1 ^2 QJ OJ t If c 0. J a. < c -E g.g'S'^.^'^ e^ g^ < iff ie. )Q W U^ C )tr 1 1 .y7'975i 38 ELEMENTS OF THE FISCAL PROBLEM. our free imports has been made with a view to ascertain- ing whether, in sober fact, there is any cause for alarm concerning them. And what is it that the anal3'sis reveals ? After fifty years of free imports, we find that, so far from the process of natural selection of industry having overwhelmed our manufacturers, our imports for home consumption, valued in 1902 at £462,000,000, consisted as to 86 per cent, of food for our people and food for our factories. Of the remaining 14 per cent., 5*4 per cent, consisted of materials used in domestic industry — the form of activity upon which more than any other factor depends the happiness of a people — or of personal necessaries. A further 5*4 per cent, consisted of luxuries, chiefly made up of articles of a special character, such as are not produced in this country and are therefore not competitive. The balance, 2*6 per cent., was made up of miscellaneous articles, such as tobacco, petroleum, &c. The following table summarises the facts : — United Kingdom Imports for Home Consumption in 1902. Per cent, of Total. Food and Fodder 44-8 Liquor Materials for use in Industry 1-5 (a) Raw 26*9 (b) Crude (c) Manufactured 5'4 8-0 Domestic Appliances and Personal Necessaries 5-4 Luxuries ... Miscellaneous 5*4 2-6 100*0 It is a common error to take our imports of a certain line of goods and contrast them with our exports. Such OUR IMPORTS OF LUXURIES—A SUMMARY. 39 a comparison is valueless unless other factors are brought into consideration, and the greatest factor of all — the extent of our home production — is usually left out of account. Let us suppose that, of the articles summarised above, a Protectionist considers that endeavour should be made to reduce importation of the following articles : — One half of the vi^holly manufactured materials ... ... say £"18,000,000 The whole of the domestic materials and personal necessaries ... 25,000,000 ^43,000,000 Here, then, we have an amount of goods valued at ;£43,ooo,ooo, that value, be it remembered, including cost of freight and insurance actually paid, not to the foreign or colonial exporter, but to British shipowners and insurance agents. What relation does this ;£'40, 000,000 bear to our home production of manufactures ? Obviously it is not an easy thing to estimate the value of the output of manu- factured articles, in workshops large and small, in such a country as this, with its varied and interdependent industries, but it is not likely that their value is less than £1,100,000,000, including manufactures of food. That is to say, the part of our imports which most Protectionists fear is to our home production of manufactures in the ratio I : 25. Give the Protectionist his duty. Let us suppose he reduces the £40,000,000 to £20,000,000. Can it be maintained that a production of £1,100,000,000 is seriously threatened by the difference between £40,000,000 worth of goods and £20,000,000 worth ? The sum is a negligible quantity in relation to our vast activities. In submitting these considerations to our Protectionist friends, I have been careful to make no appeal to economic theory, but, as a matter of principle, no imports need be feared, for as it is clear that we can only pay for 40 ELEMENTS OF THE FISCAL PROBLEM them by goods or services, importation does not reduce our activities, but is, in fact, payment for some service rendered to persons oversea. There is but one practical way to reduce imports, and that is to cease exporting. We shall pass next to the consideration of how it is that we come to possess the imports which we have just examined. I have chosen to consider them first because they are the most important part of the subject of oversea commerce. Imports are our gains in international trade. CHAPTER VII. OUR EXPORTS OF GOODS. Although the United Kingdom is one of the three greatest exporting nations, and so far as manufactured goods are concerned is the greatest exporting nation, it is not unnecessary to explain the function of exports. It is the commonest thing for British exports and British trade to be used as synonymous terms, and the majority of Protectionist writers base their arguments solely upon our outward shipments. This fallacy simply arises through the use of money in our everyday transactions, and the consequent forgetfulness of the fact that trade, whether on a small scale or a large scale, is barter. There are a very large number of people who believe that we sell goods to foreigners for money, which money is then spent in this country. Conversely they believe that our imports are paid for in money, and that money is therefore constantly going out of the country in return for our imports. The fact is, of course, that even in our own country the great majority of business transactions are carried through without the passing of a single coin. It is only the recipients of small salaries who receive money wages, and it is only in retail shops where goods are paid for with money. Even when money passes, the coins are merely used to facilitate barter. The man who receives on Saturday afternoon 50s, as his weekly wages does not work for the mere coins, but for the goods which those coins can be exchanged for. The money is merely the medium which enables him to barter his work for food or clothes or other necessaries. In a word, he exports to gain imports. A man may export, export, all day, and all 42 ELEMENTS OF THE FISCAL PROBLEM. the year, turning out an immense amount of work, but gaining few imports. Such a man we rightly consider unfortunate. Yet how often do we see, in the case of a nation, exports made the sole test of prosperity. With a nation as with an individual, it is much safer to test prosperity by imports. We do not export for sheer love of getting rid of many valuable commodities. We do not work for the sheer love of work. We work and export (or part with the results of our work) for the pleasure of securing in exchange something that we need. If we are told that Brown is doing a splendid export trade in hard- ware, we congratulate Brown, not because he is parting with his hardware, but because we know that Brown sees to it that he gets in exchange for his goods a cheque, or bill of exchange, which he can pay into his bank to enable him to import food for his family, tobacco for his pipe, a piano for his drawing-room, a new hat for his wife, or any other commodity he may elect to purchase. The test of Brown's capacity as a business man is not the amount of hardware that he parts with, but the value of the "imports" which he ultimately receives in exchange for his hardware. If he makes a bad debt, he receives no imports, and if he is unable to get a good price for his hardware, his imports are not so large as they should be. There is so much loose talk about " international " trade that many people lose sight of the simple fact that the imports and exports of a nation are the sum of a large number of individual transactions between persons on either side of a political boundary line. The individual transactions need only to be understood to give the clue to the meaning of the sum of transactions we call import and export trade. One nation does not deal with another, but an individual in one country makes a deal with an individual in another country, and in the case of a sale of goods, the respective Custom Houses of each country make a record, the one of an import, the other of an export, and so we get the figures that people wrangle over, OUR EXPORTS OF GOODS. 43 and sometimes distort, to fit some particular pretty theory or shibboleth concerning trade. An individual in Yorkshire, let us say, wants a certain article. Whether he buys it in his own country or in some other country matters not one jot, so long as he gets the article he wants at the right price. In either case he becomes the possessor of it, the gainer of it, that is, by virtue of the credit he possesses, which credit is the result of some work or service which he has done or that some- one else has done for him. He does other Yorkshiremen no wrong by purchasing what he wants in France or in Germany rather than in Lancashire or Scotland, for if it be true that he wants the article, and is all the better for gaining it, then Yorkshire has not lost but gained, by reason of the fact that a pianoforte, or tool, or picture, or whatever it may be, has come over the county border. No Yorkshireman, no Englishman, has been robbed of employment by the act of importation, for it is clear that the imported article must be paid for, and there is only one way of settling the transaction, and that is by the transfer of some other article or articles, made in England, not necessarily to France or Germany, but either to France or Germany or some other country with which France or Germany trades. If the Yorkshireman is an iron manufacturer what has actually happened is that he has bartered some of his iron for the pianoforte, tool, or picture. The foreign article has been bought, not with money, but with so much good Yorkshire iron. The importation robs no one of work ; it is, in fact, exchanged for the product of British labour. It is important to note that if we buy or import an article from an American, it does not necessarily follow that the corresponding sale or export is to an American. The reader will understand this by considering the case of an individual transaction within our own country. Let us consider the business transactions or commerce of a manufacturer of furniture. Wood is his chief raw 44 ELEMENTS OF THE FISCAL PROBLEM. material, and he buys or imports it from a timber merchant. He gives in return a cheque, which is a token enabhng the timber merchant to import in his turn from other people, but not necessarily (or indeed probably) from the furniture manufacturer. The furniture manufacturer's "exports" go, not to the timber merchant, but to a number of furniture dealers, who in their turn send the furniture maker cheques to enable him to import value in exchange for his wares. No money passes. The opera- tions are simply barter, and the imports and exports of the parties are made to suit their needs by the operations of banking. Observe that timber is exported by the timber merchant to the furniture manufacturer, but that there are no direct and visible exports from the furniture manufacturer to the timber merchant. So it is frequently with the total of transactions which form the import and export figures of Custom Houses. It will be found that the United States, being our food merchant, our timber merchant, and our cotton merchant, and making great use of our ships through having few of its own, makes much larger exports to us than we, who chiefly export manufactures, make to the United States. Our corresponding exports, like those of the furniture maker, usually go to some buyer in quite another direction, perhaps in South America or China. Such simple considerations as these show us how erroneous it is to talk of a " balance of trade " between nations. The reader has doubtless seen our exports to America gravely deducted from our imports from America to show that we had " lost " something. It would be as sensible in the individual case I have quoted to represent that the furniture maker had "lost" because his imports from his timber merchant were large and his exports to his timber merchant nil. The operations of modern banking enable us, within our own country, to import from A. while we export to B. Similarly, in transactions with persons outside our country, we can buy from C. in the United States, OUR EXPORTS OF GOODS. 45 and sell to D. in Brazil and leave the bankers to settle the transfers of credit. They are not settled in money, in gold or in silver, but by the passing of bills of exchange and a little bookkeeping. Let us now see what goods we export or send out of the country. On page 47 will be found an analysis of our exports, in the year 1902, of our own products and manufactures only, excluding all sales of imported goods, which I have already considered and deducted in the analysis of imports. The two analyses are made in pre- cisely the same way, and in the table of contrasts on page 59 the reader will find a general summary of our inward and outward shipments. It is necessary at once to observe that the values of our exports are entered by our Custom Houses at " f.o.b." prices, " f.o.b." meaning "free on board." That is to say, the values are simply those of the goods taken to the port and placed on shipboard. Insurance and freight are not included, as in the case of imports. It is important to take note of the distinction, as I shall show hereafter. It will be seen by the tables that the character of our exports differs widely from that of our imports. Of food we exported but £11,000,000 worth, and this had in great part passed through various manufacturing procf'sses. Of jams, confectionery, and preserves alone we exported 3r846,ooo worth. This trade has been stimulated by the Continental sugar bounties, which have perhaps prevented our sugar refineries from employing an additional few thousand men while supplying cheap material to other British industries employing 100,000 men and conferring great benefit upon our fruit-growers. Turning to raw materials, of the ^^32, 336,000 worth which we exported in 1902, as much as 3^27,000,000 consisted of coal, while, on the other hand, our imports of raw materials, allowing for re-exports, were valued at £124,000,000. A great deal of misapprehension has been caused by the misleading statements which have been 46 ELEMENTS OF THE FISCAL PROBLEM. disseminated about our coal exports. It has been stated that our coal and machinery exports " foster in an especial degree the competition of foreign protected manufac- tures."^ This is a misapprehension. It is not the case that foreign industries are assisted in their compe- tition with ours by the use of coal which we are unthinking enough to sell them. As a matter of fact, the rapid growth of our coal exports is not through purchases on account of foreign manufacturers, but through the growth of steam navigation, and of British navigation in particular. I am not referring to bunker coal shipped at British ports, for this is not included in the ^27,000,000 worth, but to our coal exports, usually so called. As Mr. D. A. Thomas, M.P., pointed out in his masterly paper on " Coal Exports," read to the Royal Statistical Society in May, 1903, it is utterly impossible for foreign nations to beat us with our own coal. The industry must go to the coal, not the coal to the industry. This was first demonstrated by Jevons, and a moment's reflection will show that it is true. For instance, Cornish potter's clay is taken to Staffordshire, to be near coal. Coal is not taken to the clay in Cornwall. That is why, to put it bluntly and frankly, the United Kingdom, the United States, and Germany are the three greatest industrial nations. They have the coal. Nor England, nor America, nor Germany could sustain their manufacturing greatness on imported coal. Not any fiscal policy whatsoever — good, bad, or indifferent — can make a country industrially great if it lacks coal in the Age of Coal. And the length of the Coal Age ? Who shall say ? A few figures will give a complete answer to those v\^ho are asserting, in speech and pamphlet and leaflet, that our competitors hoist us with our own petard. In 1900 the United States took from us less than i per cent. (o'03) of the coal she consumed ; Germany, 6*i per cent. Our ^ Mr. Balfour: "Economic Notes on Insular Free Trade," p. 22. ANALYSIS OF EXPORTS. 47 AN ANALYSIS OF THE EXPORTS OF BRITISH GOODS FROM THE UNITED KINGDOM IN igo2. {The Values are f.o.b.) . Food and Fodder: — £ Animals, living 187,000 Biscuits and cakes ... 857,000 Butter 79,000 Cattle foods ... 176,000 Cheese 36,000 Chicory 10,000 Cocoa and chocolate 129,000 Coffee 6,000 Corn, grain, &c., including offals ... 1,252,000 Fish 3,706,000 Hops 69,000 Jams, confectionery, preserves, &c. 846,000 Margarine 42,000 Meat 496,000 Milk, condensed 568,000 Pickles, sauces, &c — 670,000 Provisions, including tinned goods 1,389,000 Potatoes 310,000 Sugar, molasses, &c. 569,000 Total of Food and Fodder ;^ii,397,ooo 48 ELEMENTS OF THE FISCAL PROBLEM. ». Liquor: — £ Aerated waters 132,000 Beer and ale... 1,786,000 Spirits 2,808,000 Wine, British 7,000 Total of Liquor A.733,000 . Raw Materials: — Bladders, casings, &c. 162,000 Coal ... 26,307,000 Coke ... 552,000 Patent fuel ... 722,000 Clay 507.000 Cloth cuttings 60,000 Copper ore ... 1,000 Flax and hemp 185,000 Hides 376,000 Iron ore 10,000 Iron, scrap ... 326,000 Lead ore 13,000 Paper materials 379.000 Slates (roofing) 147,000 Skins and furs 427,000 Wood and timber ... 25,000 Wool 930,000 Zinc ore 54.000 Zinc, crude ... 99,000 Miscellaneous, unenumerat ed goods 1,054,000 Total of Raw Material s ••• ;^32,336,ooo D. Partly Manufactured Materials : — Cotton yarn ... ... ... ... 7,404,000 Grease and fat ... ... ... 778,000 ANALYSIS OF EXPORTS. 49 Partly Manufactured Materials (continued) :- r Jute yarn 530,000 Linen yarn ... 842,000 Manures ... 2,772,000 Metals, crude forms of: Copper, unwrought 1,202,000 Pig-iron ... 3,569,000 Puddled iron 2,000 Unwrought steel . 142,000 Pig-lead 168,000 Tin, unwrought . 736,000 Oils 2,354,000 Paraffin wax ... 260,000 Silk yarn, &c. 238,000 Straw plaiting 32,000 Wool tops, noils, flocks, &C. 2,849,000 Woollen and worsted ya rn inufactured 5,197,000 Total of Partly Mi Materials . • £29,075,000 E. Manufactured Materials and Plant :- F.P Agricultural implements ... 425,000 Bags and sacks 442,000 Brass and brass goods 613,000 Bricks 196,000 Cement 520,000 Chemicals, drugs, &c. 6,814,000 Coal products other than dyes 1,198,000 Copper manufactures 1,731,000 Cordage, cables, &c. 548,000 Crucibles 71,000 Dentists' materials ... 104,000 Electric light apparatus p. 617,000 £ so ELEMENTS OF THE FISCAL PROBLEM. E. Manufactured Materials and Engine packing Glass (plate, and bottles) ... Glue. &c. Grindstones, &c. Hardware (part only) Hatters' wares Implements and tools Iron and steel manufactures Jute goods ... Lead manufactures ... Leather Machinery ... Metal goods, miscellaneous Methylated spirits ... Mica manufactures ... Paints and colours ... Paper... Railway carriages and wagons Scientific instruments Telegraphic wire and apparatus Zinc manufactures ... Plant {continued) £ 122,000 579,000 136,000 181,000 759,000 119,000 1,147,000 25.155,000 1,983,000 289,000 1,336,000 18,755,000 863,000 1,000 5,000 1,972,000 1,672,000 2,336,000 533,000 2,839,000 37,000 Total of Manufactured Materials and Plant ... ^^74,098,000 F. Domestic Materials and Personal Necessaries : — Apparel Blacking Boots and shoes (leather) Brooms and brushes Candles Caoutchouc manufactures 6,297,000 197,000 1,897,000 160,000 433>ooo 1,224,000 ANALYSIS OF EXPORTS. 51 Domestic Materials and Personal Necessaries {continued) : — £ Chinaware and earthenware 1,899,000 Cotton piece goods ... . 55,215,000 Cotton hosiery 457,000 Cotton lace ... 3,066,000 Cotton miscellaneous goods 2,686,000 Cotton (sewing) 3,628,000 Cutlery 659,000 Fishing tackle 260,000 Furniture 905,000 Glass (flint, &c.) 518,000 Haberdashery, millinery, embroi - dery, and minor articles of apparel 1,774,000 Hardware 759,000 Hats 1,220,000 Leather goods 595,000 Linen manufactures 5,430,000 Matches 71,000 Mats and matting ... 77,000 Oilcloth and Hnoleum 1,466,000 Saddlery and harness 583,000 Soap ... 1,126,000 Starch and blue 149,000 Umbrellas 426,000 Wood manufactures 564,000 Woollen and worsted manufacture s 15,261,000 Miscellaneous 596,000 Total of Domestic Materials and Personal Necessaries ... ;^i09,598,ooo G. Manufactured ** Luxuries " Books Carriages and carts ... 1,634,000 374,000 E 2 52 ELEMENTS OF THE FISCAL PROBLEM. \L\NUFACTURED " LUXUI ^lES" (continued) : — £ Clocks and watches 102,000 Cycles 718,000 Jewellery 183,000 Motorcars ... 172,000 Musical instruments 264,000 Perfumery 224,000 Pictures 288,000 Plated wares 464,000 Prints and drawings 143,000 Silk manufactures ... 1,393,000 Silver and gold plate 65,000 Skins and furs 1,036,000 Stationery 1,286,000 Toys and games 452,000 Miscellaneous manufacti ires " Luxuries" 500,000 Total of Manufactured ^^9,298,000 H. Miscellaneous : — Arms and ammunition Horses Parcel post ... Seeds ... Ships (new) ... Tobacco Total of Miscellaneous 1,832,000 635,000 3,478,000 366,000 5,871,000 707,000 ;^i2,889,ooo Total of all classes 3^283,424,000 OUR EXPORTS OF GOODS. 53 chief rivals are practically independent of British coal, and it is that independence which has made them our rivals. As Mr. Thomas points out in the paper already referred to, "the great bulk of our coal export is for the use of steamships, and it is within the mark to say that over half of our exports are for navigation purposes." Combine this fact with the most remarkable, the most tremendous, feature in the world's commerce — namely, that we own about one-half of the world's ships — and we see that our coal exports, instead of feeding foreign competition, go largely to feed our most important industry, our carrying trade. For other reasons our coal exports deserve special con- sideration. The coal has first to be won, and the manner of its getting is so arduous that, when the coal is brought to the surface, 80 per cent, of its value is represented by labour. Trace the coal in its transport to the sea — taken as it is by steam power, the result of the burning of coal — and it is seen that the proportion of wages per ton increases. It is taken on board ship, again by labour, and, by virtue of steam coal, labour transports it to its destination. Think of the variety of employments which, from first to last, take the coal from its hiding place in the mine to its ultimate sphere of usefulness, and of the wealth which is gained by its mining and sale and transport. More than this, it is such a bulky article that many ships are required to carry it, and that means profits for shipowners and profits for shipbuilders. It is a fact little known that coal forms four-fifths of the weight of our exports. The freights of the coal are paid, by those who buy the coal, to British shipowners. Then the ships which take it out, say to the Argentine Republic, bring back wheat, and so earn money going and returning. This double freightage means profit- able shipowning, and it means, of course, cheap freights. If a ship had to go out in ballast to Argentina to fetch wheat, the freight on the wheat would be costlier, and the 54 ELEMENTS OF THE FISCAL PROBLEM. corn would be dearer to the British consumer. These are points known to few eaters of bread in this country, but they are amongst the most important in British com- merce, and I beg the reader to store them in his memory at a time when it is represented that coal exports are a loss. Undoubtedly they would be a loss, unless paid for, but for the reasons given they are doubly paid for ; not only is the coal itself sold, but the services of the ships that carry it. It is sometimes urged that coal is not an export, because it is " an exhaustible product of the earth which cannot be replaced by labour." This definition is worth a short examination. In the first place, the labours of the Royal Commission have already established the fact that in a hundred years time we shall be, for all practical purposes, no nearer the exhaustion of our coal supplies than we are at this moment. It would, therefore, be a most exaggerated regard for posterity which would lead us to check our coal production, to say nothing of the fact that there would be no posterity if we did so. It has also been established that although we are drawing upon deeper supplies, the coal, through economy of working, is costing no more to get than twenty years ago, while through increased economy of consumption one ton of coal does as much work now as three tons were wont to do. As for the term " exhaustible product of the earth," this applies not only to coal, but to iron ore, to tin, to copper, to lead, to zinc, and to every other mineral, and that this class of products should be freely interchanged between nations is for the benefit of the whole world. If we refused our steam coal to Germany for the use of her steamships, Germany could retort by refusing to sell us her zinc. In effect we exchange a little, a very little, of our coal for foreign minerals, and gain is mutual. To carry the matter a little further, there is no manufactured article which we produce which does not lead to the exhaustion of coal, in addition to some other exhaustible OUR EXPORTS OF GOODS. 55 product of the earth. Take cotton goods, for example. The cotton is spun, and the cahco is woven in factories built of bricks, which bricks are of clay burnt by coal in a kiln itself made of firebrick burnt with coal. The cotton machinery is of iron and steel — exhaustible products of the earth — constructed with the help of energy derived from coal. The burning of coal actuates the locomotive which conveys the manufactured articles to the seaboard, and the burning of coal, again, actuates the steamship — itself made with coal — which takes the cotton goods to, say, China. The " exhaustible product of the earth " is consumed all the time. In brief, you cannot export any article from this country without exporting coal. We pass to the consideration of our exports of manu- factures. As these have been grouped in precisely the same way as our imports, a comparison of the totals is possible. It will be seen that of an exportation of manu- factures valued at £222,000,000 only £9,000,000 falls in the category of " luxuries," against £25,000,000 of imports of the same nature. That is an instructive fact, and it goes to confirm what I have already stated as to the non-competitive character of the greater part of the goods which I grouped under "luxuries." The respective totals of imports and exports of half-manufactured goods are seen to differ but little, but it is otherwise with the remaining groups of manufactures. Of manufactured materials for industry we imported £37,600,000 and exported £74,000,000. Of domestic and personal necessaries we imported £25,000,000, while we exported nearly £110,000,000. However, we should never draw hasty conclusions from such comparisons, and this warning is particularly necessary in connection with individual trades. A common device is to contrast our imports and exports of leather goods, or woollens, or iron and steel, and to draw conclusions of prosperity, or the reverse, from these data alone. Such comparisons are most misleading without reference, in the first place, to the extent of home 56 ELEMENTS OF THE FISCAL PROBLEM. production. The relation of output to export varies con- siderably in different trades, as a few important examples will show. Take first of all the cotton industry. Output, importation, and exportation are as follows : — British Cotton Industry. Estimated output per annum ... 3^^90,000,000 Exports in 1902 ... ... ... 72,000,000 Imports for home consumption in 1902 ... ... ... ... 5,000,000 The cotton industry is the only case, I believe, in which the exports form the greater part of the output. It will be seen that the value of British and foreign cotton goods consumed in the United Kingdom is about -£"23,000,000, or over los. per head per annum. Very different are the figures of the woollen and worsted industries. British Worsted and Woollen Industries. Estimated output per annum ... £65,000,000 Exports in 1902 ... ... ... 