H F 
 
 1713 
 
 S4 
 
 1881 
 
 MAIN 
 
 UC-NRLF 
 
 B 3 b32 123 
 
Pam ^ 
 
 2 3 S6 
 
 FREE TRADE 
 
 VERSUS 
 
 RECIPROCITY 
 
 SAMUEL SMITH. 
 
 LIVEEPOOL ; 
 
 J. A. D. WATTS AND CO. PIUNTEltS. 
 1881. 
 
PBEFACE 
 
 If 21 
 
 The following paper was prepared a considerable time 
 ago as an address to be delivered to the Chamber of Com- 
 merce, but the strong political feeling which has lately been 
 imported into the question of reciprocity has made it inex- 
 pedient to raise a discussion in that arena, and hence these 
 remarks are offered to the public in the form of a pamphlet. 
 
 It may seem almost superfluous to re-argue what has 
 been so exhaustively discussed of late by some of our greatest 
 economists and statesmen, but the writer ventures to hope 
 that the point of view from which he has treated it may 
 possess some freshness and interest, in spite of all that has 
 been said. At all events it is written without bias of any 
 kind, and simply with the view of putting forward the truth 
 as it presents itself to the writer. 
 
 But for absence from home, this brochure would have 
 appeared two months ago. 
 
FREE TRADE r. RECIPROCITY. 
 
 I ventured some time ago to make a few remarks in the 
 Chamber of Commerce on the subject of Keciprocity, which 
 were imperfectly reported and criticised rather unfavourably, 
 and it was suggested to me by several of my friends that I ought 
 to explain more fully what value I attached to the views so 
 widely disseminated under the vague name of Keciprocity. 
 The subject is one that has taken hold of the country in no 
 ordinary way, and it is desirable on every account that it 
 should be fully and exhaustively discussed. There can be no 
 doubt that there is a wide spread feeling of disappointment, 
 we might almost say indignation, among the manufacturing 
 districts at the treatment which this country has received 
 of late years from foreign nations. The sanguine hopes 
 entertained in the years following the repeal of the Corn 
 Laws that our liberal policy would be generally imitated 
 abroad have been dismally disappointed, and there has been 
 a marked return of late years to an increasingly protective 
 policy on the part of most Continental nations, as well as 
 the great communities on the other side of the Atlantic. We 
 might almost say there is a settled purpose to shut out 
 British goods from the markets of the leading nations of the 
 world, notwithstanding that we are by far the best customers 
 for their products, and admit them nearly all free of duty 
 into cm- ports. The period of bad trade which this country 
 
6 FREE TRADE V. RECIPROCITY. 
 
 I, 
 
 has passed through, though greatly mitigated during the past 
 two years, has sown widely the seeds of discontent with our 
 commercial policy, and arguments are reappearing on all 
 sides which it was supposed the free trade controversy of 
 1840-50 had finally demolished. No doubt many of these 
 arguments are crude reproductions of ancient fallacies, but 
 others cannot fairly be so described, and it is neither wise 
 nor politic to treat them as only deserving of ridicule ; the 
 very fact that every leading nation in the world repudiates 
 our existing free trade policy should make our economical 
 authorities more modest in their assertions. The object of 
 this paper is to enquire whether there is any residuum of 
 truth in the mass of popular opinion that has been dignified 
 by the name of Eeciprocity. 
 
 But, first, we must ask what is meant by this term. In its 
 plain natural sense it means simply mutual or reciprocal 
 free trade, a consummation which every orthodox economist 
 must ardently desire. Surely there cannot be anyone who 
 does not admit that mutual is better than one-sided free 
 trade. There can be no doubt that in the plain grammatical 
 sense of the words everyone is in favor of reciprocity, but a 
 conventional meaning has come to be attached to this term. 
 It is considered that to favour reciprocity means advocating 
 the protection of native industry, or, at least, attempting by 
 means of retaliatory duties to break down foreign tariffs, and 
 so attain to greater fi:eedom of trade. It is only in that 
 latter sense that I consider the question worth serious 
 treatment. I take it for granted that most intelligent men 
 have long given up the opinion that a country likd Great 
 Britain can be benefited by protecting either its agriculture 
 or staple manufactures against foreign competition. From 
 one-third to one-half the food of our people is now imported 
 from abroad, and it is plainly of more importance that the 
 masses should have cheap food, than that the agricultural class 
 should have higher prices for their products. It is equally 
 
FREE TRADE V. RECIPROCITY. 7 
 
 clear, that as Great Britain is the greatest' exporter of 
 manufactures, she must continue to be the cheapest producer 
 in order to hold her own against the competition of the 
 world. Any protective duties we could levy which would 
 materially raise the prices either of food or manufactures 
 would be a cause of loss, not of gain, to the country at large. 
 The real question that is engaging the attention of men, by 
 no means to be classed among visionaries, is whether we 
 cannot find some appliance to bring pressure to bear upon 
 foreign countries, so that we can make it their own interest 
 to admit our products as freely as we admit theirs. 
 
 To form sound opinions upon this point it is needful to 
 put ourselves mentally in the position of foreign nations, 
 who levy heavy import duties for the avowed purpose of 
 protecting native industry, and to ascertain honestly what 
 are the real motives that induce them to follow a course 
 which all our leading authorities have declared to be suicidal. 
 It strikes me that there is great ignorance, and often not a 
 little misrepresentation, of the real motives that actuate 
 such countries as the United States and Canada in following 
 out the policy they have deliberately adopted. 
 
