yn UC-NRLF 204G lliii LT) NiV to PRICE SIXPENCE. THE COLONIAL CONFERENCE THE COBDEN CLUB'S REPLY TO THE PREFERENTIAL PROPOSALS. CASSELL AND COMPANY, Limited, LONDON, PARIS, NEW YORK. TORONTO of MELBOURNE. 1907. COBDEN CLUB. Address : — CAXTON HOUSE, WESTMINSTER, S.W. THE COLONIAL CONFERENCE THE|C0BDEN CLUB'S REPLY TO THE PREFERENTL^L PROPOSALS CASSELL & COMPANY, Limited LONDON, PARIS, NEW YORK, TORONTO cV MELBOURNE 1907 I ' C 7^^ THE COLONIAL CONFERENCE. T/ic Cobdcn Cliches Reply to the Preferential Proposals. CHAPTER I. THE EARLY MOVEMENT TOWARDS FEDERATION. What lio^ht docs the Colonial Conference of 1907 throw upon the future of the British lunpire, especi- ally as reg^ards the relations between the Mother Country and the self-g-overning- Colonics ? Before en- deavouring- to answer this question by examining- the Report of the Conference, it is desirable to present a brief account of the official circumstances which led to this Conference. The movement for a closer org-anisa- tion of the parts of the Empire for common purpo-ses of g-overnment, defence, and trade, had long- been occupying the attention of politicians both in Great Britain and the Colonies before the advent of Mr. Chamberlain to the office of Colonial Secretary in 1895 g-ave practical importance to the proposals. Not only had private associations in this country been educating- public opinion upon the advisability of Imperial Federa- tion, but as far back as 1874 Lord Carnarvon, on entering- the Colonial Office, had definitely set himself to promote the federation of Colonial g-roups as a step towards the fuller federation. When Mr. Chamberlain became Colonial Secretary in 1895 he directed all his energ^y to the promotion of this object. Events in Australia and, as he thoug-ht, in South Africa, were moving- rapidly towards local federation, and the association of these groups in one great federal union appeared to him quite practic- able. (4) From the time of the first Colonial Conference in 1887 the notion of a Customs Union had been before the minds of Federationists, though at that date it seemed outside practical politics. Lord Salisbury in 1887 recognised that an effective Customs Union was precluded by our Free Trade policy. His words are worthy of citation : " I fear that w& must for the present put in the distant and shadowy portion of our task, and not in the practical part of it, any hope of establishing a Customs Union among the various parts of our Empire. I do not think that in the nature of things it is impossible; I do not think that the mere fact that we are separated by the sea renders it impossible. . . . But the resolutions which were come to in respect of our fiscal policy forty years ago set any such possibility en- tirely aside, and it cannot be now resumed until on one side or the other very different notions with regard to fiscal policy prevail from those which prevail at the present moment."^ The first active steps towards the realisation of what appeared to Lord Salisbury in 1887 impracticable took place at the Colonial Conference at Ottawa in 1899, when three resolutions were passed dealing with trade relations in the Empire. The first two had for their object the repeal of legislation and of treaty stipulations precluding the realisation of the policy em- bodied in the third resolution, the gist of which was contained in the following two clauses : — " That this Conference records its belief in the advisability of a Customs arrangement between Great Britain and her Colonies by which trade within the Empire may be placed on a more favourable footing than that which is carried on with foreign countries." *' That until the Mother Country can see her way to enter into Customs arrangements with her Colonies, it is desirable that, when empowered so to do, the Colonies of Great Britain, or such of them as may be disposed to accede to this view, take steps to place each other's products, in whole or in part, on a more * Cd. 5091. (s) favoured Customs basis than is accorded to the like products of foreign countries."* The Imperial Government was not directly repre- sented at this Conference, but, on receivinj^ the copies of these resolutions, the Marquess of Ripon, then Secretary for the Colonies, sent to the several Colonial Governments a Memorandum setting forth in some detail the objections on behalf of Great Britain to the proposal that she should enter into any such fiscal rearrangement, and pointing out in particular that " the gain to the Colonies, whatever it might be, would, even at first, be altogether incommensurate with the loss to the Mother Country."! Mr. Chamberlain's Earlier Policy. This did not, however, prevent Mr. Chamberlain from recognising in 1895 the value of this idea as a leverage for his wider project, and, addressing the Canada Club, in London, in March, 1896, he proclaimed the doctrine that Imperial union " can be most hope- fully approached, in the first place, from its commercial side," and that "a true Zollverein for the Empire, a Free Trade established throughout the Empire, though it would involve the imposition of duties against foreign countries, might probably lead to a satisfac- tory arrangement, if the Colonies were on their part willing to consider it." At this time he rejected the notion of the preferential bond as totally imprac- ticable. *' That, while the Colonies should be left absolutely free to impose what protective duties they please both on foreign countries' and British produce, they should be required to make a small discrimination in favour of British trade, in return for which we should be expected to change our whole system and should impose duties on food and raw material. . . . My own opinion is that there is not the slightest chance that in any reasonable time this country would adopt so one-sided an arrangement. I do not believe that the working classes of this country would consent to * C. 7829, page 2. t C. 7524, page 5. (6) make a revolutionary chang-e for what they would think to be an infinitesimal gain."^ Imperial Federation on a Free Trade basis, con- ducted by an Imperial Council, which later on might grow into a Federal Parliament, was the conception which dominated Mr. Chamberlain's mind at the Colonial Conference of 1897. Such a Council, even in its earlier and merely consultative days, would be- come an organ of authoritative advice in Imperial con- cerns, and, in particular, an instrument for the preparation of a scheme of voluntary contribution to the cost of Imperial defence from the self-governing Colonies. The Secretary for the Colonies was, however, a good deal in advance of the sentiments of the Premiers attending the first Conference of 1897. They were not able to accede either to the political or the commercial project, and upon both issues confined themselves to resolutions of a purely general character. Instead of adopting the proposal of an Imperial Council, they merely passed a resolution to the effect that " The Premiers are of opinion that it would be desirable to hold periodically Conferences of representatives of the Colonies and Great Britain for the discussion of matters of common interest." On the question of Commercial Union they contented themselves with passing two resolutions, one urging the early denuncia- tion of any treaties which hampered the commercial relations between Great Britain and the Colonies, the other undertaking to confer with their colleagues with a view to considering whether a preference might not be given by the several Colonies to the products of the United Kingdom.! It is quite evident that neither Canada nor Australia were prepared then seriously to consider entering any political or economic arrangement that would bind them in any w^ay, or to entertain any proposal for Colonial contributions to Imperial defence on any basis * Speech at Conference of Home and Colonial Chambers of Commerce, June 10, 1896. t Cd. 1299, page 35. (7) of trade or population. The preferential resolution was not adopted as the first step towards commercial union upon a basis of mutual ag-reemcnt. It did not contemplate any reciprocal action on the part of the Mother Country. This Mr. Chamberlain admitted in 1902, when he said* of the 1897 resolution : " This was a proposal without any reciprocal obligation. It was considered by the Premiers at the time as a proposal which mig-ht be made in consideration of the fact that the United Kingdom was the largest and the most open market in the world for all the products of the Colonies." Even before the 1897 Conference, Canada, of her own initiative, had given a preference of 12J/2 per cent, upon British goods, afterwards increased to 25 per cent., and then to 33 j '5 per cent. Between the Confer- ence of 1897 and that of 1902, no action whatever was taken by the other Colonies to give effect to the resolu- tion regarding Preference. But in the meantime the South African war took place. The Imperial enthusiasm generated by the war, and in particular by the active co-operation of Colonial troops, greatly raised the hopes of Federationists both in Great Britain and in the Colonies, and Mr. Chamberlain entered the Conference of 1902 with proposals indicative of very sanguine expectations. The Conference of 1902. It is important to realise what were the proposals of Mr. Chamberlain and the " forward " party among the Colonials upon the three important issues, political federation, commercial union, and Imperial defence, and what the sense of the Conference was upon these issues. Mr. Chamberlain began his address to the Confer- ence by an eloquent appeal for an approach " to a more definite and a closer union," coupled with the declara- tion, ** I do not hesitate to say that, in my opinion, the political federation of the Empire is within the * Idem, page 7. (8) limits of possibility," and pleading for the immediate creation of " a real Council of the Empire to which all questions of Imperial interest might be referred, and, if it were desired to proceed gradually, the Council might in the first instance be merely an ad- visory council." "But, although that would be a preliminary step, it is clear that the object would not be completely secured until there had been conferred upon such a Council executive powers, and perhaps also legislative powers ; and it is for you to say, gentle- men, whether you think the time has come when any progress whatever can be made in this direction."* The Colonial gentlemen did not think the time had come. Not even the arch-Imperialist Mr. Seddon dare commit his Colony to any approach towards accepting the idea of an Imperial Council. No report is given of the discussion of the scheme : no Premier brought forward a resolution on the subject, and the Confer- ence contented itself with a resolution affirming, in terms similar to those of 1897, the general desirability of Conferences, adding the more definite suggestion that they should be held at intervals " not exceeding five years." The only resolution adopted which affected the political relations between the Mother Country and the Colonies was a demand not for curtailment but for enlargement of Colonial liberty, asking that in treaties negotiated by Great Britain with Foreign Powers " the views of the Colonies affected should be obtained." A strong appeal was made by Mr. Chamberlain for a " fair distribution of the burdens of Empire " in the shape of a larger contribution towards Imperial defence. The Naval side of this suggestion was supported by an elaborate Memorandum from the Australian Minister of Defence, maintaining the proposition " that the Empire should have one fleet maintained by the whole nation, every part contributing to its support on some plan to be mutually arranged." The project of a Royal Naval Reserve, to which the different * Cd. 1299, page 4. (9) partners should make both a financial and a personal contribution, and which in time ol' war should be placed under Imperial control lor use wherever it was required, was strong-ly urged by our Admiralty. Per- sonal negotiations were conducted with the various Premiers, with the result that the Premiers of Cape Colony and Natal ag-reed to recommend their Govern- ments to make a slig'ht increase on their small contri- butions to the Navy, while Australia and New^ Zealand agreed to contribute a sum of ^^200,000 and ;£^40,ooo respectively. Canada, be it observed, is not able to make any offer of assistance like the others, because "the Government of the Dominion are contemplating- the establishment of a local naval force in the waters of Canada," i.e. she would have nothing to do with an Imperial Navy. Although the First Lord of the Admiralty pointed out in plain terms^ the utter insuflficiency of these contributions, no attempt appears to have been made to come to an intercolonial agreement upon any basis of contribution whatever. No Premier cared to engage his Colony to bear a " fair " share of the burden of an Imperial Navy. Now- let us turn to Military Defence. The Secre- tary for War pleaded for an Army Reserve of the Imperial force, consisting of men to be trained and supported by the several Colonies, with a view of acting as an Imperial force and " wdth a liability to oversea service." The reserve pay of a body of 20,000 men thus trained w-ould only amount to a sum of about _;^i8o,ooo a year spread over all the Colonies. This scheme, apparently concocted between the Secretary for War and Mr. Seddon, had the support of the representatives of Cape Colony and Natal, but was rejected by those of Canada and Australia upon the ground that, "To establish a special force, set apart for general Imperial service, and practically under the absolute control of the Imperial Govern- ment, w^as objectionable in theory as derogating from the powers of self-government enjoyed by them, and * Cd. 1299, page 18. (lo) would be calculated to impede the general improve- ment in training and organisation of their defence forces, and, consequently, their ability to render effective help if it should be required."* The Tradesman's Entrance. So much for Mr. Chamberlain's projects of political and defensive federation. But, important as were these proposals, and disappointed as he must have been at their reception, his chief hope lay in com- mercial federation. Baffled in his approach through the front door of politics, he sought the tradesman's entrance. " Our first object is free trade within the Empire." By this was meant not any system of mere preferences, in which the British manufacturer should always stand at a disadvantage with the Colonial manufacturer, but equal treatment for British goods with Colonial goods. Mr. Chamberlain was quite aware that exigencies of revenue forbade the Colonies from adopting towards our goods so liberal a policy as we adopt towards theirs. " But in my mind, whenever Customs duties are balanced by Excise duties, or whenever they are levied on articles which are not produced at home, the enforcement of such duties is no derogation whatever from the principles of Free Trade, as I understand it."t Aware that the Colonies would not commit them- selves immediately to such a proposal, Mr. Chamber- lain hoped for a substantial agreement upon the project of a scheme of Colonial and British preferences in- troduced in a resolution of Mr. Seddon to the effect : " That it is essential to the well-being of the Mother Country and his Majesty's dominions beyond the seas that, in such dominions where the same do not now exist, preferential tariffs, by way of rebate on duties of British manufactured goods carried in British-owned ships, should be granted, and that in the Mother Country rebate of duty on Colonial products now tax- able should be conceded." Even on this matter no * Cd. 1299, page 32. t Cd. 1299, page 6. (") real agreement and no common policy seemed pos- sible, because " the circumstances in the different Colonies differed so widely"; and so, to save the situation, a number of separate private interviews took place between the Premiers and the President of the Board of Trade, as the result of which the several Premiers undertook to press their Governments for substantial preferences for British imports. The general resolution which they adopted, while expressing this intention, put a formal extinguisher upon Mr. Chamberlain's notion of " free trade within the Empire." The following are the important clauses of the resolution : — " That this Conference recognises that, in the pre- sent circumstances of the Colonies, it is not practicable to adopt a general system of Free Trade as between the Mother Country and the British dominions beyond the sea. " That with a view, however, to promoting the increase of trade within the Empire, it is desirable that those Colonies w-hich have not already adopted such a policy should, as far as their circumstances permit, give substantial preferential treatment to the products and manufactures of the United Kingdom. " That the Prime Ministers of the Colonies respect- fully urge on his Majesty's Government the expediency of granting in the United Kingdom preferential treat- ment to the products and manufactures of the Colonics, either by exemption from or reduction of duties now or hereafter imposed." This w^^s the first demand from the Colonies for preferential treatment of their products in British markets. It was not proposed as a necessary condition of preference to British goods in Colonial markets. The two resolutions were inde- pendent of one another. Canada had, it appears, been pressing the Imperial Government, throughout the Conference, for a definite remission of the war duty upon Colonial wheat. To this Mr. Chamberlain could not then accede, urging that the material results of the existing Canadian preference were not sufficient to justify " such an im- (12) portant departure from the established fiscal policy of the king-dom," and that if it were to be entertained at all " it would be necessary for Canada to offer some material tariff concessions beyond those which she had already voluntarily given." Subsequent events indicate that Mr. Chamberlain was counting much upon the maintenance of the wheat tax as a means of negotiation with Canada, and as the g-erm of a system of British preferences to the Colonies. The announcement of the Government, during his absence from the country, that the wheat tax was abandoned, wrecked this hope, and probably precipitated the wider campaign of protection to which he committed himself in 1903. While the Colonial Conference of 1902 showed a creditable unanimity in the minor issues of Coasting: Trade, Mail Services, Protection of Patents, Most Favoured Nation Treatment, Merchant Shipping Law^s, and other issues which appealed either to the protective spirit which more or less inspires them all, or to the several interests of the Colonies, upon