23,000,000 Imports for home consumption in 1902 ... ... ... ... 12,000,000 In this case production is nearly thrice as great as export. The home consumption is valued at £54,000,000, or about 25s. per head per annum. Some people imagine that our imports and exports of woollen goods are of a precisely similar character. That is not the case. We beat the French in worsteds, but it is to be feared that our neighbours across the Channel still have the pull of us in producing fine woollen costume cloths. There are most encouraging signs, however, that the Yorkshire woollen manufacturers are devoting increasing attention to method and design, and we may yet beat the French in costume cloths as we distance them in worsteds. OUR EXPORTS OF GOODS. 57 The figures for the iron and steel trades are as follows : — British Iron and Steel Industries (excluding Ships, Machinery, Tools, and Hardware). Estimated output per annum ... pTyOjOOOjOoo Exports in 1902 ... ... ... 28,500,000 Imports for home consumption in igo2 ... ... ... ... 7,600,000 The reader has doubtless heard accounts of the ''overwhelming" of iron and steel industries. These figures show that they are untrue in substance and in fact. As for our total production of manufactures, it is exceedingly difficult to estimate. In 1895 Mulhall put the total at £876,000,000 per annum, including manu- factures of food. From all the data I can gather I am inclined to estimate our home production of manufac- tures in 1902, excluding food manufactures, at about £900,000,000. Accepting this figure provisionally, we get the following contrast : — Manufactured Goods. United Kingdom Production, Export and Import. Estimated output per annum ... £900,000,000 Exports in 1902 ... ... ... 222,000,000 Imports for home consumption in 1902 ... ... ... ... 113,000,000 When our importation of finished goods is contrasted with our output of manufactures, and when it is further considered that only a part of the £113,000,000 worth of imported manufactures consists of articles ready for con- sumption, the bogey of foreign competition is seen in its proper proportions. It is plain that the natural selection of industry has not overwhelmed our activities. We shall see later that there is clear evidence to show that our 58 ELEMENTS OF THE FISCAL PROBLEM. production of manufactured articles has been, and is, rapidly increasing. To return to the figures on page 59, while our imports and exports vary so greatly in character, mutual service is expressed in every line of the table of comparisons. These amazing millions are made up of a vast number of individual transactions, each of them made between a buyer and seller for the profit of both. Yet we often see writings upon commerce which would lead us to suppose that one nation has the power to hurl goods at the head of another with dire intent to damage and destroy. At other times we find that men, otherwise sane, use language which, if it means anything, expresses a vague idea that our exports must not be of a character to make them useful to the foreigners who buy them. We find the Prime Minister deploring our exports of machinery,^ apparently believing that, as machines are meant to be used, they will be employed to construct goods which, by-and-bye, will cause great havoc by being cast upon our defenceless coast, with never a customs official to collect 10 per cent, ad valorem to render them innocuous — and a little dearer ! This machinery argument has attained such vogue that it is worth while to examine it in detail. I take it that Mr. Balfour would not be so churlish as to grudge a textile machine to Canada, even though the sale should foster Canadian-American competition. In the following table I have, therefore, distinguished between exports to foreign countries and exports to British possessions : — Of jri8,754,ooo worth of machinery exported in 1902 as much as 3r4,29i,ooo worth consisted of agricultural and mining machinery and locomotives. This machinery, instead of undermining our industries, served to sustain them by assisting the development of our supplies of food and raw materials. Of the rest, ;£'i2,623,ooo worth, as * " Economic Notes on Insular Free Trade." OUR EXPORTS OF GOODS. 59 p CSI n OJ a> :z; H o o 1— < o cn Q O O o c^ K u rn Ph 1— 1 H 1— ( O t^ P^ n 1^ t— 1 (f) H 1^ P^ O ^ __^ w M >*_• , k/< Ph o D o o o o o o o o o 1 o o o o o o o o o ja o^ q^ o o o o q_ q^ o •\ d tC fO VO \n oo oo oo CT » '^ fO PO C^ 0^ cn CJ^ oo CM — ' !>. on o^ 9. lO c^ oq rt- (/5 M '^ . C^ N CM c^ VO xt oo CO V+J -+- ^ t^ I>s IT) N C7> 00 ON 00 !>. t^ O VO M H H in O a, E vd vd ro v^ t^ \n in CM M o cs CM oo M CM H VO c^ H •rj- t— I S^ >> M -M cn 3 T3 (U C! (rt • 1— i P c ^^ 1-. OJ ct3 -M t/3 o 3 P tfi C O 1— 1 <•*-! ll U *■' o o c c< G . '^ CTJ t/3 .2 : ^ S (U rt rf Ij o tn 03 -♦- aterii , and U . "T 3 "^ ^ 3 '^ oi t3 5 ^ " 5 i n3 "il! a T \ a. J ►— < OJ — i 'J T i l ■^ .ct3 ,^ ■1 i-i-i T^ t; :) " ^ ^ C ■) • G 3 13 QJ c J X- 3 O t i • 'Z ^ ;- r I \ 5 H •n i ; + ■J >^ +^ o -^ \ c ^ c T C C 5 Ci Partly A Manufac -t-J (/] (U 6 o Q c. c < i S 3 1 c! .i -I y- ' 1^ H H J i -4 < i p: i e 3 C ^ W fc c 3 in -t -1 6o ELEMENTS OF THE FISCAL PROBLEM. Our Exports of Engines and Machinery in igo2. To Foreign Countries. To British Possessions. (i) Partly used in competitive industry :— Steam engines £ 880,000 3.593.000 3,482,000 £ 969,000 Textile machinery Other machinery 917,000 2,782,000 7.955.000 4,668,000 (2) Chiefly used in producing food and materials and in conveying them : — Agricultural engines Agricultural machinery Locomotives 560,000 699,000 517,000 135,000 72,000 113,000 1,782,000 413,000 Mining machinery 1,911,000 2,380,000 (3) Sewing machines 1,733,000 107,000 Total 11,599,000 7,155,000 much as 3^4,668,000 worth was exported to British pos- sessions, leaving only :£"7,955,ooo worth for the foreigner. Mr. Balfour's arguments, then, concern an uncertain part of :£'7,955,ooo worth of our exports of engines and machinery. Who shall say quite how much of the pro- duction of the exported engines and machines ultimately enters into competition with British industry ? The exports of foreign nations form, as in our own case, but a fraction of their total activities, and it follows that the engines and machinery they use, as in our own case, are more concerned with production for home consumption than for export. In relation to the machinery and engines now actually made in foreign countries, our sales to foreigners must be a quite insignificant quantity. Moreover, OUR EXPORTS OF GOODS. 6i as will be seen by reference to the analysis of imports, in 1902 we imported for home use ;^4, 110,000 of machinery, which the foreigner was unthinking enough to supply for the benefit of our industries. By far the greater part of this machinery was of a special character. There is this much truth in Mr. Balfour's philosophy. The articles we export are all of use to the foreigners and British Colonists who import them. If we sell steel to a German, he makes a machine from it, and with that machine some other German makes hosiery to increase our import statistics. If we sell a steel girder to a German, he builds it into a factory, which factory contains the machines which produce the goods which trouble Mr. Balfour. It is a sad business, the useful- ness of the things we export, but, fortunately, we have ample compensation, for it is also true that the things we import are of use to us. If it comes to counting gains in international exchanges, we have won the greater part of our comforts and luxuries from the foreigner. But we have won them fairly, by giving useful articles and services in exchange. True it is that every individual transaction in commerce is actuated by purely selfish motives, but the sum of hundreds of thousands of selfish bargains is for the common benefit of all mankind. CHAPTER VIII. OUR EXPORTS OF SERVICES. From the figures we have already examined it is clear that we do not pay for the whole of our imports by the exportation of goods. Here are the figures in a simple form : — British Imports and Exports in 1902. Imports (values c.i.f.) ... ... ^^528,391,000 Exports of British goods (values f.o.b.) 283,424,000 Exports of goods previously im- ported (values f. o. b.) ... 65,815,000 Imports exceeding exports by ... 3^179,152,000 The reader who has closely followed our examination of the facts, however, will at once be struck with the fact that to deduct f.o.b. values from c.i.f. values in this way is not strictly accurate, for it is obvious that the £■528,391,000 of imports is partly made up not only of the value of goods, but of cost of freight and insurance. We do most of the carrying trade at our own ports. That part of the value of our imports, therefore, which consists of freight and insurance is really a British " export," not an export of goods, but of services. That brings us at once to the consideration of what have been termed " invisible exports " — our earnings, that is, as shipowners, bankers, &c. — and to that important part of the subject we will now devote ourselves. As I have already pointed out, if one has any difficulty in understanding international trade, it can usually be resolved by considering the transactions of an individual, OUR EXPORTS OF SERVICES. 63 and I can most simply explain how we pay for a great part of our enormous imports by " invisible exports " by considering an individual case. A very large number of the British people pay for their imports or purchases {i.e., earn their living) without exportation of any visible kind. Instead of parting with goods in payment for their imports, they give services. A barrister, for instance, may earn :£'5oo or ;^5,ooo a year, or, in other words, import (or have the power to import) goods valued at ;f5oo or ;^5,ooo a year. His exportation, so far as goods are concerned, is nil. But he exports, nevertheless, in the form of professional services, for which people are glad to pay him. How absurd it would be to represent that a fashionable K.C., earning £"10,000 a year and " importing " goods to that amount per annum, is ruined because he has no visible " exports." Yet it is not a whit more absurd than the statements with which, no doubt, the reader is familiar, that the United Kingdom is being " ruined " because its visible imports exceed its visible exports. The result of the simple subtraction given above is hoisted as a bogey by every Protectionist writer and every Protectionist orator. Last year we had Mr. Seddon telling a British audience that every year we sent away oversea 160,000,000 golden sovereigns to pay for our " balance of trade." Although many of Mr. Seddon's hearers cried " No, no " to his absurdity on the spot, I am painfully aware that this fallacy as to the export of gold is not entertained only by the Premier of New Zealand, and I therefore give the official figures of the Board of Trade for 1902 for the benefit of Mr. Seddon and others : — Declared Real Value of Imports and Exports of Gold and Silver Bullion and Specie in 1902. Imports £31.393,345 Exports ... 26,125,206 Balance imported ;^5,268,i39 64 ELEMENTS OF THE FISCAL PROBLEM. Whereabouts in these figures are Mr. Seddon's 160,000,000 golden sovereigns ? So far from having sent out of the country sovereigns or gold for the ;£'i7g,ooo,ooo we actually imported on balance ;^5,268,i39 of gold and silver in 1902. Indeed, it is obvious that, as we produce only a few thousand pounds' worth of native gold per annum, and as there is no Tom Tiddler's ground in the United Kingdom where it may be picked up, we cannot pay the foreigner for his goods in money, and Mr. Seddon may calm his fears about the sovereigns. As I have explained, all trade is barter, and the transactions in gold between nations are small. What is exchanged is either goods or services. Just as a barrister may import goods value ^^10,000 a year without exporting goods, giving his services in exchange, so a nation may pay for a great part, or even the whole, of its imports by giving services in exchange for commodities sent it by other nations. It will be of interest to consider what services we perform for other nations to earn the £184,000,000 "balance of trade" or difference between our imports and exports. In the first place, we have an enormous shipping industry. About 50 per cent, of the world's tonnage is under the British flag, so that we do one-half of the carry- ing trade of the world. British ships bring to our shores by far the greater part of our £528,000,000 of imports, and we have already seen that this figure includes the earnings of our ships. British ships, also, take from our shores the greater part of the £349,000,000 of exports, which figure, as we have also seen, does not include the freights so earned. Not only so, but British "tramps" do a great part of the carr3'ing trade between foreign ports. The enormous earnings of our ships are all " invisible exports," and we receive payment for them in the goods we import. It is not an easy thing to estimate exactly what the freight and insurance — "invisible exports" — amount to, and the sum must vary considerably from year OUR EXPORTS OF SERVICES. 65 to year, but the average freight earnings of the last five years can be hardly less than jf go, 000, 000. This figure does not rest upon mere guess-work, but has been arrived at by three distinct methods of calculation. The Board of Trade, in their treatment of the subject, take the whole world's excess of imports as a basis of calculation. As goods are usually valued "free on board" at points of departure, and inclusive of freight at points of arrival, the values of the imports of most nations exceed the values of their exports. Taking the world as a whole, imports largely exceed exports, as is shown by the following table :— Imports and Exports of Principal Nations. In Millions of £. — Imports. Exports. Excess of Imports. I89I 1896 I90I 2,099 2,147 2,516 1,850 1,898 2,292 249 249 224 The excess of imports shown would be larger but for the fact that the imports of several countries (including one important case, the United States) are valued without freight. This table affords a rough-and-ready means of ascertaining the value of our freight earnings. It will be seen that the average excess of the imports of the principal countries taken together for the three years given is 3^240,000,000. As the imports and exports of the whole world are for the most part the same goods vahted in two different ways — (i) f.o.b. at points of origin, and (2) c.i.f. at points of arrival — the excess of value of the imports is a fair measure of the cost of freight and insurance. As we own half the world's shipping we get the rough- and-ready conclusion that about one-half the excess of imports, or, say, £120,000,000, is earned by British ships. P.p. F 66 ELEMENTS OF THE FISCAL PROBLEM. Taking into account the fact that part of these earnings must be spent abroad, in coaUng, for port dues, &c., the £120,000,000 is considerably reduced, but certainly not less than about £90,000,000 represents that part of our invisible exports represented by freight. Sir Robert Giffen's calculation proceeds on entirely different lines. In 1898, after careful consideration of the actual earnings of typical vessels, he estimated the gross tonnage of our steamships at £12 per ton and those of our sailing vessels at £4 per ton. Applying these figures to our foreign-going tonnage of 1902 we get : — Estimate of Gross Freight Earnings of British Ships in 1902. Tonnage of Foreign-going Vessels of the U. K. in 1902. Sir Robert Giffen's Estimate of Gross Earnings per ton. Aggregate Gross Earnings. Steim (tons) 7 234 000 £ 12 4 £ 86,808,000 5,568,000 92,376,cxx) From this £92,376,000 we have to deduct the outlays for coaling, &c., incurred in foreign ports, and to add profits, insurance, postage, passenger fares, &c. If we assume that these deductions and additions balance each other, we arrive at a sum of about £90,000,000 as the net earnings, which goes to support the results of the former calculation. I am personally indebted to Mr. James Taylor for a third estimate. This is based, not upon earnings per ton of shipping, but upon earnings per freight ton. " Tonnage" is a technical term, and as usually employed does not convey a correct idea. "Gross tonnage" is the "solid content " of a vessel expressed in " tons " of 100 cubic OUR EXPORTS OF SERVICES. 67 feet. " Net tonnage" is the gross tonnage less a deduction for " crew space " in the case of sailing vessels, and a further large deduction for space occupied by boilers and engines in the case of steamers. But the earnings of a vessel depend on the number of tons of 20 cwt. she can carry, or the number of " measurement tons " of 40 cubic feet her hold will contain. In the case of a mixed cargo, i.e. "weight and measurement," a greater number of freight tons can be got into a vessel than of either kind separately. To take an extreme example and revive a problem of our childhood — with a cargo of lead and feathers you could easily get over 2,000 "tons" into a vessel carrying only 1,000 tons dead weight. Measurement tons stand in relation to weight tons in about the proportion of 1,400 to 1,000, and very little lead would be displaced by the weight of the feathers, and very few feathers would be displaced to make room for the lead. It is the extent and variety of our commerce and its reciprocal character that gives our shipping its strength. Thus, esparto grass (used by paper makers), a very light article, is shipped with lead from Spain ; tin and tobacco travel together to mutual benefit from Java ; while outward cargoes consist of coal and the thousand and one things we make and send abroad to all the world. In the following table the figures of British shipping tonnage are transformed into freight tons, having regard to both dead-weight and measurement : — United Kingdom Shipping Expressed in Freight Tons. 1862 ... 5,437,952 Increase. 1872 ... 8,336,667 ... 2,898,715 in 10 years. 1882 ... 12,795,902 ... 7,357,950 „ 20 „ 1902 ... 23,584,627 ... 18,146,675 „ 40 „ After consultation with a shipbroker of great experi- ence, Mr. Taylor estimates the gross amount of freight earnings of our ships at ;^5 per freight ton. Taking the F 2 68 I':lements of Till' .fiscal problem. even millions, 23,000,000 tons, for our over-sea trade, we get j^i 15,000,000 as the gross earnings of our ships in igo2, a figure which, after allowing for expenses abroad, supports the other two estimates. To proceed, we have ]3ritish capital invested in every quarter of the globe, in every foreign country, and in every British possession. Income-tax is paid in this country on declared profits from certain classes only of foreign investments to the extent of £62,500,000 per annum. The following table is from the Report of the Commissioners of Inland Revenue : — Certain Declared Profits from Abroad in the Year igoi — 2. Indian Government Stock, Loans and Guaranteed Railways ... ^£'8,880,908 Colonial and Foreign Government Securities ... ... ... 19,245,888 Colonial and Foreign Securities other than Government ... 9,367,766 Coupons 10,454,343 Railways out of the United Kingdom 14,610,574 ; ^62,559,479 This total takes no account of the British capital invested in industrial undertakings in foreign countries and British possessions. Thus, if the reader owned a cotton mill in Russia, his profits, although spent in this country, would not be declared under any of the categories mentioned above. It is therefore impossible to say quite how much is receivable every year, but it may be safely taken at not less than £"90,000,000 per annum, representing the earnings on British investments in foreign countries and our Colonies of some £2,000,000,000 of capital, sunk in railways and tramways, in docks and harbours, in Govern- ment and municipal stock, and in industrial undertakings. OUR EXPORTS OF SERVICES. 69 In these two items alone, then, we have the sum of, say, ;^i8o,ooo,ooo of "invisible exports," but these are by no means the only items which we have to add to our exports of goods to arrive at our total exports. In addition, a considerable sum is earned in the form of bankers' and merchants' profits and commissions. Every year, again, we sell a considerable number of old ships, and their value does not appear in the Board of Trade Returns. Also we have to remember that many British civil servants, soldiers on foreign service, and others, make remittances to this country, which remittances ultimately arrive, of course, not in cash, but in the form of imports. Last, but not least, there are the Indian " home charges," the payments made by the Indian Government to this country for services rendered here in the " management " of the Indian Empire. I shall return to this point in a succeeding chapter, for it is of much importance. Suffice it here to say that £17,000,000 or thereabouts per annum is drawn from India by this country, and the Treasury drafts are ultimately satisfied by imports received in the United Kingdom. Taking these and other things into consideration, it is certain that in 1902 our exports, visible and invisible, i.e., the value of the goods sold, plus the services rendered to persons oversea, amounted to much more than £528,000,000, the declared value of our imports. This means in practice that, so far from importing more than we are able to pay for, we do not import all the value tJiat we earn, the balance going to swell the indebtedness of foreign nations and our Colonies to ourselves. It follows, therefore, that our excess of visible imports must continue to increase, and that the faster it increases the better for us. In the Frontispiece to this volume the facts we have examined as to our imports and exports are collected in a simple and convenient form. Need we fear that there will ever come a time when we 70 ELEMENTS OF THE FISCAL PROBLEM. shall be unable to pay for imports ? No. Those who are possessed by such a fear are entertaining the fallacy to which I have already referred, viz., that nations trade with nations. I repeat that so-called " international " trade consists of a multitude of transactions between individuals in different countries. When A. in America sells timber to B. in England, A. takes care to find out first of all that B. is of good credit. Unless B. is of good rating, A. does not part with his timber. The same is true of the tens of thousands of individual transactions between foreign exporters and British importers which take place every year. The fact that we actually received ^^528, 000,000 of goods in 1902 is, therefore, sufficient proof that they were paid for. The Protectionist fear that the people of this country may purchase more from other countries than they can afford is quite groundless ; we can trust the foreigner at least to see that he deals with people of good credit. ( Tariff Reform League Leaflet No. 20. THIS HILL IS DANGEROUS I A WARNING TO FREE IMPORTERS. SIGNIFICANT FIGURES FROM THE BOARD OF TRADE. For the first seven months of the present year, the Board of Trade reports as follows : — British Imports ;^3o6,o86,9oo British Exports 210,111,556 Adverse Balance £957975,344 At this rate the balance against us may easily amount by the end of the year to the handsome sum of 180 MILLIONS. Meanwhile our imports of foreign manufactured goods continue to increase. Here are the figures from January ist to July 31st, compared with those for the same period in each of the two previous years : — FOREIGN MANUFACTURED IMPORTS. First Seven Months. 1901 ^75>2o5,738 1902 77,946,159 1903 78,721,572 Increase 1903 over 1902, ^775)413- „ 1903 „ 1901. ^3,Si5>834- At this rate of progress — say 1 1 millions a month — we bid fair to break all previous records, and may look forward to closing 1903 with a credit to the foreigner of A ROUND 130 MILLIONS STERLING on the year's business in manufactured goods ! [The above is a copy, verbatim et literatim, of the front page of a leaflet largely circulated in Mr. Chamberlain's Interest by the Tariff Reform League. It will be seen that Exports are deducted from Imports, and the result termed an "Adverse Balance".] CHAPTER IX. THE GROWTH OF AN IDEA. We are now in a position to consider the reasonableness and propriety of the suggestion that "ties of interest" can be forged for the security and welfare of the British Empire, and it will be of interest, first of all, to trace the growth of the Zollverein agitation. It is more than ten years since Protection dropped its unsuccessful alias of Fair Trade and made an appeal to Imperial sentiment by assuming the garments of a Zollverein or Customs Union. It was, however, not a true British Imperial Zollverein which was advocated — not a Customs Union of the German pattern, with a total abolition of internal barriers, and duties against the world outside it— but that pale shadow of a Zollverein, a scheme of preferential trading. The idea of the " Preference " is that each part of the Empire should remain an independent fiscal unit, and levy such duties for revenue or Protection as may seem good to it, but should relax them in part in favour of other parts of the Empire, thus taxing foreign goods on a higher scale than British goods. To a self- governing Colony like Canada, with a Protective tariff, it is easy, if not agreeable, to put such a scheme into operation. The machinery exists, and it is only necessary to determine the reduction to be given to Imperial products. To the United Kingdom, favouring Colonial goods at the expense of foreign goods entails an entire reversal of our fiscal policy and the abandonment of Free Trade. We are at once confronted with the fact that Imperial reciprocity demands two strongly-contrasted sacrifices. It demands of us in the Mother Country that we should THE GROWTH OF AN IDEA. 73 sacrifice Free Trade. It demands of the Protectionist Colony that it should sacrifice Protection against the chief competitor of its manufacturers, the United Kingdom. Mr. Chamberlain realised this point very clearly when in March, 1896, at a meeting of the Canada Club, he intimated that he could only consider the question of import duties against the foreigner if our Colonies opened their ports to British goods, not merely giving us a reduction of duties, but Free Trade. In other words, he was willing to consider a true ZoUverein ; he was not willing to discuss a scheme of " Imperial Reciprocity." A few months later, on June g, i8g6, at the Congress of Chambers of Commerce of the Empire, at Grocers' Hall, London, the Colonial Secretary made his position even more clear. He said : — " This proposal (for Imperial Reciprocity) requires that we should abandon our system in favour of theirs, and it is in effect that while the Colonies should be left absolutely free to impose what Protective duties they please both on foreign imports and upon British commerce, they should be required to make a small discrimination in favour of British trade, in return for which we are expected to change our whole system, and impose duties on food and raw material. Well, 1 express again my own opinion when I say that tliere is not the slightest chance that in any reasonable time this country, or the Parliament of this country, would adopt so one-sided an agreement. The foreign trade of this country is so large, and the foreign trade of the Colonies is comparatively so small, that a small preference given to us upon that foreign trade by the Colonies would make so trifling a difference — would be so small a benefit to the total volume of our trade — that I do not believe the working classes of this country would consent to make a revolutionary change for what they would think to be an infinitesimal gain." The following year, at the Colonial Conference of 1897, Mr. Chamberlain pointed out to the Colonial Premiers that "undoubtedly the fiscal arrangements of the different Colonies differed so much among themselves, and all differed so much from those of the Mother Country, that it would be a matter of the greatest complication to arrive at any conclusion which would unite us commercially in the same sense in which the ZoUverein united the Empire of Germany." 