 As one who has often argued the point with intelligent 
 Americans in the United States, as well as in this country, 
 I am bound to say that they make out a much better case 
 than is generally supposed here. Speaking broadly, the view 
 which Americans take is that manufacturing industry on a 
 large scale cannot be planted in a new country, mainly 
 inhabited by an agricultural population, without at least a 
 period of protective duties. They hold, and I think justly, 
 that they never could have established vast manufacturing 
 industries in the face of free and open competition with an 
 old and rich country like ours. In colonial days, and up to 
 the war of 1813-14, the United States had few manufactures ; 
 they drew their supplies chiefly from Europe, and were 
 mainly an agricultural community, like Australia or New 
 
8 FBEE TEADE V. RECIPROCITY. 
 
 Zealand, but so great was the suffering caused by the war 
 of 1813-14, and so strong a feeHng did it create against this 
 country, that it decided them to cultivate home manufactures 
 even at the cost of paying higher prices. This policy has 
 constantly grown since then, and was enormously stimulated 
 by the Civil War, which made a large revenue necessary, 
 and no way of raising it seemed so easy as to levy it upon 
 foreign goods, and thus indirectly throw a considerable part 
 of the cost of the war upon Europe. 
 
 The Americans are perfectly alive to the fact that they 
 pay higher prices than they need do for many kinds of goods 
 in order to build up a system of manufactures, but they argue 
 that they get a full compensation in the great centres of 
 industry that are thereby created, and in the capital and 
 population that are attracted to their country by the profit- 
 able employment obtained in those great seats of trade. 
 
 It seems clear to me that if the United States had never 
 levied any duties at the custom-house, but adopted ab initio 
 a system of absolute and mutual free trade with this country, 
 much of the population and capital that are now employed 
 in Massachusetts and Pennsylvania would have been located 
 in Lancashire, Yorkshire, and our coal and iron regions, pro- 
 ducing the goods required by the rm'al population of America. 
 The United States would have been a vastly magnified 
 Australia or New Zealand, containing a thinly scattered popu- 
 lation and a few large commercial cities on the sea-board ; but 
 probably some millions of people would have remained in 
 these islands, and made the goods which the American 
 farmer needed, instead of emigrating and building dp the 
 manufacturing towns of New England, Pennsylvania, &c. 
 It is quite true that if we look merely at the interest of the 
 individual and not at that of the nation, it is better that 
 these millions of people emigrated and found a home in the 
 ^new world than that they should have remained to swell the 
 already too dense population of Great Britain ; but nations 
 
FREE TRADE V. RECIPROCITY. 9 
 
 look at these questions from a different point of view to 
 individuals, and what has been a source of national gain to 
 America has been a cause of national loss to us, and in 
 such a matter as this it is vain to expect absolute identity 
 of interest between two rival nations. 
 
 It may be argued that now that the manufacturing 
 system of America is complete, and suffices to supply almost 
 her whole home consumption, she has no longer any interest 
 to bolster it up, but rather to aim at being a cheap producer 
 and compete with England in the open markets of the world. 
 No doubt there is force in this view, and it will gradually 
 gain ground in America and lead to a relaxation of her tariff, 
 especially as her rapidly diminishing debt makes it un- 
 necessary to raise so large a revenue. 
 
 The point, however, I wish to insist upon is that the 
 United States, like all new countries, our own colonies 
 included, consider the acquisition of extensive manufacturing 
 industry worth paying a price for, and there is no way in 
 which they can obtain that object in the earlier stages of 
 national growth except by a protective tariff. This motive 
 is so strong, and operates so constantly, that we need never 
 expect to see it disappear, and I have little doubt that when 
 Australia, New Zealand, and our other colonies reach a 
 certain stage of progress they w411 protect their own manu- 
 factures, as Canada is now doing. It seems to me that 
 some of our economists err in supposing that mankind 
 are to be ruled by no principles except such as can be 
 shown logically to facilitate the acquisition of wealth for the 
 individual. Human nature is a very complex thing, and 
 man is not a mere wealth-producing machine. He is 
 influenced, and justly influenced, by motives that appeal 
 to other parts of his nature than his pocket. The Irish 
 farmer prefers to remain at home rather than emigrate 
 to Manitoba, though he can get 100 acres there mor<e 
 easily than five acres in Ireland. The Irish people, as a 
 
 2 
 
10 FREE TRADE V. RECIPROCITY. 
 
 whole, would rather have a population of five or six millions 
 in the island, fairly well off than two or three milKons 
 employed in cattle grazing, even though they were much 
 better off. There can be no doubt that pure economical 
 laws as they have usually been expounded in this country 
 would point to Ireland becoming ultimately merely a grazing 
 country, for that form of agi'iculture yields the best retm^n to 
 the labour and capital employed on the land, and best suits 
 the wet climate of the sister isle ; but the Irish people, with 
 very natural patriotism, insist upon rooting the peasantry 
 in the soil, and have constrained parliament, led by one of 
 our greatest living economists, to pass a measure which 
 flies in the teeth of English notions of political economy. 
 
 A few years ago any such measure as that recently passed 
 would have been pronounced absurd by the press of this 
 country, but now it is seen to be a necessity, and the reason 
 is that human nature is affected by many motives besides 
 those that are purely economical. Love of country, of 
 kindred, of religion, are all motives that rightly influence 
 men, and make them willing to sacrifice something of mere 
 gain, and it is the want of perception of this truth which 
 has led many of our commercial authorities to underrate the 
 powerful motives that sway foreign countries, and even our 
 own colonies, in settling their commercial policy. Most of 
 the countries with which we deal are willing to make a 
 slight individual sacrifice to keep a larger population at 
 home, and give them widely varied industries, and thus 
 make them, as they think, self-sufficing. 
 
 No doubt it can be clearly shown that if there Were no 
 national distinctions, and all the world were of one family 
 and one speech, it would be an immense boon to abolish 
 custom-houses and tariffs, and leave trade to flow in the 
 channels that nature has marked out for it. But seeing that 
 nations possess a strong corporate existence, and national 
 rivalry and even jealousy are still powerful factors in the 
 
FKEE TKADE V. KECIPKOCITY. 11 
 
 world, and likely to remain so till the niillenium, we cannot 
 expect that great changes of commercial policy will be made 
 merely upon abstract economical gromids; and miless each 
 individual nation sees it to be its plain self-interest to adopt 
 perfect freedom of trade, no amount of admonition or expos- 
 tulation on our part will avail much. 
 