the vital question of imperial federation, political, military, or commercial, no substantial result was obtained. The advanced proposals made in nearly every in- stance by Mr. Seddon, and supported with some degree of cordiality by the representatives of Cape Colony and Natal, were rejected by the representatives of Canada and Australia. The Conference of 1907. Now, turning to the Colonial Conference of 1907, we are in a position to consider the value of its de- liberations, taking as the chief heads the same three issues of political structure, defence, and commercial federation which figured in the Conference of 1902. First, turning to the political relations of the Colonies and the Mother Country, we find that while measures are taken for improving the deliberative char- acter of the Conference and for establishing more con- tinuous opportunity of discussion between the different parts of the Empire, no single step Is taken towards ('3) the establishment of a Council or other imperial body with the beginnings of administrative or legislative authority. This was not for lack of attempts in this direction. Resolutions of the Governments of Australia, New Zea- land, and Cape Colony were tabled proposing the establishment of an Imperial Council, to consist of representatives of Great Britain and the self-governing Colonies. While the Australian resolution made it clear that the functions of such a Council were to be exclusively deliberative, New Zealand held that " it might facilitate the dealing with questions that affect the over-sea dominions "; while Cape Colony, more ad- vanced in its Imperialism, proposed that at such Im- perial Council " questions concerning, inter alia^ the peace of the Empire should be discussed," and linked the proposal with a plan of Imperial defence. The Colonial Office, under Mr. Lyttelton, appears to have taken the initiative in proposing the sub- stitution of an Imperial Council for a Colonial Con- ference, and in negotiating with the Colonial Govern- ments upon the matter. The adoption of the proposal was stopped by the refusal of Canada to accede to the arrangement, and Sir W. Laurier's explanation of this position deserves quotation. " When this subject was first put to the Colonial Governments by the despatch of Mr. Lyttelton, the suggestion was that an Imperial Council should be created ; and, as we understood it in Canada, it meant this — and I think that was the thought that Mr. Lyttelton had in his mind at the time — that the Council should be composed of the members of the present Conference or of the Conferences which have taken place up to this date ; that is to say, of the Prime Ministers of all the self-governing Colonies, assisted by a permanent body to sit here in the City of London, similar to the Imperial Defence Committee. If that idea had been accepted, that there should be here a permanent Imperial Civil Committee instead of an Imperial Defence Committee, the title *' Imperial Council," I think, would have been appropriate. We demurred at once in Canada to the idea of creating such (14) a committee as was suggested, but we thought it pre- ferable to keep the Conferences to their present com- position, ivithotit any more power than they have at the present time ; and therefore we suggested that the name Conference should be retained, substituting for ' Colonial ' the word ' Imperial,' which I think is more in accordance with the fitness of things. These Con- ferences are really Imperial in their character, since they are not composed only of the self-governing Colonies, but of the representatives of the Imperial Government also."* The suspicion evidently entertained by Canada lest an Imperial Council might acquire new powers does not appear to have been shared by Australia, New Zealand, and Cape Colony, but it is important to ob- serve that Mr. Deakin, in proposing the new title, and Sir J. Ward and Dr. Jameson in supporting it, ex- pressly disclaim the notion of creating any body with any other than purely consultative powers. " Our idea was not to endow the new body, under whatever title it was known, with any legislative or executive power whatever, nor to diminish its immedi- ate dependence upon the Governments of the Dominions represented here " (Mr. Deakinf). " I want also to say that I think the functions and powers of the Council should be consultative and advisory only on everything, and that it should have no executive or administrative powers" (Sir J. Wardi). "We did not wish to institute any new scheme whatever, as Mr. Deakin has explained ; all that we desired was to make more efficient the work of the Conference, as the Conference stands at present " (Dr. Jameson^). But while the representatives of the several Colonies are in full agreement that no body shall be created which shall trench in any way upon the control of their own affairs by the Colonies, or shall bind them to any common action, a very interesting rift of sentiment appears upon certain practical proposals which to certain Colonies appear to have a dangerous tendency in that direction. * Cd. 3523, page 29. t Page 27. X Page 31. § Page 33. (■5) The Pfrmanent Secretariat. While Sir W. Laurier favoured the substitution of " Imperial " for " Colonial " Conference, on the ground that it was a more accurate expression of the facts, he looked with grave suspicion upon the estab- lishment of a permanent " Secretariat," a suspicion evidently shared to some extent by Lord Elgin and General Botha. ^ Such a body, though designed to be dependent upon the Governments in whose interests it existed, and to be purely informatory in its functions, might tend to " independence " and to the acquisition of some measure of real control. This criticism of Sir W. Laurier, General Botha, and Lord Elgin was overborne by a recognition that it was necessary to make some sort of permanent provision for orderly communication between the Governments which in the future were to meet in regular Conference every four years, and it was finally agreed " That it is desirable to establish a system by which the several Governments represented should be informed during the periods between the Conferences in regard to matters which have been or may be sub- jects for discussion, by means of a permanent secre- tarial staff, charged, under the direction of the Secretary of State for the Colonies, with the duty of obtaining information for the use of the Conference, of attending to its resolutions, and of conducting cor- respondence on matters relating to its affairs." To the Colonial and British politicians who favour Imperial Federation, this Secretariat may come to be a stronger point d'appui than the periodic Conference. Behind the proposals of Mr. Deakin and Dr. Jameson may be seen an express desire to remove the relations between Great Britain and the self-governing Colonies from the control of the Colonial Office altogether, and to set them upon an entirely new footing under a body representing the several Governments and pre- sided over by the British Prime ^linistcr as represent- ing the Crown. Mr. Deakin, who took the k\'id in * Pages 36, 37. (i6) expressing- this idea, desired to have a clear distinc- tion drawn between the status of the self-governing and of the Crown Colonies. " The Colonial Office must expect to see the self- g'overning' communities outg'row its capacity for con- trol, which is not capable of being indefinitely extended."^ " All the departments of this Government would remain — the Colonial Office, the Foreign Office, the Board of Trade — and matters of inquiry and ordinary communications would g"0 to these departments as a matter of course. What I thoug-ht might be attached to the Prime Minister personally were those dispatches which have respect to the exercise of the self-govern- ing functions of self-governing communities, all great constitutional questions or matters involving constitu- tional questions."! This revolutionary proposal, it seems, was to be achieved by the establishment of a Secretariat inde- pendent of the Colonial Office and presided over by the Prime Minister. As developed by Mr. Deakin and Dr. Jameson, it deserves more than a passing atten- tion. Their avowed aim was the creation of a staff " controlled by the Prime Minister here as representing all the Prime Ministers of the Empire, "| to which should be transferred the consideration of all constitu- tional issues between the British Government and the self-governing Colonies, which at present fall within the province of the Colonial Office. This, if carried through, would have the effect of removing the Secre- tariat from the authority of a responsible Minister of the British Government, for the Prime Minister would preside as primus, inter pares on behalf of the body of Premiers forming the Conference. § Sir W. Laurier took the strongest objection to this proposal, insisting that the Secretariat should be under the control of the Colonial Office. Finally, the refusal of the Prime Minister to accede to the proposal that he should preside decided the issue. But this attempt * Page 44. t P^ge 67. t Page 44. § Pages 67 and 68. (T) to remove the constitutional control of the self-i;ovcrn- ing Colonies from the Colonial Office, and to set up in this Secretariat the nucleus of a real Imperial Council in which the Prime Minister of England should preside as a member of the Imperial Conference, was a bold attempt at making- history. Summary of the Political Results. Various other attempts at constructive Imperialism, proposed by Mr. Deakin, usually with the backing of Dr. Jameson, were successfully opposed by Sir W. Laurier, who, with General Botha, ranked as an oppo- sition to the forward movement. Of such a character was the proposal of Mr. Deakin that in the absence of the Prime Minister, who was formally constituted President of the future Imperial Conferences, the " senior member" of the Conference, not the Colonial Secretary, should preside. This sug- gestion, logically linked with the determination to make the Conference and the Secretariat a body purely representative of equal Governments, was withdrawn on the objection of the representative of Canada. So was the Australian resolution, " That it is desirable to establish an Imperial Court of Appeal." Sir W. Laurier's speech upon this resolution makes it evident that Canada looks not to the substitution of an Im- perial Court for the present jurisdiction of the Privy Council, but to the elimination of Imperial jurisdiction altogether.^ Summarising the political results of the Conference, we perceive that the following changes in the con- stitution of the Conference were effected. Known no longer as a Colonial, but as an Imperial Conference, it is to be held not irregularly as heretofore, but at regular intervals of four years. The Prime Minister is to be ex officio President, instead of the Secretary of State for the Colonies, who, however, will be Vice- President, and will, as heretofore, be charged with the arrangements for the Conference. The permanent * Page 2IO. (i8) secretarial staff under the Secretary of the Colonies is charg-ed with " the duty of obtaining- information for the use of the Conference, of attending to its resolu- tions, and of conducting correspondence on matters relating to its affairs." Upon matters of importance, which cannot conveniently be postponed, subsidiary Conferences may be held between representatives of the Governments concerned. The Colonies and Imperial Defence. On the question of Imperial Defence the crucial issue is evidently this : Will the self-g^overning- Colonies undertake to contribute money and men on any ag"reed basis to the maintenance of an Imperial Army and Navy to be operated as a whole and in whatever part of the Empire they are needed? Mr. Haldane approached the question of an Imperial Army very delicately, describing- the main distinction be- tween the expeditionary force and the home defence line in our British Service, and sug-gesting- that the Colonies should draw a similar distinction. He did not, however, raise directly the radical question whether the Colonies would undertake to keep any force which was available for use outside the Colony. This question of Colonial enlistment for compulsory service throughout the Empire was touched by several speakers, but no one, with the exception of Mr. Smartt, of Cape Colony, expressed a view favouring the possibility of such enlistment. Sir F. W. Borden, of Canada, pointed out that the Canadian laws did not permit the raising of such a force, and Sir J. Ward held out no hope of any other than an emergency supply of volunteers from New Zealand. While the Conference unanimously endorsed a resolution for the free voluntary co-operation of the parts of the Empire in military training and methods of equipment, to be forwarded by the instrumentality of an Imperial General Staff, that body was described by Mr. Haldane as " a purely advisory body," in reply to Sir F. Borden's statement that " I scarcely think it would do to have officers in the different Dominions (19) who were responsible in the first place to the ^Secretary of State for War here." Upon the question of an Imperial Navy no resolu- tion was passed, and the Conference confined itself to a series of expressions of g-eneral sympathy and a disposition on the part of the Colonies, other than Canada, to increase their present contribution to the British Navy. It is impossible to read the report of the discits- sions on Defence without perceiving- that the self- governing- Colonies are not in the least disposed to bind themselves, either now or in the future, to any considerable contribution to Imperial Defence, still less to any measure which places their ships or their fight- ing men under the control of British or Imperial ofiicers. Preferential Proposal ix 1907. In the important debates upon the commercial relations of the Empire, and particularly upon Prefer- ential Trade, it is of great importance to realise two facts : first, that the attitude of the British Govern- ment was one of pronounced and consistent hostility to all the proposals involving her in preference to Colonial goods ; second, that among the Colonial Premiers wide differences displayed themselves as to the degree of urgency and mode of pressure brought to bear on the Mother Country. Sir W. Laurier and General Botha were content to reaflfirm the resolutions of 1902, which, in relation to the Mother Country, " urge on his Majesty's Government the expediency of granting in the United Kingdom preferential treatment to the products and manufactures of the Colonies, either by exemption from or reduction of duties now or hereafter im- posed." This may be taken as the Conservative position ; Australia, New Zealand, Cape Colony, and Natal all adopted a more forward attitude, in their resolutions or in discussion. The steps marking this advance are best set forth (20) in the following- resolutions proposed as addenda to the resolutions of 1902 : — (i) The Commonwealth of Australia proposed — " That it is desirable that the preferential treatment accorded by the Colonies to the products and manufactures of the United Kingdom be also granted to the products and manufactures of other self-governing Colonies. That it is desirable that the United Kingdom grant preferential treat- ment to the products and manufactures of the Colonies." The first of these clauses implies a limitation of the liberty of the several Colonial Governments in bargaining with one another upon tariff terms, aiming at a more rigorous union among the members of the Colonial Empire. The second expands into a general demand for equivalent preference the smaller request of the 1902 resolutions, and invites Great Britain to a step involving the reversal of her entire Free Trade policy. (2) Cape Colony proposed that — " This Confer- . ence, while adhering to the principle of preferential treatment of the products and manufactures of the United Kingdom, de- sires to impress upon his Majesty's Govern- ment the opinion that the continuance of such preferential treatment to the producers and manufacturers of Great Britain is largely dependent upon the granting of some reciprocal privileges to British Colonies." This resolution of Dr. Jameson is, in effect, not- withstanding his disclaimer,'^ a threat to withdraw existing preferences unless a ([nid. pro c[iio in British preferences is given, and may be held to mark the most forward step of the Colonial Preferentialists. * Page 287. (21) The rejection of these resoUitions hi favour of a simple reaffirmation of the 1902 resohitions imphes that the representative Colonial position is that of Canada, claiming- of her own free will to give a prefer- ence to the Mother Country, asking- for such prefer- ence as Great Britain can see her way to giving- without undue disturbance of her general fiscal policy, but in no sense proposing a bargain of preferences or seeking to bind the various parts of the Empire in any common Imperial agreement. Two other proposals set before the Conference for forcing the hands of the British Government on the Tariff question further illustrate the divergence be- tween the definitely realised principles of national development, for which Canada stands, and the vague, hasty, short-sighted Imperialism advocated by IMr. Deakin and Dr. Jameson on behalf of the Colonies which they claim to represent.