74 ELEMENTS OF THE FISCAL PROBLEM. It would hardly be possible to formulate the chief objections to preferential trading in clearer terms than in the utterances I have quoted. Moreover, in the years that elapsed between the two Colonial Conferences, we had the benefit of the experience of a Colonial Pre- ferential Tariff in actual operation. In 1897 Canada reduced its tariff by iih per cent, in favour of the domestic exports of the United Kingdom ; the next year the Preference was increased to 25 per cent., and in July, igoo, it was again raised to ;i^^j per cent. Unfortunately, however, the Dominion largely took away with one hand what it gave with the other. At the same time that it made a fractional reduction in its duties in our favour, it raised the duties on manufactured articles — the only goods we are in a position to suppl3\ To put it as fairly as possible, while in competition with foreign manufacturers, the Canadian tariff gives our manufacturers a fractional advantage, as a whole, it favours the United States. Thus in 1902 the average duty on British goods amounted to 17 per cent., while the average duty on American goods was only 13 per cent. Further, when the geographical advantage of the United States is taken into account, it is clear that, even in respect to manufactured goods, the one-third reduction of duties in our favour is largely inoperative. All this was clearly understood in the early summer of 1902, when the visit of the Colonial Premiers in connection with the Coronation was approaching. Mr. Chamberlain took occasion on May i6th, 1902, to encourage our Colonial visitors in the Zollverein idea. On that day he made a speech which contained the following passage : — " At the present moment the Empire is being attacked on all sides, and in our isolation we must look to ourselves. We must draw closer our international relations, the ties of sentiment, the ties of sympathy, yes, and the ties of interest. If by adherence to economic pedantry, to old shibboleths, we are to lose opportunities of closer union which are offered us by our Colonies, if we are to put aside occasions now within our grasp, if we do not take every chance in our power to keep British trade in British hands, I am certain that we shall deserve the disasters which will infallibly come upon us." TH?: GROWTH OF AN IDEA. 75 It is difficult to know what passed in Mr. Chamberlain's mind between the date of this utterance and the time — a few days later — when he delivered his opening speech at the Colonial Conference of 1902. This speech contained several passages which are worth special attention. The first is one which shows that whatever may be the case at this moment, Mr, Chamberlain had no doubt in 1902 as to the meaning of the words " Free Trade," He said : " Our first object then, as I say, is Free Trade within the Empire ; . . . but when I speak of Free Trade it must be understood that I do not mean by that the total abolition of Customs duties as between different parts of the Empire. . . . I see that your revenue must always probably, and certainly for a long time to come, depend chiefly upon indirect taxation ; , . . but in my mind whenever Customs duties are balanced by Excise duties, or whenever they are levied upon articles which are not produced at home,^ enforcement of such duties is no derogation from the principles of Free Trade, as I understand it." The second passage points to the fact that Mr. Chamberlain clearly realised that the 1897 Conference proposals as to preferential tariffs were not based upon any reciprocal obligation on our part : — " In 1897 I would remind you that the Premiers then unanimously undertook to consult with their colleagues, and to consider whether a Preference might not be given on their Customs tariff for goods imported from the United Kingdom. This was a proposal without any reciprocal obligation. It was regarded by the Premiers at the time as a proposal that might be made in consideration of the fact that the United Kingdom was the largest and the best, and the most open market in the world for all the products of the Colonies." The third passage to which I direct the reader's attention clearly establishes in Mr. Chamberlain's own lucid language the disappointing results of the Canadian Preference : — " While I cannot but gratefully acknowledge the intention of this proposal, and its sentimental value as a proof of goodwill and affection, ' After the lapse of but one year Mr. Chamberlain now affects to believe that no difference exists between duties for Revenue and duties for Protection ! 76 ELEMENTS OF THE FISCAL PKOHLEM. yet that its substantial results have been altogether disappointing to us, and I think they must have been eciually disappointing to its promoters. . . . The total increase of the trade of Canada with foreigners during the period named, this is including both the trade subject to the tariff, and also the Free Trade, was 6g per cent., while the total increase of British trade was only 48 per cent. . . . And the net result which I desire to impress upon you is that, in spite of the preference which Canada has given us, their tariff has pressed, with the greatest severity, upon its best customer and has favoured the foreigner, who is constantly doing his best to shut out her goods. . . . We cannot bargain with you for it ; we cannot pay for it unless you go much further and enable us to enter your home market on terms of greater equality. . . . So long as a preferential tariff, even a munificent Preference, is still sufficiently Protective to exclude us altogether, or nearly so, from your markets, it is no satisfaction to us that you have imposed even greater disability upon the same goods if they come from foreign markets, especially if the goods in which the foreigners are interested come in under more favourable conditions." With a rapidity which surely he himself has never equalled, Mr. Chamberlain has completely changed his mind as to the results of the Preference. On May 15th, 1903, apparently with the object of publicly declaring his disapproval of the removal by Mr. Ritchie of the shilling corn duty (which Mr. Balfour on the same day was defending), he broke out in a vigorous speech, at Birming- ham, in which he asked : " Now, what has Canada done for us?" and answered his own question by declaring that the Preference had had an " important result." This in spite of the fact that in the previous July he declared, as we have seen, that the Canadian tariff " favoured the foreigner." Further, he did not scruple to threaten us with the withdrawal of the Canadian Preference, although, as we have seen, it was made perfectly clear when that Preference was iirst extended that there was no " reciprocal obligation " involved. In the same speech retaliation against foreigners was, for the first time, tacked on to the policy of preferential tariffs. The policy which, even as late as 1902, was confined to the suggestion that " ties of interest" could be created to bind the Empire together, became in May, 1903, a policy of retaliation against the foreigner. A few days later, on May 20th, Mr. Chamberlain, THE GROWTH OF AN IDEA. 77 in a letter to Councillor Livesey, made a tentative appeal to the British working man, alleging that any increased cost of living that might follow the adoption of his policy would be more than atoned for by an increase in his wages. On May 22nd he made the further suggestion in the House of Commons that the food duties might provide a fund to finance a scheme of old-age pensions, but in view of the ridicule which it excited, it was soon dropped. On May 28th, in the House of Commons, we had the famous debate raised by Sir Charles Dilke, on the motion for adjournment for the Whitsuntide holidays, when the following remarks were, by much questioning, extracted from Mr. Chamberlain : — "When we have got the mandate— if we ever get it — then will be the time to produce the plan. Everybody knows that a plan, in the sense of a definite and complete scheme, is absolutely impossible until we know a great deal of matters into which we have still to inquire. . . . " I want to know from every manufacturing district .... what particular article or articles of manufacture could be much more largely sold if a preferential rate were given by the Colonies . . . "The hon. Member for Carnarvon said I was in favour of taxing raw materials and food. Of course the hon. member had no right, from anything I have said, to say anything of the sort. . . . Inquiries are to be instituted which may throw further light on the subject. . . . " So far as I can see, it will not be necessary to put any tax at all on raw material. It would be a complicated way of dealing with a subject which might be dealt with much more simply. Therefore, we come to this : if you are to give a Preference to the Colonies — I don't say that you are — you must put a tax on food. I make hon. gentlemen opposite a present of that." The " present to hon. gentlemen opposite " was rounded off on June 26th, 1903, at the Constitutional Club, when he declared that a system of Preferential Tariffs was *' the only system by which the Empire can be kept together." It does not appear that, since June, 1903, there has been any further alteration in Mr. Chamberlain's opinions, and at Glasgow, on October 6th, 1903, he made the opening speech of his campaign. Its proposals, and the 7S i:l1':ments of the fiscal problem. ar^'uments which were used to support them, may be summarised as follows : — (i) A Disease which Calls for a Remedy. Signs are discernible that all is not well with British trade. While not anticipating a sudden catastrophe, Mr. Chamberlain sees " cracks and crevices in the walls of the great structure." The exports of Germany and America have grown at a much greater rate than our own. (2) Foreign and Colonial Trade. Our exports to British Possessions have increased at a much greater rate than those to foreign countries, which leads to the conclusion that it is the Imperial portion of our trade which has the first claim on our attention. (3) Where the Remedy may be Found. These things being so, we cannot afford to let the Colonies go adrift. We must endeavour to retain our Colonial markets. We must go to them and point out that, while we see " that they have no right to neglect what Provi- dence has given them in the shape of mineral and other resources," we think they should leave to us the manu- facturing of many goods which they do not now make. This, of course, in exchange for a quid pro quo. (4) A Self- Sustaining Empire. The importance of the endeavour to retain Colonial markets is accentuated by the consideration that the eleven million white Colonists of to-day will grow to forty millions in the time to come, and that already our self-governing Colonists import ^£'49, 000, 000 of goods from the foreigner per annum. By seizing the opportunity before us, we can build up a self-sustaining Empire. (5) We must Tax Food to Provide a Preference. Cheap raw materials being a prime necessity of our manufacturing trade, we cannot include them in a THE GROWTH OF AN IDEA. 79 preferential tariff. Therefore, we must tax food, but this can be done "without adding one farthing to the cost of hving of any family in the country." (6) We must Negotiate for the Reduction of Foreign Tariffs. To provide a means of negotiation for the reduction of foreign duties, and to defend our trade against unfair competition, it is also necessary to levy duties on imports of foreign manufactured articles. (7) The Scheme Outlined. To achieve the objects thus summarised, Mr. Chamber- lain makes the following proposals : — New Taxes on Food. {To he levied on Foreign imports only, to give a " Preference " to Colonial Supplies.) (i) Corn, except maize, a duty of 2S. per quarter. (2) Flour, a duty at a somewhat higher rate than on corn to " protect " the miller. (3) Meat, except bacon, a duty of 5 per cent. (4) Dairy produce, a duty of 5 per cent. Reductions on Present Taxes on Food. (i) Tea duty, three-fourths to be remitted. (2) Sugar duty, one-half to be remitted. (3) Cocoa and coffee duties to be reduced. A Wine Preference. Colonial wine growers to be assisted by preferential duties. A Duty on Manufactures. A duty not exceeding an average of 10 per cent, ad valorem to be levied on foreign manufactures. (Presumably Colonial manufactures are to come in free. 8o ELEMENTS OF THE FISCAL PROBLEM. Mr. Chamberlain has not made the point at all clear, but it is of great importance.) This summary, I think, does fair justice to Mr. Chamberlain's case in its broad outlines. We will now examine it in detail. CHAPTER X. THE TAXATION OF FOOD AND MATERIALS. Byron, who had a considerable insight into human nature, pointed out, in deathless verse, the unwisdom of dipping one's hand into a fellow-creature's breeches pocket. Now it is quite clear that if " ties of interest " are to be created to bind our Colonies to our side, someone's pocket has got to suffer. If we are to make it "worth their while," who is to pay the bribe ? Mr. Chamberlain, as we have seen, was driven to make this clear in the House of Commons on May 28th, 1903, when, after much questioning, he admitted that there was only one way to give the Colonies a Tariff Preference, and that was to tax foreign raw material and foreign food. His exact words were : "The Preference must be given either on raw materials or on food, or on both." He then proceeded to qualify this remark by observing that, owing to the difficulty of adjusting draw- backs^ on exports, the idea of taxing raw materials was abandoned, with the result that only one course remained. To use the Colonial Secretary's own phrase, " We must ' In Protectionist countries, when an article is exported which is manufactured from imported material upon which duty has been paid, the duty is returned to the exporter, and the rebate is termed a "drawback." That is to say the foreigner gets the article manu- factured from taxed material cheaper than the poor home consumer ! Such is the nature of the policy which we are asked to substitute for Free Trade ! F.P. G 82 ELEMENTS OF THE FISCAL PROBLEM. put a tax on food." I am tempted to make another quotation : — Sir RoDEKi- Peel, Mr. Joseph Chamberlain, June, 1846. May 28th, 1903. " It may be that 1 shall leave a " If you are to give a Preference name sometimes remembered to the Colonies — I don't say that with expressions of goodwill in you are — you must put a tax on those places which are the abode food. I make hon. gentlemen of men whose lot it is to labour opposite a present of that." and to earn their daily bread by the sweat of their brow — a name remembered with expression of goodwill when they shall re- create their exhausted strength with abundant and untaxed food, the sweeter because it is no longer leavened with a sense of injustice." Passing by this pitiable contrast, we may note Mr. Chamberlain's revelation of what he conceives to be the true function of our enormous imports of material. ^' If a tax,'' he said, " were put on raw material it would have to be accompanied by drawbacks on the finished exports." Not a word did he say as to the consequences to our home trade of a tax on materials ; his only thought, apparently, was of the difficulties in giving drawbacks on exports. Exports are the least part of the question. It is the enhanced price of commodities at home which would result from a tax on foreign materials, which is the chief cause of concern. Let every reader of these lines take thought as to the materials of his clothes, his house, and his furniture, and again look at the items on page 15. He will be astonished to find how many of them (apart from bricks and mortar) are of foreign origin — necessarily so, for we have but limited supplies in our own country, and he will realise that it is not merely that foreign material is so largely the basis of our export trade, but that it enters into nearly all the comforts and conveniences of our lives. That, apparently, does not appeal to the ex-Colonial Secretary, but difficulties as to "drawbacks THE TAXATION OF FOOD AND MATERIALS. 83 on exports " presenting themselves, he reluctantly abandons materials and administers cold comfort by the phrase, " You must put a tax on food." The analysis we have already made shows exactly what proportions of our imported food supplies we receive from our Colonies and foreign countries respectively. Leaving liquor out of the question, the 1902 figures are : — Our Food Imports in 1902. From foreign countries ... ... ^172,574,420 From British possessions ... ... 43,159,970 £215,734,390 Taking the question in its broadest aspect, therefore, we see that four-fifths of our imported food are derived from foreign lands. jMr. Chamberlain's proposal is to tax the greater part of our imported food for the benefit of the producers of the remainder, the idea being, that by increasing the price of food in this country it will be better worth the while of our Colonists to grow food for our markets, as they will be enabled to get a higher price. At the same time, a bonus would be given to our home food producers (or their landlords), for they too would be enabled to raise their prices by at least the amount of the duty. An attempt is some- times made to show that the foreign exporter would pay the duty and not ourselves. Some pertinent questions put to Ministers in the House of Commons should finally dispose of that delusion. On July 3rd, 1903, Mr. Bonar Law was compelled to admit, in reply to Colonel Denny, how the French consumer is made to pay the French import duty, and a little more. Mr. Bonar Law's reply to Colonel Denny was : " The French import duty on wheat is at the rate of seven francs per hundred kilogrammes, equal to 1 2s. 2\d. per quarter. The average of the prices of wheat at the eleven French markets, for which parti- culars are given in the Journal OJ]icicl for June 29th, was 405-. b^^/, per G 2 84 ELEMENTS OF THE FISCAL PROBLEM. quarter. The Gazette average price of British wheat in England and Wales for the week ended June 20th was 27J. 6d. per quarter. Item by item, similar details were extracted from the Government as to the price of corn in Germany and Italy in the same month. The official replies are summarised in the follovvins: table : — Price of Wheat in Various Countries in June, i 903. — Price of Wheat per Quarter. Import Duty per Quarter. Price without the Duty. Italy France German V s. d. 44 2 40 sj 35 6 27 6 5. d. 75 lire per 1,000 kilos — 13 i 7 francs per 100 kilos = 12 2^ 3 mks. 50 pfgs. per 100 kilos. = 77! I 0" 5. d. 31 I 28 6 27 loi United Kingdom 26 6 This table shows most clearly that in June, 1903, French, German, and Italian consumers were not only paying the whole of the duty but something more. The German pays the duty of 7s. y\d., and is. 4^^. more ; the Frenchman pays the duty of 12s. 2ld., and 2s. more ; the Italian, poorest and most unfortunate of all, pays the duty of 13s. id., and 4s. jd. more. The question is further authoritatively dealt with in the recent Board of Trade Blue-book on " British and Foreign Trade and Industry." The following table enables a comparison to be made between the United Kingdom and Germany, both as regards difference of wheat prices and of import duty during the last twenty years. The years 1885, 1888, 1892, and igo2, in which changes took place in the rates of import duty on wheat either in Germany or in the United Kingdom are omitted, as it is impossible to make a satisfactory comparison of the average import duties in force during those years. The other sixteen years of the period are shown opposite : THE TAXATION OF FOOD AND MATERIALS. 85 German and British Wheat Prices Compared. Excess of Germany over United Kingdom. Difference between — A. B. B. and A. Excess of Average Excess of Import Price of Wheat Duty on Wheat per Quarter. per Quarter. s. d. s. d. s. d. 1883 ... - I 4 2 2 3 6 1884 ... 2 2 2 2 1886 ... 3 2 6 61 3 44 1887 ... 3 3 6 61 3 34 1889 ... 10 I 10 IQl 9^ 1890 ... 9 " 10 10^ ii| I89I ... II 4 10 10^ - 54 1893 ... 6 9 7 7i 10^ 1894 ... 6 7 7 7h I oi 1895 ... 7 5 7 74 2i 1896 ... 7 2 7 72 54 1897 - 5 10 7 72 I 94 1898 ... 6 6 7 72 I 14 1899 ... 8 I 7 72 - 5,^ 1900 ... 5 9 7 74 I 104 I90I ... 8 6 7 74 - lOj Mean... 6 2j 7 5 I 24 The official comment is as follows : — " It will be seen from these figures that, taking the whole of the above period, the difference of price between English and German wheat has on an average been somewhat less than the difference of Customs duty, viz., 6s. 2hd. as compared with 7^^. '^d. The corre- spondence between the difference of price and of duty has been closer during the latter than during the earlier half of the period, when Germany was less dependent upon imported wheat. " If we confine our attention to the period 1893 — IQ^^ (^'•^•> between the alteration of the (lerman duties in 1892 and the imposition of the corn duty in the United Kingdom in 1902), the results are as follows :~ Per Quarter. ' s. d. Mean difference of English and German price ... 6 Greatest ... ... ... ... ... ... 8 Least ... ... ... ... ... ... 5 Difference of import duty 7 II 6 9 74 86 ELEMENTS OF THE FISCAL PROBLEM. With regard to France, Mr. Geo. J. S. Broomhall, the editor of the " Corn Trade Year Book," gives the following figures taken from the annual reports of the British and French agricultural authorities : — Official Price of Wheat in France and England. Average of the year (native produce) jor the years when France has been an importer. 1890 1891 1S92 1893 1894 1897 1 French Price. s. d. 44 I 47 10 41 6 37 9 34 G 43 9 English Price. 31 II 37 o 30 3 26 4 22 10 30 2 French Ex- j cess over ! French Duty. lEnglish Price. s. d. 12 2 ID 10 II 3 II 5 II 8 13 7 5. d. 8 9 8 9 8 9 8 9 8 9 12 2 In all these years, when France had to import a sub- stantial share of her wheat consumption (10 per cent, to 20 per cent.), the French consumer paid the duty and some- thing more. Of course, in years when France produces as much or more wheat as she requires (as in 1895, i8g6, 1898, 1899, 1900, and 1901), her wheat prices may be about the same as in Free Trade England. In such j^ears the duty is non-existent, for there are no imports, just as a duty on the import of coal in this country would not affect the price of coal because w'e do not import coal. But we must import wheat every year, and, therefore, we should have to pay the duty and more every year, as France did in the years shown in the table above. It is most important to note that if w^e placed a duty upon foreign food we should raise the price, not of the foreign supplies alone, but of the colonial and home- grown supplies also. Our home production of food is THE TAXATION OF FOOD AND MATERIALS. 87 valued at about ^300,000,000, so that our total food supplies are as follows : — British Food Comumption in 1902. (For man and beast.) Food imported from foreign countries ... ... ... ^^172, 574,420 Food imported from British pos- sessions... ... ... ... 43,159,970 Home-grown food (say) ... ... 300,000,000 ;^5i5>734>390 The policy of Protection would ultimately affect the price of the whole of this vast quantity of food, the con- sumption of which makes us the best-fed people in Europe. It will be convenient, however, to confine this discussion strictly to the immediate effect of Mr. Chamberlain's pro- posals, as outlined at Glasgow and set out in detail on page 79. The following points should be kept clearly in mind : — 1. Oar present food taxes are purely of a revenue character. They are, therefore, levied upon articles which we do not ourselves produce. Consequently every penny paid by the taxpayer goes into the national purse, the only leakage being the cost of collection, which is small through the very simplicity of the duties. 2. The proposed preferential food duties are Protective in character. The Treasury would merely gain through the imports from foreign countries, for these alone are to be taxed. But the colonial and home supplies would also be raised in price by at least the amount of the duty. There- fore the taxpayer would pay a little to the national purse and a great deal to private interests. That, of course, is the root evil of Protection. If, after the authentic French and German details I 88 ELEMENTS OF THE FISCAL PROBLEM. have quoted, the reader has still any doubt as to whether import duties would raise the price of food, I direct his attention to the fact that Mr. Chamberlain admits it in two ways. First, he promises not to tax raw materials, because, he says, to do so would injure our industries. But if import duties " tax the foreigner," Mr. Chamberlain should not allow the foreigner to escape a tax on the materials with which he supplies us. Second, Mr. Chamberlain excepts maize from his proposed corn duty and bacon from the meat duty. Why ? To assist the very poor, we are told. But if the foreigner pays the duty, it is no assistance to our poor not to tax maize and bacon. I now direct attention to the simple statistical examina- tion of the effect of the new food taxes which is printed on pages go — 91. Its results may be summed up as follows : — (i) The Brithh consinner loses ... £16,300,000 (2) The British Treasury gains ... 5,950,000 (3) The British Colonial food pro- ducer gains ... ... ... 1,600,000 The most striking thing is the paltry nature of the benefit given by the scheme to British Colonial food pro- ducers. Think of it. The suggestion is that ;£'i,6oo,ooo is sufficient to purchase the loyalty of eleven million British Colonists. It works out at less than 3s. per head per annum. If loyalty must be bought, it would appear to be more sensible to vote our Colonists the ^s. per head as a free gift from the Imperial Exchequer rather than make the British consumer pay -^16,000,000 to provide it. But it is not true that the loyalty of British Colonists has a price. It is suggested that the British consumer's loss of /■16, 000, 000 can be made up to him by a reduction of the tea and sugar duties, but a little simple arithmetic also THE TAXATION OF FOOD AND MATERIALS. 89 disposes of this plea. On the figures of the fiscal year 1902 — 3 the following result is arrived at : — Revenue Taxes Reduced. Three-fourths of tea duty ... ... ^^4,500,000 One-half of sugar duty ... ... 2,500,000 Part of cocoa and coffee duties, say... 100,000 3^7,100,000 But as we have seen, the consumer's loss on bread, meat, butter, eggs and cheese would be £16,300,000. So that we get : — Consumer's Loss on Transfer. Loss on corn, meat and dairy produce ... ... ... ... £16,300,000 Gain on tea, &c. ... ... ... 7,100,000 £9,200,000 The effect on the national purse would be as follows : — Treasury's Loss and Gain. Loss on remissions of tea, &c., taxes £7,100,000 Gain through corn, &c., taxes ... 