 The action of France at the present time is, perhaps, the 
 strongest stimulant to the reciprocity movement, though she 
 is only following in the wake of Germany, which raised her 
 tariff considerably last year. I think there is less excuse for 
 old and populous countries, like France and Germany, to lean 
 upon protection than for new countries like the United 
 States. It is fairly open to question whether those countries, 
 with their dense population, cheap and abundant capital, and 
 first-rate technical education, cannot hold their own in many 
 branches of manufacture, as against us in the open field of 
 competition. Undoubtedly, however, the feeling prevails 
 widely on the Continent, that England, with her superior 
 mineral resources, could gradually kill out most of their textile 
 manufactures were there absolute free trade. I am by no means 
 sure that she could not do so in the plainer branches of trade, 
 though probably the French, with their superior taste and 
 climate, could hold their own in the finer goods and articles 
 of taste. Let us suppose for a moment that the Continental 
 view of our manufacturing supremacy is right, and also 
 suppose that Mr. Cobden had convinced all Europe, at the 
 same time that he convinced the British Parliament, that 
 imrestricted free trade was best for the world at large. 
 Under these circumstances we should have seen the gradual 
 transference to this country of nearly all the cotton, 
 woollen, linen, and hardware manufactures of Europe. 
 Lancashire and Yorkshire would have profited enormously. 
 The capitalists of Kouen, and Mulhouse, and Liege, and 
 Chemnitz, and other seats of maimfacture, would either have 
 lost their capital or transferred it to England; and their 
 
12 FREE TRADE V. RECIPROCITY. 
 
 operatives would have been dispersed and forced to emigrate. 
 Many, probably, would have had to follow their trade to 
 England. Now all this would be pronounced perfectly 
 orthodox by the writers on political economy : population 
 and capital would be seeking the places where they found 
 the best field of employment and the highest remuneration, 
 and the peasants of France and Germany would buy then- 
 goods cheaper when made in England than on their native 
 soil, but the respective nations would lose what the indi- 
 viduals gained. France, Germany, &c. would become weaker 
 and England stronger ; and that is fatal in the eyes of most 
 foreigners to the adoption of our theories. You will find 
 that with one consent, all nations prefer to keep their people 
 at home, even in the teeth of economical science. I do not, 
 however, go so far as to affirm that the view held on the Con- 
 tinent about the natm^al supremacy of British manufacturing 
 power is altogether correct. I am not sure but that the 
 pressure of necessity would so stimulate invention and skill 
 in both France and Germany as to retain many branches of 
 trade even in the field of open competition ; still I cannot 
 doubt that England would be the greatest gainer under a 
 system of mutual free trade, and I cannot deny that the fears 
 of their manufacturing classes are in some degree justified. 
 There can be little doubt that backward countries like Russia, 
 would have had no manufactures at all, or only the rudest and 
 coarsest kind, had they never adopted protection. England 
 could as surely have prevented their growth as she has that 
 of Irish trade outside of Ulster, or we might add as the north 
 of England has attracted manufacturing industry fi-om the 
 south. Everything, now-a-days, tends to concentrate trade in 
 the centres of population, skilled labour, and wealth. The out- 
 lying mills in the glens of Lancashire and Yorkshire have 
 nearly all been killed by the competition of the great towns ; 
 and this same principle, which makes it hopeless to start new 
 branches of trade in country districts, makes it equally 
 
FKEE TEADE V. RECTPBOCITY. 13 
 
 impossible for backward and thinly peopled countries to 
 stand the competition of rich and highly organised ones, 
 except with the help of protection. 
 
 No doubt on economical gi'ounds it is better that the 
 highlanders of Scotland should be drawn to Glasgow to find 
 employment, and the Irish of Connaught to the towns of 
 Lancashire — they will produce more, and earn more, than it is 
 possible for them to do in their native valleys — but they have 
 to make the sacrifice of leaving the places and associations 
 they love most, to follow the com'se of trade, which cuts out 
 for itself channels independent of human taste or preference. 
 In any single nation where there is unrestricted freedom, it 
 will be found that the great industries tend more and more 
 to concentrate at certain spots. We submit to it as to an 
 inevitable law. The same rule would hold good in the great 
 field of the world if there were no frontiers or custom-houses, 
 and looking to the natural advantages that England has 
 from her coal and iron, her humid climate, and energetic popu- 
 lation, I can hardly doubt that were the whole world as fi-ee 
 from artificial barriers as the different parts of the same nation, 
 many, if not most, of the great trades of the world would 
 concentrate here, and gradually supplant or absorb foreign 
 rivals, as the outlying industries of England and Scotland 
 have been extinguished, or absorbed into the great towns. 
 
 This truth is widely perceived in all foreign countries, 
 though rarely alluded to in ours. Our writers confine their 
 attention to the folly of foreigners in paying higher prices 
 than they need if they would take the same articles from 
 us, they overlook the correlative fact that if we can produce 
 cheaper, we should either starve out their trade, or force the 
 foreign capitalists, with their employes, to come over to us 
 and be gradually absorbed into the British nation, as the 
 Huguenots were after the revocation of the Edict of Nantes. 
 Whenever matters come to this pass, we may safely predict 
 that national and patriotic considerations will carry the day, 
 and mere economical arguments will go to the winds. 
 