^' Dr. Jameson, basing his argument upon the fact that the British Government, as participants in the South African Customs Union on behalf of the pro- tectorates of Basutoland and Bechuanaland, are sub- scribers to the preferential policy adopted by that Union, moved — " That his Majesty's Government should now take into consideration the possibility of granting a like preference to all portions of the Empire on the present dutiable articles in the British tariff." This proposal to force British preference l^y a side- wind was supported by Australia, New Zealand, and Natal, but was opposed by General Botha. Sir W. Laurier was absent at the time of voting, but on the introduction of the resolution he had favoured its post- ponement. Mr. Deakin 's motion — that, " in order to provide funds for developing trade, commerce, the means of communication and those of transport within the Em- pire, a duty of i per cent, upon all foreign imports * It must not be forgotten that Mr. Deakin, though the titular representative of the Australian Government, is, in fact, the leader of the smallest of the three parliamentary parties in that country ; while Dr. Jameson can hardly be regarded as the representa- tive of a present majority of the electorate of his Colony. (22) shall be levied or an equivalent contribution made by each of its legislatures " — met with very little favour. The Colonies which approved the general object, and had no rooted aversion to the method, considered it vague in its financial implications, and Sir W. Laurier raised two fatal objections : one, that it would involve alterations in the existing tariff for which Canada was not prepared ; the other, that it proposed " to create a general fund for certain purposes, in= definite, undetermined." To this project of an Imperial Surtax, originally suggested by Mr. Hofmeyer in 1894, in order to furnish a fund for Imperial defence, the general feeling of the Conference was opposed, and Mr. Lloyd- George pointed out that the proposal would involve on the part of Great Britain a contribution of 4^ millions, as against ;^^6oo,ooo by the self-governing Colonies, besides implying a reversal of our fiscal policy. One other resolution upon which the policy of the Colonial Premiers and that of Great Britain was at variance deserves mention. In 1902 the Conference carried a motion relating to coastwise trade, which urged upon the Governments of the Colonies and the United Kingdom " the advisability of refusing the privileges of coastwise trade, including trade between the Mother Country and its Colonies and possessions, and between one Colony or possession and another, to countries in which the corresponding trade is con- fined to ships of their own nationality." To this, as to every Colonial proposal involving formal restriction of existing trading rights accorded to foreign nations, the British Government refused assent. The net result of the preferential and restrictive movement, of which Mr. Deakin was the principal mouthpiece, was to reaffirm the resolutions of 1902, but without the support of the British Government. No resolution in advance of the position of 1902 suc- ceeded in gaining the support of Canada and the. Transvaal. The position of the British Government (23) upon each aspect of the " preferential " and " re- strictive " movement, advocated alike by Lord Kli^in, Mr. Asquith, Mr. Lloyd-George, and Mr. Winston Churchill, was a definite, consistent " non possumus," a refusal to depart from the present policy of freedom of trade. Constructive Policy. The All-Red Route. On issues of constructive commercial policy for the Empire, however, the attitude of the British Government was very different, and Mr. Lloyd-George and other Ministers supported a variety of practical proposals for improving the trade relations of the different parts of the Empire. To this class belong the resolutions in favour of uniformity in trade marks and patents, in naturalisation, in company law, and in trade statistics, and the further extension of cheap postage and cable communications throughout the Empire. But by far the most im.portant practical proposal to which the British Government gave its assent was that for subsidising the development of Imperial com- munications, and in particular the establishment of an "all-red" route connecting this country with Canada, Australia, and New Zealand. In view of the contentious matter which is undoubtedly contained in this resolution, it may be well here to place it in evidence: — "That, in the opinion of this Conference, the interests of the Empire demand that, in so far as practicable, its different parts should be connected by the best possible means of mail communication, travel, and transportation ; that to this end it is advisable that Great Britain should be connected with Canada, and through Canada with Australia and New Zealand, by the best service available within reasonable cost ; that, for the purpose of carrying the above project into effect, such financial support as may be necessary should be contributed by Great Britain, Canada, Australia, and New Zealand in equitable pro- portions." The British Government, through Mr. Lloyd- (24) Geort^e, appears here to have committed itself definitely to the policy of subsidising shipping and railroad companies for the purpose of directing through Imperial channels the flow of mails, pas- sengers, and goods which " naturally " tended to flow through other and foreign channels, as well as of stimu- lating by governmental aid the existing current of Im- perial trade and travel. Of these two objects the latter is the less exposed to controversy. To improve and cheapen Imperial routes so as to unite the different parts of the Empire by better communications may seem an innocent and a reasonable project, though its attainment by means of subsidies to private profit- making companies exposes it tO' certain obvious risks. But to cheapen Imperial routes with the object or result of diverting existing or potential trade from foreign sea or land routes has the appearance of an infringement of Free Trade principles. It seems to imply that the money of the taxpayer in this country and the Colonies is to be applied to draw trade away from the routes which nature prescribes as the easiest, and to induce it into routes which, being naturally more difficult, and therefore more expensive, can only be maintained by bounties. Primd facie this is an un- warrantable use of public money, a commercial policy adopted for political purposes, and involving methods liable to those abuses which notoriously beset every form of bounty. General Results of the Conference. Viewing the Conference in the broader light its proceedings shed upon the relations of the self- governing Colonies towards Great Britain, it is evident that the provisions made for closer and more continuous communications and deliberations are in nowise to be interpreted as the beginning of a move- ment towards a Political Federation or a Commercial Union. The position of Canada with regard to all proposals for endowing any federal organ with any function which may develop administrative or legisla- tive power is one of undisguised hostility. She de- (^5) sires no Imperial council of any sort, no Imperial court of appeal, will enter no scheme for imperial defence which fetters her present freedom, and no tariff arrangement which involves her in any common action. She simply desires to be free to make her own arrangements with the Mother Country and the Sister Colonies on terms of equality as Government with Government, entering any specific concrete co- operation which by her independent action she approves, but rejecting any invitation to bind her hands by an agreement to submit to an Imperial body any decision affecting her political status, her tariff policy, or her measures of defence. She desires, though not importunately, release from the control exercised at present by the Judicial Committee of the Privy Council, and the right of giving authoritative advice upon the conclusion of Treaties between Great Britain and foreign countries, which primarily affect her interests, claiming in effect for the Parliamentary Government of the Dominion, the same relation to the Crown as is possessed by the Parliamentary Govern- ment of this country. Though disposed to use the preference accorded in goodwill to the British Govern- ment as a means of evoking a preference from Great Britain, she does not press this as a claim, still less as an instrument for setting up a common tariff system for the Empire. The significance of this Canadian Policy is that it represents the most fully conscious evolution ol the Colonial principle, an evolution not towards closer union, but consistently towards larger independence in political, military, and economic action. Where Canada stands to-day, the other self-governing Colonies will stand to-morrow. The hot genuine senti- ments which inspire here and there a politician of the calibre of Mr. Deakin, Mr. Seddon, or Dr. Jameson, will split the concrete moulds into which they seek to pour themselves. The effective forms of an Imperial federation — political, military, or economic — will be found necessarily to involve a fettering of Colonial liberties now exercised, and in particular a predomin- ance of Great Britain in Imperial designs hostile to the (26) democracy and sense of self-determination in these self-g"Overning communities. The preferential policy actually adopted or in- tended by these Colonies, when closely examined, is found to be slig-ht in form and conflicting in purpose with the protective principle that regulates their fiscal policy. Party politics in this country have given it an importance it does not possess. If not a merely pass- ing phase of Colonial history, it will be found to possess no potency as an instrument for Imperial federation ; and the wisdom of the British Government in refusing to abrogate, or even to modify, her policy of free im- ports is amply vindicated by the unsubstantiality of the proposal. CHAPTER II. THE VALUE OF COLONIAL PREFERENCES. Growth of Canadian Preference. In scekino tp ascertain the value of the existin-77 P^r cent, and in- creased to 53.48 per cent. This decline of British and increase of American imports is even more conspicuous in dutiable than in free goods. Then came, in April, 1897, the first Preference, amounting to a reduction of 12^4 per cent, on existing tariff rates. This percentage was increased to 25 per * Report of the Department of Trade and Commerce, Ottawa, 1907. 27 (28) Percentages of Imports from Great Britain. 1 United States. Years. 4 3 1 -23 5 a-? 03 ^6 III s'^ 0) S-s ex ia o2 m"^ r Sl Dul Total 8 £ oOH Dul Total i Total Unit( Tota Per cent. Per cent. Per cent. Per cent. Per cent. Per cent. 1868 6478 3982 56-06 22-93 53-96 33-77 1869 6935 3175 56-20 , 18-97 62-04 34-03 1870 66-52 34'50 56-10 19-27 59-69 32-43 1871 66-25 35-99 57-58 23-43 54-31 32-28 1S72 70-59 3820 59-27 19-43 55-81 32-14 1873 6663 38-55 54-61 23-42 53-47 36-29 1874 62 69 2903 49-87 27-67 65-19 41-97 1875 62-64 28 15 5I-II 2855 67-78 41-66 1876 5376 2508 43-75 35-41 70-53 47-67 1S77 54-03 19-31 41-78 38-59 77-88 52-45 1878 5376 16-69 4121 39-25 80-13 53-10 1879 48-84 16-72 39-34 42-95 7891 53-57 1880 5174 3643 48-30 36-11 54-88 4033 1881 50-06 37-23 47-39 35-78 56-74 40-15 1882 48-34 35-04 45-30 38-41 55-58 4233 1883 44-47 36-16 42-40 42-20 54-48 45-25 1884 41-02 35-03 39-56 4474 53-88 46-97 1885 41-90 35-^2 40-12 42-62 54-12 45-68 1886 43-00 34-13 40 -66 41-97 51-94 44-60 1887 4578 33-25 42-56 39-13 52-71 42-61 1888 44-29 26-81 38-90 38-90 62-34 46-13 1889 43-26 28-97 38-73 31-91 60-79 45-86 1890 43'i5 2895 38-75 39-65 60-13 45-99 1891 42-19 28-57 37-67 3997 6o-i2 46-65 1892 44-58 2224 35-66 42-66 48-34 44-90 1893 45'6i 2353 36-92 40-88 52-49 45-44 1894 4379 2o-6i 33-96 41-13 53-84 46-52 1895 39-81 18-39 30-85 44-05 57-79 49-84 1896 36-24 22-19 31-15 43-28 64-07 50-80 1897 3053 22-73 27-58 46-03 6569 53-48 1898 3023 18-35 2536 5100 71-13 59-24 1899 3077 15-70 24-72 49-73 73-43 5924 1900 30-25 18-66 25-66 51-65 70-69 59-17 1901 29-92 15-50 24-10 50-58 74-66 60-30 1902 29-54 17-94 24-95 50-72 70-11 58-40 1903 30-85 18-84 26-15 50-10 68-46 5729 1904 30-18 1 7 "73 25-34 52-07 69-14 5871 1905 29-88 15-14 23-98 52-21 73-13 60-58 1906 30-40 15-03 24.42 51-74 71-90 59-59 (29) cent, in August, 1898, and to 33 J 3 in July, 1900, tlioui;]i the increased eilicacy of these enlarged preferences was somewhat impaired by tariff changes, making on the whole for more protection in manufactured goods. A partial withdrawal of the Preference in certain woollen and other textiles took place in 1904. The effects of the Preference seem to be as follows : 1. Though it has not stopped the decline in per- centage of British imports (free and dutiable), it has greatly reduced the pace of the decline. While the decline in the imports of free goods from Great Britain continues as before, the decline of dutiable goods has been completely stopped. 2. While the total imports from the United States show a rate of growth nearly as great as in the nine years preceding 1898, the growth of percentage of dutiable goods has been greatly reduced. 3. It thus appears that, though the general course of Canadian import trade is seen to flow ever more strongly towards the United States, the Preference has diverted a certain amount of trade from that country to Great Britain. For though it is not possible to argue with certainty post hoc, ergo propter hoc, imputing to the Preference trade changes which, occurring during a period of new abnormal activity, may be due to other causes, it is legitimate to assume that the Preference must have had some effect in checking the proportionate decline of British dutiable imports into Canada, and in in- creasing the rate of increase in the total value of these imports. American Trade with Canada. But when we examine closely the trade statistics, in order to see how far the present or any probable future Preference will check the " natural " tendency of Canada to trade more fully with her neighbour, and will conduce to a general policy of imperial commercial solidarity, we encounter several important factors. In the first place, not merely does the total import trade from the United States grow at a faster rate than that from Great Britain, but the same tendency is (3o; still more strikingly illustrated in the percentages of export trade. During the period which chiefly concerns us, viz., 1897 to 1906, the proportions of total exports to Great Britain and to the United States run respectively as follows^ : — Exports from Canada. Great Britain. United States. Percentag ss. 1897 59.17 32.13 1898 67.78 23-52 1899 65.92 24.32 1900 60.60 30.66 I90I 54-15 36.20 1902 55.87 33-13 1903 58.25 31.61 1904 55-71 .. 33-50 1905 50.61 37.51 1906 53.96 35-68 rcentag es do not tell evei -ythi ig- In considering their practical bearing on our problem it is well to recall the actual values represented in the free and dutiable trade in question. Not merely is the import trade with the United States immensely larger in value than that with Great Britain, but the proportion of it which is and must remain free is also very much greater. The follow^ing table w^ill suffice to make this clear : — Total Imports. Years. Dutiable. Free. Totals. ^~~ ' $ $ i«97 66,220,765 40,397,062 106,617,827 7898 74,625,088 51,682,074 126,307,162 1899 89,433,172 59,913,287 149,346,459 1900 104,346,795 68,160,083 172,506.878 1901 105,969,756 71.730,938 177,700,694 igo2 118.657,496 77.822.694 196,480,190 1903 136,796,065 88.017,654 224,813,719 1904 148,909,576 94,680,443 243.590.019 1905 150,928,787 100,688,332 251,617,119 1906 173,046,109 110,236,095 283,282,204 * Report, 1907, Ottawa. (31 Years. Imports FROM Great Britain. Dutiable. ! Free. Totals. » ' » $ 1897 I 20,217,422 9,183,766 29.401.188 1898 .. •• 1 22,556,479 9,486.982 32,043.461 1899 .. 27.521,508 9.409,815 36.931.323 1 900 . . 31.561.756 12,718,227 44.279.9S3 1901 .. .. j 31,701,654 11,11^,341 42.819,995 1902 .. .. 1 35.062,564 13,960,162 49.022.726 1903 .. .. 1 42,210,165 16.582.873 58.793.038 1904 .. ■• i 44.939.829 16.784,787 61.724.616 1905 .. 45,099,527 15.243.177 60.342,704 1906 .. 52.615.725 1 16,568,190 69,183,915 Imports from United States. Years. Dutiable. Free. Totals. ; t $ » 1897 . .. 1 30,482,509 26.540.833 57.023,342 1898 . 38,063,960 36.760.963 74.824.923 1899 . 44,471,824 43.995.349 88.467,173 1900 . 53,897.561 48,182.616 102,080.177 1901 . 53.600.278 53.549.047 107.149.325 1902 . 60.181,808 54,562.888 114.744,696 1903 ■ 68,538,323 60.251,914 128.790.237 1904 . 77,543,780 65.466,798 143.010,578 1905 . 78.797.440 73.634.186 152,431,626 1906 . 89.540,776 1 79,257,600 168.798,376 From this table it appears that not only is a much larger proportion of the American imports admitted free than of the British imports, but that this propor- tion has grown considerably. Whereas about three-quarters of our imports arc taxed, only a little over a half of the American imports are taxed. This is, of course, due principally to the fact that they are raw materials, but the bearing it has upon the general relations between Canada and America is significant. Then, again, in estimating the value of the Prefer- ence as indicative of trade policy, it is material to ask, *' What is the average ad valorem duty upon dutiable (32) goods coming from Great Britain and the United States respectively ? ' ' The following table^ gives the average od valorem rate of duty on dutiable imports paid during recent years by Great Britain and the United States, and the average paid on dutiable imports from all sources : — Great Britain. U.S.A. All Sources. Per cent. Per cent. Per cent. 1897 30.693 26.727 29.967 1898 29.478 26.118 2Q.222 1899 26.627 26.339 28.652 1900 25-583 25-032 27.634 I90I 24.748 24-835 27.427 1902 24.027 25.182 27.265 1903 23.316 24.907 27.064 1904 24.117 25.217 27.426 1905 24.770 26.118 27.692 1906 24.601 24-779 26.835 We venture to draw particular attention to this illuminating piece of evidence. It has frequently been observed that the ad valorem tax upon imports as a whole is much lower for the United States than for Great Britain, in 1906 the former paying only 13.144 per cent, as compared with 18.709 paid by us. This, of course, is explained by the larger proportion of free goods from the United States. But this table shows that in spite of the Preference taxed goods from America are not taxed at higher rates than those from Great Britain. This means that, although on certain lines of goods America is handi- capped in competition with Great Britain, the handicap is made up by lower rates on other goods in which we do not seriously compete. Real ATeasure of the Preference. Again, it appears from this table that the 33^ i per cent, preference works out at a considerably lower figure in practice, for the fall in percentage of taxation for Great Britain from 1897 to 1906, instead of amount- * Report, Ottawa, page 15. (33) ing- to one-third, amounts only to onc-tifth, i-i-prcscntini; a real preference of not more than 20 per cent. Nor is this all. Though the reduction in average duty for the United States is much smaller than that for Great Britain, it is not inconsiderable, and is pro tanto a reduction of the amount of preference given to us, if we compare values of trade instead of single commodities. At least half of the size of the prefer- ence disappears in the light of the figures here dis- closed.