5,950,000 Balance loss ... ... £1,150,000 In the calculations on page 91, " dairy produce " has been interpreted to mean eggs, butter and bacon. It is asserted by Mr. Chamberlain's supporters, however, that lard, and even margarine and condensed milk would be taxed under the scheme as " dairy produce " ! In that case, of course, the consumer's loss would be much more than £16,000,000, 90 ELEMENTS OF THE FISCAL PROBLEM. FOOD IMPORTS AFFECTED BY MR. CHAMBER- LAIN'S PROPOSALS. (Imports in 1902.) (i) Corii and Grain, Meal and Flour {Maize alone excepted). Note. — I cwt. = 112 lbs. ; i Quarter of Grain = 480 lbs. From Foreign Countries. From Colonies. Corn, grain, &c. : Wheat, and flour in equivalent weight of grain Barley Oats Rye Buckwheat Cwts. 82,485,481 25,107,646 15,262,351 756.503 78,501 2,698,144 1,416,405 399.495 3.913. 151 Cwts. 25,442,220 93.191 594,816 391,008 470 1.723.784 3.981,905 61,452 2,582,663 Peas, beans and lentils Rice, meal and flour Oatmeal and groats Miscellaneous 732,117,677 34.S71.509 (2) Meat {Bacon alone excepted). From Foreign Countries. From British Possessions. Beef Hams Mutton (fresh) Pork £ 7,553,000 3,438,500 3,152,000 1,728,500 £ 596,000 420,500 3,763,000 2? ';oo R abbi ts Other meats Poultry and game Animals for food 314,000 1 420,000 3,430,000 1 555.000 1,035,000 1 24,000 6 St4 000 T-vfii nno 27,205,000 7,563,000 (3) Dairy Produce. From Foreign Countries. From British Possessions. Butter . Cheese Eggs .. £ £ 7,992,000 2,534,000 1,979,000 4,443,000 6,099 000 210,000 26,070,000 7,187,000 THE TAXATION OF FOOD AND MATERIALS, gi THE STATISTICS OF MR. CHAMBERLAIN'S PROPOSED DIFFERENTIAL FOOD DUTIES. Duty Re- Loss to Gain to ceived by Consumer. Colonists. Treasury. (1) Corn (except maize), £ £ £ 6d. per cwt. on foreign supplies only : Cwts. Foreign... 132,000,000 3,300,000 3,300,000 — Colonial... 35,000,000 — 875,000 875,000 Home pro- duce ... 160,000,000 4,000,000 (2) Meat (except bacon), 5 per cent, on foreign supplies only : Foreign ...;^27, 000,000 1,350,000 1,350,000 — Colonial... 7,500,000 — 375.000 375,000 Home produce (about)... 45,000,000 2,250,000 (3) Dairy Produce, 5 per cent, on foreign supplies only : Foreign ...£26,000,000 1,300,000 1,300,000 — Colonial... 7,000,000 — 350,000 350,000 Home produce (about)... 50,000,000 — 2,500,000 — 5,950,000 16,300,000 1,600,000 92 ELEMENTS OE THE EISCAL PROBLEM. It should not be forgotten in this connection that the sugar duty was reimposed, after an interval of twenty years, purely as a war tax. It is the duty of the Chancellor of the Exchequer, therefore, to remove it at the earliest possible date as an act of ele- mentary justice, and not as " compensation " for new taxation. It remains to consider the lo per cent, duty on manu- factured goods. As to this it may be remarked that, while a duty of lo per cent, is insufficient to diminish our imports of manufactures to any appreciable extent, it is ample to raise the prices of goods all round and to reduce the purchasing power of the consumer by is. to 2s. in the pound. As a measure of Protection, it is ludicrous. As the thin end of the wedge, it is welcomed by those who hope for 25 per cent, later on. As a means of negotiating with the foreigner it would be absolutely useless. If Germany, with duties averaging 25 per cent. ad valorem has been unable to make any impression on the Dingley tariff, how can it be seriously suggested that a mere 10 per cent, would suffice as a weapon of retaliation ? Possibly the United States might be inclined to bargain on a 10 per cent, corn or meat duty, in view of the fact that we buy so much food from them, but if by negotia- tion we reduce the food duty, the Canadian Preference would disappear and the Empire ex hypothesi would fall to pieces, lacking " the only system which can keep it together." To this point I shall return later. Mr. Chamberlain is doubtless sincere when he speaks of a duty on food "not exceeding" 5 per cent, ad valorem and upwards, and a duty on manufactured articles " not exceeding " an average of about 10 per cent, ad valorem. It is always found in experience that Protection comes in mildly. It is a small thing, it is urged, and no one will feel the duties. Then, step by step, the imposts advance, always by small degrees, and at each step the consumer is told that it is very absurd of him to make so THE TAXATION OF FOOD AND MATERIALS. 93 much fuss about a very small tax. Consider the duties, how they grow : — G rowth of German Wheat Duties, s. d. 1857 ... .. I 2 per quarter 1879 ..22,, 1885 ... ... ••6 6,, „ 1888 ... .. 10 10 „ 1892 ... -.11,, But the farmers are not satisfied, even with "js. yd. per quarter, and they are so strongly represented in the Reichstag that in the new German Tariff Bill they have fixed minimum duties of over iis. per quarter, which the Government will have no power to reduce by negotiation with other Powers and which may lead to costly tariff wars. The experience of France is much the same. The modest jd. per quarter of i860 has grown to the 12s. 2^d. of the present tariff. If, therefore, we are so unfortunate as to embark on Mr. Chamberlain's 2s. duty, we have no guarantee that it will stop there. The wheat grower is glad to have it, of course, but his gratitude consists in a lively sense of favours to come. But that is not all. Let us see who, precisely, would benefit in our Colonies. Take first, the case of our self- governing Colonies, which it is asserted (they do belie our Colonists who make the assertion) will go adrift unless providedw ith " ties of interest." The table on the next page examines the figures relating to the chief imports of food so far as the self-governing Colonies are concerned. It shows that, by taxing food, and food alone, to bind the Empire together, we should chiefly be offering an advan- tage to Canada, who, it will be seen by my table, supplies us with more food of the kinds which Mr. Chamberlain proposes to tax than all the other self-governing Colonies put together. In 1902, a year of drought in Australia, 94 ELEMENTS OF THE FISCAL PROBLEM. The Chief Foods which we Imported from the Self-governing Colonies in 1902. Values in Thousands of £. — Canada. Australia (a Year of Drought). New Zealand. South Africa. Wheat Cheese Butter Meat : Beef Mutton Rabbits Cattle, sheep and lambs ... 3.194 4,301 1,347 92 1,730 1,483 402 312 568 246 53 131 781 428 3,272 173 10,664 3,011 4,838 — the Commonwealth supplied us with only -^3,000,000 worth of food, while New Zealand sent us nearly £5,000,000 worth. These quantities are simply trifling in relation to the extent of our total food supplies, but it is important to note that, as between the Colonies themselves, the variation in interest is considerable. 750,000 New Zealanders would get a bonus on £5,000,000, w^hile 4,000,000 Australians would get a bonus on only £3,000,000. As for South Africa, the case in which Mr. Chamberlain is, or should be, most interested, we receive only a little wine and food from the Cape. As for Canada itself, our bonus in food would suit agricultural Canada, but the quid pro quo, the Canadian Preference for British goods, but serves to irritate industrial Canada, which demands Protection. Even the present preferential tariff {a small reduction in duties chiefly aimed at ourselves) has caused much dissatisfaction to many Canadian manufacturers, which has repeatedly found public expression. Mr. Monk, THE TAXATION OF FOOD AND MATERIALS. 95 the member for Jacques Cartier, asked, in March, 1902, whether, — " We are to continue being made the slaughter market for the great manufacturers of Europe. At present, under the preferential clauses, we are sacrificed to the great manufacturers of Great Britain. . . . Ready and willing as we were to give Great Britain a Preference, we were not prepared to grant such a Preference as would imperil in any way our own great industrial interests." Mr. Tarte, a Canadian Minister, wrote to Sir Wilfrid Laurier in October, 1902, as follows : — " The interests of the Canadian people make it our duty to revise, without delay, the tariff of 1897, with the view of giving a more adequate Protection." As for the Canadian Government itself, in an official memorandum prepared a few months ago the following appeared : — " The Canadian Government has been attacked by Canadian manu- facturers on the ground that the Preference is seriously interfering with their trade. The woollen manufacturers have been foremost in the attack, and they have made very bitter complaints to the effect that the industry is threatened with ruin through the severe competition from Britain brought about by the operation of the Preference." Moreover, it is on record that the Canadian Finance Minister, in a statement made to the Dominion Parliament in April, 1903, remarked that at the time of the 1902 Conference in London, Mr. Fielding frankly told the Colonial Secretary that, while his Government were prepared to rearrange their tariff to give Great Britain a Preference over the foreign competitor, they were not prepared, as between the British and the Canadian manufacturer, to make any further reduction in their tariff which would operate to the advantage of the former. But to leave the sectional interests of Canada out of the question, how could we redress the balance as between Canada and our other Colonies ? In spite of Mr. Chamber Iain's disclaimer, we should soon hnd it necessary, in com- mon fairness, to atone for the undue favour given to Canada by taxing raw materials on behalf of the other Colonies. 96 ELEMENTS OF THE FISCAL PROBLEM. That would enable us to favour Australasian and South African wool (to the destruction of our woollen and worsted industries) which in turn would doubtless lead to a demand for a Preference for Canadian timber and wood pulp, as against European supplies. However we rang the changes on the tariff, it is certain that we could not devise taxes which would confer anything like equal benefits upon our Possessions, and to confer unequal benefits would be to create intense and not unnatural dissatisfaction. CHAPTER XI. THE DIRECTION OF BRITISH TRADE. It is now of interest to consider our import and export trade (in goods) as a whole : — British Over-Sea Trade in 1902. Imports. From foreign countries ... ... £"421,598,241 From British possessions ... 106,793,033 ^^528,391,274 Exports of BrHish Goods. To foreio^n countries 3^174.395.355 To British possessions^ ... ... 109,028,611 3^283,423,966 Exports of Goods Previously Imported. To foreign countries ... ... £57,331,942 To British possessions ... ... 8,482,871 £65,814,813 Total Exports. To foreign countries ... ... £231,727,297 To British possessions ... ... 117,511,482 £349,238,779 ^ Includes ;^6,ooo,ooo exported to the Straits Settlements, Hong Kong and the Channel Islands. P.P. H 98 ELEMENTS OF THE FISCAL PROBLEM. Total Trade (Imports and Exports together)} With foreign countries 3^653,325,538 With British possessions 224,304,515 j;877, 630,053 A glance at these figures will show how overwhelmingly important is the foreign part of our commerce. Not only do we derive the greater part of our indispensable imports from foreign lands, but our export trade is transacted chiefly with places outside the Empire. It will be seen that our total trade in goods in 1902 was valued at ,^877, 000,000, of which 5^653,000,000 was transacted with foreign countries, and £"224,000,000 with British posses- sions. Let us clearly realise, therefore, that in attempting by artificial means to divert trade from foreign to colonial channels we should be dislocating three-fourths of our commerce with the object of increasing the remaining fourth. I say " with the object " because it by no means follows that an}' tampering with the natural channels of trade would carry that object into effect. In matters of trade it is axiomatic that, to quote Mr. Barrie's inimitable butler, " Whatever is natural is right." The effect of duties, even of small ones, cannot be gauged in advance. That is why Protectionist countries are always tinkering their tariffs. It is quite the usual thing for a duty to leave unsatisfied the very industry which it was enacted to encourage, while it inflicts unmerited discomfiture upon others which no one imagined it could possibly injure. ^ In Mr. Vince's pamphlet, published with the impritnaiur of Mr. Chamberlain, I am criticised (p. 43) for adding imports and exports together to express the magnitude of our trade, and the criticism has been repeated by Mr. Chamberlain in one of his recent speeches. The animadversion reveals an amazing ignorance of the real meaning of the figures concerned. Our import and export returns do not correspond to the Cr. and Dr. sides of a ledger, but are simply records of goods which pass over a political boundary line. The total ^877,630,053 does, of course, much less than justice to our commerce, because it takes no account, as we have seen, of our exports of services, which are worth over ^200,000,000 per annum. THE DIRECTION OF BRITISH TRADE. 99 Merely to give preferential duties to our Colonies would by no means insure that our trade with our Colonies would increase. In so far as colonial food producers were concerned, they would, I think, make immediate gains, but the general depression of trade that would follow would soon reduce the purchasing power of the United Kingdom, and our Colonies would find that they had killed the goose that laid the golden eggs. Our Colonies should remember that we are rich, not because of our trade with them, but because of our trade with the world. If they will have us dislocate the greater part of our trade to please them, I assure them the British market will soon cease to be as attractive as at present. Professor W. J. Ashley, in "The Tariff Problem," subjects my comparison of foreign and colonial trade to adverse criticism. He says : — " But such figures teach us nothing. If we are asked whether it is wise to 'endanger' the 600 milUons for the sake of the 200, it must be asked in return what is the relative significance to us of the 600 and the 200, what would be likely to happen with these figures if we did nothing, and whether measures proposed to increase the 200 need necessarily diminish the 600 to the same extent. Moreover, it must be pointed out that the export figures suggest a different, and on the face of it, a surprising, encouraging, comparison ; and if imports are of most significance for the past history of the country, exports are certainly more significant for its future."'" It is precisel}^ because Professor Ashley overlooks the true significance of our imports that he makes this criticism. Our export returns, as we have seen, are incomplete. Our import returns, on the other hand, are a complete record, not merely of the growth of imports, hit of the growth of exports. They are, therefore, something more than a mere record of the past. It is necessary to remind Mr. Ashley (i) that we possess 10,000,000 tons of shipping ; (2) that our ships earn a sum approaching ;;^ioo,ooo, 000 per annum ; (3) that our export returns are incomplete, for they contain no record of those earnings ; (4) that our imports, because H 2 TOO ELEMENTS OF THE FISCAL PROBLEM. s?5 •*vO 0> 0> PO "I -1- in t^OO Tl- U-i CO w Tt- rri p) CO 10 >-< O -t- C7> O M CO M O S^ ■^■^OrO" r-~00 l^roOO O ''I ^ O c) r^ rnO O io» o >-' O >ovo o CO in l-^o" rn rf N pf ro -r o\o" o" oT c> •*■ 11 lno^:oco t^oo^O p< opnco i^po P) 00 CO POOO ■^ 0\ C^ "OO 00 P< rOVO CO P4 Co" lO Tt' n" i-i M N w 1-1 1-1 s? oi O -t- cr>oo o VO >-. PO t^ P) ro >„,o o" d 'o c\ m" ^K lO l^ P< 00 CTiOO S? lO M 00 vD in •0 P< pO-^POPOm M t^C^POPOO 00 M M M « a M S? S? O CTi t^ PI CO <0 ino Tj- o M r^ pj O oo CO M in in "o t>.oo" d !>. ■^ C^ PO CTi PO t^ ro pp) t^vo mo S? Oiinp) w pio mo p< p) •^■^o c-^vo i^ inoo o O poo p) oo ppiw po-^pj oinpow p< PI p< t^^t^pi pjoooo M N vo" o -^ o" G\ pT CO di inoo" tv, -■ t^o-rooo n c^o^oi " _ M ro O P)" P' w m" pT M IH w f-v r^ ooo t--co pi-)vO o rn n -r in pp)o M o vo .-■fmrod -^PO ^W>0 -3- P) ro POCO ovD >-i in t>oo pT in c^ d^ ^ o O O POOO r^io POO Ci o w po -r u-) OoopiP'OOOoOPii-i-rco'rt^d O t^ On p* po POCO po-rint^TPi p) " rt- pT o" ci d^ oo" d 'T o po p) d o" po m" p) inDo -^ M ooo opiopo'i-in-^"*- r^OPOi-lOp T3 O rt 5W "" . 1 rt Oroi-i lOroM rot^O O . - pi" Co" Co" roo" CO Tp ro pi" O OO fi ri JO (O" "*• lO t-^ lO C?i m" lO lo On n" ^^ ■^i-i N MUD iOtJ-i^iOC^O ■:l-iot~^ON'^ ■^OO t^UD m m O -+ rn S^ o J 0>HOOC^Mf»^00^|-^^oro^Ou^O\m0^^u-)>HC^t^<^^■^0 \o N r-^Moo oo r^iomt-^p) onvdoo '^Tt-M m ^t-oo pj t^Tt-o M Tfpl M r^O O O OiO t^M C^f^t^O N >OiHiO-+-^CO_Oir^ I , o co" -*• >n r^ o" w" ^^ o" N uS o cii rn o" oo" r^ <^ w ^^ oo" cfi o" ci 0\ ^ooco Mvo cr>>ooo 'j-o M p) iH Mooo T^t^M o o" d" -"t- »o Tf M Sj roo loiomo^vo t^'f'^ rn o 'o -i-w^o M -novo r---i^o loo M O a\w ChiOChP) mVO ro-nJ-u-jCO N lOOl^OM iri(7iM CI tJ-Q O^rocs cr\"TO OVD MOO O t^C?iOO 'OrfM "OyD G>r»TO CTif) t^ loco -;Mo ^00 HI t^vD N M fo ':^ ii M cr\co O oo Cv t^oo m rn >o M oo" oo" 03 "^ ^ '*• "^ ■^ '^" "^ t^ t^ '-' 44i>ooo "DUMPING." H7 Contrast this with our present imports of iron and steel : — Iron and Steel Production and Imports per Annum. Production. £ Iron and steel and manu- factures thereof ! 70,000,000 Machinery, tools, hard ware, &c 70,000,000 Imports Retained. £ 7,600,000 8,000,000 So much for the " overwhelming " of our iron trade ! It is often stated that the greater part of our importa- tions from foreign countries consists of surplus stock specially manufactured to supply our open market at *' dumped " prices. The recent American census of manufactures enables us to contrast American produc- tion and sales in this country. The census puts the value of the output of American industries at ^^2, 600,000, 000. Our imports of manufactures from the United States are worth ;f 20,000,000 per annum. America's production of goods is therefore one hundred and thirty times as great as her export to this country, which sufficiently disproves the allegation that the latter consists of an artificial surplus. The fact is, of course, that there is no man in the world who sells more cheaply than he must, and such goods as have been " dumped " in this country, in Austria, in Holland, in Belgium, and in America itself, during the past few years have been forced sales by unfortunate Germans during a commercial crisis of exceptional severity. L2 CHAPTER XVII. "MOST FAVOURED NATION." Our Treaty of Commerce and Navigation with Russia, dated January 12th, 1859, contains (Article II.) the following clause : — " No other or higher duties shall be imposed on the importations into the dominions and possessions of Her Britannic Majesty of any article the growth, produce, or manufacture of the dominions and possessions of His Majesty the Emperor of All the Russias, from whatever place arriving, and no other or higher duties shall be imposed on the importation into the dominions and possessions of His Majesty the Emperor of All the Russias of any article the growth, produce, or manufacture of Her Britannic Majesty's dominions and possessions, from whatever place arriving, than are or shall be payable on the like article the growth, produce, or manufacture of any other foreign country." Such is the ordinary form of what is commonly called the most-favoured-nation clause. It will be found ex- pressed in almost the same terms in one of our oldest Treaties of Commerce and Navigation, that concluded with the United States of America on July 3rd, 1815.-^ In some form or other it is included in our commercial treaties with all the nations of Europe, of Asia, and of America. It is by far the most valuable part of the whole system of commercial treaties, linking them together, and making ' It should be observed that the United States interpretation of the most-favoured-nation clause is not that accepted in Europe. America holds that when a concession is granted to nation A. in return for some reciprocal advantage, nation B. does not receive the concession, in spite of a most-favoured-nation clause, unless B. also gives America a reciprocal advantage equivalent to that granted by A. In con- sequence of this interpretation, which, needless to say, we have never recognised, the reciprocity clauses of the Dingley Tariff Act have remained practically a dead letter. "MOST FAVOURED NATION." 149 for freedom of trade between all nations. Yet the Prime Minister has written for circulation to his colleagues, and subsequently published for the instruction of his fellow- subjects, a memorandum which urges them " to use fiscal inducements " to break down foreign tariffs, without reference to the fact that, by virtue of the most-favoured- nation clause, reductions in tariffs are necessarily dis- tributed, and that we enjoy at this moment the fruits of foreign commercial treaties, and of foreign tariff wars, almost without exception. If such an omission is possible for a statesman, we need not wonder if the policy which the moderate call " Reciprocity " and the extreme " Re- taliation " is being discussed as though all commercial treaties were cancelled, and each foreign nation had special tariffs for British goods, levied with the object of extir- pating our trade and destroying our commercial supremacy. Perhaps it is not surprising that so many people are badly informed as to the operation of commercial treaties. As a Free Trade nation we are out of practice in tariff matters. Mr. Chamberlain, tackled on details, talks of a Committee of Experts. But where are British tariff experts to be found ? Where is the man who shall arrange duties to "average 10 per cent, ai valorem " to the satisfaction of the complicated activities which constitute British industry? How much shall be given to leather, and how much to boots ? How much to yarn, and how much to piece-goods ? Let our tariff reformers study the record of the hundred and one deliberations (for " delibera- tions " read " wrangles ") of the Committee which was finally dragooned by an abuse of the closure into passing the new German tariff, and I shall be surprised if it does not occur to them that the matter is not nearly so simple as it looks in large type on a Birmingham leaflet. The operation of the most-favoured-nation clause has never been better illustrated than in connection with our treaty with Russia, and a brief description of the tariff I50 ELEMENTS OF THE FISCAL PROBLEM. war of 1893 — 94 between Germany and Russia and its practical results for ourselves should do much to dispel such misconceptions of our position in relation to foreign tariffs as arc exhibited in Mr. Balfour's "Economic Notes." In the first place, it is necessary to recall that in December,i89i, Germany entered into treaties of commerce with Austria, Italy, and Belgium. These were followed in 1892 by a treaty with Switzerland, and subsequently arrangements were concluded with Spain, Roumania and Servia. In view of the treaty with ourselves of 1865, and the treaty of Frankfort (1871), which arranged for most-favoured-nation treatment between France and Germany in perpetuity,^ the position in 1893 was that Russia alone amongst the great European States had no commercial treaty with Germany. The arrange- ment of the tariff schedules of the December, 1891, treaties constituted a lower scale of German duties which, by virtue of the most-favoured-nation clause, was enjoyed, not merely by the parties to the treaties, but by France, the United Kingdom, and all other nations which had concluded commercial treaties with the Zollverein. Russia had for many years refused to negotiate com- mercial treaties, while steadily increasing her Protective ^ Article XI. of the Treaty of Frankfort states : — " Since the treaties of commerce with the various States of Germany have been annulled through the war, the German administration and the French administration will place as the basis of their commercial relations the principle of mutual treatment on the footing of the most favoured nation. This rule embraces the import and export payments, the transit trade, the customs regulations, the admittance and treat- ment of the subjects of both nations and the representatives of the same. Nevertheless, excepted from the above rule are the concessions which one of the contracting parties has granted or will grant, through commercial treaties, to other countries than the following : England, Belgium, Netherlands, Switzerland, Austria, Russia." As the treaty is a perpetual one, it follows that Germany and France must for all time grant to each other all favours they give to any of the six Powers named in the Article. "MOST FAVOURED NATION." 151 tariffs. The magnitude of the commerce between Ger- many and Russia led to the increased duties teUing with more effect upon Russia's great neighbour than upon any other Power. Germany, after the conclusion of the 1891 treaties, applied to Russian products her general tariff. In August, 1893, Russia, who had found it neces- sary in the previous June to abandon her single tariff system and arrange a maximum and minimum tariff, applied the higher scale to German imports. In retalia- tion, Germany clapped on Russian imports an additional 50 per cent, on her general tariff rates. Russia replied not only by a 50 per cent, increase in her maximum duties, but by a special levy of additional tonnage dues on German shipping. As a result, both sides suffered severely, and German navigation in particular. The pace, however, was too hot to last, and on February loth, 1894, peace was concluded. It was a peace much to the satisfaction of German industrials, but not at all to the liking of the German Agrarians. Russia's object was to obtain lower duties for her grain in the German market. Germany's object was to lower the barriers erected by Russia against foreign manufactures. By the terms of the treaty, Russia was given most-favoured-nation treatment by Germany, while Germany succeeded in obtaining the reduction of the minimum Russian duties on 135 different items. The German farmers had to grin and bear it, while the German manufacturers were delighted, and sent bagmen over the frontier by the first train. So far we had been interested spectators in the game, profiting in the Russian market by the differential duties levied on German manufactures. The test of the value of our commercial treaty with Russia arose with the conclusion of the treaty of 1894. A consideration of the reductions in duties obtained by Germany will, I think, convince the most sceptical that the most-favoured-nation clause is of practical value to this country. To mention only some of the articles affected, the duties were reduced 152 ELEMENTS OF THE FISCAL PROBLEM. on iron and steel, brass, copper and zinc wares, wire, cutlery, tools, machinery, engines, paper, textiles, knitted goods, umbrellas, earthenware, glass, chemicals, cement, furniture, and mineral waters. In all these articles we are interested, and Germany, in fighting for the reduction of the Russian duties upon them, was, of course, fighting our battle. It is of particular interest to note that one of the reductions affected tinplates, the then minimum duty of I rouble 70 copecks per poud being reduced by 15 copecks. This was far more to our advantage than to that of Germany, as we are the largest exporters of tinplates. Indeed, our increased exports of tinplates to Russia of late years have in part compensated us for the loss of the American market. In 1894 the imports into Russia from the United Kingdom increased by 14 million roubles. That increase, unfortunately, has not been maintained, but in justice to our traders it should be remembered that the Germans have natural and obvious advantages in their commerce with Russia. So far as tariffs go, however, we have had equality of opportunity. The Russo-German trouble is likely to recur. The German Agrarian party have been successful in forcing through the Reichstag a new tariff specially framed in their interests. Section I. of the Tariff Bill contains the following: clause : — " The tariff rates of duty on the following kinds of cereals shall not be reduced, by conventional arrangements, below the following rates : Rye 5 marks per 100 kilogs. Wheat 5-50 ,, ,, „ „ Malting Barley 4 „ ,. „ „ Oats 5 „ „ „ ,, To make the meaning of this clear I ought to explain that most Protectionist nations have a double tariff, which is arrived at in two ways. One method is to construct by legislation what is called 9, maxirnum and minimum tariif. "MOST FAVOURED NATION." 