14 FREE TRADE V. RECIPROCITY. 
 
 At this point one naturally asks the question is there 
 never a point at which the interest of foreign nations, even 
 from a national and patriotic point of view, is in favour of 
 free trade? T would reply that it becomes their interest when 
 they not only supply their home market but produce a 
 considerable surplus for export abroad. It is the necessity 
 of being a large exporter which makes it the undoubted 
 interest of England to practice and preach free trade, and 
 just as other countries reach that position their policy will 
 also change, and imitate ours. It may be added that France 
 already occupies that position; it is true she is a large 
 exporter of fine goods and articles of taste, and in regard 
 to them protection does her no good and is unnecessary, but 
 in the commoner articles, such as calico, plain woollens 
 and hardware, it is probable that England would gradually 
 beat her out of her home market under mutual free trade, 
 and she knows it and fears it, especially as these trades are 
 much heavier and employ much more capital and labour 
 than the manufacture of fancy articles for the rich. No 
 country can be a large exporter of the commoner kinds 
 of manufacture that has a high protective tariff. It keeps 
 her from being a cheap producer; and speaking broadly, a 
 country has to choose between protection and a trade limited 
 to its home market on the one hand, or free trade and 
 the markets of the world on the other. Great Britain has 
 wisely adopted the latter alternative— indeed she had no 
 choice ; she could not import food and raw materials from 
 abroad for her teeming population unless she created a great 
 market abroad for her goods which she sent in payment ; 
 but if poor and backward countries were to imitate her policy 
 they would not gain the foreign markets, but would probably 
 lose most of their home trade. 
 
 We cannot too clearly remember that the position of this 
 country is almost unique among the nations of the earth. 
 Its population is nearly double what it can maintain with 
 
FREE TRADE 7\ RECIPROCITy. 15 
 
 home gi'own food, and most of the raw materials of its 
 industry have also to be imported. It must of necessity 
 find outlets abroad for its manufactm^es, or else part with its 
 population. It is just in proportion as it can find these 
 outlets that it can continue to gi'ow in wealth and popu- 
 lation. Supposing that we had always enjoyed mutual free 
 trade with America, but few of our people need have 
 emigrated. We might have been at this day exporting two 
 or three hundred millions a year of goods, in place of twenty 
 or thirty, and taking back two or three hundred millions of 
 food and raw materials, in place of eighty to a hundred. 
 Our population might have been forty to fifty millions, in 
 place of thirty-five. There is absolutely no limit to the 
 growth of wealth and population in a country like this, except 
 by the limitation or closing of foreign markets. The degree 
 to which we can send the produce of our labour abroad 
 measures ' the degree to which we can expand and multiply 
 at home. 
 
 Unfortunately nearly every country of importance is fully 
 alive to this, and tries with all its might to prevent that 
 desirable result, and the consequence is that we are thrown 
 increasingly upon the poor undeveloped countries of the 
 world, and our younger Colonies, for the expansion of our 
 trade. But this is by no means a desperate position. The 
 world is large, a great part of it is poor, undeveloped and 
 semi-civilized, and in these vast regions our trade is con- 
 stantly growing. India, China, and Japan can absorb almost 
 limitless quantities of goods ; indeed nearly the whole of 
 Asia, Afi'ica, South America, and Australia are open to our 
 trade. As we are the cheapest producers we control these 
 great markets. The nations that rely upon protective tariffs 
 cannot touch us. The competition of the United States, 
 which used to be formidable in China, has almost died out 
 since she raised her tariff so much ; and Germany, which 
 used to export considerably to the East, has lost that trade, 
 
16 FREE TRADE V. RECIPROCITY. 
 
 just as she shut us out of her home market, by raising her 
 tariff. This is a world of compensations. No country has 
 unmixed advantages, and as we suffer from the unjust treat- 
 ment of nations that are pohtically on an equahty with 
 ourselves, we gain an increasing control of the trade of the 
 poorer and dependent part of the world, "We have also 
 gained the undisputed control of the carrying trade. Since 
 the introduction of steam, our unrivalled facilities for ship 
 building and navigation have given us not merely pre- 
 ponderance, but absolute supremacy on the ocean. America, 
 once a close competitor with us for ocean traffic, has entirely 
 lost it since she advanced her tariff, and will never regain it 
 till she adopts free trade. It is some comfort to think that 
 a steady adherence to a liberal commercial policy has brought 
 us many advantages to compensate for the ill treatment we 
 have met at the hands of the stronger nations. So far as 
 one can judge, the course of British trade in the future will 
 be mainly one of expansion with the more backward parts of 
 the world, and contraction with the more highly civilized 
 nations, so far at least as the export of our manufactures is 
 concerned. 
 
 This leads me to the point with which this enquiry 
 started. . Have we any means of bringing pressure to bear 
 upon those nations which treat us most unjustly ? Can we 
 punish them by retaliation, or otherwise, so as to make 
 them lower their tariffs, and admit our goods? The gist of 
 the whole reciprocity agitation turns upon this. I would 
 remark here, that scant justice is measured out to those who 
 advocate retaliation. It is usually assumed that all they 
 wish, or expect, is simply to forbid the import of really 
 necessary articles from abroad, because the foreigner will 
 not take our goods in exchange; that they wish, for instance, 
 to cut off the food supply which comes from America because 
 America will not take our calicoes. Truly that policy would 
 be like cutting off the nose to spite the cheek, and I never 
 
FREE TRADE V. RECIPROCITY. 17 
 
 met or heard of any rational man who advocates it. It is 
 therefore a poor way of reasoning to meet the more intelhgent 
 advocates of reciprocity by fastening on them an absm^dity 
 they entirely disclaim. What able men, such as Mr. Ecroyd, 
 hope to see attained is, to bring temporary pressure upon 
 countries like France which will suffice to make it their 
 interest to adopt either entire or partial fi'ee trade. They 
 hold that if we threatened to tax the French wines, brandies, 
 silks and laces, and did so in earnest unless they reduced 
 their tariff on om- goods, we should create in France so 
 strong an agitation among powerful classes of the com- 
 munity in favom' of free trade that it would be adopted. 
 To give effect to this pohcy it would be needful to adopt it 
 in case of refusal, and perhaps for a term of years to pay a 
 little more for some articles of luxury, and divert some 
 English money into home channels instead of foreign ; but 
 the contention is that sooner, or later, the suffering classes 
 in France would compel their government to capitulate, and 
 then we would enjoy the advantage of full instead of partial 
 free trade. 
 