^ Two causes seem to have conduced to this result. In the first place, when the Preference was originally arranged the ordinary duty was raised upon certain articles which were very largely imported from Great Britain, so that the Preference involved a much smaller reduction in the actual rate paid on British goods than the percentage of the Preference would seem to imply. In the second place, as we shall see, the Preference on certain woollen and other goods, figuring largely in our exports to Canada, has been reduced. When we examine recent statistics of Canadian imports to ascertain what classes of British trade the Preference appears to have assisted, we do not find any very clear results upon the course of our greatest textile and metal manufactures. First take the textiles, which form about 52 per cent, of the preferential imports, f Thoug-h the g-rowth of our woollen imports shows a very large and satis- factory advance, considerably greater than that of our European competitors, the small import trade from the United States has grown somewhat faster. Our cotton imports yield similar results, though here our rate of growth is faster than that of the United States, slower, however, than that of the small European trade. * Sir W. Laurier, in his address at the Conference, over-esti- mated the value of the Preference. "As to the dutiable goods, you have increased those goods to the figure of $52,000,000 " (wrongly described as £ in the official report), " that is to say, upon $52,000,000 of importations from Great Britain into Canada we give you a preference of 33J3 per cent., which is certainly a valuable contribution to British trade." t Cd. 3,524, page 337. C (34) Wool and Manufactures. (Report Canadian Trade, Ottawa, pages 351 and 324.) Great Britain. U.S.A. Others. » « ^ 1897 5076,859 218,396 1.330,493 1898 6,221,836 252,242 I.51I) ,788 1899 7,686,366 428,631 1,688, ,206 1900 7,787,929 359.986 1.653, ^650 I90I 8,061,459 370.453 1. 512, >i93 1902 8,860,393 354.598 i.73i> ,865 1903 11,105,487 394.379 2,061, o49 1904 12^707.715 491,328 1,920, ^340 1905 13.137025 519.948 1.915^ 438 1906 14,739.776 Cotton and 624,322 Manufactures. 2,087, >735 Great Britain. U.S.A. Others. ^ » ^ 1897 2,693,114 1,119,147 239. ,100 1898 3,086,068 1.332,533 292, >i93 1899 3,906,676 1,679,428 398,084 1900 4,474,687 I. 509.312 522, o7o I90I 4,869,909 1,463,686 584. .397 1902 5>io8,5i3 1,608,369 734: .877 1903 5o39.i29 1,760,695 819,902 1904 6,016,783 1,827,438 704: • 757 1905 5,780,041 1,862,784 707; ,8^6 1906 6,494,603 2,151,987 92I: .756 The imports of silk and flax show less satisfactory results. In silk the British imports have doubled since 1897, but both American and " other " imports have advanced at a faster pace, and the same is true of flax. Measured in percentages, the respective growth of British and general textile imports into Canada during the period 1896-7 and 1905-6 is as follows^ : — Increases of 1905-6 over 1896-7. Per cent. From United Kingdom. From all Sources. Cotton .... , 141 136 Wool .... . 164 145 Silk . . . . 70 176 Flax, hemp, and jute III 144 Carpets (other than woollen), curtains, and oilcloth • 279 235 *Cd. 3524, page 338. (35) It looks as if the Preference had assisted us in strengthening- our woollen and carpets import trades, but had produced no very appreciable effect upon the other textiles. The operation of the Preference Uj^on the dutiable part of metal and machinery trades is distinctly dis- appointing, for, though our trade has increased fourfold since 1897, the American trade, far larger in bulk, has increased fivefold. In point of fact, the gain of the United States has been far faster since 1897 than it was before, in spite of the British Preference. The main part of this trade consists, of course, in iron and steel manufactures, and it is here that the overwhelming strength of the United States appears. Metals and Manufactures. (Report Can adian Trade, pages 357 and 352.) Great B ritain. U.S.A. Others. $ % 9 1897 2,102, 530 7,588,096 462,318 1898 2,230, 567 12,006,521 446,336 1899 2,748, ,187 14,706,314 514,424 1900 4,705. 470 19,443,423 662,867 I90I 2,965, >i53 17,768,502 598,371 1902 5,124, ,011 19,913,810 1,704,756 1903 i^iz^yyi'}^ 23,582,528 2,607,661 1904 6,750: .503 26,576,274 2,128,119 1905 6,045, ,346 27,273,171 1,415,061 1906 8,499: ,468 32,207,263 1,597,644 Iron and Stee ;l Manufactures. Great Britain. U.S.A. Others. « ) « $ 1897 1,848, .937 6,580,029 352,497 1898 1,924: .763 10,653,373 323,338 1899 2,335, ,821 13,173,175 369,708 1900 4,304, ,869 17,663,325 506,575 I90I 2,617, ,124 16,054,867 421,101 1902 4,754, ,860 18,066,592 1,512,840 1903 7,348, ,621 21,375.077 2,403,940 1904 6,227,975 24,252,940 1,913,153 1905 5,437 .435 24,849,709 1,177,100 1906 7,591, ,660 29,370,921 1,348,620 (36) In spite of the Preference not only the United States, but Germany and Belg^ium show a rapid in- crease of her export trade with Canada in iron and steel. Germany and Switzerland in cotton, France in woollen goods, are gaining a strong footing ; though, as regards Germany, the surtax has operated as a temporary check upon the advance. Ineffectiveness of the Preference. Regarding the Preference, then, as designed to divert into our pockets the gains of the import trade from the United States its inefficiency is apparent. Taking the two chief trade groups — the textile and the metal — we find that the entire value of the dutiable textile trade possessed by the United States does not exceed 3^ million dollars, while their dutiable metal trade with Canada is worth over 32 million dollars. If the Preference had enabled us to cut heavily into this latter trade, its value might have been consider- able. But, as we see, it has not made any impression. On the other hand, the effect it has produced upon the textiles is of much less importance, because the American trade is not of any considerable size. In glass, leather, drugs and chemicals, among the secondary manufactures, and in a few others of the third rank, in which may be included certain sup- plementary textile trades (such as curtains, carpets, and cordage), jams and pickles. Great Britain has made a more rapid advance since 1897 than the United States ; but in most others the Preference has not succeeded in deflecting into British channels the in- creasing trade either of the United States or the Con- tinental European countries. Possibilities of Further Preference. But, it is often said, we have not yet tested fully the value of the preferential policy : Canada may be willing to go further, to increase her Preference, especially if we were prepared to meet her either with a reciprocal Preference, or with some other quid fro quo. (37) Here are two questions : Is Canada likely to increase her Preference still further? Could any possible increase of Preference turn over to us any larg-e proportion of the trade held at present by the United States or other countries? Taking" the first question, there is no reason to suppose that Canada could, consistently with her pro- tective policy, make any considerable increase of her Preference. " We have done everything that we could," says Sir. W. Laurier — " that has been our policy — to throw the whole of our trade towards Great Britain." * " Xot only have we done it by Preference, by Legislation, but we have forced our trade against the laws of nature and geography. If we were to follow the laws of nature and geography between Canada and the United States, the whole trade would flow from south to north, and from north to south. We have done everything possible by building canals and subsidising railways to bring the trade from west to east and east to w-est, so as to bring trade into British channels. All this we have done recog- nising the principle of the great advantage of forcing trade within the British Empire. This principle we recognise. We are bound to say that though the preference which w^e have given has not done as much, perhaps, for British trade as the British merchant or manufacturer would like, we have told the British people at the same time that there is a way of doing more. There is the Preference of mutual trade, and this is what w^e had in view when we adopted in 1902 the resolution of last year." But though the last sentences seem to hold out a suggestion of increased preference in return for an action which we cannot take, there is no reason to believe that any real advance upon the present Prefer- ence would be practicable. Apart from the fact that there must be limits to the willingness of the Canadian people to pay the heavy cost of flouting '* the laws of nature and * Report of Colonial Conference (Cd. 3,523, page 410). (38) g-eog^raphy," the general fiscal policy of Canada pre- cludes any really efficacious policy of Preference. For the sheet anchor of Canadian fiscal policy is protection for Canadian industries, in particular for her rising- manufactures. She admits no- " Schedule of forbidden industries " such as Mr. Chamberlain once vainly imagined. Even now her young- textile and metal manufactures are looking with jealous eyes at the imports which her present tariff lets in. As new industries arise, and her existing manufactures have strengthened their economic and political posi- tion, they will insist upon tariff rates high enough and numerous enough to secure for them the home market. If competing British goods enter under the preferen- tial tariff, that tariff will either be reduced or the general tariff will be raised so high that a preference upon it becomes innocuous. Reduction of the Woollen Preference. This is no mere speculative theory. In 1904 the Canadian woollen manufacturers, finding themselves unable to hold their own with certain classes of Eng- lish goods, succeeded in inducing Mr. Fielding, the Finance Minister, to introduce into his Budget a special provision for partial withdrawal of this Preference. " We propose," said Mr. Fielding, " to deal with the matter in this way. Our present duty on the class of goods which I may describe as cloths, tweeds, overcoatings, wearing apparel, and goods of that character, is 35 per cent., subject to the Preference, which brings the duty on British goods down to 22^'S per cent. We do not propose tO' increase the general tariff, but we propose to put a limit to the extent to which the Preference shall apply to these goods. We propose to fix a minimum tariff of 30 per cent, on this class of goods coming in under the Preferential tariff." The same treatment was demanded and conceded to twine and cordage, subject to a 25 per cent, tariff, which the British Preference had reduced to 16^3 per (39) cent. " This," says Mr. Fielding-, " is a lower rale of duty than even the most moderate tariff man usually is willing to impose, and we propose to fix a minimum duty of 20 per cent, ad valorem on that class of goods coming in under the British Preference." Thus we perceive that the Canadian woollen trade, finding that it is " suffering severely from (British) competition," procures a withdrawal of the greater part of the Preference which, instead of 2>2>y^^ pc*" cent., was lowered to 14}^ per cent. — a substitution of one- seventh for one-third. Canada's fiscal system is primarily designed to enable her to build up manufactures. She has within her borders, or can import, all the raw materials and fuel required for manufactures ; and, as her popula- tion and her towns grow, trade after trade will be started to produce goods which hitherto had been im- ported from Great Britain. As each such trade feels the pinch of the Preference, it will press upon a com- pliant Finance Minister to do what INIr. Fielding did for woollens. How can it be otherwise? There is an inherent antagonism between Preference and Protection, and in a Protectionist coimtry Preference must always give way. Preference Firther Rediced i\ 1907. Nor is this the only method of withdrawing or weakening Preference. The new Canadian Tariff Act of 1907 has interposed between the general tariff and the Preferential tariff an intermediate tariff of rates which, upon the average, are lower by one-tenth than those of the general tariff. The object of this intermediate tariff is to enter into favourable arrangements with foreign countries possessing two tariff rates so as to secure access at the lower rate by offering them a similar advantage. Now it is evident that, since the British Preference is reckoned on the general, not on the new intermediate, tariff, the necessary effect is to reduce the value of the Prefer- ence on our goods competing with foreign goods which enter Canada on the intermediate tariff, unless the ( 40 ) percentag-e of the Preference Itself were raised. Now, though the uniform rebate of 33^ per cent., the former preference, has been replaced in the new tariff by preferential rates varying from item to item, there has been no pretence of raising the general level of the Preference so as to provide against the new foreign competition which may come in upon the intermediate basis. If, therefore, any arrangement takes place between Canada and one of our great manufacturing competitors, so as to place the .latter on the intermediate tariff, the result will necessarily be a further practical reduction of the Preference. Our twp largest and most effective competitors are Germany and the United States. At present German goods are especially handicapped by a surtax, due to German tariff action against Canada ensuant on the granting of the British Preference. If, how- ever, as the result of negotiating, Germany could secure not merely the withdrawal of the surtax, but an entrance on the intermediate tariff basis, the pro- tection which the Preference has hitherto afforded us, in competition with some important lines of German goods, would be so seriously diminished as to jeopardise our trade. Still more important might be the consequences of a reciprocal arrangement with the United States, which contributes 75 per cent, of the imports from non-British sources into Canada. Most of our metal and machine imports are already keenly competing with those of the United States ; if the latter could get access on the lower intermediate basis a signal damage would be done to our trade, and the same is true of certain textiles and other manufactured goods. It is idle to reply that Canada has definitely abandoned all hope of a favourable reciprocal arrangement with the United States. This intermediate tariff has for its chief effect, if not for its intention, the offer of a fresh temptation to the New England manufacturers tO' push the American Government into commercial negotiations with Canada. Apart from this, the grant of access on the intermediate tariff to France, Germany, Belgium, Switzerland, or Japan, which (41) already do a quite considerable trade witli Canada, would mean a diminution of the i^reierencc upon not inconsiderable lines of trade. It must be remembered that the existence of the Preference will be a special incentive to nations, providinj^ Snoods which at present are just undersold by us in the Canadian market, to bid for entrance on the interme- diate tariff. Not only has the new scale of Preference, sub- stituting- a number of particular rates for the general rate of one-third, provided no safeguard against this operation of the intermediate tariff, but taken as a w^hole it is a reduction of the value of the Preference, even reckoned on the general tariff basis. For in the important woollen trade not merely is the larger with- drawal of Preference, achieved in 1904, maintained, but it is extended to cover other lines of woollen goods. Seventy per cent, in value of the " wool and woollens " imported in the last fiscal year are now brought under this lower rate of Preference.* In cottons, according to Professor Flux, the preferential duties upon the great bulk of our trade have been raised, while the rates of the general tariff have been lowered : the result is that the Preference, formerly amounting^ to about 10 per cent, of the value of the goods has been reduced by more than one-fifth of its amount. In iron and steel goods the Preference of the new tariff w^orks out more favourably for us so far as foreign competition on the general tariff basis goes, for a preferential difference of a little over 6 per cent, has been replaced by one of over 8 per cent., apparently arranged, in part at any rate, for the purpose of assisting us to get some business which has hitherto been in the hands of America. But the fact that the general tariff on these goods has been in- creased, as well as the bounties on Canadian products, shows that there is no intention to allow Preference to weaken Protection of home industries. Reverting to the general influence of the inter- mediate tariff upon our Preference, we may refer to * Professor A, W. Flux, Econojnic Journal, June, 1907. (42) the admission of Sir W. Laurier when the matter came up at the Colonial Conference,'^ that it might mean that instead of having- a margin of SSJ/s per cent, ov.er his foreign competitor the English im- porter may have a margin of only 28 per cent. The official statement of the matter is this : " The British Preferential rates are about 30 per cent, lower, on the average, than the general rates of duty, whilst the intermediate tariff rates are from about 8 per cent, to 15 per cent, (with an approximate average of 10 per cent.) lower than those rates, "t Here of course the conflict is not with the principle of Protection, but with that of negotiation ; but since the latter is now an accepted part of a " Scientific Tariff," it is likely to militate more and more against the efficacy of the Preference. Bounties ix their Effect ox Preference. Finally, the policy of bounties, applied in Canada to the iron and steel and certain other trades, is hostile to the validity of Preference. These bounties are paid upon the home production of pig iron, puddled iron bars, steel, manufacture of steel, binder twine, lead, and crude petroleum. This system, which dates back in origin to 1895, was further developed in 1899, when, partly in compensation for certain reductions of prohibitive duties in the 1897 tariff, a considerable bounty was given to Canadian production of iron and steel. In 1904 binder twine was added to the bounty list, and in 1905 petroleum. The total amount of payments in bounties has grown at an ex- ceedingly rapid pace, as the following official figures i indicate : — bouxties durix(; the fiscal years exdixg juxe 30. 1897 886,384 1902 .. 8791,089 1898 240,819 1903 1,406,185 1899 356,774 1904 1,130,041 1900 356,112 1905 •• 2,234,685 I90I 498,020 1906 .. 2,400,771 * Page 414. f Cd. 3,524, page 340. \ Canadian Trade, 1906, page 701. ( 43 ) Of the sum of $2,400,771, paid in i()oh, not less than ^2,004,338 went to iron and steel in the follow- ing- proportions : — Pig iron .^687, ()32 Puddled iron bars ... ... 5*875 Steel ingots ... ... ... 940,999 Manufactures of steel ... 