153 The French tariff is of this pattern. Thus the French dut)' on locomotives is as follows : — Extract from the French Tariff. — Maximum Tariff. Francs. Minimum Tariff. Francs. Locomotives, per 100 kilogs 20 15 By the most-favoured-nation clause, British locomotives are rated at the lower scale of duty. The United States, on the other hand, which does not enjoy French most- favoured-nation treatment, is rated at the higher scale. The present German tariff was arrived at in a different fashion. A double scale was not legislated for in the first instance, but a single scale of duties was arranged, termed the general, or autonomous, tariff. As already explained, commercial treaties were negotiated by Germany in 1891 and subsequently, by virtue of which a scale of lower duties came into existence. These lower duties, the fruit of negotiation with other Powers, constitute a lower schedule of duties known as the conventional tariff. A double tariff is thus constructed, the lower scale being the result of bargaining and the distribution by the most- favoured-nation clause of the results of the bargaining. Now, in the new German General Customs Tariff the Agrarians have secured the clause set out above, which renders it impossible for the German Government, in bargaining with Russia, to reduce the duty on rye, an article which Russia exports to Germany. This ties the hands of the Government, and may lead to another tariff dispute between the two countries. Indeed, if Germany denounced her present commercial treaties^ and > To " denounce " a commercial treaty is to give such notice of its discontinuance as may be provided in its terms. The German treaties 154 ELEMENTS OF THE FISCAL PROBLEM. brought her newly-framed tariff measure into actual operation in a year's time, the retaliatory tariffs which have already been framed by Russia, Austria, and Italy, three of Germany's most important markets, would be used in reply, and a bitter tariff war would ensue, in which Germany would be a heavy loser. In such a case Germany's loss would be our gain, for we are Germany's chief competitor in the exportation of many articles which Russia, Austria, and Italy buy largely. The idea prevalent in this country that the new German Customs Tariff is particularly aimed at ourselves is the very reverse to the truth. The new German tariff is the work of the Agrarian majority, and the interests of that Agrarian majority are not by any means the interests of German manufacturers. All the Agrarians wanted was high rates of duty upon agricultural products, and those high rates they obtained, while they insisted upon moderate rates for agricultural machinery and implements, of which we are exporters. In the new Russian tariff a special weapon is forged against Germany by differential rates between imports by sea and imports by land. To quote one example: — Extract from the New Rtcssian Tariff. Imported by Sea. Imported along the Western Land Frontier. Machines for the working of metal (per poud) Roub. Cop. 4 ^5 Roub. Cop. 5 38 Yet many British manufacturers are at this moment under the impression that the proposed new Russian tariff is aimed at British trade in particular. Further light upon the great advantages we gain by (save the perpetual treaty with France) are now all terminable by one year's notice. MOST FAVOURED NATION. 155 remaining spectators of, rather than participants in, tariff wars, is given by the Franco-Swiss dispute of 1893, which is full of instruction for those who believe that little risk is run in the ignoble contests of the Custom House. Swiss imports from France, which in 1892 were valued at 5^7,170,240, swiftly fell to ^^4, 462, 360 in 1893, a part of the trade lost to France being gained by the onlookers, as the followins: table shows : — Swiss Imports, 1892 — 93. 1892. 1893. Difference between 1892 and 1893. From France £ 7.170.240 27,606,160 £ 4,462,360 28,638,520 £ - 2,707,880 + 1,032,360 From other Countries Total 34,776,400 33,100,880 - 1,675,520 And Switzerland also suffered, of course, for almost the only certain thing about tariff wars is loss. Swiss exports to France fell from 3r4,ioi,840 in 1892 to ^2,970,120 in 1893 :— Swiss Exports, 1892 — 93. 1892. 1893. Difference between 1892 and 1893. To France To other Countries £ 4,101,840 22,204,120 26,305,960 £ 2,970,120 22,887,920 £ - 1,131,720 + 683,800 Total 25,858,040 - 447,920 156 ELEMENTS OF THE FISCAL PROBLEM. Switzerland managed to make up for the loss of a part of her export trade to France by increased exports to other countries ; nevertheless, her export trade fell by nearly half a million sterling in a year. France was certainly the worse sufferer of the two misguided com- batants. The Swiss importation of French manufactured articles fell off by 55 i per cent. Almost every important article of French export to Switzerland suffered severely. The following is a list of the most notable examples : — Loss in French Exports to Switzerland, 1893. Articles. Loss per cent Woollen goods ... ... ... ... 75 Silk goods 60 Linen goods 80 Cotton goods 66 Watches . . . 77 All metal goods 49 Leather goods 64 Boots 65 Paper 61 Colours 57 Toilet soap and p srfumery 45 The French makers of all these articles had the dubious satisfaction of seeing orders which they might have had go to Germany and other countries. Retaliation, this is called ! Free Trade England looked on, as I have said, and our exports to Switzerland increased in 1S93 b}' 6| per cent., principally gained at the expense of the French retaliators. The advantage of being outside all these tariff disputes will be apparent. The most-favoured-nation clause is in effect, as I have tried to explain, a link between the nations, and as a result of its operation a reduction given by one nation to another is automatically enjoyed by every other nation with which the first has treaty relations. "MOST FAVOURED NATION." 157 Whatever the outcome of the arrangement of Germany's new commercial treaties, we shall enjoy equality of treatment. We shall profit by every advantage secured by Germany in Russia or Austria, or secured by Russia or Austria in Germany. Without stirring a finger, without the framing of a single despatch. Free Trade England secures in every market the advantages of every tariff war without expending a single shot or suffering the hardships of a campaign. I doubt if it is commonly realised that, just as the most-favoured-nation clause gave us the advantages obtained by Germany in its contest with Russia, so any advantages which we gained by a tariff war with any country would be distributed under existing commercial treaties to our competitors. We may now consider the effect of the establishment of a British preferential tariff. (i.) In the first place let us take it that Mr. Chamberlain does not propose to " prefer," colonial manufactures, but to give the Preference on food only. To levy a duty upon foreign food and not upon colonial food would undoubtedly be regarded by foreign nations as a breach of the most-favoured-nation clause. We should have to persuade foreign countries that, although our Colonies are independent fiscal units, the Preference is a domestic affair with which foreigners have no concern. If we succeeded in establishing this view, the most-favoured- nation clause would remain intact. If we failed, we should lose the preferential tariffs of foreign nations which we now enjoy. In the former case, having gained the first point, we could proceed to bargain reciprocity treaties with our 10 per cent, duty on goods. In the latter case we should have to face the fighting tariffs of foreign nations. (2.) In the second place, let us take it that Mr. Chamberlain proposes to give the Preference on both food and goods. In that case the difficulty of persuading 158 ELEMENTS OF THE FISCAL PROBLEM. foreign nations that the most-favoured-nation clause was not affected would be doubled. Further, we could not bargain with our duty on manufactures, for if we did so we should offend our Colonists. A hint of the crop of difficulties we should encounter in attempting such delicate negotiations as those I have described is given by the fiscal rupture between Canada and Germany in connection with the Canadian Preference. Mr. Chamberlain, in his speech at Birmingham on May 15th, 1903, attacked Germany for refusing most- favoured-nation treatment to Canada, but the German- Canadian fiscal quarrel did not originate in the year 1903. Mr. Chamberlain chose to revive the question at Birmingham to excite feeling against Germany in support of his very poor case for preferential tariffs. The Canadian matter arose as long ago as 1898, when Canada, in giving us a Preference which she denied to Germany, violated the Anglo-German Commercial Treaty of 1865, by virtue of which Germany was entitled to the same treatment as ourselves in our Colonies. It was not Germany which violated a treaty into which we had entered with our eyes open, and certain it is that, from a purely business point of view, Germany had every right to ask that our treaty engagements should be respected. It is only fair to point out that Germany does not accord preferential treatment to her colonies, nor do German colonies favour German goods before our own. As a result of the Canadian preferential tariff we denounced the treaty with Germany, and therefore deprived the British Empire of most-favoured-nation treatment by Germany of our own free will. Germany, however, recognising that Canada was an independent fiscal unit, and that we were not responsible for her fiscal policy, agreed to continue most-favoured-nation treatment to every part of the British Empire except Canada, and that treatment we have enjoyed to this day. Canada, how- ever, has never ceased to resent the withdrawal of most- "MOST FAVOURED NATION." 159 favoured-nation treatment, and this year has gone the length of imposing a surtax upon German goods. This is a most effective act of retahation, as the following figures show : — German-Canadian Trade in 1902. German exports to Canada ... ... £2,200,000 Canadian exports to Germany ... 540,000 It is an easy matter for Canada to penalise Germany, because German exports to Canada are considerable. It is difficult for Germany to retaliate because Canadian exports to Germany are small. This fact was fully recognised at the Colonial Conference of 1902, as will be seen by the following extract from the official report of the proceedings : — "LOSS OF MOST-FAVOURED-NATION TREATMENT. " In connection with the discussion of the question of preferential trade the Conference also considered the point raised by the Common- wealth Government as to the possibility of the Colonies losing most- favoured-nation treatment in foreign countries in the event of their giving tariff preference to British goods. As, however, the exports from the Colonies to foreign countries are almost exclusively articles of food or raw materials for various industries, the possibility of discrimination against them in foreign markets was not regarded as serious, and as the exports from foreign countries to the Colonies are mainly manufactured articles, it was recognised that if such dis- crimination did take place the Colonies had an effective remedy in their own hands." It is as true to-day, in 1903, as it was at the date of the Colonial Conference that our Colonies can retaliate, if they choose to do so, in most effective fashion. Moreover, Canada has actually resorted to the " effective remedy." Yet we now have the belated suggestion that we must step in to protect Canada from German aggression, and that a tariff is needed to defend our Colonies, if not ourselves ! Such has been the outcome of a single experiment in preferential trading, and it gives us a foretaste of the i6o ELEMENTS OF THE FISCAL PROBLEM. troubles that would inevitably arise, and the dislocation of trade that would surely occur, if we endeavoured at one and the same time to negotiate reciprocity treaties and give our Colonies a Preference. It is not that we have need to be afraid of hurting other nations, but that there is very grave risk of hurting ourselves. In the phrase which has become classic, *' Smitten on one cheek, we should smite ourselves upon the other." I am not without hope that those who read these lines will agree with me that when a nation is told by a popular orator to "retaliate," to "strike back," it is being used unfairly, unless the nature of our commercial relations with the world at large, and especially the facts as to the operation of the most-favoured-nation clause, are explained to it. I think many of our " retaliators " would be less ardent if they realised that in reducing the American tariff we should benefit Germany as much as ourselves. Another point remains to consider. It is sometimes asserted that, in view of our large imports, which are valued at over ^^500,000,000 per annum, foreign nations would hasten to reduce their tariffs as soon as we adopted a policy of retaliation. One observer goes so far as to say that our market is so valuable that the mere threat of a Protective tariff would suffice. The fallacy of this reasoning lies in forgetfulness of the fact that by far the greater part of our imports consists of food and materials. Food, as we have seen, accounts for £216,000,000. I am inclined to agree that if we used a food tax as a means of negotiation (as Germany did with Russia in 1893), we might succeed in driving some tariff bargains, but a moment's thought will show that the policy of Preference forbids the use of such a weapon. The differential food duty would be a fixed bargain with our Colonies, and we should have no power by negotiation with foreign Powers to reduce it. Another large part of our imports consists of raw material, which even Mr. Chamberlain does not propose to tax. Indeed, "MOST FAVOURED NATION." i6i the only part of our imports which could be taken into account in arranging treaties of reciprocity would be the jTi 13,000,000 of manufactured and partly manufactured articles. Now, the imports of manufactured articles by the three chief industrial nations are as follows : — Impo/ts of Manufactured and Partly Manufactured Goods for Home Consuuiption. (C.i.f. values.) United Kingdom ... ... ... ;£"! 13,000,000 United States ... ... ... 90,000,000^ Germany ... ... ... ... 60,000,000 These figures show that the importation of manufactured and half-manufactured goods into the United Kingdom is not so much greater than the imports of the same nature into the United States or Germany as to make a 10 per cent, duty, in our hands, a " bigger revolver " than America or Germany possess in their present tariffs. Germany, again, imports from the United States to the value of ;£'50,ooo,ooo per annum, and is free to negotiate not only her duties on manufactures, but her food taxes. Yet she has failed to secure a single advantage in the American market for her manufactured goods. How, then, could we, with our hands tied by the Colonial Preference, hope to succeed with a low tariff where Germany has failed with a high one ? ^ Nearly ^30,000,000 duty is paid on this ^90,000,000, making the total cost to the American consumer ^120,000,000, or more than we pay for imported manufactures. F.P. M CHAPTER XVIII. SHIPS AND SHIPPING. A Prime Minister has written a pamphlet^ on the com- merce of an island in which shipping is dismissed in a footnote. A poet has addressed some verses" to "The Islanders" which urge them, not to look to their ships after the manner of islanders, but to become conscripts. A professor of economics at an English University has written a book^ to influence public opinion as to our commercial policy without reference to the fact that the exports and imports of an island are carried in ships. It would, however, be erroneous to infer from these facts that ships and shipping are things irrelevant to the subject we are discussing. On the contrary, the earnings of our ships are of such importance that they pay for the greater part of our imports of the raw materials for our industries. Moreover, as the lands which compose our Empire are sundered by the sea, our ships are the sole material link of Empire. Without ships, the seas divide. With the command of the sea, our Empire is united. So that, despite the Prime Minister, the poet and the professor, we will devote some consideration to our ships. When the Mosely Labour Commission recently visited America the Commissioners were shown over Cramp's Yard at Philadelphia. One of them remarked that it reminded him of a British shipyard, and Mr. Cramp ^ "Economic Notes on Insular Free Trade," by the Right Hon. A. J. Balfour, M.P. ^ " The Islanders," by Rudyard Kipling. 2 " The Tariff Problem," by Professor W. J. Ashley, of Birmingham University. SHIPS AND SHIPPING. 163 declared that no higher compliment could have been paid him. He was right. Nowhere in the world can ships be built so well and so cheaply as in this country, and there is a very simple explanation. Free Trade has given our shipbuilders access to the cheapest and best materials in the world. And consider how diverse those materials are. As Sir Christopher Furness recently pointed out, the steel is made from ore produced in Spain and Sweden, the brass from Spanish and American copper, the zinc comes from Germany, the woodwork from America or Norway, the ropes from Russia, and the hemp from the Philippines. And not only raw materials are concerned. It is the simple fact that of late German plates and other materials have been utilised by British shipbuilders at prices at which they have been denied to German shipbuilders. Little wonder, then, that we are still able to build ships at from 25 per cent, to 33^ per cent, less than can be accomplished in Germany or America. And not only have our shipbuilders had cheap materials, but they have had the owners of the largest carrying trade in the world as their home market. Our shipping has doubled in the short space of thirty years, and at the present time we own more than one-half of the world's tonnage. Two things have operated to shape such a magnificent end. The one is the fact that we have had Free Trade in coal exportation ; the other that we have enjoyed free imports. To quote Mr. D. A. Thomas, M.P. : '* It is difficult to exaggerate the importance to our shipping industry of the cargo provided by coal for outward-bound vessels. More than four-fifths of the weight of our exports consists of coal ; without it the great bulk of the shipping bringing corn, cotton, wood, wool, sugar, &c., to our shores would be compelled perforce to clear without cargo, in ballast." We could not replace the coal with sufficient exports of manufactures, because their bulk for value is, of course, much less than that of the raw materials and food we chiefly import. This point realised, it will be understood M 2 i64 ELEMENTS OF THE FISCAL PROBLEM. that Protection would attack our shipping both in its inward and outward freights. The following table shows the progress of our oversea shipping : — British Ships Registered for Oversea Trade, 1861 to 1902, In Millions of Net Tons. Average of Quinquennial Periods. Sailing Tons. Steam Tons. 1861-65 1866-70 1871-75 1876-80 4-6 47 4"i 4-1 3'5 3*1 2-9 2'3 1-9 1-9 0-6 0-9 1-6 2*3 3*5 4'4 57 6-6 7-6 8-1 1881-85 1886-90 1891-95 1896-I9OO In the year 1901 ... In the year 1902 ... These figures, in addition to showing the magnificent growth of our shipping, will also be of interest to the general reader as showing the period at which the con- struction of steamships o\'ertook that of sailing vessels. This occurred in the quinquennial period, 1881 — 85, since when sailing tonnage has rapidly declined. The significant fact emerges from this table that British steam- ships have increased by 1,000,000 tons every five years since 1870, in the same period, that is, in which American oversea shipping, which ranked with ours a generation ago, has decreased by one-half: — United States Ships Registered for Oversea Trade, i860 to 1900. Tons. 2,379,396 i860 1870 l{ 1,448,846 1,314,402 SHIPS AND SHIPPING. 165 United States Ships Registered for Oversea Trade, i860 to 1900 {continued). Tons. 928,062 1890 1900 I9OI 1902 816,795 879.595 873,235 The reader should, of course, bear in mind that the American Civil War dealt a blow at American shipping from which, under an}' conditions, it would have taken some time to recover, but that recovery would undoubtedly have taken place, and American shipping to-day been a close rival of our own, but for the malign influence of Protection on shipbuilding and shipowning alike. The succeeding table compares the relative growth of the ocean tonnage of the principal maritime countries, shipping and sailing tons being added together : — Merchant Navies of the Chief Maritime Nations. In Millions of Tons. (Steam and Sailing Tons together.) Year. U.K. British Possessions. German Empire. United States. France. Norway. Italy. Japan. 1850 3-6 07 _ 1-6 07 03 i860 4-6 i-o 2-5 I-O o"5 — — 1S70 5-7 1*4 o-g 1-5 I I i-o x-o 1880 6-6 1-9 I'2 1-3 09 I '5 I-Q o-i 1S90 80 17 1-4 09 0-9 17 0-8 o-i 1900 9-3 1-4 1-9 0-8 I'O i'5 09 08 1901 9-b 1-5 21 0-9 I'l 1-5 10 09 1902 lOO I '5 0-9 ~ ~ ~ If we added the tonnage of the rest of the world we should find that we own, approximately, 50 per cent, of the world's shipping. But even these figures do less than justice to our mercantile marine, because steam and sail- ing tons are added together, and a steam ton is the effective equivalent of three sailing tons. Taking the i66 ELEMENTS OF THE FISCAL PROBLEM. figures of igoo, the last year for which we have complete returns, for steam tonnage only, we get : — Meychant Steamships of the Chief Countries in tqoi. Tons. United Kingdom ... ... ... 7,617,793 British Possessions German Empire United States., France ... Norway Italy ... Japan . . 571.830 1,506,059 429,722 546,541 531,142 424,711 583,067 I now give the figures relating to the shipping trade at British ports : — Sailing and Steam Ships {excluding Coasters). Tonnage entered and cleared at United Kingdom Ports with Cargo and in Ballast. i860. 1870. 1880. 1890. 1895. igoo. igo2. British. Foreign. 13-9 io'7 25-0 II-5 41*3 ^7'3 53-9 20-3 58-6 21-8 627 35-8 64*9 34'9 The following table is of great importance, because it shows the respective shares of foreign countries and British possessions in building up our shipping trade. Its figures partly result from the fact that an increasing bulk of our trade has been transacted with foreign countries, in spite of the great growth of the Empire in the period to which they relate. SHIPS AND SHIPPING. 167 Total Tonnage of Vessels entered at United Kingdom Ports. (Distinguishing the Tonnage entered from Foreign Countries and from British Possessions.) From Foreign From British Total Countries. Possessions. Average of Quinquennial Tonnage. Million Per Cent. Million Per Cent. Periods. Millions. Tons. of Total. Tons. of Total. 1855-59 1063 8-39 78-9 2-24 21-1 1860-64 13-04 10-33 79-2 2-71 20-8 1865-69 l6'02 13-21 82-5 2-81 17-5 1870-74 2077 17-64 84-9 3-13 150 1875-79 24-94 21-39 85-8 3-55 14-2 1880-84 30-34 26-27 86-6 4 07 13-4 1885-89 32-91 28-85 87-7 4-06 12-3 1890-94 37 '66 33-15 88-0 4-51 12-0 1895-99 44-28 39-14 88-4 5-14 11-6 A final table as to shipbuilding : — Shipbuilding for Home and Foreign Account. In Thousands of Tons. U.K. U.S.A. France. Germany. Year. '^-•^ Awl'd. Built. Sold Abroad. Built. Sold Abroad. Built. Sold Abroad. 1879... 1889... 1899... 1900... 1901... 1902... 406 855 949 944 983 950 49 183 199 207 207 150 193 231 300 394 483 469 43 10 23 12 14 7 25 32 68 89 106 8 19 13 17 18 30 78 103 119 102 8 61 43 47 41 The table is sufficiently flattering to British shipbuilders as it stands. It becomes more so when it is observed that — (i) France pays high bounties to her shipbuilders ; (2) Germany pays heavy subsidies to her ocean liners ; and (3) the United States figures include canal boats i6S ELEMENTS OF THE FISCAL PROBLEM. and barges. The discrepancy between these American " tonnage built " figures and the tonnage of American ocean vessels given in the other tables arises from the inclusion in the former of a considerable number of ships and boats employed on the great lakes and in river traffic. The Washington Census Bureau in its last report on United States shipbuilding says : " The addition to the American tonnage in foreign trade by new construction was insufficient to make up for the loss of such tonnage from natural and common causes, and the decline in American shipbuilding for foreign trade which has been so marked for half a century has not been arrested." Mr. Walter Runciman, M.P., points out that of the 8,200 steamships which fly the British flag about 6,goo are " tramps," so that our maritime supremacy lies in our tramp shipping. Tramp business cannot exist without cheap shipbuilding, which explains why the world's tramp shipping is almost entirely British. Of the cost of a new steamship about 45 per cent, goes to the shipbuilder and engineer, 45 per cent, in steel, &c., and 10 per cent, in profit. The danger to shipbuilders if a duty on foreign steel denies them free access to foreign markets is extreme. It should be remembered that the combination of the entire British iron and steel trade would be no larger than the Morgan Steel Trust of the United States, which controls about one-half of the American output, and therefore as much as our whole production. Finally, we have something more than mercantile interests to consider. Our naval supremacy is also con- cerned in this question. No country in the world can build a cruiser or line-of-battle ship as quickly and cheaply as ourselves. The prospect of dear war vessels under Protection in the future is far more to be feared than bankrupt sales of German iron in the present. CHAPTER XIX. WAGES. The subject of wages, the reward of labour, has engaged the attention of many economists, who have not entirely agreed concerning it. One point, however, is perfectly clear, and may be appropriately treated in a work of this compass. It is the distinction which exists between nominal and real wages, a distinction which is absolutely ignored by Mr. Chamberlain.