 The opponents of this pohcy generally confine their 
 attention to the first stage of this process, and decline to 
 look to the second. They enlarge upon the evil — if such it 
 can be called — of making wines, brandies, &c. dearer to the 
 consumer; but they do not reply to the argument that it 
 may be worth paying this price, for a short time, if it effects 
 the end of opening the French markets freely to our goods, 
 and thereby benefiting millions of producers. It does seem 
 to me that the wisdom or unwisdom, of this policy turns 
 upon its practicability, rather than upon abstract scientific 
 dogmas. We receive from France some forty-two millions 
 worth of commodities, chiefly, luxuries, and we send her 
 twenty-eight milhons of goods, of which sixteen are British 
 products, and represent the subsistence of, perhaps, half a 
 million of people. It seems to us that the addition of a 
 
18 FREE TEADE V. RECIPROCITY. 
 
 tax on these luxuries, even if it fell partly upon the con- 
 sumers, who are mostly rich people, would be more than 
 compensated if the French markets were shortly re-opened 
 to our trade. 
 
 The difficulty that meets me is more one of practicability 
 and expediency than of the abstract deductions of economical 
 science. I have considerable doubt whether it is possible 
 for this country to adopt a retaliatory policy, with sufficient 
 consistency and firmness, to produce much concession in 
 return. Our whole custom-house arrangements have been 
 so long framed upon the principle of unshaken faith in the 
 efficacy of free trade that it is doubtful if it is expedient to 
 retrace our steps, unless we have much clearer views of 
 what we aim at than are ever likely to be attained in a 
 free country like ours, where every class and party makes 
 itself heard. Foreign nations would pay no respect to 
 mere tinkerings with the tariff for the purpose of annoying 
 them. Any policy adopted to break down their selfishness 
 would need to be firm, resolute, and, if need be, prolonged. 
 All manner of difficult questions would arise as between 
 one country and another. It would be next to impossible 
 to prevent the transhipment of goods, and a discriminating 
 tariff would be found hardly possible. I am bound to say 
 that I have seen no scheme yet proposed that appears really 
 feasible, and it would be a great mistake to adopt a weak, 
 vascillating policy that would rob us of the benefit of con- 
 sistency without giving solid advantage in return. Besides, 
 we are not labouring under any dangerous decadence of 
 trade. The country is undoubtedly reviving, all the tests 
 of national progress are again becoming satisfactory. We 
 are emerging from a most severe and prolonged crisis, and 
 the arguments in favour of a change of policy which were 
 plausible some years ago, are passing away. Further, any 
 power that we possess to retaliate on foreign nations is 
 restricted to what may be called luxuries, or, at least, not 
 
FREE TRADE V. RECIPROCITY. 10 
 
 prime necessaries of life, and these are but a small part of 
 our imports. No practical statesman would now propose to 
 tax the food products and raw materials of x\raerica, and we 
 therefore cannot touch that nation which, of all others, 
 treats us most harshly. 
 
 Upon the whole, I lean to the opinion that unless matters 
 become much worse than they are now, it is not worth while 
 to disturb the policy, at once simple and noble, that we have 
 now followed for a generation. I venture to express the 
 belief that a time of increased prosperity is at hand — indeed 
 had Pro\4dence vouchsafed to us the blessing of a good 
 harvest this year trade would probably have re\dved in a 
 marked degree — even as matters stand the outlook is not 
 unpromising if the world remains at peace, and patience and 
 perseverance in a straightforward and honest policy will 
 meet its reward. 
 
 It may, however, not be amiss for a few moments to 
 take a retrospective glance, and consider what might have 
 been the result of applying the principle of reciprocal free 
 trade to our colonies from their infancy onwards. There 
 was a time with all of them when they entirely depended on 
 the mother country for their supply of manufactured goods. 
 They were at the outset merely agricultural communities, 
 and it may fairly be maintained, as a just political principle, 
 that, in return for the territory this country acquired for 
 them, and the protection afforded them in their earlier 
 stages, they might have been required to enter a national 
 Zollverein, and neither levy duties on British goods, nor have 
 any of their products taxed on arrival here. There was a stage 
 with all om' colonies when this would have been gladly agreed 
 to ; it may well be doubted whether the bargain would have 
 been kept when the vigorous children attained maturity; but, 
 for argument's sake, suppose such a policy had been practi- 
 cable, and conceive the magnificent results that would have 
 
20 FEEE TEADE V. EECIPROCITY. 
 
 accrued to the mother country. Our Austrahan colonies, 
 inchiding New Zealand, at present are mainly dependent 
 upon this country for their supplies of manufactm-ed goods, 
 and, though their population is only a little over 2\ millions, 
 they take nearly as much from us as the United States 
 with their population of 50 millions; in other words, the 
 people of Australia consume about ^67 per head of British 
 imports, against 10s per head consumed in the United 
 States. Supposing that the United States had remained 
 a colony, and a part of an Anglo-Saxon Zollverein, it is 
 not absurd to suppose that they should be consuming nearly 
 as much per head of our goods as the people of Australia, 
 located so much further off, now do. If they took £5 per 
 head, they would receive 250 millions per annum on the 
 present scale of their population, but, unquestionably, had 
 this policy been pursued, a large part of the manufacturing 
 population of the States would have been located in Great 
 Britain. Old England would have stood to them in the 
 same relation which New England now does; their popu- 
 lation might have been, say 40 millions and ours 45, and 
 the additional 10 millions of our population would have 
 drawn their subsistence from the American colonists in 
 return for clothing them. This would have been a specimen 
 of the evolution of pure economical laws untouched by 
 political considerations. But, under no conceivable circum- 
 stances, is it likely that America would have so long repressed 
 the desire for national independence — the dream of an Anglo- 
 Saxon Zollverein never has been, and we fear never will 
 be, realized. But one can readily see how immensely it is 
 for the interest of this country to retain the trade of the 
 colonies, and if any feasible means could be devised even 
 yet whereby Australia, New Zealand, &c. could be persuaded 
 to remain as good customers as they are now, it would be of 
 first rate importance. 
 