369,832 Now, in their effect upon the import trade, these tariffs are equivalent to an enhancement of import duties, and though it is contended that they were awarded in 1899 ^^ compensation for a reduction of tariff rates, this consideration is immaterial. For with regard to the protection consisting of these bounties there is no British Preference. The inevitable effect is to reduce considerably the influence of the Preferential Tariff in enabling British iron and steel goods to enter Canadian markets, for the bounty protects the Cana- dian producer equally against British and American imports. This bounty system is doubtless in some degree responsible for the slight effect produced by the Preference upon British metal imports, as com- pared with textile imports. First introduced, the bounties were designed to relieve the home producers from the new strain of foreign competition during a period of a few years, and a rapidly descending scale O'f bounties was arranged. But the " pull " of the interested trades has been able to maintain the full bounty upon the higher grades of manufacture, and greatly to mitigate the fall in the cruder grades, so that the bounties afford a very large measure of additional protection. Although these bounties were designed merely lor the feeding of infant industries, and wx're planned to disappear in 1907, the usual logic of Protection has been operative here, and the Tariff Law of 1907 ])r()- vides not merely for their continuance but for a sub- stantial increase. Preference .\ Merely Te.mpor.xrv Mkasi re. Bearing in mind these facts of recent C^madian history — first, the deliberate withdrawal of a |)ortion (44) of the preference on woollen goods, &c. ; secondly, the effect of the intermediate tariff in lessening- the Prefer- ence for British importers who compete with foreign importers coming under this intermediate tariff"; thirdly, the growth of the bounty system — it is not possible to believe that Canada intends to increase her Preference. For it is clear that her new manufacturing interests and the politicians who represent them recognise that the use of protective duties to establish and maintain Canadian manufactures is inconsistent with any policy of permanent and efficacious Preferences. As the staple textile and metal industries grow in Canada, the British Preference upon these imports will be with- drawn, by one or other of the devices which have been already employed. And when Canadian or American capital sees its way to develop drugs, earthenware, glass, leather, spirits, and other secondary manufac- tures of importance, it is improbable that the existing Preference of 333/3 per cent, will be allowed to stand. It is no doubt true that, for the present, until the full manufacturing development of Canada is assured, Canadian statesmen are prepared to turn over to Great Britain all the import trade they can. What Trades Can We Capture? When, confining our attention to general figures of Canadian import trade, we mark how, out of 283 million dollars' worth of imports entered for Canadian consumption, only 69 millions are British, we seem to see a vast field of opportunity which Preference might enable us to utilise. But the size of this opportunity shrivels before closer inspection. In the first place, it appears that a far larger pro- portion of American and other foreign imports consist of non-dutiable goods, which Preference cannot affect. The returns for 1906 illustrate this : — Dutiable. Free. Great Britain ... $52,615,725 $16,568,190 U.S.A. ... 89,540,776 79,257,000 Others ... 30,889,608 14,410,905 (45) But, confining our attention to the dutiable imports from foreign countries, let us ask how much of the §120,000,000, which at present goes to the United States and other foreign countries, the existing or any other sort of Preference could enable us to take. In the first place, a very large proportion of these dutiable imports consists of foodstuffs, raw materials of manufacture, and of certain special manufactures in which we cannot seriously compete with the nations now importing them. Such, for instance, are Animals Books, periodicals, &c. Breadstuffs Bricks, &c. Carriages, &c. Coal, coke ... Coffee Fish Fruits Oils Provisions Seeds Settlers' effects Silk Turpentine Vegetables Wood and manufactures Value of (Foreign) Dutiable Imports, 1906. ... $1,187,500 1,45^251 2,070,411 422,000 2,304,073 ... 8,762,615 706,410 1,996,527 4»542,i83 2,033,800 2,961,066 380,000 7,305,026 460,000 597,730 73^^797 ■■■ 2,515,172 §40,426,561 If we knock off these virtually non-competitive imports, the foreign trade remaining open for our com- petition amounts to 80 million dollars. Now of this 80 millions no less than 32 millions consists of metal imports, chiefly iron and steel from the United States. Seeing that the Preference, tempered by bounties, appears to have had no effect in stopping the increase of pace in the American trade, it seems unlikely that any increase of Preference, consistent with Protection, (46) can enable us to cut materially into this trade. There are, moreover, other imports, chiefly American, where a monopoly is so firmly established, either by access to superior natural resources, cheapness of transport in heavy goods, superior methods of production, or ques- tions of taste, that no considerable displacement could be effected by a rise of preference. Some of these trades are very large, e.g. electric apparatus, 2,j4 mil- lion dollars; dutiable packages, 2j^ millions; leather goods, 2j4 millions; spirits and wine, ij4 millions; others, such as watches and clocks, paper, musical and optical instruments, hides and skins, soap, coffee, buttons, brooms, fertilisers, are of quite considerable dimensions. The smaller trades, especially those relat- ing to luxuries and articles of taste, or dependent on some cheap American materials, are in most cases so strongly held that the effects of any preference must be slow and slight. The most liberal computation of the existing foreign dutiable import trade which might be affected by an increased Preference could hardly exceed §30,000,000, of which it is reasonable to hold that only a small proportion could be so diverted. Even this assumes that the goods exported to Canada under this prefer- ence would otherwise not have been produced or sold at a profit elsewhere, a wholly unwarranted assumption which vitiates all the computations of gains from preferential tariffs. Computation of the Worth of Preference. The really valid estimate of gains from Preference would be based upon a computation of the higher mar- gin of profits secured by selling goods in Canada under the preferential treatment as compared with the lower margin of profits from selling them in some other market. The notion that these goods (or an equiva- lent quantity of other goods) would not have been produced or sold at all— in other words, that the preference has enlarged the aggregate market for British goods and the aggregate profits on British trade to an extent measured by the amount of the new trade put into British hands — is based upon a total misconception of the nature of trade. Even assuming- that ;£,'o, 000,000 worth of Canadian trade were diverted from other foreign channels into British hands, this would not imply that an aggregate increase of employment of British capital and labour to this extent had been created. It might only mean that ;£^b,ooo,ooo worth of British goods, which would have been sold in the home trade or in some other foreign market, was diverted into Canada, where the price and the margin of profit had been rendered somewhat higher by the Preference. Although the Preference at its outset in 1897 re- ceived the support of not a few Free Traders in Canada, on the ground that it was at any rate a step in the direction of Free Trade, the history of the last ten years has made it evident that, where Preference interferes with Protection, it goes to the wall. Sir \V. Laurier's declaration at the Conference that " We feel strong enough in Canada to give a preference on all our manufactured products," whereas in Australia and New Zealand " they do not feel strong enough," is an unsubstantiated claim of superiority. There is seen to be no intention whatever to allow British manufacturers to enter on a preferential tariff, so as to compete successfully with Canadian manufactures. So long as the Protective policy main- tains its hold in Canada, the continuation of Preference must operate so as to cause the ordinary tariff rates to be higher than would otherwise suffice : the prefer- ential duty must be sufficient to protect, the ordinary duty must be excessive. The present position is quite clearly defined. Cana- dian Protectionists have no objection to the Canadian consumer paying to British manufacturers a slightly higher price for goods which could be more cheaply got from the United States or Germany, so long as these goods cannot be supplied by Canadian makers. They favour the maintenance of Preference upon such goods. If, however, the manufactured goods in question, though not competing directly with Canadian products, (4«) should form an important cost of production in some Canadian manufactures, they will not permit the main- tenance of preference upon these goods. Still less will they consent to admit British goods which compete with their own. Protectionism, of course, cannot be absolute in a country the revenue of which is largely dependent upon import duties. Government, therefore, is continually disposed to let in even competitive goods at a moderate tariff designed for revenue purposes : but the manufacturing interests continually strive to raise the tariff to the point of prohibition. Preference Falls between Two Stools. As we have seen. Preference is consistent neither with a Free Trade nor a Protective policy. It does not even recommend itself to a Government primarily guided by motives of high revenue : for to such a Gov- ernment it either ranks as a wasteful concession, in cases where the ordinary duty serves to draw the maxi- mum revenue, or it compels the ordinary duty to be placed so high as to kill the goose that lays the golden eggs. A preferential duty is in the nature of the case precarious and unstable. Of Canadian Preference this must remain particularly true ; for Canada must be considered at present as divided between two possible economic policies. Her present avowed ambition is to become, like the United States, as far as possible a self-supporting state, and, whatever may be the size of the immediate concessions to British imports, there is no probability that such concessions can last, since they are manifestly inconsistent with this larger destiny. Canada has within her borders all the chief natural sources of supply necessary for a full manufacturing career : raw materials (agricultural and mineral), power, enterprise, and skilled labour ; and the energetic pur- suit of this career will be the first concern of those able capitalists who, there, as in the United States, appear likely to control in all essential matters the fiscal policy of the Dominion. The other policy is to develop that closer industrial (49) and commercial connection with the United States which natural circumstances desig-nate as her destiny. Although of late political discretion has appeared to involve an ostentatious disavowal of any disposition to seek better trade relations with the United States, this attitude must yield to the plain dictates of common sense. A real identity of interests so strong, that even in the midst of political antagonism the actual growth of commercial intercourse exceeds that with Great Britain, must weave the necessary form of union. There are two reasons why Canada and the United States must draw into even closer commercial relations. Canadians have large supplies of raw materials which American manufacturers want to buy with an ever- growing pressure of desire : Americans have other raw materials, or similar materials, at points of better access, which Canadian manufacturers and railroads require. Though the interests of unrelated, unorgan- ised consumers may be ignored or flouted, not so those of organised producers — factory owners who want coal, grain, or lumber. All four populated and developing districts along the Canadian frontier adjoin sections of the Republic which, from paucity of natural resources or from growth of popu- lation, cannot supply themselves with all the food, materials, and fuel they require : strong capitalist busi- nesses see a clear gain in freedom of exchange for such articles. In Illinois and other mid-w^estern ^States, still more strongly in Massachusetts and other manufac- turing wStates of New^ England, is this pressure growing. Thwarted at present by a combination of political cir- cumstances, it bides its time to force forward on the American side proposals of reciprocity which Canada cannot and will not reject, and which, once accepted, will grow into an ever-strengthening economic bond be- tween the two great American nations. It is idle to ignore this probability and the fact that such a policy must cut across and even overthrow the preferential movement. Canada will, of course, only secure that great neighbouring market by giving the American manufacturers at least an equal chance with the British. D (so) This rapprochement will be accelerated by the com- munity of capitalist interests growing up in the two American nations. Though the Canadian tariff has probably not drawn into Canada any larger quantity of American capital than would have entered on a Free Trade basis, it has caused that capital to flow principally into strongly organised industrial enter- prises. The invasion of Canada by the great American corporations, the Steel Trust, the Harvester Company, the American Locomotive Works, the Singer Manu- facturing Company, the Rand Drill Company, etc., im- plies a great growing consolidation of capitalist interests that cannot fail to exert an influence upon tariff policy on both sides. It pays the Harvester Trust and others to set up works inside Canada rather than to make for the Canadian market in their American factories machines which will be subjected to a heavy duty. But the larger the Canadian market becomes, and the greater the stake they hold in that country, the more irksome and wasteful will be the double inter- ference of two sets of changing tariffs cutting in two the economic unity of their business- No single force makes so obviously for closer economic relations be- tween Canada and the United States. But whether we consider the future policy of Canada to lie in the direction of protective self-sufficiency or of closer reciprocal relations with the United States, the instability of the Preferential Tariff is equally involved. The several grades of Preference which have already been tried are seen to have exerted no considerable power to alter the normal channels of trade under the Protective system, nor is there any reason to believe that any substantial increase of Preference is likely to be given, or that, being given, it could divert any large amount of valuable trade from foreign into British hands. New Zealand Preference. We have examined at considerable length the Cana- dian Preference because that is the only Colonial Pre- ference that has been long enough in operation to afford any full test of its working. The New Zealand Preference, which came into operation in November, 1903, is not of wide applica- tion, as the followino- statement of Sir Joseph Ward before the Conference* will indicate: — "'Goods enumerated in the First Schedule to the Act pay double the ordinary duty when of foreign produc- tion. ' I may say that cement is the only article which is referred to in the schedule. ' Under the Second Schedule, foreig"n g-oods pay the ordinary duty plus one-half. Among- the important articles included in this Schedule are boots and shoes, fancy goods and toys, hardware, hollow ware and iron nails, ironmongery, iron pipes and fittings, pianos, earthenware and glass- ware. Under the Third Schedule, foreign goods pay a 20 per cent, ad valorem duty on certain articles formerly on the free list, whilst British goods are admitted free of duty as heretofore.' There is a handicap there of 20 per cent, against foreign goods which come into New- Zealand without any duty, as compared with British goods. ' The chief classes of goods included in this Schedule are iron (plain black sheet, rod, bolt, bar, and plate) rails for railways and tramways, and print- ing paper,' and the Schedule attached to it shows that since that tariff has been in operation, giving a prefer- ence of duty to England as against foreign countries, there has been a very considerable increase in the importation to New Zealand from England on some of the lines, and a diminution from foreign countries." Here we are clearly confronted with a Preference used as an instrument for increasing the stringency of Protection. The Preference is given in some instances by raising the general tariff and leaving the duty upon British imports as before, in other instances by putting foreign imports formerly admitted free upon the Tariff. The Preference covers about 20 per cent, of British imports into New Zealand. Though it is claimed that in six classes of goods an increased import trade for Great Britain has ensued, the slightness of the influence of the New Zealand Preference is indicated by the fol- lowing table,! comparing the import trade in 1902, the * Page 266. t Cd. 3,524, page 408. ( 52 ) year preceding- Preference, with the subsequent years. The proportions between British and foreign imports remain virtually unchanged. Total Imports of Merchandise FROM United British Foreign All Kingdom. Possessions. Countries. Countries. I i I i 1902 6,851,000 2,202,000 1,906,000 10,959,000 1903 7,439,000 2,497,000 2,140,000 12,096,000 1904 7,982,000 2,656,000 2,262,000 i2,qoo,ooo 1905 7,784,000 2,578,000 2,1 19,000 12,481,000 The following table, ^ however, confined to articles of a class now subject to Preferential treatment, ap- pears to yield a somewhat more favourable result. MPORTS OF A Class Now Subject to Preference, United British Foreign All Kingdom. Possessions. Countries. Countries. i I £ i 1902 1,341,000 326,000 580,000 2,247,000 1903 1,507,000 367,000 695,000 2,569,000 1904 1,604,000 436,000 691,000 2,731,000 1905 1,626,000 440,000 572,000 2,638,000 South African Preference. The first Preference of the South African Customs Union dates from a Convention which took place in Aug-ust, 1903. A rebate of the whole duty was given to British goods liable to an ad valorem duty of 2^ per cent. ; on all goods liable tO' other ad valorem duties, or to combined ad valorem and specific duties, a rebate of 25 per cent, on the ad valorem part was given. No preference was given upon specific duties. In May, 1906, a new Customs Convention came into force, granting rebates to certain articles subject to specific duties, as well as continuing the rebates on articles subject to ad valorem duties. The general result is a rebate of about 3 per cent, ad valorem on * Cd. 3,524, page 408. (53) both classes of imports. The granting ol" this rebate on speeihc duties has, however, generally been accom- panied by an equivalent rise in the speeihc duties in question, and in some instances {e.g. blasting com- pounds, candles, grain and fodder) the rise of speciiic duties has been so great that, allowing for the rebate, the tax on British imports is greater than before. The specific duties on other articles not allowed re- bate (e.g. second-hand clothing, spirits, and tobacco) have been increased. Other articles previously charged 25 per cent, ad valorem with a rebate of 6^2 per cent, under the combined list, have now been transferred to the purely ad valorem list with a rebate of only 3 per cent. " The general ad valorem rate has been raised from 10 per cent, to 15 per cent, ad valorem with a rebate of 3 per cent, instead of 2^2 per cent, ad valorem on British goods, the result being, so far as goods sub- ject to the " unenumerated rate" are concerned, that the rates for British and foreign goods are 12 per cent, and 15 per cent, respectively, as against 75^ per cent, and 10 per cent, previously in force. "^ The net. result of these changes appears to be a distinct diminution in the value of the Preference, not compensated by the fact that a certain number of articles previously on the free list [e.g. agricultural im- plements and machines, unwrought metals and leather) are now subjected to a 3 per cent, ad valorem tax, remitted to Great Britain. Here, as in Canada and New Zealand, the Preference is worked mainly by raising duties upon foreigners, not by reducing them on the Mother Country. The countries constituting the South Africa Cus- toms Union are Cape Colony, Natal, Bechuanaland Protectorate, Basutoland, Orange River Colony, Transvaal, Swaziland, and South and North-West Rhodesia. The actual duty ad valorem is 15 per cent, to 25 per cent, for cotton and woollen goods (except where used * Cd. 3,529, page 396. (54) as materials in manufacture), and lo per cent, for iron and metal goods (except where used for materials, when they are imported free or at 3 per cent.). In substance this Preference is probably a larger one than that of the other Colonies, partly because it places in the free list a number of British manu- factures formerly taxed 3 per cent., but chiefly be- cause, unlike the New Zealand and Australian prefer- ences, it extends to the great staple trades and covers about 61 per cent, of the total imports intO' Cape Colony, i.e. 53 per cent, from the United Kingdom, and 8 per cent, from the reciprocating Colonies. The disordered state of South African commerce during recent years makes it very difficult to con- jecture the value of the rebate of 1903, still less that of 1906. The general current of trade for the last four years has, however, been slightly favourable to Great Britain, and some part of this result may be accredited to the Preference. Total Imports of Merchandise.