-^ Nominal wages are the money wages, or actual coins or other currency which a man receives from his employer. Real wages are the goods which can be bought with the money wages. We are so habituated to the use of money in every-day trans- actions, and to talking of money when we mean wealth, that the important distinction referred to is often lost sight of. It is not out of place, therefore, to point out that a man does not work for mone}' to acquire so many coins with the King's head on them, but to obtain comforts and conveniences for himself and his family. Food, clothes, housing, perchance luxuries and amusements — these are ^ In May, 1903, Mr. Chamberlain addressed the following letter to a correspondent, Mr. Livesey, on the subject of wages : — " I have the fullest confidence in the working classes, and in their power to realise the great issues which depend upon our present action. 1 am firmly convinced that the prosperity of this country largely depends on our trade with the Colonies, which under a wise system of mutual concession will increase by leaps and bounds. We have been apt in the past to consider too much the advantage of buying cheaply, andnot to pay sufficient attention to the methods by which we may have the means that will enable us to pay at all. Increased wages are even more important to the working classes than reduced cost of living. A working man in the Transvaal may pay two or three times as much as his comrade at home for the necessaries of life for himself and his family, but if his wages are three or four limes as mucli, the balance is still in his favour.'' I70 ELEMENTS OF THE FISCAL PROBLEM. the real wages for which a man labours. This simple truth understood, it is realised that money wages are no clue to the happiness or comfort of the man who receives them. The all-important consideration is : what can the coins be exchanged for when the man or his wife goes to market ? How much bread, how much meat, will the money command ? Is bread cheaper ? — then the wages have risen. Is meat dearer ? — then the wages have fallen. The purchasing power of the sovereign is everything — the sovereign itself is but a piece of gold, and the uses of gold are exceedingly limited. The important part that free imports play in the matter of wages will be apparent from the consideration that the amount of wealth within a country, the product of labour — the fund from which alone wages can be drawn — can be materially increased by judicious exchange with the people of other nations. Therein, as I have already pointed out, lies the function of export trade. We export to gain imports of greater utility or cheapness than the goods we part with. If we construct an engine and export it, we gain the means under Free Trade of importing in exchange the best value the world has to offer. In a Protectionist country the exporter gains his credit, receives his bill of exchange, but the State fines him if he goes to a foreign land to obtain the value he has earned by his export. The folly of this will be apparent from the consideration that ultimately a man can only be paid out of the product of his labour, or what can be exchanged for the product of his labour. Every hindrance placed by the State upon exchange, whether within the country or without it, is something done towards the lowering of real wages b37the reduction of the stock of commodities from which the wages are drawn. Thus to discourage imports of foreign corn by a duty is simply to reduce the stock of food in the country, to raise the price by at least the amount of the duty, and consequently to reduce real wages by WAGES. 171 reducing the purchasing power of the money wages. Under Free Trade we have seen wages increased not merely by the raising of money wages, although that has been enormous, but by the wonderful cheapening of every article of food and comfort. It may be of assistance in considering this important subject, if we picture a small community of a hundred people living upon an island. They work at various occupations, and by employing themselves upon the natural resources of the island produce wealth which, by exchange with each other, they use to the best possible advantage. One man tills the soil, another takes to fishing or hunting, a third fashions habitations or furniture. Each individual's "wages" are what he himself produces, or what he can obtain by exchange for his production. The wages (real wages, not money) of the islanders are seen clearly to be the products of their labour, or what they can exchange for those products with their fellows. The value of the exchanges possible to them, however, is restricted by the fact that each islander has but ninety- nine other people to barter with, and by the natural limitations of the island itself. Now let us imagine that one of the islanders constructs a boat and makes his way to another land. He finds there many products and articles which are not produced at home, and many others which, although produced at home, are not there produced so well or so plentifully. He returns home and reports his discovery. Immediately it occurs to the islanders that a new means of exchange is open to them. They load the boat with their products, and our adventurous islander (becomes a commission merchant) takes them to the foreign country. The island has exported. Why ? To get better value in exchange. Arrived at his destination, the islander barters his boat load for the largest amount of goods he can get in exchange. He returns, the boat is unloaded, and the islanders have imported. Their wages — the reward of their labour — are 172 ELEMENTS OF THE FISCAL l^ROBLEM. increased in value by the fact that a new means of exchange has been opened to them. No longer compelled to enjoy only what they themselves can make, or what they can gain by exchange with their fellows, they have now a channel by means of which their labour becomes far more useful. Some of them, finding that in the foreign land certain articles they were wont to make are produced in a much better way, turn like sensible men to other handi- crafts. The goods which the boat brings to the island are found to increase the islanders' comforts, which is to say, increase their wages. If they denied themselves exchange their comforts would decline, or in other words, their wages, the reward of their labour, would decline. The fact that these islanders have 42,000,000 inhabitants instead of 100 does not alter the argument. Ships are continually leaving these shores taking goods to places oversea. They return with other goods. The more plentiful the return the better for us, the greater the value of the reward of our labour. The exports, the goods that go out, are loss to the island. The imports, the goods that come in, are gain to the island. Let us now turn from theory to facts. The recent Blue-book on " British and Foreign Trade and Industry" devotes several of its memoranda to an examination of the question of wages. The general course of money wages is carefully examined by the method of index numbers, which means, in simple language, that the wages of one period are expressed as percentages of those of another. Thus, expressing the wages of 1900 by the number 100, the wages of other 3'ears are shown by per- centages in the table on page 173. It cannot be too clearly borne in mind that these increased wages have been contemporaneous with a fall in the price of food and other commodities, so that not only does the workman in Free Trade England receive more money wages, but every shilling now commands more food and comforts than in the days gone by. The general fall WAGES. 173 Movement of Money Wages in the United Kingdom. Year. Building. Coal Mining. Engineering. Textiles. Average of the four groups. 1878... 88-8 61-9 88 -o 92-4 82-8 1883.. 84-4 6g-2 90 93-3 84-3 1888... 844 64-8 91-2 937 83-6 1893... go '3 80-4 92-6 94 '9 89-5 1898... 977 786 99-1 94'9 92-6 1900... 1000 1000 loo-o 1000 ICOO igo2... 100 87-5 1 00 -2 1000 96-9 in the prices of commodities is shown by the following table:— The Fall in Prices. Group of Articles. Prices in 1871. Prices in 1902. Average Prices of the Ten Years from 1S92 to 1901. Coal and metals Textiles (raw materials) Food and drink : — I. Corn. &c II. Meat, fish, and dairy produce III. Sugar, tea, &c 100 100 100 100 100 100 Per cent. 114-9 65-0 C37 94-4 46-1 69-2 Per cent. lOfO 62-3 65-1 88-2 56-6 Miscellaneous 66-8 All groups 100 78-8 75-8 In this table the convenient method of index numbers is again employed, the prices of 1902 being expressed as per- centages of those of 1871. In simple language, the com- modities which could be bought in 1871 for ;^ioo would now cost only ,^78 16s. The bearing of this upon the fiscal issue is obvious. The wonderful increase in the purchasing power of money, largely, but not of course wholly, due to Free Trade, has meant a great increase in real wages, which are not money 174 elp:ments of the fiscal problem. but what money will buy. To put it in another way, the man who in 1902 earns ^^78 i6s. per annum is as well off, apart from rent, as a man who earned ;£'ioo per annum in 1871. The Board of Trade have also prepared a table which shows the change in the rate of wages (money wages) in certain countries from 1881 to 1900. The wages of 1900 are taken as 100, and those of other years expressed in percentages. Changes in Money Wages in the United Kingdom, United States, Germany, France, and Italy, 188 1 — 1900. (The Figures are exclusive of Agriculture.) United Kingdom. United States. Germany. France. Italy. Principal Groups of Trades. Average of all Trades. Groups of Principal Trades under Imperial Insurance Scheme. Mean of Skilled Trades. Wages in certain Factories, mainly Textile and Metal. I88I... 1882... 1883... 1884... 1885... 1886... 1887... 1888... 1889... 1890... 1891... 1892... 1893... 1894... 1895... 1896... 1897... 1898... 1899... 1900... 831 84-4 843 834 819 811 8i-5 83-6 869 go-i 9I-I 893 89-5 887 88-2 89-2 90- 1 92-6 95- 1 100 88- 1 go- 1 918 91-8 90-6 907 924 934 94*3 95 5 967 968 960 94-8 94-6 947 957 956 98-2 IOOO 81-4 787 79 '3 So-8 84-4 84-8 84-3 84-8 849 85-9 88-6 90-9 94 "4 968 lOO'O 85-0 87-5 870 87-5 87-5 96-0 loo-o 86 88 89 90 91 92 92 94 96 98 97 97 97 98 98 98 99 100 The rise of wages in the United Kingdom has been at a greater rate than in the United States, while Germany, WAGES. 175 although starting from a much lower level, has failed to gain on us. It will also be useful to reproduce here the Board of Trade comparative table of money wages paid in certain skilled trades in the United Kingdom, United States, Germany and France: — Average Weekly Wages in Fifteen Skilled Trades. — United Kingdom. United States. Germany. France. (A) Number of quotations of rates of wages on which the following results are based 470 141 184 248 (B) Average^ I. Capital cities Tor ^fiftTl'n II- Other cities tor tiiteen ji„„„ skilled trades) ^^^ towns ... s. d. 42 36 S. d. 75 69 4 s. d. 24 22 6 s. d. 36 22 10 ^^i JL*^",ff,§,^) I. Capital cities ^°":^P^'^'so" II. Other cities £mt'.o^r.^:J and towns... Per cent. of United Kingdom Rates. 100 100 Per cent. of United Kingdom Rates. 179 193 Per cent. of United Kingdom Rates. 57 63 Per cent. of United Kingdom Rates. 86 63 This official table crystallises the broad fact that British money wages are the highest in Europe. But these figures take no account of the hours of labour worked to obtain the wages,^ and it is important to note that, generally ' Sir John Brunner, the well-known chemical manufacturer, gives, as a contribution to the materials for our study, some interesting facts as to the wages paid in his own trade. Sir John is a manufacturer of alkali by what is called the ammonia process, a raw material in the manufacture of soap, of glass, and of paper, and the total make of alkali by this process in the world is over a million tons a year. The average daily wage paid to the workmen employed in this trade is, in Germany, 78 per cent, of the English rate, in France, 77 per cent., in Austria, 56 per cent., and in Hungary, 43 per cent. To earn these wages in Germany, in France, in Austria, and in Hungary, the men 176 ELEMENTS OF THE FISCAL PROBLEM. speaking, the four countries compared stand in the following order as regards the length of current hours of labour : — 1. Germany (longest) 2. France 3. United States of America 4. United Kingdom (shortest). Reverting to the question of real wages involved in the cost of commodities, the following table compares the cost of food to German and British workmen since 1877, again by the method of index numbers : — Cost of Food to a Workman's Family. (Average for 1897 — 1901 taken as 100.) Average of Germany. United Kingdom. 1877-81 112 lOI 103 99 100 140 125 1882-86 1887-91 1892-96 1897-1901 106 98 100 The meaning of this table is that in the last five years a German workman has been able to purchase as much food of the kind to which he is accustomed for 100 shillings as he could get twenty years previously for 112 shillings, while the British workman has been able to make 100 shillings go as far in purchasing food as 140 shillings would have gone twenty years before. It is not urged here that the rates of wages paid in the countries referred to constitute absolute proof or disproof of the wisdom of any particular fiscal policy. They do, have to work 12 hours a day, while in England the men work only 8 hours a day. Sir John Brunner's firm give their men a week's holiday annually without stoppage of pay. The German, therefore, has to work 52 weeks 12 hours a day to get 78 per cent, of the wage of the Englishman working 51 weeks 8 hours a day ; and the others get less in the proportion shown. WAGES. 177 however, most conclusively show that Free Trade has been consistent with employment at higher wages than in any other European country, and that a steadily increasing rate of wages has been accompanied by a greater fall in the price of food than in other countries. So far as deductions can logically be drawn from the comparisons, they go to support the economic considerations which I have placed before the reader. F.P. CHAPTER XX. THE PAST, THE PRESENT AND THE FUTURE. In the foregoing pages few comparisons have been drawn between our own import and export figures and those of other countries. As I said at the beginning, such com- parisons are usually worthless in relation to the discussion of a wise fiscal policy, for each country has its own peculiar needs and conditions. Even if that were not so, to make fine-drawn inferences from a comparison of the statistics of the Custom Houses of nations, as is so fre- quently done, is to ignore the fact that the values com- pared are arrived at in many different ways. Certainly, there is no excuse for such elementary blunders, for our own Board of Trade, in publishing the commercial statis- tics of foreign countries, always explains the differences which exist. The warnings, however, are disregarded, and we find statesmen brandishing at random, before popular audiences, the figures of a Blue-book which devotes a page to explaining why they should not be so misused. Compare, for instance, the official import values of the United Kingdom, the United States, and France. In our own case, the import values represent, to use the official explanation, *'the cost, insurance, and freight ; or when goods are consigned for sale, the latest sale value of such goods." In the case of the United States, the import values represent, again to use the official definition, "the actual market value or wholesale price of such merchandise as bought and sold in usual wholesale quantities at the time of exportation to the United States in the principal markets of the country from whence imported . . . including costs, charges THE PAST, PRESENT AND FUTURE. 179 and expenses incident to placing the merchandise in condition ready for shipment to the United States." We see, therefore, that whereas our own imports are inclusive of freight and insurance charges, those of the United States are not, and that ;^ioo of American imports represents a larger importation than ;/^ioo of British imports. In the case of France, again, the official import values are fixed by a Commission and not by the declara- tion of importers. It will be understood, therefore, that it is misleading to derive any but broad conclusions from a comparison of figures arrived at by such varying methods. Another most important consideration is that, at any given period, countries are at different stages of industrial and commercial development, and that the rate of their progress, as measured by reference to another period more or less removed, must vary accordingly. Everyone knows how difficult it is to increase the turnover of an old- established business. The period of leaps and bounds has passed, and, while steady progress is made, it is not progress at the same rate as that of the energetic young firm which commenced operations but recently. When, therefore, the external trade statistics of different nations are compared, it is necessary to take into account both the magnitude and period of development of their commerce, and not to imagine that an increase of 5 per cent, in a figure of ^250,000,000 is not necessarily so satisfactory as an increase of 50 per cent, in a figure of £50,000,000. It is for the reasons stated that I have made little use of comparisons of imports and exports in the preceding chapters. The figures of the external trade of Germany and America, but not, be it observed, of France, Spain, Italy, Russia, or Austria, are much used in the endeavour to show that " all is not well " with our own country. But, apart from the considerations I have just advanced, nothing could be more misleading than to represent that Protection is responsible for the measure of success that has been achieved by either Germany or America. For since when N 2 i8o ELEMENTS OF THE FISCAL PROBLEM. has Germany progressed ? Since she abolished the stupid thirty or forty tariff systems — a sort of Protectionist paradise — which existed within the confines o what is now the German Empire. Free Trade now rules over 211,000 square miles of German territory. Yet at one time the Bavarian would have told you that only duties saved his trade from the hated Prussian. Taking internal Free Trade into account, and remembering also that Germany has a magnificent system of secondary and technical schools, that she has internal waterways far better than ours, and a population of 60,000,000 against our 40,000,000, what is left in her progress to attribute to the barrier she still retains against certain foreign products ? Nay, when we see German materials sold to Belgians, to Americans, and to ourselves — " dumped," as the current term has it — at prices lower than they are sold to German buyers, and when we know that Germans have been taxed heavily to give us cheap sugar, may we not feel that, but for the stupidity of statesmen, Germany might and should by this time have attained to wealth more nearly approaching our own ? As a distinguished German economist recently remarked: "The Germans are as yet no match for the British from a commercial point of view. "^ ^ As recently as November 13th, 1896, Mr. Chamberlain could see quite clearly that craven fear of German competition was ludicrous. In his trenchant vva\ he remarked : — "What is the charge made against British industry? Germany is the countrv which we are to fear. (Laughter.) Germany is the country' which is to undermine our industry, and which has made this astonishing progress. Germany, we are told, is making inroads upon our trade, as the sea encroaches upon our shores. (Laughter.) Well, I am not certain that the sea does encroach upon our shores. (Laughter.) But I would prefer to reply to charges of this kind by facts and figures, rather than by rhetorical argument. Let us look, then, at the course of trade as between Germany and this country, and when we do so I think we shall find that although there is reason for watchfulness, there is no reason at all for despairing, and there is hardly reason for serious alarm — certainly nothing of a kind which would make Mr. Chantrill's hair stand up on end. (Loud laughter.) While it is most important that this question should have your careful and continuous attention, there is no reason whatever for putting forward alarmist views of our position, which are greedily accepted THE PAST, PRESENT AND FUTURE. i8i And if America be quoted, what a magnificent example of Free Trade principles is there. Forty-five States, each countries of considerable size, with no customs barriers against each other, thriving and prospering by virtue of Free Trade ; 80,000,000 people dividing between them the magnificent resources of the most favoured part of the New World, and only hindered in their progress by the barriers which prevent them from freely exchanging their products with the larger world beyond.^ How useless it is to make comparisons between such a land and these little islands in the North Sea ; how misleading to tell the British workman that a customs duty can make England resemble America, as though Protection could stretch our borders across the Atlantic, give us prairie and forest and mine, and change us from one of the smallest to one of the largest countries in the world. Nothing we can do can hinder American progress ; nothing we can do can prevent the United States from having a larger output than ourselves in every department of industry. If the reader is content for his country to be prosperous, he need not fear America, for the United States cannot rob us of prosperity. If he is not content with prosperity, but imagines that 40,000,000 Britons and their heirs can for ever be industrially and commercially supreme over 80,000,000 Americans and their heirs, he is foredoomed to disappointment, for neither Free Trade abroad, and which lead our foreign friends and competitors to take altogether an erroneous view of the commercial power and the commercial influence of Great Britain. (Loud cheers.)" It is as true to-day as it was on November 13th, 1896, only seven years ago, that to shout upon the housetops that British trade is decaying, is to encourage our enemies and competitors, and to bring about such a loss of commercial prestige as must prejudicially affect our traders in every part of the world. ' Let me here remind the reader of the following passage from the last speech made by President McKinley before his assassination : " A system which provides a mutual exchange of commodities is manifestly essential to the continued and healthful growth of our export trade. We must not repose in fancied security that we can for ever sell everything and buy little or nothing. If such a thing were possible it would not be best for us or for those with whom we deal." i82 ELEMENTS OF THE FISCAL PROBLEM. nor Protection can do anything for him. Nothing can be done to hush the waihngs of those who see in every point gained by a rival a point lost to this country ; who find a cause for envy and despair in the inevitable growth of other nations ; who complain of every fresh evidence of competition ; whose ideal of British prosperity is that a complacent world, or, at the least, considerate Colonies, should forward raw materials to this country to be manu- factured and re-sold to them at a profit. These must remain in gloom, and there is no help for them until they cease to hunt shadows, face hard facts, and come to believe that there are more worthy thoughts than those of a prosperous trader who envies every customer that crosses his rival's threshold. So far as our own progress is concerned, it has been of a most satisfactory character — since we abolished our import duties. In the first half of the nineteenth centurj' our imports and exports for all practical purposes remained stationary. The following is the record of our exports between 1801 and 1849 : — Bri 1801 1806 1811 1816 1821 1826 1831 1836 1841 1846 1849 sh Exports, 1801 — 49 In million £ .. 42 .. 41 •• 33 .. 42 .. 37 •• 31 •• 37 •• 53 •• 52 •• 58 .. 64 THE PAST, PRESENT AND FUTURE. 183 Such was the snail's progress of our export trade during fifty years of unalloyed Protection. Unfortunately, we are unable to contrast the record of our imports, because we have no records of their real values before 1854. I give the record for both imports and exports, so far as it is possible, since the date of the repeal of the Corn Laws, in the important table on pages 184 — 186. Between 1801 and 1850, our exports were stagnant, and while foreign corn was denied to our people, no less than five Select Parliamentary Committees investigated agricul- tural distress. This slow progress, or rather want of progress, was in spite of the fact that steam power and the use of machinery in industry dated from the eighteenth century. But with the advent of the Free Trade era, what a remarkable change the record exhibits ! Between 1849 and 1857 our exports doubled, rising from £64,000,000 to ;j{J" 122,000,000. The reader should not forget the part that railways played in our development. Although the Stockton- Darlington Railway was opened in 1825, many years elapsed before it was recognised that George Stephenson had created a mighty instrument to facilitate exchange in the steam locomotive, and the great development of railway communication did not take place until after the repeal of the Corn Laws. With regard to steam and machinery, however, Newcomen's pumping engine was invented in 1705, Watt's steam engine patent was taken out in 1769, — the date, also, of Arkwright's spinning-jenny, — the Crompton mule followed in 1776, while the cotton factory system was established at the dawn of the nineteenth century. When every- thing is considered, it is impossible to resist the conclusion that the sudden increase in our foreign trade was due to the abolition of the duties which harassed and hampered our activities. As for rail- ways and steamships, they are but the instruments of Free Trade, promoting the transfer of commodities 1 84 ELEMENTS OF THE FISCAL PROBLEM. UNITED KINGDOM: 1846— 1902. IMPORT VALUES, EXPORT VALUES, TONNAGE OF VESSELS SOLELY ENGAGED IN OVERSEA TRADE, AND SALES OF NEW SHIPS TO FOREIGN COUNTRIES. (Based on Custom House and Board of Trade Returns.) Year. Imports (c.i.t.). Exports (f.o.b.). Ships Excluded. Vessels Employed in Ovtrsia Trade orjly. New Ships sold to Foreigners. Remarks. Million Million Million Thousand £. £■ Tons. Tons. 1846 58 Corn Laws repealed ; the repeal took effect in 1849. 1847 ~ 59 — _.. 1848 53 1849 64 2-1^ — Navigation Laws repealed. 1850 — - 71 2-2 I85I 74 2-3 Australian gold discoveries. 1852 1853 78 2-4 99 2-8 . British Tariff greatly reduced. Re- ductions in Dutch, German, and Austrian duties. 1854 152 97 2-8 Crimean War, 1854 — 5^- Import values first recorded. 1855 143 96 3*0 — Belgian Tariff reductions, 1850 -56. 1856 172 116 3-2 French Tariff reductions. 1857 188 122 3'2 Indian Mutiny. 1858 164 117 y3 East India Company ceased to exist. iSnQ 179 130 3-2 27 Canadian Tariff increased. i860 210 136 3*1 14 Cobden Treaty with France. 1 A small amount of additional tonnage is employed in both home and foreign trade, and not included in these figures, which relate to oversea trade only. THE PAST, PRESENT, AND FUTURE. 185 Imports (c.i.f). Million 217 226 249 275 271 295 275 295 295 303 330 355 370 374 375 394 369 411 397 413 Exports (f.o.b.). Ships Excluded. Million 125 124 147 160 166 189 181 180 igo 200 223 256 255 239 223 201 199 193 192 223 234 242 Vessels EmpIo}-ed in Ovtr-0 t^OO O V o ■-T o g Tj-OD ;^« JTiPriw ION fOMOO p prOO N .'*-t^M f^ O ^:^ obow'-iM^-il-iOJNNNN 13 w N rr> lO 10 u->vO t^ O^ t--.00 0>-00 O^CCO^O fOt^t^ — M >H N ro ■^ 'J- mvo C^vO ^OOOOO CTiO 0>0 0>0 OiOO r;;: M M M M g M in o vD io