 It seems not unlikely that Australia a hundred years 
 
FREE TRADE V. RECIPROCITY. 21 
 
 hence may be nearly as populous as the United States now 
 are; supposing, however, it then contains 30 millions of 
 prosperous people, and that it can be persuaded to follow 
 Free Trade with Great Britain, and also supposing, as would 
 no doubt be the case, that the rougher and more bulky 
 manufactm'es would gradually spring up there as population 
 increased, even without protection, so that the consumption 
 was reduced to, say £5 per head, om' trade would be 150 
 millions of exports, and no doubt an equivalent amount of 
 imports, say equal to half our entire foreign trade, as at 
 present existing. The only possibility of such a desirable 
 event taking place, turns upon Australia having no desire 
 for national independence, and being content to be a part 
 of a great Anglo-Saxon empire. But if, as is much more 
 likely when she comes to man's estate, she should wish to 
 enter the republic of nations on equal terms, I fear that 
 economical considerations will be outweighed by political. 
 Her statesmen will point out that by a protective tariff, she 
 will perforce draw to her shores the population and capital 
 employed in manufacturing for her abroad, and her sheep 
 farmers and gold miners will in all probability tax themselves 
 for some years, as they are already beginning to do, to 
 draw this additional som'ce of wealth and greatness to their 
 country. All questions of this kind we cannot too often 
 remember have two sides, one affecting the individual, the 
 other the state, and what appears to be the interest of the 
 former, is not always the interest of the latter. 
 
 Let me illustrate, by again referring to Australia. Speak- 
 ing broadly, she has now two millions of people (not counting 
 New Zealand) nearly all agriculturists or gold miners. She 
 produces little except agricultural produce and gold, and what 
 she does not consume she exports to pay for clothing and 
 luxuries. Let us say for argument's sake that she produces in 
 all eighty millions worth, of which she consumes forty and 
 exports forty to pay for her imports from England and other 
 
22 FEEE TRADE V. KECIFKOCITY. 
 
 countries, which are valued at that tigui-e oil landing. It is 
 quite clear that if she could draw to her shores the people 
 who produce the forty millions she imports, she would nearly 
 double her population and national wealth. We say nearly, 
 for no doubt her first population of farmers and miners would 
 lose something, at least in the earlier stages of building up 
 manufacturing industry, for they would have to pay more 
 than they do at present; they would suffer as the American 
 western farmers do who pay higher prices for iron and calico 
 than they could buy them at from Great Britain ; but let it be 
 borne in mind — and this is the crucial point — the state would 
 gain the accession of a manufacturing population of say one to 
 two millions, producing not only the forty millions of goods 
 at present consumed by her agricultm'al population, but all 
 the additional goods required for their own consumption. 
 The producers of food, instead of sending their surplus to 
 England to exchange against the goods of Bradford and 
 Manchester, would send it to the new manufacturing centres 
 at home, and the spectacle would be presented of their foreign 
 trade declining w^hile the commonwealth grew in wealth and 
 population. Of com'se it will be replied that the farmers of 
 Australia would be gTeat fools to tax themselves merely to 
 draw people to their country to make their clothing at a 
 greater cost than England is willing to make it at now, and 
 this argument will have weight with them so long as there 
 is no contrariety of interest between Australia and England. 
 So long as the colony feels towards the mother country, 
 as Wales feels towards England, or Lincolnshire feels towards 
 Yorkshire, there is little chance of this policy being adted on. 
 Mr. Mongi'edien shows conclusively in his admirable little 
 book on free trade how absm^d it would be for one part of 
 England to protect itself against another, and he argues that 
 it is equally absurd for one country to protect itself against 
 another, but he fails to perceive, or at least make allowance 
 for the new and weighty considerations that come into play 
 
FREE TKADE I'. RECIPROCITY. 23 
 
 when the interests of the state are concerned. There can be 
 little doubt that if Australia were an independent state she 
 could make herself more strong and populous by attracting 
 a manufacturing population and building up native industries 
 as the United States has done. To revert to my illustration. 
 At the present time Australia supports two millions of 
 people earning, let us say, £4:0 per head. Under pro- 
 tection she might increase that, let us say to be on the 
 safe side, to three millions earning only £35 per head. I 
 suppose that the extra cost of the native goods amounts to 
 a tax of £5 per head, and that is an enormous allowance, 
 and would only hold good in the earlier years when the 
 system was being fostered, for as soon as the system was 
 built up the immense saving on freight across the ocean, 
 both on the goods and raw produce, would probably counter- 
 balance the extra cost of manufacturing. If we suppose 
 then that the three millions of population earn £35 per 
 head, as against £40 per head earned by two millions 
 at present, the income of the whole state would be 105 
 millions as against 80 millions at present. I believe this 
 describes in a rough and inexact manner the class of 
 considerations that turns the scale against free trade with 
 most foreign nations. They prefer to have a large aggregate 
 population, and increased national wealth and greatness, to a 
 smaller population and more wealth to the individual. 
 France would, for instance, rather have 36 milhons of people 
 earning, let us assume, £20 per head, than 30 millions 
 earning say £22 per head. If we could convince her five 
 millions of peasant proprietors that by buying their clothing 
 and tools in England they would save say £2 per head, but 
 at the cost of destroying their manufacturing centres, and 
 forcing the operatives to emigrate to Great Britain or 
 America, they would with one consent say: Keep them at 
 home, and let us pay the extra cost; we would rather have 
 36 millions of people than 30 millions a little better off. 
 