* 1902 1903 1904 1905 From United All British Kingdom. Possessions. 29,248,000 30,070,000 ' 20,294,000 18,253,000 I 4,730,000 3,742,000 3,784,000 4>553,ooo Foreign. £ 10,675,000 14,284,000 7,722,000 6,649,000 Total. 44,653,000 48,096,000 31,800,000 29,455,000 On the other hand, it must be remembered that Great Britain already holds, and has always held, a practical monopoly of a large share of the import trade into South Africa. If to the estimate of foreign im- ports given in the Table above we add the goods that come through Delagoa Bay into the Trans- vaal, we get an aggregate of 8j4 millions only out of a general import trade of some 35 millions. Of this Sj4 millions about half consists of food and drink and raw materials upon which the effect of the * Selected from Table I., page 398, Cd. 3,524. (55) Preference is virtually }iil. Of the 4^2 millions of foreign manufactured goods, it seems possible that a sufficiently large preference might divert a certain share, e.g. textile goods and machinery, from Ger- many and the United States, whose trade has been large in recent years. But it is unlikely that a 3 per cent, ad valorem preference would go very far in this direction. Moreover, it must not be forgotten that it has been and will remain the policy of South Africa to keep a large free list, and especially to keep upon it many classes of manufactured goods required for the equipment of mines and factories. Finally, it may fairly be assumed that out of the 4^2 millions in question no inconsiderable part consists of luxuries^ articles of taste, and special tools and machines, in which, even aided by a preference, we cannot effec- tively compete with foreign importers. Australian Preferkxck. The Australian offer of Preference, contained in the Resolution of 1906, to which the British Govern- ment refused assent, was described by Mr. Deakin as " an overture from us which is not to be regarded as a bid, but as a suggestion of friendly negotiation." As in the case of New Zealand, the proposal took the form, not of a reduction upon existing duties in favour of British goods, but of an increase of duties upon foreign goods. It was applicable only to about 8 per cent, of British imports,* and was made upon conditions which, even if they could have been ac- cepted, would have reduced to still smaller dimensions the size of the offer. The proposal was to increase by 10 per cent., 7^2 per cent., and 5 per cent, the duties already levied upon certain classes of imports " not imported direct from the United Kingdom in British ships manned through- out by white crews, and guaranteed to be the produce or manufactures of the United Kingdom." The classes of goods to which this Preference nomin- * Cd. 3,523, page 315, and Cd. 3,524, pugt- 4i(). f 5^) ally applies are : (i) Arms, ammunition, fuzes, and dynamite; (2) painters' colours and materials; (3) boots and shoes; (4) plated ware; (5) pickles, sauces, and condiments ; (6) bicycles and parts ; (7) cutlery ; (8) furniture; (9) starch and blue; (10) woodware ; (11) clocks and watches; (12) gas and oil engines and turbines. The total average annual value of these imports for 1901-05 (with the exception of class 12, not given in the Annual Statement of Trade) amounted to ;£'i,539,ooo out of a total average annual import trade from Great Britain amounting to pf 18,271,705. In other words, the Preference is applicable to about one-twelfth of our imports intO' Australia. Excluded from the Preference are the six largest classes of British imports, viz. cotton and woollen goods, apparel, iron, machinery, British and Irish spirits. Mr. Asquith thus'^ estimates the value of this Prefer- ence (irrespective of the conditions attached to it) : — " What is the amount of foreign trade which con- ceivably, supposing it had its full effect, it would enable the British importer to capture from the foreigner? The precise amount put down is ;jf928,ooo. If you allow 10 per cent., which I should think was a very fair figure, as the profit that might reasonably be expected to be made, if you secure the whole of that ;£r928,ooo of foreign trade, the net result of this would be a possible profit of somewhere between ;£r90,ooo and ^aoo,ooo to the British importer there and to the exporter here, that is, on a trade that amounts to 20^ millions at this moment." In other words, the maximum gain that could accrue to our side of the transaction is some ;£!!"50,ooo. But this gain takes no account of the conditions. The goods, in order to secure the Preference, must be British produce, carried in British ships manned entirely by white crews. Now, quite a considerable part of several of the classes of goods to which the Preference applies consists of re-exports of foreign or * Report, page 315. (57) Colonial produce. About oue-scventh of the largest class — viz. arms and ammutiilion consists of foreign goods ; and three-fourths of another (smaller) class — viz. clocks and watches — falls under the same exclud- ing condition. Finally, the all-white-crew condition virtually in- validates the whole Preference, for its acceptance would involve an expensive reorganisation of the entire Pacific trade, which could not be entertained. The triviality of the Australian offer is thus trans- parent. Not merely is no reduction made in any duty previously imposed on British imports, but upon British re-exports and upon all goods of the specified classes not carried in all-British ships a higher duty than before is imposed. An examination of the classes selected for " preference " makes it certain that in Australia, as in New Zealand, the tariff policy is dominated by a protective motive which negates the possibility of any truly elhcacious preference. A preference on the staple textile and metal trades, which are our largest and most profitable exports to Australia, would have been a more attractive offer. Why was it not given? Why was the Preference con- fined to this 8 per cent, of minor manufactures ? The answer to these questions is plain. No pre- ference can be granted which enables British goods to compete on equal terms with Australian manufactures. The large handicap of freight is not regarded as sufli- cient : where Australian manufactures are concerned, the Mother Country ranks as a mere foreigner, to be kept out by the same duties as are set upon American or German goods that seek to enter her market. The reason why textile and clothing trades, and metals, machinery, etc., are excluded from preference is simply that these are the two groups of Australian manufac- tures that are most developed and best organised. Though both textile and metal trades are small in actual bulk, employing respectively 53,000 and 37,000 in 1903)^ arid can only produce a small number of the various textile and metal goods, present jealousy and * Coghlan, Statistical Account, page 962. (58) future ambition conspire to make them bring political pressure to exclude from the preferential lists the only British imports to v%hich preference might be of some considerable value. Though Mr. Deakin describes this proposal as a " forerunner," these facts indicate the diflficulties which the Protective policy, even in a new country with small, undeveloped manufacturing in- terests, places in the way of any really valuable pre- ference. The same dilemma confronts our sanguine Pre- ferentialists in each Colonial instance. Either Free Trade will triumph, in which case no duties exist upon which effective preference can be given, or Protection is maintained in Colonies whose manufactures will ex- hibit a constantly increasing power to exclude from the Preference those very classes of British imports to which preference would be really valuable. At present the accepted policy of Australia is protective, and Pre- ference, so far from signifying a move towards Free Trade by lowering the barrier so as to admit British goods on easier terms than before, merely signifies a raising of the barrier against foreign goods. Discussing the fiscal issue as set before Australia at the last General Election, Mr. Deakin said : " There are two issues ; the first issue, as we put it, was Pro- tection." Mr. Lloyd-George: "A higher tariff!" Mr. Deakin : " Yes ; because without the tariff we do not get the opportunity of preference. We mentioned preference second in order of importance. In logical order we say Protection and preferential trade." * Now, it never seems to occur to Mr. Deakin that there is every difference in the world to the British manufacturer between a preference by lowering present British duties and a preference by raising foreign duties. For, while the latter means, at most, the chance of get- ting some part of a market held at present by the foreigner, the latter means an indefinite expansion of British imports through the fall of price to Australian consumers ensuant upon the reduction of tariff. It is not too much to say that, whatever the worth ^ Page 360. (59) of a Colonial prefcrctirc may hv, it is almost (k'stroNcd when the preference is i^ivcn, as has been the case in almost every instance, by raising- duties on foreign im- ports instead of reducing them on British. Sr.M.M.ARV Ol- \'.\l.ll-: C)l- I^RHll-RKNCKS. We may best summarise this examination of the present and prospective value of Colonial Preferences by quoting- the following table* giving the values of manufactured goods imported into the self-governing Colonies, in 1904,! from other parts of the British Km- pire and foreign countries, respectively : — British Foreign Empire. Countries. Australia ... ... ;£r2 1,004, 000 ;£J3,762,ooo Xew Zealand ... 8,256,000 1,622,000 Canada ... ... 10,655,000 18,912,000 Newfoundland ... 593,000 253,000 Cape of Good Hope 12,256,000 2,265,000 Natal ... ... 5,094,000 1,507,000 ;f 57^858,000 ;^3i,32i,ooo Add to this total another three-quarters of a million, estimated for the Transvaal (via Delagoa Bay), and the whole value of foreign imported manufactures which the Preferential Tariff is designed to divert to the Mother Country amounts to about ;£.32,ooo,ooo, more than half of which is Canadian. Our analysis of Cana- dian trade led us to the conclusion that the most liberal preference would not be likely to secure to us more than one-third of this foreign trade, and if we were to apply this estimate to the foreign trade with the other Colonies we should probably be taking a too favourable view of the possibilities of the power of preferences to influence trade. It seems extremely unlikely that more than 7710,000,000 worth of existing foreign trade could * Cd. 3,328, pages 55 and 56. t The figures for 1905 are incomplete owing to a change in classification for Cape Colony and Natal. (6o) be turned from foreign into British channels by any scale of preferences, even were Preference to rank first and Protection second as a fiscal motive with the Colo- nies. In order to secure this possible increase of ;^i 0,000,000 in the value of our Colonial trade, we are invited to dislocate the entire Free Trade system in its application to our import trade of ;^563,ooo,ooo. CHAPTER III. THE CASE OF INDIA. HavixCx reo-ard to the attempt made l)y certain of the Colonial Premiers to press upon the Imperial Cov- ernment a system of preferential tariffs as the chief instrument of an attempt to make the Empire a self- sufficing economic federation, the fact that no member of the Conference represented India, the country con- taining- five-sixths of the entire population of the Empire, is deserving of consideration. The President of the Conference, Lord Elgin, may be considered to represent not only the Mother Country in her relations to the self-governing Colonies, but also the Crown Colonies and Protectorates. But the Secretary of State for India, though present, was not a member of the Conference, nor was Sir J. L. Mackay, who held a sort of watching brief, and was permitted to state the Indian case on Preferences. The significance of this omission is very apparent throughout the proceedings. The Premiers of the self-governing Colonies spoke and thought and acted as if their territories, together with the British Isles, constituted the Empire ; and when they supported the constitution of an " Imperial " Con- ference, in which they met the British representatives as " Governments with Government," they never seemed to realise that such liberty as they imputed to the Mother Country to make new tariff arrangements could never be the liberty which they enjoyed, because Great Britain must have regard not merely to her own interests but to those of the " unfree " portions of the Empire. The same consideration precludes the pra( tiial 6i (62) " equality," which some of them were disposed to assert : the magnitude and variety of interests in India and the other non-self-governing; portions of the Em- pire must always give to Great Britain the position of predominant partner in any body fully representing the interests of the Empire, whether for politics, for com- merce, or for defence. The fact that India has no real voice in these Imperial Conferences imparts an air of unreality to them, regarded as an instrument for consolidating the forces of the Empire, of which she is by far the most important section. Not merely does the Indian popu- lation outnumber twenty-fold that of the entire body of self-governing Colonies, but the size and peculiar nature of her over-sea trade give her an eminent right to consideration in any tariff policy which either she or the Mother Country may be invited to adopt. If Great Britain were, at the bidding of the self- governing Colonies, to adopt tariff changes injurious to foreign countries who' might seek to retaliate on India, the magnitude of her foreign export trade would expose her to the gravest injury ; w^hile, on the contrary, as Sir J. L. Mackay pointed out, " India has practically nothing to gain by the adoption by the Empire of a system of tariffs discriminating against the manufactured products and food stuffs of foreign countries." ^ The balance of Indian trade with Great Britain is such that on such schemes of Preference as are usually proposed India would be a heavy loser. " Not only do the exports of India consist chiefly of com- modities which are not likely to receive a preference in the tariff arrangements of the United Kingdom, but they gO' for the most part to foreign countries. On the other hand, three-fifths of the total import trade of India is the produce of the United Kingdom, and the goods belong to classes to which a dis- criminating tariff could be effectively applied. It is estimated that a third of the goods which the United Kingdom sends to India are exposed to the competi- * Cd. 3.523. page 300. ( ^\1 ) tion of foreion (Countries. India, ihtM-cforc, has obviou.sly much more to g^ivc under a prtd'ercntial scheme than she can receive under such an arrani^i'- ment."* This statement is powerfully supjiorted by a Memorandum contributed by the India OITicc to the Conference, containino- the followinq- summary of trade relations in 1905 between India and outside countries : — Imports into India. Per Exports from Per cent.j India. cent. (i) The British Empire ;— The Ignited Kingdom The Crown Colonies The Self-Governing Colonies £ 45,852.000 3,907,000 600,000 50,359,000 67^1 26,663,000 5 10,220,000 |i 2,676,000 25 9^ 2i Total 73i 39.559,000 37 (2) Foreign Countries : — Europe Asia Africa ... America 11,430,000 5.120,000 84,000 1.507,000 i6| 1 2| 28,547,000 23.957,000 2,897,000 10,525,000 65,926,000 27 23 3 10 Total 18,141,000 26| 63 Grand Total 68 500,000 100 105,485.000 100 The two facts which stand out conspicuously in this table are : first, the larg-e proportion of the total import trade with India which Great Britain already possesses, and the correspondingly small proportion of advantage which any Preference on the part of India could secure for her ; second, the large pro- portion of the export trade which India does with foreign countries, and the correspondingly large damage which a disturbance of her present friendlv commercial relations with these countries might en- tail. As regards imports from our manufactin'ing co\w- * Page 301. { 64 ) petitors, there is very little trade that we could hope to take from them by any Preference India might give us. Three European countries send imports valued at between two and three millions each, viz. Austria, Belgium, and Germany, most of which trade lies in the small by-ways of commerce ; the United States sends her nothing of account. No considerable gain could accrue to Great Britain from Preference. On the other hand, India does a large and a rapidly expanding export trade with many foreign countries, consisting chiefly of raw materials for manufacture, such as oilseeds, raw jute, raw cotton, and rice. Three-quarters of her seed crop and nearly three- quarters of her cotton goes to the Continent of Europe, and " the Continental demand for these com- modities is important and would be difficult to re- place."