JOMO»p^^»ppN^^Nfo — bbwMMMwWMMwNMI-ciHMNWNNNN •j;m c» m rr)'0■^-■^Olr)«n^OVO u-)u-)»0 >0 •no 'O O f< "t-sO CX3 O M -to iXi O ^ "*-vD 00 0\ O M N lOUD O t^ t^ r^ t^ t^oo 00000000 O^O^O^O^O^C^O O O 00CC'X)00CO00CO0O000000000000CO00'X>CX30O ONO\<7l 2o6 ELEMENTS OF THE FISCAL PROBLEM. Germany. The comparison of 1872 with 1902 in exports^ may be corrected by the simple and obvious expedient of measuring the growth of consumption of the raw material. I have given prominence in the table, therefore, to the consumption figures. For 1902 and 1872 the figures are : — United Kingdom Consumption of Native and Imported Wool and Hair. lbs. 1902 ... ... ... ... 562,000,000 1872 389,000,000 Increase ... ... 173,000,000 In late years the consumption of what is known as " shoddy " (i.e., disintegrated woollen rags) has greatly increased, in addition to the growing consumption of pure wool. A fair estimate by a reliable authority puts the total consumption of wool, hair, and shoddy as follows : — United Kingdom Co7isumption of Wool, Hair, and Shoddy. lbs. 1902 ... ... ... ... 630,000,000 1872 ... ... ... ... 400,000,000 Increase ... ... 230,000,000 On the other hand, it will be seen by the table that our exports of tops, noils, &c., have increased considerably. I may explain, for the benefit of the uninitiated, that a " top " is long-stapled wool combed ready for use as a material by the worsted spinner, the residuum of short wool combed out being termed the " noil." The "top," then, is long-stapled wool in its most elementary process of manufacture. The table shows that our exports of tops and noils have increased from an insignificant and unrecorded quantity in 1870 to a value of ^^2, 800,000 in 1902. Our exports of yarns have also increased in value, THE PAST, PRESENT AND FUTURE. 207 and, of course, more in quantity, but our exports of piece goods have fallen considerably in value and not incon- siderably in quantity. Against this we have been exporting an increased quantity and value of woollen and worsted apparel, estimated by Mr. Hooper, the secretary of the Bradford Chamber of Commerce, at -^700,000 in 1870 and ^2,000,000 in 1902. In this connection an amusing attempt has been made to show that our exports of apparel have taken the place of other exports to the detriment of the national welfare. " Let us see," says the critic, " what are the comparatively new exports which are taking the place of the old,"^ and he proceeds to see, amongst other things, that our exports of apparel have increased, and dilates upon the fact that apparel is made by labour " of a low grade, chiefly female, very poorly paid, and quite unorganised." As I need hardly point out, if this be true (most certainly it is not true of the Leeds factories), it cannot be the case that the labour which makes apparel "takes the place" of labour which makes cloth, for the apparel is made of cloth. Wool must have been carded or combed, and yarn must have been spun and woven before the clothing factory began its operations. Taking all the figures together, the broad conclusion is, that while the output of the British woollen and worsted industries has been always increasing, the exportation of late years has fallen, especially to the United States since the McKinley and Dingley tariffs. The home trade has grown in a most satisfactory manner, and our people are better clad than of yore. With regard to our woollen exports, those who believe 1 " The Tariff Problem," W. J. Ashley, pp. 100, 106, and 107. Com- pare the following extract from the expert review of the Bradford Trades in the Yorkshire Obse7vcr\ December 29th, 1902: "The enormous development of the manufacturing clothiers' business in Leeds, Bristol, and elsewhere has helped us greatly, and we have also had a big trade with Canada. Thus, although the American market is absolutely closed to us, except for such high class worsteds as are made in Huddersfield, we have a muchsounder, more widely distributed, and perhaps a bigger trade than we ever had." 2o8 ELEMENTS OF THE FISCAL PROBLEM. that Protection would have saved them from falling are commended to the following figures : — French Exports of Woollen Goods, i8gi — 1901. Million Francs. J-UV^X ... ... 1893 J^/ 279 1895 323 1897 265 1899 264 I90I 214 After what I have said as to the value of comparisons I need hardly add that I do not urge that these figures either support Free Trade or condemn Protection. They simply show that in France, a highly Protectionist country, exports of woollen goods have fallen, and that, therefore, the critic who infers that the smaller fall in our own woollen exports is due to Free Trade, draws his con- clusion from insufficient premises. Before leaving the wool figures, I would point out that one of the most unsatisfactory items in the table on page 205, to my mind, is the stationary character of our imports of yarn. Our woollen manufacturers do not make sufficient use of the special yarns of Belgium and France. They can import them free of duty, and by application to method turn out costume cloths to rival the French productions. But, as I have said elsewhere, it is happily true that the Yorkshire trades give every evidence of progress and adaptability, which are particularly necessary in a trade which has to obey the dictates of fashion, and change its yarns and its patterns from year to year, and almost from day to day. Let us next turn to the iron and steel trade. The critic already referred to, in dealing with the commercial THE PAST, PRESENT AND FUTURE. 209 situation^ dismisses these important industries in two paragraphs, the first of which is as follows : — " Passing over coal for the present, the next most important entry in the list of British exports is Iron and Steel and Manufactures (excluding Machinery and Ships). The value of these reached their maximum in 1873 (^37,750,000) after a period of rapid growth. It has never since reached so high a point (1882, ,£31,000,000 ; iSgo, ;£3i,ooo,ooo ; igoo, ^31,000,000) ; and for the last thirty years it has been stationary — varying between ^25,000,000 and ^31,000,000 in periods of prosperity, and sinking to ;^i8,ooo,ooo or ^20,000,000 in periods of depression." Such remarks as these teach us nothing, and are beside the point in a consideration of the " commercial situation." The exports of iron and steel may rise through depression or fall through prosperity. Let me illustrate this by the case of Germany in recent years : — German Iron and Steel Exports and Imports, igoo to 1902. — Exports. Imports. 1900 I90I 1902 Metric Centners. 15,000,000 23,000,000 33,000,000 Metric Centners. 9,831,000 4,006,000 2,689,000 One can only suppose from the paragraph I have quoted, that the professor who wrote it would deduce abounding prosperity from these truly remarkable figures. Alas! they are not a picture of prosperity, but of one of the most acute periods of commercial depression that has ever visited a great nation. During the boom of 1900 (which Free Trade England shared with Germany) imports were high because iron and steel were wanted in such quantities that the German manufacturers could not cope with the demand. In 1901 acute depression (which ' VV. J. Ashley, " The Tariff Problem," p. 65. F.P. 2IO ELEMENTS OF THE FISCAL PROBLEM. Free Trade England, although drained by a great war, did not share with Germany) set in. Few Germans wanted iron and steel, and not only did imports fall, but the German manufacturers were compelled to offer their output in foreign markets at any price they could get, to the great advantage of the United Kingdom, Belgium, Holland and America, and to the great chagrin of the German engineers who were denied the cheap iron offered to the foreigner. On page 211 will be found some useful iron and steel statistics, which are not confined to a consideration of exports, and still less to exports " excluding machinery and ships." We taught the world engineering, and there is no excuse for leaving engines and ships out of con- sideration when our commercial outlook is discussed. The table gives, in the first place, our production of pig-iron, because all manufactures of iron and steel have their origin in pig-iron. The production figure is, there- fore, a broad test of the progress of the industry, and it will be seen that we have not looked back. The boasted year 1872 sinks into insignificance when we see that our output was then 6,700,000 tons per annum and now about 9,000,000 tons. Reference to exports alone is most mis- leading. In 1873 pig-iron was at £6 a ton, whereas the average price in 1902 was : — For Scotch warrants ,, Cleveland warrants .. ,, West Coast warrants It is exceedingly satisfactory to note from the table that our iron and steel output has been sold, not so much to the foreigner as to the British shipbuilder and engineer. I need not dwell upon the wonderful figures as to the growth of shipbuilding which are set out in the table. Per Ton, s. d. 54 6 49 3 59 6 THE PAST, PRESENT AND FUTURE. 211 BRITISH IRON AND STEEL STATISTICS. Imports (c.i.f.). (A small part is Exports. Year. Pig-iron Output. Re-exported.) (f- D.b.). New Ships Built in British Iron and Trnn anH Machinery Yards. Steel. Machinery. Steel. (excluding Ships). Million Million Million Million Million Tonnage. Tons. £■ I- I- £■ 1858 3-5 0-3 12-6 3-6 236,554 i860 3-8 07 137 3-8 225,871 1S62 39 07 130 4"i 261,932 1864 4-8 i-o 150 4-8 460,833 1866 4-5 i'3 17-1 47 379.539 1868 5-0 II 00 17-6 47 362,328 1870 6-0 13 t-4 4) 24*0 53 394,357 1872I 67 2-1 3. 360 8-2 474718 1874 60 24 0) Xi 31-2 9-8 603,867 1876 6-6 2-5 X) 207 7-2 378,020 1878 64 27 "3 18-4 7-5 470.719 1880 77 3-6 28-4 9-2 472,896 1882 8-6 39 to 31-6 II-4 783.051 18S4 7-8 3-9 24-5 127 588,274 1886 7-0 31 Z 21-8 97 331.528 1888 80 4-0 26-4 12-5 573.947 1890 7 9 4-0 31-6 16-4 812,638 1892 67 4-0 21-8 131 801,548 1894 7-4 4-0 187 13-4 669,492 1896 87 57 238 160 736.814 1898 8-6 5-0 27 226 ^Tl 870,608 1900 90 73 32 320 196 944,267 1901 79 7-6 3-6 253 17-8 983.133 1902 87 7'9 44 292 187 950.425 1 The great boom of 1871 — 74 is particularly noticeable in these iron figures. Although our exports of iron and steel in 1872 were valued at ^36,000,000, against ;^29, 000,000 in]i902, the output of pig-iron in 1872 was only 6,700,000 tons, against 8,700,000 tons in 1902. P 2 212 ELEMENTS OF THE FISCAL PROBLEM. but I marvel at the outlook of the man who can name our ships without considering them. As for engineering, the figures as to our exports are but half the story. The value of our output is now enormous, and while our exports are large, our production for home consumption is larger. Our annual output of machinery is worth nearly ^Tso, 000,000, of which only ;£"i 8,700,000 was exported in 1902, while £"4,400,000 of special machinery was brought in to the advantage of our industries. As to our imports of iron, for my part I would rather see the indispensable metal come in than go out. At any rate, let us hope that it will be long before we find occasion to make a present of a great part of our iron production to foreign nations, as Germany has done with hers since igoo. When we export let it be because, after having supplied an abundant home demand, we yet require elbow room for our activities. That is the kind of export trade which is worth having, and is a sign of progress. To export from sheer weakness causes Custom House records to rise, but the resulting statistics are but a reflection of the poverty of the people who have parted with wealth which they cannot afford to retain. It will be convenient to repeat here the estimate given in a former chapter of our production of iron, steel, machiner}-, hardware, and tools, but excluding that important item, ships : — British Iron Production — Average per Annum. Exported pig-iron at ;^3 per ton /■3, 309, 000 Exported iron and steel other than pig at /lo per ton 25,652,000 Finished iron and steel consumed in United Kingdom at /■ 10 per ton ... 29,780,000 Foundry castings, 850,000, at /la per ton ... ... 10,200,000 1,200,000 tons of machinery at £^^0 per ton ... ... 48,000,000 Other products — hardware, tools, &c. ... ... ... 22,500,000 ;^i39,44i,ooo THE PAST, PRESENT AND FUTURE. 213 This may be contrasted with our present imports of iron and steel : — Iron and Steel Production and Imports per Annum. Production. Imports Retained. Iron and steel and manufactures thereof Machinery, tools, hardware, &c £ 70,000,000 70,000,000 / 7,600,000 8,000,000 Figures, these, which sufficiently dispose of many alarm- ing stories with which the reader is no doubt familiar. In considering such figures, the reader should not forget that the importation, small as it is, is large enough to protect iron and steel consumers from the operations of trusts and rings. Under a Protective system, if a municipality requires rails for its tramways, it is at the mercy of the producers. The trade combination, trust, cartel or ring, arranges that the municipality shall have its rails, and the price, if you please, is so much per ton, a figure which, if examined, is found to have a direct relation to the cost of imported rails plus the duty. The municipality cannot help itself, for the range of its sources of supply is limited by the tariff wall. The ring gets the order, and the members of the ring profit at the cost of the ratepayers. Under Free Trade, on the other hand, as soon as the municipality finds itself threatened by the operations of a ring, it buys its rails from abroad ; the ratepayers are " Protected," and when next tenders for rails are invited it is found that there is no necessity to have resort to foreign contractors. There is no reflection upon our iron and steel producers in these statements. When a man takes his goods to market he is more than human if he does not demand for them the highest price the circumstances of the hour 214 ELEMENTS OF THE FISCAL PROBLEM. enable him to obtain. If Protective duties exist, he must take them into his calculations, for if he does not, others will. If the iron and steel trade magnanimously refused to take advantage of its opportunities, it would find itself in the unenviable position of exchanging its productions at low prices for the high-priced productions of other trades. It cannot be truly alleged that either Germans or Americans are indifferent to the welfare of their country, but the operations of their trusts and controlling syndi- cates have in both cases led to such abuses of the consumer that the intervention of Government has been called for. So far as the future of the iron and steel industries of this country is concerned, the outlook may be summed up by saying that the position of the best British works is practically unassailable, and that those which are nol abreast of the times, and are working in unsuitable localities and under unfavourable conditions, can adopt the obvious remedies of removing to the seaboard, and of using modern methods. Further, we do not yet sufficiently appreciate the advantages of the American scrap-heap policy with regard to machinery. The American maxim is that machinery is cheap and that labour is dear, and that if the expenditure of ten thousand dollars on new machinery reduces the wages bill it is a capital invest- ment. That view is the true view. Let it be borne in mind, however, that while there is not the slightest need to be pessimistic about our iron and steel trade, nothing we may do can alter the fact that the industry of America will continue to be on a much larger scale than ours. I have dwelt upon the broad details of these three great industries because, after an examination of their exports alone, a pessimistic observer proceeds to talk of " a policy of industrial defence,"^ based on the conception that our "The Tariff Problem," W. J. Ashley, Chapter V. THE PAST, PRESENT AND FUTURE. 215 great industries have been stagnant, or even decaying, in the last generation. This, in spite of the fact that the first of them, the cotton industry, by an overwhelming majority, declares that the "defence" it requires is from the advocates of dearer food, while as to the woollen and iron industries, many of the most enterprising firms are protesting with vigour against the policy which it is proposed to thrust upon them. The woollen and worsted industries, in the event of the Preference for Colonial food being adopted, must face the prospect of a Preference for South African and Australa- sian wool. The iron and steel trade, as I have indicated, is in no danger from "dumping," but some of its members are suffering from unsuitable position and inadequate plant. As for the minor trades, even the pessimist is compelled to admit that a large number of them are progressing most rapidly.^ He is driven to the allegation that the minor industries employ less skilled labour than the old staple trades. This is, of course, due to an entire mis- apprehension. The construction of furniture and upholstery requires far greater skill than is demanded of a cotton operative, and the maker of rubber goods has as honour- able and advanced a calling as the wool-comber. It is amusing to find that our most skilled great occupations, engineering, shipbuilding, and many of the crafts connected with housebuilding, are neglected by the same critic who dwells upon the manufacture of jam and pickles. The whole matter may be summed up in the table with which the Board of Trade have provided us, which is reproduced on page 217. This shows that in fifteen great occupations the number of persons employed has much increased. If we bear in mind that the majority of the living people represented by these cold figures are male adults with families, they take a deeper interest as representing no inconsiderable portion of the British people. During the • W. J. Ashley, " The Tariff Problem," p. 106. !i6 ELEMENTS OF THE FISCAL PROBLEM. Persons Employed in Fifteen Great Occupations. iS6i 1871 1881 1891 1901 15 Trades, 14 Trades, including Agriculture.! excluding Agriculture 4,278,000 4,172,000 4,227,000 4,538,000 4,897,000 2,475,000 2,748,000 3,027,000 3.439,000 3,909,000 forty 3'ears covered by the figures, economy of labour through improved machinery has accompanied rapidly -increased output. I am reminded, as I write, of the masked men who in the old days broke up the machines which, poor fellows, they sincerely believed to have been invented for their destruction. Many people who would smile to-day at the idea of machinery displacing labour are ardent Protectionists, unable to see that if Protection be advis- able against foreign products in the interest of the workers, it is even more advisable against the use of machinery. For one man whose labour has to be trans- ferred to another calling through the importation of articles made better or cheaper than he can make them, ten men are temporarily or permanently inconvenienced by the invention of labour-saving appliances and the caprice of fashion. It should be observed that several of our most pro- gressive industries would be injured by the taxation of manufactures, because their materials are finished goods. Building, engineering, shipbuilding, and printing deserve at least as much consideration as sugar-refining, one of the most insignificant and unskilled trades in the country, which employs very few people, and could not employ many more if we refused to eat any but sugar which had passed through its hands. Our sugar refineries only employ about 3,500 people, who refine a great part of our consumption. Yet it is alleged that if by Protection THE PAST, PRESENT AND FUTURE. 217 OCCUPATIONS OF THE BRITISH PEOPLE. Summary Table showing the Total Number of Persons in England and Wales occupied in the under-mentioned Groups of Industries. (Compiled from the Census Reports, 1861 — 1901.) Year. Groups of Industries. 1861. Agriculture Building Coal-mining Cotton Lace Woollen and worsted Linen Silk Iron and steel • ... Machine - making and shipbuilding^ Tailoring Boot and shoe Printing and book- binding Furniture Earthenware and glass Totals 1,803,049 472,222 270,604 492,196 54.617 230,029 22,718 116,320 129,507 123,812 142.955 255.791 46,576 64,148 1871. 1,423,854 583.019 315.398 508,715 49.370 1881. 1,199,827 686,999 383.570 551.746 44.144 246,645 j 240,006 18,680 \ 12,871 82,963 i 64,835 191,291 200,677 172,948 149,864 224,559 64,226 75,202 217,096 160,648 224,059 88,108 84,131 53,611 65,478 68,226 4,278,155 , 4,172,212 i 4,226,943 1,099,572 701.284 I 519,144 605.755 34.948 258.356 8.531 52,027 202,406 292,239 208.720 248,789 121,913 101,345 82,760 1901. 988,340 945.S75 648,944 582,119 36,439 236,106 4.956 39.035 216,022 325,000* 259,292 251.143 149.793 121,531 92.556 4.537.789 I 4.897.151 ' Including ironfounders. '^ Excluding blacksmiths and ironfounders. * In 1901 a different classification was adopted from that of previous censuses, which makes it impossible to state a true comparative figure, but the 325,000 is a moderate estimate. 2i8 ELEMENTS OF THE FISCAL PROBLEM. we helped the trade to refine all our sugar " ten times as many men might be employed " !^ A striking instance of the vitality of our minor industries is afforded by the tinplate trade. The McKinley Tariff struck this a heavy blow, as is shown by the following figures : — Exports of British Tinplates to U.S.A. Average of 1887 — go (four years before McKinley Tariff) ... ' £4,278,667 Average of 1892 — 93 (two years of McKinley Tariff) ... ... ... £3,527,568 Average of 1895 — 96 (two years of the low Wilson Tariff) ... ... ... ...£1,927,572 Average of 1898 — 1901 (four years of Dingley Tariff) ... ... ... ... £806,600 In 1902 (Dingley Tariff still in force) ... £887,432 While our exports to the States were thus falling, the production of American tinplates grew from 30,000 tons in 1892 to 366,000 tons in 1902, The following figures show how rapidly we found other customers : — British Exports of Tinplates. In Millions of £. Average of To U.S.A. To other Countries. Total. 1887-90 1892-93 i8Qi;-q6 4-2 3-5 i-g 0-8 0-9 1*4 1-6 17 2-5 3 '4 5-6 3-6 1898-1901 3"3 In the year 1902 4"3 ^ Vi'd/' Mr. Chamberlain's speech at Greenock October 7th, 1903. THE PAST, PRESENT AND FUTURE. 219 And not only has there been an increase of our tin plate exports to Germany, Holland, Belgium, Russia, France, and our Colonies, but the home market, most valuable of all, has also expanded, so that at the present time the trade is more vigorous than ever. The industry, threatened by Protection, has been saved by Free Trade. The chief raw material of the tinplate maker is, of course, iron and steel, and if there had been a British iron and steel duty, our tinplate makers would never have recovered from the blow inflicted by the American tariff. America, however, is still suffering from the results of its tinplate duties, which have proved to be a most expensive luxury to the American public. In the ten years 1891 — 99 the American consumer paid over £"18,000,000 in increased prices for tinplates through the duties. In 1898 the Tinplate Trust was formed, and obtained an almost com- plete monopoly. It arbitrarily raised prices to within a few cents of the price of imported plates plus the duty, and, to maintain prices, closed more than thirty mills. Its control of the product and of prices is almost absolute through the tariff. An American writer, Mr. Byron W. Holt, says : — " Protection is responsible for the Tinplate Trust and its many sins. The tinplate industry, because it came as an industrial mendicant, has always been a curse to America. It began by interfering with, or ruining, thousands of well-established and independent concerns, which asked for no governmental aid, but only to be left alone. Because of the increased cost of tin cans in 1891, canning factories were com- pelled to reduce wages, discharge hands, and pay lower prices for vegetables and fruits. The loss to farmers, who have since been unable to sell their surplus products to canners, has been enormous. The loss to labourers who are deprived of cheap canned food is also great. But dear tin and dear sugar in America have helped to establish more firmly the canning industry in England, from whence we get much of our jams and marmalade, after paying a stiff duty on them." Nor is it true that without the duty America would have had no tinplate industry. The industry would probably have established itself in America in any case during the cheap iron and steel period (1893 — 98). It was, in fact, cheap steel that, under the comparatively low 220 ELEMENTS OF THE FISCAL PROBLEM. duties of the Wilson Tariff, caused the really rapid growth of the trade. But while there is much doubt as to the part played by the duties in fostering the industry, there is no doubt at all that the Tinplate Trust, like the Glass Trust and the Paper Trust, is founded on the Tariff. Much evidence has already been given to show that, "judged by all available tests, both the total wealth and the diffused well-being of the country are greater than they have ever been " ^ ; and there are many other common-sense tests which we can apply to decide the tariff problem, not upon such exceptional instances as the alleged woes of sugar-refiners or Coventry ribbon-makers, but upon the general happiness and prosperity of the community. Most people are aware that as our population has increased the number of our paupers has decreased. The following figures speak for themselves : — Pauperistn in England and W ales. Annual Averages of. Total Paupers. Ratio to Population. 1855-59 i86^-6q 894,822 962,075 752.976 788.357 814,749 47 4-5 31 29 2-6 1875-79 188^-80 1895-99 The conclusion is forced upon us that our industries have found employment for our increasing population, while our ever-growing consumption per head of bread, meat, tea, sugar, and tobacco shown by the table on page 221, perhaps the most valuable in this work, is eloquent of the improved condition and comfort of the masses. ^ Mr. Balfour, "Economic Notes on Insular Free Trade." THE PAST, PRESENT AND FUTURE. 221 W O J Q O X w Q < Q W H O Ph H W H o ".rH ^^ t— I I— I z W o oJ H <■»-■ o o 0) 3 o o s o c OJ 'S D OJ 43 OO M Cj OO 3 a, o Pm o x: 1-4 OO CTN -^oo M in -^ M t>^ M o CT^oo o mo t>^ t^ t^ 0^ M > -^ U-) fo>o lOM mw oi o^-i-M nvo H C) t>.00 O roco vO t^^roO Mm ro in CTi in 'ro c^oo b o vnVj-b m Vj-O >h Vb o M H fO -^OO rO OJ in t^ 'O -^ H M oco c^ OO H -^ -^oo oo ro I o in *M c^ o b b Vo t^ h V b *m 1 | t^ 00 OMninrot^foi>.wooo\oooMO fO|>OMt^O-^s O O OO O O M -i- O H in tj- t/)[/).,t/5 bjo 03 XI c rt c o o _c 'u u B 'd c 03 OJ 3 X 0) o tuO o -i o o '■ o o o t/:X 3 o c t-l o c o3 . ^ o3 0) 3 ^:! ^ o PQ p:5P^pqoWp:;p^OOHJ^(^HU?^ c^S ^ 1- O <0 222 ELEMENTS OF THE FISCAL PROBLEM. Another remarkable test is afforded by the yield of the income-tax. The Commissioners of His Majesty's Inland Revenue have made an unsolicited contribution to the Great Inquest of the Nation in their forty-sixth Report. In their observations on the searching subject of the income-tax, so dear to the heart of every British citizen, they say: — " It is satisfactory to us to be able to note that notwithstanding the high rate o^ is. 2,d. in the pound, the yield of the tax per penny again shows a substantial advance." The growth of the yield per penny is indeed remarkable, as the following figures testify : Income-tax Yield per Penny, 1893 — 1902. 1893 -. £"2,240,000 1898 . . ^^2, 188,000 1894 .. 2,191,000 1899 . . 2,284,000 1895 .. 1,982,000 1900 . • 2,353,000 1896 .. 2,033,000 I90I . ■ 2,475,000 1897 .. 2,099,000 1902 . . 