24 FREE TRADE V. RECIPROCITY. 
 
 Mr. Mongredien points out the absurdity of Wales 
 building up a Customs frontier as against England in order 
 to force its people to make pottery at home at a higher cost 
 than they can do in Staffordshire, or calico at a higher cost 
 than they can do in Lancashire; but this is just what Wales 
 would probably do in some measure if she were an inde- 
 pendent nation, and what I suspect the sister isle would 
 attempt if she were cut loose from England. I am much 
 surprised that so little weight is allowed to these considera- 
 tions by our leading economists ; they are sufficiently 
 powerful to overrule all the weighty arguments advanced in 
 favour of international free trade ; they appeal to some of the 
 strongest feelings of human natm'e, and it is as foolish to 
 ignore them as for a physician, in prescribing for a disease, 
 to ignore the constitution of his patient. 
 
 I would take this opportunity of saying that the maxims 
 of political economy are but lame guides for the statesman 
 when taken per se, and without due regard to the other 
 relations that men sustain to each other. I speak as one 
 brought up in the school of Adam Smith and John Stuart 
 Mill, and I venture to surmise that political economy has 
 not yet found its proper place in the scale of sciences. It 
 has yet to be correlated with those others which deal with 
 man as a member of society, as being subject, and rightly 
 subject, to powerful influence on the side of religion, family, 
 and country — legislation that is based upon no higher 
 conception of man than that of a producer or consumer of 
 wealth will signally fail — om' economical authorities and 
 their imitators, who are often mere doctrinaires,' lecture 
 foreign nations because they do not legislate on pure 
 economical grounds — they often only display their ignorance 
 in doing so — their standpoint is purely insular, and they 
 palm off as universal axioms what are only deductions from 
 our insular experience. Om' earlier economists deduced 
 their formulas principally from British experience, and many 
 
FEEE TRADE V. RECIPROCITY. 25 
 
 of these are only true as applied to the set of circumstancei5 
 that surround ourselves; at least, they need large qualifi- 
 cations and exceptions when applied to other countries. To 
 form correct conclusions all round, this science needs to 
 be looked at, and its problems treated, from many and 
 different standpoints, and I venture to say that, as this 
 process goes on, we shall be less surprised that able and 
 intelligent statesmen in America, France, and Germany 
 demur to some of our dogmas. I would further observe 
 that political economy is far fi'om being an exact science — 
 its formulas are nearly always subject to important limita- 
 tions, and when they are applied by mere theorists to solve 
 practical problems they often conduct to conclusions the 
 reverse of true. To a knowledge of the science in the 
 abstract, there must be added a practical knowledge of 
 business, or, at least, of public affairs, to make a man able 
 to apply its dicta intelligently — it is more like the science of 
 politics, or what has lately come to be called sociology, and 
 those who know it best will apply its formulas with the 
 greatest caution. Some of the current maxims which pass 
 muster as infallible axioms are utterly misleading when 
 applied to the practical problems of commerce — let me refer 
 to one which is constantly quoted, viz. that all trade is 
 barter, and that imports and exports pay for each other — 
 and to another which one constantly meets with, viz. that 
 an excess of imports is a proof of a wealthy and prosperous 
 nation, and excess of exports of a poor and unprosperous 
 one. Both of these maxims have a certain degree of truth 
 when stated broadly, but are utterly misleading when 
 applied to the commercial phenomena of particular years 
 and particular nations. 
 
 I will take leave to illustrate this by reference to the 
 recent experience of British and American trade. For 
 convenience sake I will take the latter first, and examine the 
 sixteen years that have elapsed since the conclusion of their 
 
26 FREE TRADE V. RECIPROCITY. 
 
 civil war, and divide them into tv70 periods of eight years 
 each. The former was a time of great inflation and 
 extravagant expenditure; the issue of inconvertible paper 
 money caused by the war had produced a fictitious prosperity, 
 and led to heavy imports of European luxuries, while the 
 great cotton crop, the chief article of export, was several 
 years much reduced. America for these eight years imported 
 in value nearly double what she exported — if the theory that 
 all trade is barter is true, she was lucky in getting 40s worth 
 of goods for every 20s she paid with — and if the further 
 theory that excess of imports is a sign of wealth be true she 
 was rolling in wealth. But what was the true explanation? 
 She was contracting enormous indebtedness in Europe — she 
 was exporting national bonds, state bonds, railway securities, 
 &c. to the extent of hundreds of millions sterling, and laying 
 a foundation for a time of great suffering and distress — her 
 exports and imports no doubt balanced, but in the same way 
 as the expenditure of a spendthrift, who pays by gi%ang 
 I.O.U.'s. 
 
 The time came when these debts had to be liquidated — 
 the commercial crisis fi'om 1873 to 1878 exploded the fabric 
 of fictitious prosperity, severe thrift became the order of the 
 day — imports fell off prodigiously, exports largely increased, 
 and showed for several years a hea\7- surplus, she became a 
 creditor instead of a debtor to Europe, and her bonds and 
 securities flowed back as fast as they went out ; but a trifling 
 proportion of the Federal debt is now held in Em-ope, and 
 much fewer good securities of all kinds than eight years ago ; 
 in addition to all which she has supplied herself with an 
 ample gold currency. America has in fact been laying the 
 true foundations of national prosperity the past eight years 
 at a wonderful pace. But if we have to go by the formulas 
 I have already referred to, we should have to believe the 
 absurdity that her diminished imports and increased exports 
 were a sign of growing poverty, that she was in fact only 
 
FREE TRADE V. RECIPROCITY. 27 
 
 getting 10s worth of goods in return for say 20s she was 
 paying to the foreigner. 
 