^ Not only these markets, but the important Asiatic and American markets for her tropical pro- duce would be exposed to injury, were she to abandon her virtually Free Trade system, and impose taxes upon foreign goods in order to give a Preference to Great Britain. The only method in which a show of fairness to India could obtain would be one which gave her the liberty of imposing a protective tariff on all imported manufactures with a discrimination favourable to Great Britain. Chiming in, as this proposal would, with the sympathies of the people, and possibly with the con- veniences of the public revenue. Protection would be likely to accompany Preference as it does elsewhere, and a huge free market, the largest we possess outside our own confines, would be taken from us.f The grow^th of the Indian export trade has been very great during recent years, and is of the utmost *Ccl. 3,524, page 455. t "There is no doubt," said Sir J. L. Mackay, "that if a preferential policy were adopted which admitted of the establish- ment of protective tariffs by Great Britain, proposals in this direction would be put forward and pressed by Indian manufac- turers. They would claim the same right to protect their manu- factures as the Colonies enjoy, and it would be difficult to offer an opposition to so logical a course " (page 301). (65) importance to Great Britain, not merely as a buyer of Indian goods, but as the creditor of India upon an enormous scale. India's ability to pay her debts and her interest depends chiefly on her exports. Any chang-e of policy which, provoking retaliation, damaged her foreign markets, would therefore recoil heavily upon us. Nor is the fear of retaliation so idle as is sometimes alleged. Though most of the Indian exports to foreign countries are foodstuffs and raw materials, there arc very few in which she enjoys an effective monopoly, and where she would not run a risk of being ousted from markets she possessed by some competitor. In a war of tariffs, to which any adoption of a pre- ferential tariff with Protection against foreigners might lead, it might very well pay a foreign Government, aware of the peculiar nature of the economic bonds be- tween Great Britain and India, to strike a blow at the former through the trade of the latter, even though there were some repercussion from the blow. CHAPTER IV. THE ILLUSION OF A SELF-SUFFICING EMPIRE. The Questions of Fact. Suppose that it appeared possible by some gradual and not too revolutionary tampering- with our policy of free imports to exchange so much of our present foreign trade for Imperial trade that, on the one hand, we substituted two-sided Free Trade within the Empire for one-sided Free Trade wuth the world, while, on the other hand, we could supply all the chief material needs of the population of the Empire from the natural and human resources of the Empire : such a policy, if not finally convincing, would at least be plausible. If, by a little tinkering with tariffs, we could get all the foods and raw materials we require from our Colonies and possessions, upon cheap and reliable terms, while they furnished a full and secure market for all our important manufactures, it is prob- able that no accepted theories of international trade would be allowed to stand in the way of this Imperial experiment. Indeed, if the current of trade running on natural lines were making so fast in the direction of Imperial self-sufficiency that a little fiscal aid might relieve us from our present dependence upon foreigners for supplies which our Colonies were capable of putting in our markets, there might be some disposition to hasten by artificial means the earlier and fuller attain- ment of an ideal of Imperial self-suflficiency. This, at any rate, would be sailing with the tide, and, by an extension of the ''infant industries " argument, might be represented as assisting us to realise more rapidly 66 (67) our " destiny " by removing' a certain inertia of habit which kept our trade in certain outworn and unprofit- able grooves. But what are the facts? Is our inter- Imperial trade so superior in its size and value that we can afford to ig^nore our dependence upon foreign nations? Is it growings so fast in relation to foreign trade that a little fiscal aid will secure Imperial self- sufliciency? Is the predominance of our trade with the self-governing Colonies such that we cannot afford to ignore their request that we should revolutionise our fiscal system in their interests and ours ? The answer to each of these questions is a negative so crushing" and so conclusive that it is dilHcult to be- lieve that any reader who has faced the figures upon which it is based can any more entertain the possibility of realising the economic dream of this Imperialism. The actual relative importance of our British trade with the self-governing Colonies, the other Colonial possessions, and foreign nations is best conveyed by the following diagram (page 68) constructed by Mr. H. Morgan-Browne upon the trade statistics of 1905. It cannot seriously be supposed that any tariff ar- rangement can enable us to dispense with that foreign trade which constitutes more than three-quarters of the aggregate of our oversea trade. Breaking this aggregate of trade into imports and exports, we find that during the quinquennial period 1900-04 the proportion of our imports from foreign countries was 79.2 per cent., from British possessions 20.8 per cent., while the proportion of our exports to foreign countries was 62.7 per cent., to British posses- sions 37.3 per cent.^ To procure the economic self-sulTiciency that is de- sired, we are invited to believe that the Empire, which at present supplies us with a trifle over one-fifth of what we need to buy abroad, can easily and conveniently supply it all, while the Imperial markets, which at pre- sent take less than two-fifths of what we sell, can take and pay for all. Our dependence upon foreign nations for buying and for selling is so much greater than our * Cd. 3,524, pages 208-212. (68) dependence on our Colonies as to render obviously im- practicable any such Imperial self-sufficiency as is sug- gested. To disturb our relations with the customers with whom we do three-quarters of our trade, in order With FoRESGN Countries ^676,000,000. ./<-. C^^"" ^\^ ,cf> »9 #^ l1^ to improve our relations with those that represent the other quarter, would be a manifest act of folly. Why We Buy from Foreigners. We buy three-quarters of our imported goods from foreigners, not because we prefer to deal with foreigners (69) — rather the contrary. Other thini^s — i.e. prices, quaH- ties, distances, reliabiHty of supply — beinj^- equal, wc tend to give a preference to Colonial supplies, a prefer- ence in which community of language and personal relations support the sentiment of the ilag. Wc only buy these goods from foreigners cither because our Colonies do not produce them at all or because the foreign products are better, cheaper, easier of access, more reliable, or in other ways better accommodated to our needs. The common notion that the Colonies could provide most of these goods quite as well and as cheaply is based upon lo'ose thinking", to which it is a sufficient reply to ask, " Why, then, with the sentimental preference just alluded to, do they not provide them now? " No ! It is manifest that if by any sort of fiscal jugglery we could displace this foreign by Colonial trade, we should have to pay more for worse articles. Nor is that all. A nation like ours, depending for its work and life upon the large regular intake of various foods and raw, materials, must be able to rely upon getting them in large, regular, and increasing quanti- ties. This reliance is best established by keeping open full connections with the largest possible variety of sources of supply ; for in this way best do we eliminate the influence o| climatic and other natural or political accidents affecting the supplies. Droughts or diseases cutting off some supply of vegetable or animal product, political troubles or wars stopping industry or stifling export trade, sudden growth of demand for domestic uses absorbing the whole supply ; these and othcF causes may interfere at any time with the supply from some single source. To narrow the sources of supply is evidently to increase the risk. To bind ourselves in any way and to any degree to Canada, Australasia, South Africa, or even to the Em- pire as a whole, for our imported supplies of such essen- tials as cotton, wool, wheat, meat, sugar, so as to reduce our facility of recourse to the foreign markets with which we deal so largely now, would be to in- crease generally the precariousness of our national life. The Fiscal Blue-book (Cd. 1,761) contains a table (70) illustrating- our dependence upon other countries for the first requisite of life — wheat and wheat-flour — dur- ing- the quinquennial period 1898-1902 : — Quantity Per- Mean of centage Sources of Supply. 1S98-1902. Pro- Cwts. portion. British Colonies and Possessions i9>o33,634 19.0 Europe (including Turkey) 8,760,208 8.8 United States r32,3o6,884 62.2 South America ... 9,711,874 9-7 Other Countries ... 290,062 0-3 A comparison with the quinquennial period 187 1-5 shows that the agg^reg^ate averag-e annual imports of wheat had just doubled in the quarter of a century. This means, of course, that, thoug-h during that period there had been a large increase, not merely in the actual quantity, but in the proportion of the supply drawn from the Empire, the average amount of wheat which we had to take from foreign countries had also greatly grown. During the last four years the Imperial supply, especially from Canada, has greatly grow^n, so that the one-fifth of 1898-1902 has grown to over one-third. Nevertheless, when we are regarding the possibility of becoming a self-sufficing Empire, it is to the absolute rather than the relative amount of our dependence upon foreign wheat that we must look. Notwithstanding the great development of Avheat-fields in Canada, Australia, and India, so great has been the growth of our depend- ence upon imported food * that a larger number and even a larger proportion of our population are de- pendent upon foreign wheat for their food supply than was the case a generation ago. * Wheat, Home Production and Imported, percentage. 1885-87. 1890-92. If 95-97. 1900-02. Home Imported 11^ 66-2 29-8 70*2 217 78-3 22 -s 77 '5 * Cd. 1,761, page 108. {7>) Moreover, the gravest of the risks invohed in the wild proposal that we should rely upon the Imperial supply of wheat is often overlooked. The strength of a ehain is determined by its weakest link, the searcity of a food supply by its leanest year. Although in normal years we are receiving large supplies from India, Australia, and New Zealand, we can have no reasonable certainty that one or more of these supplies will not fail us any year. In 1897 no wheat came from Australia and New Zealand, and a very trifling quan- tity was exported from famine-racked India; in 1896 there was nothing from Australia and New Zealand and a short supply from India; in 1903 Australia again had no wheat to send. To invite us, therefore, to rely upon the Empire for our imported wheat is to tie us to Canada alone in a lean year, like 1897, or, more strictly, to Manitoba and the new North-West, for the older provinces send us no wheat. What applies to wheat applies with even greater force to other cereal foods and to meat. Though the Empire is constantly increasing the proportion of its contribution to our meat supply, the growth of our dependence on imported meat is such that the need of foreign supplies is greater than ever. A paper* presented to the Colonial Conference thus exhibits the size of our dependence upon foreign and Imperial supplies of food, drink, and tobacco during the last five years : — Imports of Food, Drink, and Tobacco. 1901. 1902. 1903. Foreign Produce Imperial Produce £ 183,274,000 41,448,000 £ 181,054,000 43.350.000 £ 181,677,000 50,608,000 Total 224,722.000 224,404.000 232,285,000 Percentage of Imperial Produce 18 19 22 *Cd. 3,524, page 234. (72) Imports of Food, Drink, and Tobacco. 1905. [906. Foreign Produce Imperial Produce Total Percentage of Imperial Produce 174,957.000 56,445,000 231,402,000 172,913,000 59,205,000 24 26 179,650,109 58,508,047 232,118,000 ' 238,158,156 24*6 Though these figures show a satisfactory rate of increase during recent years, it remains not the less true that the Colonies are at present only able to supply a little over a quarter of our food demand. The pro- portion of our raw materials supplied by the Empire is slightly higher, viz. 28 per cent, in 1905, while manufactured and semi-manufactured goods are only of Imperial origin to the extent of 11 per cent. A more detailed analysis of this return shows that for our supply of wood and timber, iron ore, cotton, oils, hides, and other materials of our manufactures we are dependent to an overwhelming extent upon imports from foreign countries. Such being the actual condition to-day, the notion that a little effort of pulling together and fiscal co- operation can convert us into a self-sufficing Empire is seen to be chimerical. No Natural Trend Towards Imperial Self- SUFFICIEN'CY. A study of the tendencies of the last half-century makes it evident that the natural play of mutual self- interest is not drawing Great Britain closer to the Colonies so far as volume of trade is concerned. The proportion both of our import and our export trade with our Colonies and other possessions has remained unaltered, though during this period considerable slices of the earth have passed from the position of foreign to British territory. 73) From the tables^ presented to the Conference we have extracted the following list of percentages which establish this important fact. It will be observed that the figures both of imports and of exports bear almost identically the proportion in 1906 which they bore in the first quinquennial period 1855-9. Imports into Great Britain. Per cent, from Per cent, from Foreign Countries. British Possessions. 1854 ... ^^.(. 22.4 1855-9 ... 76.3 23.7 1860-4 71.2 28.8 1865-9 76.0 24.0 1870-4 78.0 22.0 1875-9 77.9 22.1 1880-4 ... 76.5 23-5 1885-9 77.1 22.9 1890-4 77.1 22.9 1895-9 78.4 21.6 1900-4 79.2 20.8 1905 77-3 22.7 1906 76.6 23-4 t Exports from Great Britain. Per cent, to Per cent, to Foreign Countries . British Possessions. 1854 68.6 31-4 1855-9 71.5 28.5 1860-4 72.5 27.5 1865-9 ... 76.7 23-3 1870-4 ... 77-6 22.4 1875-9 71.9 28.1 1880-4 70.6 29.4 1885-9 70.0 30.6 1890-4 71.2 28.8 1895-9 70.6 29.4 1900-4 ... 67.5 32.5 1905 69.7 30-3 1906 71.3 28.7 * <^d. 3,524, pages 207 212. t This table refers to total exports, including re-exports of Colonial and forei^^n prod Lice. Another table (pag e 211), giving Exports of United Kingdom Produce only, does not . alter the effect. The percentao^e to British Possessions was 74 8 in 1854. 33.3 for the first quinquenniun 1 1855-g, and 32.8 for 1 906. (74) Finally, pooling- our import and export trade, we find that the proportion of our foreign to our inter- Imperial trade, as illustrated by the statistics of the last fifteen years, ^ is virtually fixed. Percentage Proportions of 1891. 189^. 1893. 1894. 1895. 1896. 1S97. 1898. Foreign Trade Inter-Imperial Trade 75-5 24-5 75-3 247 75-3 247 74 7 253 24-8 758 24-2 75-4 24-6 75-4 246 1899. 1900. 1501. 1902. 1903. 1904. 1905. Foreign Trade Inter-Imperial rrade ■ 748 25-2 757 24-3 74-8 25-2 74-1 259 737 26-3 733 267 741 259 These statistics establish beyond all question the fact that there exists no drive of economic interests impelling- us to increased dependence on Imperial trade. Now let us ask how it is with that portion of Im- perial trade which we do with the self-governing Colonies. Is our trade with them increasing sO' fast as to give them a stronger claim to dictate, or even to suggest, to us a change of fiscal policy? Total Value of Imports from Self-governin :g Colonies (including Bullion, Specie, and Cape Diamonds) into United Kingdom.! Imports from all Sources. 1891 ;^479, 110,090 IS92 459,928,679 Imports from Self- Governing' Colonies. i.'57,437,6o2 58,320,458 Percentage of Imports from Self- Governing Colonies to total Imports. II. 9 12.6 * Statistical Abstract for the British Empire. Cd. 3,328, page 5. t Constructed from Tables Cd. 3,328, pages 58-9 ; Cd. 3,092, pages 785 204-215. (75) Percentage of Imports from Self- GovxrninK' Imports from Self- Colonics to Imports from all Sources. Governing Colonies, total Imports. 1^93 ;£'445» 135.^84 ;£^59)i35>^^4 i3-2 1894 449,910,527 62,107,522 13.8 1895 468,119,404 66,543,750 14. 