2,570,000 These figures are the more striking when it is remembered that during these years the scale of abatements and exemp- tions was again and again extended. In spite of the increased abatements made in 1899, the 3aeld continued to rise. The satisfaction of the Commissioners is justifiably increased by a consideration of the cheerful figures relating to the growth of British incomes. They set out the following comparisons : — The Growth of British Incomes. Years. Gross Incomes brought under Review. Gross Income. Schedule D, "Trades and Professions. ' ' 1868-6Q 1875-76 £ 398,794,000 544,371,000 657,097,000 cS66,993,ooo £ 173,054,000 271,973,000 1S94-95 1901-02 340,559,000 487,731,000 THE PAST, PRESENT AND FUTURE. 223 The incomes of trades and professions have trebled in the thirty years during which it is asserted that we have "stood still." This growth in nominal or money income is increased by the fact that in 1902, as I showed when discussing wages, an income of -£jS i6s. buys as much, apart from rent, as did an income of ;^ioo a generation ago. Further proof as to the growth of our activities in the home trade is afforded by the amount of goods traffic transacted by our railways. In the short period of ten years, 1891 to igoo, the receipts from goods traffic increased from ;£'42,200,ooo to £53,500,000, a growth of 25 per cent, in a decade ! Another conclusive test is afforded by the Bankers' Clearing House Returns. In 1892 the cheques cleared at the London Clearing House amounted to £6,481,000,000. In 1902 this pretty figure had grown to £10,028,000,000. Mr. J. Herbert Tritton, the hon. secretary of the London Clearing Bankers, in his report says : " The total of £10,028,000,000 is the largest amount passed through in any one year, and exceeds the total of 1901 (which was hitherto the record year) by £467,573,000." In spite of the overwhelming evidence as to the increased wealth, comfort and general prosperity of the United Kingdom, for some years doubt and dismay has been arising in the minds of many people as to our commercial position. This has been consequent upon, and caused solely by, the growth of the trade of Germany and the United States of America. The exports of these two countries, we are told, have grown at a much faster rate than our own. It is forgotten that exactly the same argument can be used as between Germany and America, or as between France and Germany, and that all three countries have Protective tariffs of a more or less severe character. Compare, for instance, the growth of the 224 ELEMENTS OF THE FISCAL PROBLEM. exports of manufactures of France and America in the last twenty years. We get the following figures : — Exports of Manufactured Articles from France and U.S.A. United States. The exports of France have thus grown by only £"16,000,000, while those of America have grown by ;£"6g,ooo,ooo. What is the explanation ? Is it that the tariff of France is not so high as that of America ? Let us test that theory by comparing the exports of France with those of Germany : — Exports of Manufactured Articles from France and Germany. The tariff of France is as high as that of Germany, but while French exports have gained by £16,000,000, German exports have risen £65,000,000. Yet their exports of manufactures were at about the same level in 1880. Such considerations as these show that it is unwise to draw hasty conclusions from comparative statistics. And, as I have already pointed out, the magnitude of the trade upon which an increase is shown should not be forgotten. It may be an easy thing to increase shipments from THE PAST, PRESENT AND FUTURE. 225 £"21,000,000 to £90,000,000, but it will probably be an arduous and protracted task to increase the £90,000,000 to £120,000,000. The figures of our own early days of prosperity are usually forgotten, but consider them : British Exports of Manufactures. 1854 1856 1858 i860 1862 1864 1866 Million £. 89 104 106 125 112 148 174 That is to say, in the short space of thirteen years, 1854 to 1866, our exports of manufactures rose by £85,000,000. Now let us compare the growth of German exports of manufactures, beginning with the year in which she first reached, as nearly as possible, the figure £89,000,000 : — British and German Exports of Manufactures. In Million £. United Kingdom, 13 Years, 1854-66. German Empire, 13 years, 1881-93. 1854 1856 1858 i860 1862 89 104 106 125 112 148 174 1881 88 1883 1885 1887 1889 98 90 102 1864 1891 1893 1866 100 Increase in 13 years— 85. Increase in 13 years— 12. The "marvellous" growth of German export trade, of which we hear so much, takes on a very different aspect F.P. Q 226 ELEMElSfTS OF THE FISCAL PROBLEM. when we look at these figures. And we have to remember that, if there was less competition in the 'sixties, Germany in 1881 had at her command far greater facilities for trade than we had in 1854. ^^ the inquiry be extended beyond 1893, we find that German exports of manufactures proceeded as follows : — Gernuin Exports of Manufactures. Million / 1893 • 100 1894 . 94 1895 • ... 109 1896 . 115 1897 . 115 i8g8 . ... 120 1899 . 136 1900 . 149 1901 . 145 So that German exports of manufactures are not yet as valuable as ours were in 1864 ! How long will it be before Germany reaches our present figure of ^^230,000,000 ? Who can say ? The ^145,000,000 of 1901, as everyone knows, was the result of sales abroad from sheer weakness in the home market, akin to the sale of bankrupt stock. It is probable that in five years' time German exports will be little larger than to-day, but, we may hope, shipped for different reasons. When, and it will of course happen sooner or later, Germany reaches an exportation of manufactures amounting to £200,000,000 we shall find that the rate of progress of her exports will be but slow. Indeed, as we have seen, it has been slower in the past than ours has ever been. German exports of manufactures scarcely moved between 1880 and 1894, and French exports of manufactures have been almost stationary since 1876. I speak only of values. The reader will understand, from what I said at the THE PAST, PRESENT AND FUTURE. 227 beginning of this chapter, that I set no store upon such comparisons. But, if we must have comparisons between the Custom House statistics of nations which differ in area, population, race genius, cHmate, soil, seaboard, position, minerals, &c., then our figures, as I have shown, need not fear any reasonable test that may be applied to them. So much for the more unworthy of the two causes which has led to the present revival of the Protectionist movement. The other, happily, has its roots in nobler soil. The idea that we should sacrifice a part of our comfort in order to promote Imperial unity may be mistaken, but it is at least to be respected. Everyone must agree that, when it has been demonstrated that Free Trade is wise and fruitful, it is arguable whether or not we should in part relax our fiscal principles to meet political exigencies, just as, while we desire to be at peace with all men, we think it wise to tax ourselves to provide an impregnable defence for our island shores. Recognising this, I have given my reasons for believing that the combined policy of Preference and Retaliation which has been promulgated would accentuate the local interests of the self-governing Colonies, weaken the Empire at its heart, and utterly ignore that great part of the Empire which does not possess self-government. Our relations with the white Colonies present no problem so grave as that of the future of the 350,000,000 Indians, Africans, &c., who are within our borders. A policy of preferential tariffs, considered as a matter of political expediency, must not fail to take into account the geographical conditions of the British Empire. It is idle to refer to the German Zollverein as an instrument of political consolidation without reference to the fact that the German States -^.re not sundered by the sea. Distance, as I have said before, is a factor which no scheme of Empire Q2 228 ELEMENTS OF THE FISCAL PROBLEM. can eliminate from the problem, and distant possessions must continue to find their best and most suitable markets in the nearest great centres of the world's popula- tion. If it be true that increased commercial intercourse will lead to political union between Canada and the United States then that political union is inevitable, for no fiscal arrangement can lead to greater commerce between the United Kingdom and Canada than between Canada and the United States. A duty of 2s. or los. per quarter on foreign corn cannot be such a material bond between the Dominion and ourselves as the 3,000 miles of boundary which join her to the United States. And it is to be remembered that the scheme submitted to us provides a tie of interest which, as I have already shown, is of value to few of our Colonists but Canadians. Our food imports during the last thirty years from Australia and New Zealand have been notoriously uncertain in character. In 1870 Australia sent us 13,000 cwt. of wheat. In 1873, 1,552,000 cwt. In 1877 the supply fell to 146,000 cwt. For other years the figures have been : 1880, 2,708,000 cwt. ; 1886, 379,000 cwt. ; 1894, 3,651,275 cwt.; 1897, nil; 1902, 4,174,753 cwt. The record of New Zealand is similar. South Africa has no food to sell, and Mr. Chamberlain has framed a scheme which does nothing for a part of the Empire which, if material bonds are necessary, needs such a bond. It is not surprising that Mr. Chamberlain is silent on this important point, for it is not possible to give a practical Pre- ference to South Africa unless we tax the materials of our industry. We have but to consider the simple facts of geography, over which we have no control, to see that the policy which is commended to us as the " only system by which the Empire can be kept together" is an impractic- able policy. It therefore amounts to a counsel of despair, and unnecessarily and unwisely suggests the severance of ties which have happily existed in continuity and grown stronger since we abolished the old Colonial Preferences THE PAST, PRESENT AND FUTURE. 229 on timber, coffee, and sugar. Since that time, now sixty years ago, the United Kingdom and the Britains beyond the seas have kept together and prospered in freedom. We shall be wise not to substitute for that freedom an appeal to pecuniary and sectional interests, nor to believe that the throbbing pulse of loyalty is to be detected in the cold records of the Custom House. For ourselves, in Little England, there is much to do if we are to be worthy to continue to lead the great British confederacy which we dream may hold the peace of the world in its hands in the time to come. There are great deeds behind us, we have wrought well, we are rich, but we must strive still with holy discontent. What men can do that must we. Educational reform cannot give us a fresh native supply of iron ore or conserve our coal, but it can fit our people for the stern work before them, in the work- shop, in the office, in the laboratory — and I must not forget to add — on the road. The removal of freight disabilities and the improvement of our waterways cannot bring cotton bales to Lancashire, but it can give fresh life to many a British manufacturer defeated, not by the foreigner, but by the cost of transport to tide-water. The adoption of the metric system cannot double our population, but it can make it possible to quote quantities and measure- ments to be understood of the benighted foreigner who has not the good fortune to know how many ounces go to the pound, nor whether the result be a pound troy or a pound avoirdupois. The application of science to industry cannot increase our area, but it can do much to keep us where we have ever been, in the front rank of the world's peoples. In some of these things legislation can help us, but, for the greater part, the work must be done by individual effort. It will be a sorry day's work for British progress when we take for our motto " The Government will provide." INDEX. Agricultural, Employment, 217 Implements, 49, 119 Machinery, 60 America, its Internal Free Trade, 181 American Competition — is it to be feared ? iSi Anglo-German Commercial Treaty of 1865. ..158 Apparel, 50, 51, 207 Argentina : Imports of Wheat from, 10 Mutton, II Trade with United Kingdom, lOI Arms and Ammunition, 19, 36, 52, Asbestos, 14 Ashley, Professor W. J., on the Tariff Problem, 99, 108, log, iiS, 137, 162, 194, 207, 209, 214 Australia : Commonwealth Tariff, 105 Imports of Wheat from, 10 Imports from Foreign Coun- tries, III And Lancashire Contrasted, 13G Population, 135 Standard Correspondent on Pro- tection, 106 Suggested Bonus on Food, 94 Trade with United Kingdom, 100 Austria, Imports of Wheat from, 10 Bacon Consumption, 221 Imports, 13 Bags and Sacks, 49 Balance of Trade, 12, 64, 71 Balfour, Rt. Hon. A. J. : On Coal, 46 On Machinery, 58 Bankers' Clearing House Returns, 223 Barley, 13 Baroda, Maharaja of, on Protection for Indian Industry, 127 Beef, 13, 94 Beer, 14, 48, 221 Belgium, Trade with United King- dom, lOI Board of Trade on Import Duties, 84 Bookbinding, Employment, 217 Books, 18, 26, 51 Boom of 1872 — 3... 194 Boot and Shoe Trades, Employ- ment, 217 Boots and Shoes, 26, 119, 156 Bounties on Canadian Iron, 105 Brass, 17, 49 Bread Consumption, 221 Bricks, 49 Bristles, 14 British Commerce since 1850 Sum- marised, 193 Empire, Growth of, 109 Exports, 1801 — 1902. ..182 — 186 Iron Production, 14G Shipping, 164 Trade with British Posses- sions, lOI Trade with Foreign Coun- tries, 100 Brooms and Brushes, 18, 32, 50 Brunner, Sir John, on British and Continental Wages, 175 Building, 28, 29, 200 Employment, 217 Wages, 173 Butter, 13, 47, 94, 128 Consumption, 221 C.I.F., the term explained, 12 Canada : Exports to Germany, 159 Imports from America, iiG Imports from Foreign Coun- tries, 113 Imports from France, iiO Imports from Germany, iiG 232 INDEX. Canada — continued. Imports from United King- dom, 76 Imports of Wlieat from, 10 Iron Bounties, 105 And London Contrasted, 136 Lead Bounties, 105 Opinion of Manufacturers as to Preference, 95 Pig-iron, 24 Population, 135 Relations with Germany, 133, 158 Trade with United Kingdom, 100 Canadian Government and Mr. Chamberlain, 95 Grain and American Ports, 133 Manufacturers' Associa- tion on Preferential Trading, 7, 119 Preferential Tariff, 74 Candles, 18, 50 Caoutchouc, 14, 50 Cape of Good Hope : Trade withUnited Kingdom, 100 Imports from Foreign Coun- tries, III Carnegie, Mr., on Anglo-American Relations, 132 Carriages, 18, 51, 119 Cartels in Germany, and their Operations, 142 Carts, 18, 51, 119 Cement, 17, 49, 197 Chamberlain, J. : Condemns Preferential Trading in 1896. ..73 His Criticisms, 98 His Judgment of Commerce, 2 His Proposals Summarised, 78—80 His Use of Selected Statistics, 194 On Canadian Preference, 75 On Colonial Industries, 117 On Drawbacks, 82 On "Dumping," 144 On Food Taxes, 77 On German Competition, 180 On Free Trade in 1902. ..75 On German Wages, 28 On Imports of Joinery, 28 And Peel : A Contrast, 82 On Revenue and Protective Duties in 1902. ..75 Chamberlain, J. — cuntinucd. On " Ties of Interest," 74 On Wages, 77, 169 Scheme Examined in Detail, 87—96 Speech at Glasgow, October, 1903. ..77 Chamberlain-Vince Pamphlet, its Criticisms, 108 Cheese, 13, 47, 94, 128 Consumption, 221 Chemicals, 17, 49, 113, 19S Cheques, Cleared, 223 Chinaware, 18, 51 Clocks, 18, 52 Coal, 48, 49, 113 Exhaustion, 54 Exports of, 46 Their Importance, 53 Exports and Navigation, 53 And Outward Freights, 163 Prices, 173 Its Relation to Industry, 46 Coal-Mining, Employment. 217 Wages, 173 Cocoa, 13, 47, 128 Coffee, 13, 47, 113, 128 Colonial Conference of 1902. ..75 Colonial Conference of 1902 and the Most - Favoured - Nation Clause, 159 Colonial Food Supplies, 83, 94 Imports from Foreign Countries,' III Preference, Practical Value of, 114 Command of the Sea, 53 Comparative Progress of United Kingdom and Germany, 225 Comparisons between Nations, their Value, 178 Confectionery, 128 Consumer and Import Duties, 84 Consumers' Loss under Chamber- lain Scheme, 89 Corn, 13, 47, 129 Corn Duties and Prices, 84 — 93 Duty of 1902... 23 Prices, 173 Copper, 15, 16, 17, 24, 48, 49, 130, 199 Cost of Food in United Kingdom and Germany, 176 Cotton, 14. 16, 21, 113, 129, 199, 203 Cotton Goods, 18, 21, 51, 56, 119, 156, 203 Yarn, i5, 48 INDEX. 233 Cotton Trade, Employment, 217 Output in United Kingdom, 21 Customs Union for British Empire, 72 Cutlery, 18, 51 Cycles, 18, 52 Dairy Prodoce and Mr. Chamber- lain, 89, 90, 91 Denison, Colonel, on Foreign Population of Empire, 139 " Denouncing " a Treaty, Defini- tion, 153 Domestic Materials, 17, 32 Dingley Tariff, 35, 149, 207, 218 Direction of Britisli Trade, 97 Displacement of Labour by Machi- nery, 216 Drawbacks, Defined, 8r Mr. Chamberlain on, 82 " Dumping," 140 Duties and the Consumer, 35, 36, 92 EflFect on Industry, 31 Earthenware, 18, 32, 51 Employment, 217 " Economic Notes on Insular Free Trade," 46, 58 Eggs, 13, 129 Electrical Goods, 17, 49 Employment in the Great Trades, 215—217 Engineering, 210 Employment, 217 Entrepot Trade, 103 Excess of Imports, 65 Exchange, 41 Exports and Imports of Principal Nations, 65 And Our Oversea Invest- ments, 191 And Prices, 195 Illustrated, 44 Of Services, 62 Of United Kingdom, ana- lysed, 47 Their Function, 41 F.O.B., its Meaning, 45 Fiscal Policy, its Limitations, i Fish, 13 Fisheries, of United Kingdom, 5 Flax, 15 Food : Consumption in United King- dom, 221 Food — continued. Imports Aftected by the Cham- berlain Proposals, 90 Supplies, of United Kingdom, 4. 8, II, 83 Supplies, from U.S.A., 128 Supplies in Time of War, 133 United Kingdom Imports and Exports, 8, 10, 37, 38, 59 Taxes on, 78 — 80, 82 Foreign Competition, in Manufac- tures, 57 Population of Empire, 135 France : Fall in Woollen Exports, 20S Exports of Manufactures, 224 Imports, 191 Imports of Wheat from, 10 Mercantile Marine, 165 Trade with United Kingdom, loi Wheat Duty, 84, 93 Franco - German War and Its Effect, 185, 193 Franco-Swiss Tariff War, 155 Free Trade and Our Progress, 183 And Wages, 169 Its True Claim, i Within the Empire, 104 Freight Earnings, 65 " Tons " Defined, G7 French Tariff, an Extract, 153 Fruit, 13 Furniture, 27, 28, 51, 119, 200, 215 Trades, Employment, 217 Furs, 15, 199 General and Conventional Tariffs, 153 German Tariff Bill, 93, 152 Trade Depression, 209 Zollverein, 104 Germany : Coal Exports, 141 Coal Imports from United Kingdom, 4G Duties on Grain, 152 Exports of Manufactures, 224 Exports to Canada, 159 Imports, 191 Imports of Manufactures, iGi Imports of Wheat from, 10 Iron and Steel Trade, 209 Mercantile Marine, 165 Relations with Canada, 133 Trade with United Kingdom. loi Wages, 174 Wheat Duty, 84, 93 234 INDEX. Giffen, Sir Robert, on Freight Earnings, 66 Glass, 17, 18, 30, 50, 51 Trades, Employment, 217 Gold Exports and Imports, 63 Goods Trafl&c, 223 Grain, 13, 47, 129 Gutta Percha, 15 Hair, 15 Half-manufactured Products, 55 Hardware, 17, 18, 32, 50, 51 Hemp, 15, 129 Hides, 4, 15, 26, 30, 113, 129, 197, 199 Holland, Trade with United King- dom, lOI Home Trade and Exports, 192 Horses, 19 Hosiery, 51 Hours of Labour, 176 Houses, Value of United Kingdom Output, 29 Ice, 19 Implements, 17, 50 Imports and Exports of Principal Nations, 65 Imports and Prices, 195 Imports, Illustrated, 44 Into Self-Governing Colonies, iii Of United Kingdom, analy- sis, 13 — 19 Of United Kingdom, how Recorded, 12 Their Function, 4, 40 Incidence of Import Duties, 84 Income Tax, yield per Penny, 222 Incomes, Growth of, 222 India, 121 Demand for Protection, 126 Excess of Exports, 122 " Home Charges," 69, 123 Importance of its Trade, 104 Imports of Manufactures, 126 Imports of Wheat from, 10 National Congress, 126 Population, 135 Trade with United Kingdom, 100, 121 Indiarubber, 14, 18, 50, 113, 129, 199 Industry, its Growth Measured by Consumption of Materials, 197 International Trade, 42 Investments of United Kingdom in Places Oversea, 68, 188, 190 Invisible Exports of United King- dom, 12. 62, 63 Invisible Imports of United King- dom, Frontispiece Iron, 16, 17, 24, 30, 49, 57, 105, 119, 199, 209, 211, 214, 217 From Germany, 142 Production in United King- dom, 57 Ore, 5, 15, 24, 48 And Steel Prices, 195 And Steel Trades, Employ- ment, 217 And Steel Trades, the Outlook, 214 Italy : Mercantile Marine, 165 Wages, 174 Wheat Duty, 84 Jams, 47 Japan, Mercantile Marine, 165 Jewellery, 19, 52 Joinery, 27, 119, 199, 201, 200 Jute, 15, 20 Goods, 17, 50 Yarn, 16, 49 Lace, 19, 34, 51 Lamps, 1 8 Lancashire and Australia, Con- trasted, 136 Lancashire, Cotton Trade, 21 Lard, 13 Lead, 15, 16, 48, 49, 50, 105, 130, 199 Leather, 17, 18, 26, 27, 30, 31, 50, 51, 119, 156, 197, 199 Linen, 16, 18, 51, 156, 199 Trade, Employment, 217 Linoleum, 18, 51 Liquor, United Kingdom Imports and Exports, 59 Locomotives, 60 London and Canada Contrasted, 136 Luxuries, Imports of, 18, 35, 37 Machinery, 17, 26, 27, 50, 58, 119, 154 Employment, 217 Value of Output, 212 Mahogany, German Duties on 23 Maize, 13 Manufactures : The Taxation of, 79 United Kingdom Imports and Exports, 37, 38, 59 Manures, i5, 130 INDEX. 235 Margarine, 13, 47, 129 Matches, 18, 51 Maximum and Minimum Tariffs, 153 Measurement, "Tons," 67 Meat, 13, 47, 129 Consumption, 221 Prices, 173 Mercantile Marine of the Great Nations, 165 Metal, Prices, 173 Metals, 15, 16, 17, 24, 48, 50, 113, 130, 156, 197, 198 Milk, 14, 129 Mineral Waters, 14, 48 Minerals, of United Kingdom, 5 Mining Machinery, 60 Minor Industries, 207, 215 Money, 41 Wages in Various Countries, 174 Most-Favoured-Nation Clause, 148 Motor Cars, 19, 52 Musical Instruments, 19, 52, 119 Mutton, 14, 94 Natal : Trade with United Kingdom, 100 Imports from Foreign Countries, 11 1 Natural Resources, their Definition, 2 Naval Supremacy and Cheap Ship- building, 168 New South Wales and Free Trade, 105 New Zealand : Imports of Wheat from, 10 Imports froir Foreign Countries, 11 1 Mutton, II Population, 135 Trade with United Kingdom, 100 Norway, Mercantile Marine, 165 Oats, 13 Occupations of the British People, 217 Oils, 49, 113, 130, 198, 199 Ores, 15, 24, 48 Paint, 30, 50 Paper, 17, 19, 26, 50, 130, 15G, 197, 199 Materials, 15, 48 Pauperism, 220 Peel, Sir Robert. His Famous Utterance, 82 Petroleum, 17, 19, 36, 130 Pianofortes, 34 Population : Of Australia, 135 Of the British Empire, 135 Of Canada, 135 Of India, 135 Of New Zealand, 135 Of South Africa, 135 Pork, 14, 221 Preferential Duties, Fixed Bargains with our Colonies, 160 Preferential Tariffs, 22 As an Imperial Policy, 77 The Question of Reciprocal Obligation, 75 Preferential Trading and the Most- Favoured-Nation Clause, 157 Price's Movement, 1871 — 1902, 173 And the Movement of Exports and Imports, 195 Printing, Employment, 217 Production : Of Cotton Goods, 5G Of Iron and Steel, 57 Of Manufactures in United Kingdom, 39, 57 Of Woollen and Worsted Goods, 56 Protection in Practice, 31 And Wages, 1C9 Protective Duties, 87 Provisions, 113 Pyrites, 15, 199 Rabbits, 14, 94 Railway Carriages, 50 Raw Materials, 19, 23 Growth of Imports, 198 — 199 The Question of Taxation, 82 Supplies from United States of America, 128 United Kingdom Imports and Exports, 37, 38, 45, 59 Reciprocity, 79, 149 Retaliation, 79, 149 Revenue Duties, 75, 87 Rhenish-Westphalian Coal Syn- dicate and its Dumping Opera- tions, 142 Rice, 13 Ross, Mr., Premier of Ontario, Welcomes a Preference on Cana- dian Goods, 120 23^ INDEX. Russia : New General Tariff, 154 Imports of Wheat from, 10 Trade with United Kingdom, lOI Russo-German Tariff War, 1893 — 4 ...150 Rye, 13 Saddlery and Harness, 26, 51 St. Lawrence Navigation, 133 Scientific Instruments, 50 Seaboard, its Importance, 2 Sea Power, 53 Seddon, R. J., on Exports of Gold, 63 Self-containment, as a Policy, 6 Self-sustaining Empire, 78 Services, how Exported, 62 Shipbuilding, 163, 167, 210 Shipping, 52, 99, 162 Earnings, 64 Ships : Exported, 184 Gross Tonnage Defined, 66 Net Tonnage Defined, 67 Shoddy, 206 Silk, 15, 19, 34, 49, 52, 156. 159, 197, 199 Trade, Employment, 217 Skilled and Unskilled Trades, 215 Skins, 15, 19, 48, 52, 130 Slates, 15, 48, 130 Soap, 18, 156 Southern States and Cotton Manu- facture, 202 Spirits, 14, 48, 113, 119, 129 Steam Engines, 17 Steamships of the Great Nations, 166 Steel, 17, 24, 30, 49, 57, 119, 209, 211 Steel Production in United King- dom, 57 Stone, 15, 130, 199 Straits Settlements, Trade with United Kingdom, 100 Suez Canal Shares, Frontispiece Sugar, 14, 47, 113, 129 Duty, 89 Refining an Insignificant In- dustry, 216 Tailoring, Employment, 217 Tar, 1 5, 130 Tariff, Difficulties of Detail, 31 1 Tariff Reform League, its Know- ledge and Methods, 71 Taylor, James, Estimate of Freight Earnings, 67 Tea, 14, 129 Consumption, 221 Duty, 89 Telegraphic Wire, 50 Test by Exports, 225 Textile Materials, 198 Textiles, Wages, 173 Thomas, D. A., on Coal, 46 " Ties of Interest," 72, 74, 82 Timber, 96, 113, 130, 199, 200, 201 Duties, 21 In United Kingdom, 4 Tin, 15, 16, 49, 199 Tinplates, 218 Tobacco, 19, 36, 52, 113 Consumption, 221 Tonnage Defined, 66 — 67 Tools, 17, 26, 27, 50 Tops and Noils, 49, 206 Toys, 19, 52 " Trade Follows the Flag," the Proposition Examined, 108 Trade is Barter, 41 " Tramp " Ships and Our Carrying Trade, 168 Treasury's Loss under Chamber- lain Scheme, 89 Treaty of Frankfort, 150 United Kingdom, Analysis of Exports, 47 Analysis of Imports, 13 — 19 Area, 4 As a Free Port, 103 Exports, 97 Exports of Manufactures, 57 Exports, 1801 — 1902. ..182 — 186 Growth of Oversea Invest- ments, 188 Imports, 97 Imports of Manufactures, 57, 161 Iron and Steel Production, 146 Mercantile Marine, 164 Natural Resources, 4 Population, 5, 136 Production of Manufactures, 57 Table showing Exports, Imports, Shipping and Ships Sold 1849 — 1902... 184 — 186 Trade with Argentina, loi Trade with Australia, 100 Trade with Belgium, 101 INDEX. 237 United Kingdom— continued. Trade with British Possessions, 100, 107 Trade with Canada, loo Trade with Cape of Good Hope, 100 Trade with Foreign Countries, loi, 107 Trade with Foreign Countries and British Possessions Con- trasted, 102, 107 Trade with France, loi Trade with Germany, loi Trade with Holland. loi Trade with India, 100, 121 Trade with Natal, 100 Trade with New Zealand, 100 Trade with Russia, loi Trade with Straits Settlements, 100 Trade with United States, 101 Trade with West Indies, 100 Wages, 174 — 175 United States: As a supplier of Food and Materials, 128 Coal Imports from United Kingdom, 46 Imports, 191 Imports of Manufactures, 35, 161 Imports of Wheat from, 10 Interpretation of Most-Fa- voured-Nation Clause, 148 Mercantile Marine, 165 Output of Manufactures, 147 Trade with United Kingdom, lOI Wages, 174- -175 United States Steel Corporation, its Output, 145 Varnish, 17 Ve;jetables, 14 Vince-Chamberlain Pamphlet, 98 Wages, Defined, 169 Wages and Protection, 169 Wages in Various Countries, 174 War and Food Supplies, 133 Watches, 19, 52 West Indies, Trade with United Kingdom, 100 Wheat, 13, 94 White Population of British Empire, 135 " Who Pays the Duty ? " 84 Wine, 14, 48, 113, 129 Wood, 16, 27, 28, 48, 201 Wood Manufactures, 17, 51 Pulp, 96 Wool, 4, 16, 20, 48, 113, 130, 199 Consumption in United King- dom, 205, 206 Woollen Yarn, 16 And Worsted Trades, Employ- ment, 217 Woollens, 18, 49, 51. 56. 119. 156. 204, 205 Work, the Object of, 42 Worsteds, 18. 49, 51. 56. 204, 205 Zinc, 15, 17. 24, 48, 50, 130, 199 ZoUverein, as a British Imperial Policy, 72 BRADBURY, AGNEW, & CO. LU., PRINTERS, LONDON AKU TOMlKlnOt. Crown 8vo, 220 pp. 2s. 6d. net. TH€ TARIFF PROBLCM By W. J. ASHLEY, Projcssoy of Commerce in the University of Birmingham; Late Professor oj Economic History in Harvard Uni- versity, U.S.A. CONTENTS. 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