 The commercial history of England the last ten years 
 affords a similar illustration — it may be divided into two 
 sections, that of 1870-73, which were four years of great 
 prosperity, and 1874-79, which were six years of great de- 
 pression. In the first four our exports and imports, when 
 proper allowances were made for re-export of foreign produce, 
 f(3r freight and for interest on our immense capital invested 
 abroad, left a large annual sm-plus, as Mr. Mongredien has 
 admirably shown — indeed out. of the great profits of our trade 
 we were investing fresh capital abroad to the extent of about 
 100 millions annually. No doubt much of that was lent to 
 bankrupt states and lost, but much more was well invested 
 and returns large interest — the country was really prospering. 
 She was not eating or drinking the balance due to her from 
 abroad as she has done since then. Then followed the six 
 years of bad trade. All the figures were reversed — the 
 imports immensely increased — our exports largely fell off — 
 the balance against this country was on the average about 
 sixty millions worse than for the previous four years. 
 
 The cause of this was obvious — a succession of bad 
 harvests caused us to import far more food than usual — the 
 foreigner received 40 or 50 millions a year more for food 
 than formerly — and instead of taking our goods in return, he 
 raised his tariffs against us, and took less of our goods than 
 before. All the features of our trade became unfavourable, 
 we might almost say alarming, and yet strange to say we 
 ought to have been congratulating ourselves on our growing 
 wealth if the formula be accepted that excess of imports is 
 the test of a flourishing country. No doubt there is a measure 
 of truth in that formula in so far as our large investments in 
 former years enabled us to pay for the prodigious amount of 
 food we required, but certainly it would have been a far 
 truer sign of national prosperity if we had imported less, and 
 
28 FREE TRADE r. RECIPROCITY. 
 
 exported more. The fact is that the trading of a country 
 resembles in many respects the expenditiu-e of a private 
 individual — where we see a large expenditm-e maintained for 
 many years we conclude justly that there must be a large 
 income to sustain it, but an inflated expenditure for a few 
 years often shows only the recklesness of a spendthrift, and 
 is the prelude to bankruptcy, so the large expenditure of the 
 United States on Em'opean luxm-ies in 1865 to 1872 was a 
 bad sign, and heralded the crisis that followed, and thfe 
 excessive amount of our imports from 1874 to 1880 also showed 
 that this country was in a very unprosperous state. 
 
 As I have already mentioned, however, the past year or 
 two the tide has shown signs of turning — om' exports 
 increased last year by fully 30 millions, and promise to be 
 larger again this year, and had the harvest tm-ned out well 
 our imports would have fallen off considerably — bad harvests 
 are a dispensation of Providence, and we can only submit 
 to them with patience, but there are other and important 
 respects in which om' national wealth might be greatly 
 increased apart fi'om foreign trade altogether. I refer to the 
 excessive and needless waste of energy and resource that 
 this country sustains fi-om the excessive intemperance of a 
 large part of the people. Our average expenditure in 
 alcoholic drinks has been 130 millions sterHng annually for 
 several years, and the indirect waste from enfeebled labour, 
 pauperism and crime may not improbably represent 50 
 miUions more. Deduct from that total of 180 millions what 
 the state takes in taxation, say roughly 30 milhons, and 
 there remains a tax of 150 millions voluntarily borne by the 
 community, or about the value of half the consumption of 
 food in the United Kingdom. Suppose that one half of that 
 could be saved by the community, what a vista of prosperity 
 and social improvement would be gained. 
 
 Seventy-five millions a year would be added to the 
 expenditure on food, clothing, houses, furniture, &c. or saved 
 
FREE TRADE l\ RECIPROCITY. 29 
 
 for profitable investment. All the unemployed labour in the 
 country might be set in motion, and most of the trades 
 suddenly galvanized into prosperity. I have often marvelled 
 that economists have directed so little attention to what is 
 so fundamental to a nation's prosperity. No expansion of 
 our foreign trade, that is at all possible, would yield so rich 
 a result, and if the same energy was directed to this homely 
 question, that is now devoted to visionary attempts to force 
 reciprocity on unwilling nations, far more substantial good 
 would result. 
 
 I would add, in conclusion, that my best hopes for the 
 development of our foreign trade depend upon the con- 
 tinuance of international peace. No small part of the heavy 
 tariffs imposed by foreign countries are for the temporary 
 exigencies of war expenditure, and the interest on debts thus 
 created; any great war throws back for many years the 
 tendency towards freer trade ; the civil war in America has 
 probably cost this country hundreds of millions in the 
 vast reduction of our export trade thereby caused. The 
 present action of France is to a large extent the reflex 
 influence of her disastrous war ten years ago, and the huge 
 addition it made to her annual expenditure. Russia has also 
 added to her tariff to meet the cost of the Turkish war, and 
 so all round the compass. No country is so deeply interested 
 in universal peace as we are, and none feels so quickly the 
 disastrous waste of warfare. If a period of prolonged peace 
 now sets in a general reduction of taxes may be expected, 
 and some relaxation of tariffs will come about gradually 
 merely on revenue grounds. This is certain to come about 
 before long in America, for their national debt is being 
 rapidly paid off, and we will share in the prosperity of the 
 United States I may say almost in spite of their protectio nist 
 policy. 
 
 For these various reasons I have no great fear for the 
 future of this country — the severe lessons of the past six 
 
30 FREE TRADE V. RECIPROCITY. 
 
 years were necessary and useful — they checked a prodigality 
 and recklesness that were eating out the heart of the nation, 
 and they have prepared the way for valuable social reforms, 
 and will bring about still greater. Our advancement in 
 national wealth has been certainly rapid the past twenty 
 years, and what the country needs is not more wealth but a 
 wider and better use of it. If the masses of our people had 
 more of the thrift that prevails in France and Germany, and 
 if the accumulation of wealth in London was more fairly 
 spread through the country, there would be no cause to 
 complain. 
 
 I must ask pardon in conclusion if I have diverged a little 
 from the strict title of my paper — the subjects alluded to 
 were all more or less allied to it, and whether or not the 
 reader agrees with me, I hope he will allow that an honest 
 attempt has been made to treat the subject candidly, and 
 without any tinge of party or political feeling. 
 
CDBTDMl'