1 1896 485,205,766 63,869,559 13.2 1^97 504>305>i69 78,167,643 15.5 1898 533.469,277 80,278,988 15.0 1899 534,412,651 80,455,549^ 15.0^ 1900 566,021,972 68,623,999" 12. I* 1901 568,084,546 68,059,766* 12.0* 1902 565,164,009 73,569,650 13.0 1903 586,950,529 83,820,544 14.3 1904 601,944,352 86,222,925 14.3 1905 623,241,783 97,666,783 15.6 Total \'alue of Exports to Self-goverxixg Colonies from United Kingdom (including Bul- lion AND Specie). Percentage Exports to of Exports Exports to all Countries. Self-Governing to Self- Colonies. Governing Colonies. I89I ;^346,342,509 ;^44,8i5,996 12.9 1892 321,550,856 38,726,842 12. I 1893 310,230,288 37,009,165 II. 9 1894 301,597,467 34,731,167 II-5 1895 317,559,166 43,127,836 13.6 1896 341,551,273 46,949,580 13-7 1897 343,783,677 44,725,938 13.0 1898 346,227,689 44,378,606 12.8 1899 365,025,842 50,231,996 ^Z-7 1900 386,345,793 56,543,137 14.6 I90I 373,879,370 58,920,205 16.0 1902 375,358,985 66,186,854 17.6 1903 399,606,910 65,678,668 16.3 1904 417,318,153 58,688,721 14.2 1905 452,988,046 58,745,996 12.9 Stoppage of South African imports. (76) Although the general tendency as expressed in these figures is towards a slight, though irregular, increase in the relative importance of the trade bonds between Great Britain and the self-governing Colonies, more marked in our import than in our export trade, it cannot be asserted that the part they play in our Im- perial economy is such as tO' entitle them to bring authoritative pressure upon us to revolutionise our fiscal policy either in their interests or in that of the Empire as a whole. These Colonies are not, individually or collectively, in a position to guarantee to supply us with any of those prime articles of food and raw materials, the bulk of which we draw at present from foreign coun- tries ; neither can they show any early probability of such increase of population and demand as will pro- vide a Colonial market equivalent in size, value, or stability to the foreign markets in which at present we sell most of our export goods. Indeed, if we turn to the tendency of the last few- years, we find reason to believe that the self-governing Colonies are less promising markets for our manu- facture than formerly appeared. For during the last five years, while our exports of British produce to foreign countries show a notable expansion, and our exports to India and certain other possessions have advanced considerably, the sales in the self-governing Colonies as a whole are stagnant. When the Premiers of self-governing Colonies urge upon us the adoption of Colonial preferences in order to secure the large and growing markets which they can provide, it is not unnatural that we should point to these figures as indicative that the preferences which they are giving are unable even to secure to us the share of the Colonial markets which we had obtained already. The whole situation, regarded from the standpoint of the interests of British trade, is best summarised in the following Tables, composed out of materials fur- nished to the Conference, setting forth the dimensions of an import and export trade with our Colonies and with Foreign Countries during the five years 1 901-5 : — [77) Import Trade of United Kingdom (1901-05). From 1901. 1902. 1903. Self - governing Colonies India Other Colonies and Possessions Total, British Posses- sions Total, Foreign Countries Total, all Sources ... Percentage, British Possessions Percentage, Self- governing Colonies (to Total from all Sources) ... 60,331.874 27.391.734 416,305,318 521,990,198 59.879.316 28,724,006 63.590.934 32.304.747 17.961,272 18.313. 135 17,775,111 105,684,880 j 106,916,457 ; 113,670,792 421.474,817 528,391,274 II 3 428.929,497 542,600,289 1 1 71 From 1904. I 1505. Self - governing £ £ Colonies 64.905,604 72.105,866 India 36,472,636 36,062,291 Other Colonies and Possessions 18,640,166 19.700.569 Total. British Posses- sions 120,018,406 127,868,726 Total, Foreign Countries 431,020,222 437,151,191 Total, all Sources ... 551,038,628 565,019.917 Percentage, British Possessions 22 23 Percentage, Self- governing Colonies (to Total from all Sources) 1178 127 1 *From Cd. 3,424. pages 234, 239. &.c. (78) Total Exports (Produce of United Kingdom). To 1901. 1902. 1903. Self - governing £ £ £ Colonies .. 52.253,838 60,364.758 59,29^,002 India 34,978,126 32,681,979 34,477,099 Other Colonies and Possessions 17.641,857 16,045,119 17.371.763 Total, British Posses- sions 104,873,821 109,091,856 I'll, 146,864 Total, Foreign Countries 175.148.555 174,332,110 179.653.244 Total, all Destina- tions 280,022,376 283,423,966 290.800,108 Percentage, British Possessions .37 38 38 Percentage, S e 1 f - governing Colonies (to Total from all Sources) 186 212 20-3 To 1904. 1905. Self - governing £ £ Colonies 52,296.678 52.118.574 India 40,641,277 42,996.388 Other Colonies and Possessions 18,999.915 18.322,849 Total, British Posses- sions 1 1 1.937.870 113,437,811 Total, Foreign Countries 188,773,170 216,378,803 Total, all Destina- tions 300,711,040 329,816,614 Percentage, British Possessions 37 34 Percentage, Self- governing Colonies (to Total from all Sources) .73 158 The difference between these figures and those given above for the Self-governing Colonies is due to the fact that the earlier Table included re-exports, imports, and exports of bullion and specie, and diamond imports, all omitted from this Table. (79) If instead of confining;- our attention to exports of British produce and manufacture we include the re- export trade, the fii^urcs indicate a positive decHne of a considerable amount during the last four years, a drop from 66^2 millions in 1902 to 63)2 millions in 1906. The Evidence from Colonial Trade. But our statement would not be complete without some reference to the evidence reg-ardingf the growth of Imperial self-sufficiency afforded by the trade of the Colonies themselves. The question here is not — Is Great Britain buying more largely from and selling more largely to her Colonies? but, Are these Colonies themselves buying a larger proportion of w'hat they need from the Mother Country, and selling a larger proportion of what they have to sell to her? The relative importance of the present dependence of the self-governing Colonies upon Great Britain, the other British possessions, and foreign countries for the imports may best be measured by the following Table (see page 80) presented to the Colonial Conference.* But this dependence on the Mother Country is steadily diminishing, not only for import but for export trade, as the following figures derived from the Abstract of Colonial Trade clearlv indicate. Imports into Colonies, Possessions, and Protectorates. Total Imports Imports from Percentage into United Kingdom from.U. K. Colonies. to Colonies. to Colonies. I89I-2-3 ;£"534»594>ooo ;^' 290,73 1,000 54-3 1894-5-6 518,435,000 270,631,000 52.2 1897-8-9 628,521,000 312,804,000 49-7 1 900- 1 -2 804,725,000 378,322,000 47.01 1903-4-5 931,045,000 423»75->ooo 45-5 * Cd. 3,524, page 321. (8o) .i q_ __ C in in l-l Cl • ■) 00 in 00 < 1 -^ o_ -"S- 't cc 5 On c^" VO* O 10 N M m w -J « c l-H fO t^ t> N M ^ c 3 O O Q c S tc ^ ^ in a. 6 !>. 1 •S 2 ^ CO s t; S '^ o_ w 00 o tS < N 0" N (5\ Tf !/! H a o <«• ^c in m IH M ?■ i ^c!^ M 01 M o ■55 I i u m s 1 < > 1 i '- 1 in CO* q^ in in 00 rn ^ N ro dom. Per Cent. ^ rj N m N 60 , C 2 T3 S C 0^ o_ C 5 ^ ro ro ^ M ^ i ^ (N in 00 N ri_ N t^ o_ . PO ■Si H N . 13 . C ^ C3 U 1 en ^3 S c c<3 Oh • 'c C rt • i 2 rt u '0 u ^Zy u .2 u c .2 'S 03 ralian 3 p (^ ;z; < * Exports FKO.M Colonies, Possessions, AND Protectorates. Total Exports Exports to Percentage from United Kingdom to Colonies. from Colonies. U.K. 1891--3 ^ 585, 23 1, 000 ^^75.79o>ooo 47.0 1S94-5-6 574,010,000 279,813,000 48.7 1897-8-9 697o5i>ooo 334,210,000 47-9 1900-1-2 779,581,000 324,898,000 41.9 1903-4-5 971,312,000 418,504,000 43-1 From the triennial percentag'es here ^Iven it appears that while, as we have seen before, Great Britain's dependence on her Empire for trade is virtually stationary, the dependence of her Empire upon her for trade is rapidly diminishing. Finally, it is relevant to inquire whether the com- mercial interdependence among our Colonies and pos- sessions is growing at a faster pace than their depend- ence upon foreign nations. Apart from their relations with the Mother Country, is the economic solidarity of the Empire increasing? Here such evidence as official statistics afford points the same lesson as the statistics relating to trade between Colonies and Mother Country. Though a large actual increase of trade is taking place between the different Colonies and possessions, this increase is considerably smaller than that of their foreign trade. The Colonies and possessions are therefore, like Great Britain herself, becoming more, not less, dependent upon foreign countries for their profitable trade. This tendency Is proved by the following table, com- piled from tables in the Statistical Abstract* : — Imports into Colonies and Possessions from Foreign Countries and other British Possessions (excluding Great Britain). 1890. 1895. 1900. 1901. Foreign Colonies t52.305.000 34,697,000 52,660,000 28,259,000 86,654,000 47,832,000 90,643,000 49,695.000 * Cd t Fig 3,328, pages Inures for 189 1. 79 and 35. (82) Foreign Colonies 1902. 96,420,000 55,159,000 109,822,000 63,424,000 1904. 106,187,000 62,151,000 108,773,000 57,143,000 Summary of Evidenxe. To suppose that such clear, strong, persistent cur- rents of self-hiterest as are hidicated here can be safely, advantageously, or even possibly, reversed by tariff or other legislation is preposterous. An attempt to realise by interference with the free current of trade the vision of a self-sufficing Empire must issue in grievous loss and in bitter disappoint- ment. For all such measures, by artificial restriction and direction of industrial powers, must reduce the production of wealth both for Great Britain and for the Colonies ; there would be a smaller surplus for over- sea trade with the rest of the Empire, and the product and the profit of this trade would be diminished. Ex- perience would speedily enforce the lesson of the logic of Free Trade. The territorial magnitude of the Em- pire is the only fact which gives any passing plausi- bility to the notion of economic self-sufficiency. When from territory, which is irrelevant, we turn to popula- tion and industrial development, the really relevant facts, the impracticability of the project begins to be evident, and the study of the actual course of com- merce as here set forth exhibits its final and complete futility. If we were foolish enough to try tinkering with preferential taxes and bounties for Imperial trade, we might succeed, at great damage and risk to our gen- eral trade, in slightly abating the force and altering the direction of the trade currents so as to divert a slightly increased share of a diminished aggregate of trade to the Colonies, but no amount of legislation on prefer- ential lines would bring us within measurable distance of becoming a self-sufficing Empire. CHAPTER V. WHAT WE GI\'E AND WHAT WE GET. Now that Mr. Dcakin and Dr. Jameson urge upon the British nation Colonial Preference as a just claim in return for the Preference they have given, a business quid pro quo, a plain statement of the actual state of our debit and credit account with the self-governing- Colonies becomes necessary. However distasteful it may appear to reduce the benefits and obligations of the Mother Country and the children to this cold cal- culus, the demands of these pushful Colonial states- men leave us no choice. Now that Colonial Preferences no longer figure as a gift horse, but frankly assume the character of goods left at our door for inspection, approval, and early payment, it becomes our duty to examine their value. We have therefore taken, in order, the different Preferential Tariffs of Canada, Australia, Xew Zea- land, and South Africa and tried to ascertain what they are worth to us. Put on any reasonable business footing the " gift " of the Colonial Preferences does not mean any con- siderable accession to our national trade. It is not enough to justify the demand that we should give up the Free Trade policy under which 95 per cent, of the population of our Empire lives, and establish Pro- tection, so as to give a return gift of Preference to the Colonies, who represent 5 per cent, of the Empire. But another higlily relevant question awaits an answer. Are we actually in the position of a country receiving a benefit from other countries and giving nothing in return? We think not. Mr. Deakin, Dr. 83 (84) Jameson, and their supporters in this country may be invited to consider more closely than they appear to have done hitherto the solid benefits which we bestow upon their Colonies now. Firstly. — We give them a larg^e free market in re- turn for a smaller protected market. All the food and raw materials they have to sell, with the excep- tion of tobacco, sugar, and wine, enter tariff-free not only the British Isles but India and all our Crown Colonies. In return for this free market, which ab- sorbs nearly two-thirds of the total value of the Colonial exports, they impose protective duties upon three- quarters of the manufactured goods which enter their ports. A return of the Board of Trade, April, 1907 (133), shows that of a total import trade from the self- governing Colonies into Great Britain, amounting in value to ;^88,462,898, only ;^i 38,962 was subject to duty. On the other hand, out of a total export trade from Great Britain to the same Colonies, amounting in value to ;£'63,o97,ooo, no less than ;£744,963,ooo was taxed on entrance. Many British manufactures are virtually denied access to the Colonies by means of a tariff, which, though lower than that placed on foreign goods, is too high for profitable entrance. Nor should it be forgotten that, though foreign goods are allowed entrance to our shores upon the same free terms with Colonial goods, the latter do enjoy what may be termed a sentimental preference, which, could it be measured in ;^ s. d., would prob- ably be worth as much as the formal Preferences secured under Colonial tariffs. Imperial sentiment has, during the last two decades, notoriously influ- enced British consumers ; given anything like equality of price and quality. Colonial wares have been pre- ferred to foreign, and with regard to public contracts and purchases the practice has become a policy. A free British and Imperial market for all sorts of Colonial produce with this sentimental favour is worth more to the Colonics than a restricted Colonial market, (85) from which all genuine competition with Colonial manu- factures is excluded, is' worth to us. Secondly. — The British taxpayer gives the Colonies a virtually gratuitous defence for their territory and their trade. At the time of the Colonial Conference of 1902 the relative expenditure of Great Britain and the Colonies upon the military and naval defence of the Empire was expressed in the following table (see page 86).^ After the Conference of 1902 several Colonial (Governments increased their naval g'rant, and the present naval subsidies! are as follows : — Australia ... ... ... ... ;£720o,ooo New Zealand ... ... ... 40,000 Cape Colony ... ... ... ... 50,000 Xatal ... ... ... ... ... 35,000 Newfoundland ... ... ... 3,000 Total ... ... ... ..._;^328,ooo Canada has recently taken over from the Imperial Government the Halifax and Esquimalt Dockyards, defraying- the cost of their maintenance, and has built a cruiser for Canadian use. With the exception of some further slig-ht expendi- ture on docks, partly for naval use, and on patrolling" local waters, this small amount represents all the con- tribution which can be reg^arded as made to the naval defence of the Empire by the Colonies. No recent figures of the military expenditure of the Colonies are available. But at present no Colony maintains any force available for any other purpose than Colonial defence. There is no Colonial military contribution to the expenses of imperial defence cor- responding- to the little sums voted by the Colonial Governments to the Imperial Navy. Almost the entire expense of defending the Empire falls upon the people of the United King-dom. * Cd. 1,299, page 42. t Cd. 3,525, page 130. (86) w H p^ n Pu P, a, W W ffi hJ C/5 -> H <: C^ n w z < >, « < H and y per of tion. «* -i|^ -;^ «|-t nl-^i TJ 0< o o inmcTiO\M o tj-w m M MM 0^ Naval Militar head popula c« 0^ cT) ^^ «n ^ rd J>- iN-oo* o --t- in o" 6" n ci in ^'^ ^ "^ ^ ^ NfOw 01 0) w ro o "^ • Ki-# «!-* rtl-l- rt|-+ rt|C. rtlCl r-^Il r-|71 t"V o -o t-i o o oo pooo o in iH a\oo o m M M M M J3 rt-^ ^ .fi — ' • Ti- NO(N(NMOmONN'^ c» ^ P M ^11 ^ o ooooooooooo o o foo 0^0 inNvo N r^-^tH a> s^ >^ o in o a\ Ttoo yD fo N t^ tH t^ m ^b o inoq "9. ^„ N! «>• f^ q;> 't '^r '^ in n! nl .•S s ^ o food incToo" inNcxT int-Cci! VD ro 00 rovo MM O O M 0^ ro in M M M CO N in H N '■ J -M a ' '■ a '. '. (i'fi : '■ '■ : i tdo'^vhc-.ojJS^ _. u ^ ^ > ac/) ^ H 12; u ^ c r! D (87) Moreover, in reckoning the current expenditure which the British taxpayers incur upon behalf of Im- perial defence, the interest upon the vast debt, in- curred largely in the making and the defence of the Empire, must not be forgotten. The entire burden of the interest upon this debt of nearly ;£^8oo, 000,000 and of the annual sinking funds set up for its repay- ment is borne by the people of Great Britain : the Colo- nies contribute not a penny to this Imperial outlay. Thirdly. — The British connection, fortified by the recent admission of Colonial stocks as trust securities, has furnished a full flow of cheap capital for the de- velopment of Colonial resources. The magnitude and importance of this service of the Mother Country have never received adequate recognition. The Statist, in two recent articles,^ pre- sents a remarkable estimate of the value of this British preference on investments. In the first place, the Imperial connection has influenced the minds of British investors. "It is true that Great Britain has found a very large amount of capital for foreign countries and has greatly contributed to the prosperity of these countries, but we have charged foreign countries rates of interest much higher than we have charged the Colonies. Moreover, we have not been willing to lend to foreign countries any very large amount of money on the security of Government bonds. Our investors prefer the bonds and stocks of railway and industrial securities rather than Government securi- ties. . . . But they have made an important ex- ception as regards the Colonies and India, holding that any State within the British Empire would never fail to meet her obligations." In 1900 this preference was strengthened by the admission of Colonial Government securities to the list of British trustee investments. The value of these Colonial and Indian securities is estimated at over ;£'5 1 7,000,000. *' But the advantage of the low rate of interest is not * April 27 and May 4, 1907. { 88 ) confined to the trustee list of Colonial and Indian securities ; it extends to the non-trustee securities of the Colonial and Indian Governments, and also to the debenture and preference stocks of Colonial railways. The yields afforded upon British capital invested in Colonial land, mortg"ag"e, industrial, and mining com- panies are, of course, governed by the success of the various enterprises ; but the volume of capital invested in such undertakings is greatly swollen by the greater willingness of British investors to place their money in the Colonies and India than in foreign countries." The aggregate of British investments in Colonial and Indian Government, corporation, and railway securities is estimated by the Siaiist at ;^9i4, 758,000, and when to this sum is added an estimate for banking, land, mortgage, industrial, and mining companies the gigantic figure of ;£j" 1,3 00, 000, 000 is reached. What is the worth of this British preference? " Excluding the capital placed in industrial enterprises, the preference ivhich the Colonies enjoy in the matter of interest is at least i per cent, compared with the interest we ask from foreign countries which apparently offer equally good security, and in which our investors are willing to place capital." Here is a " gift " worth at least ;^io,ooo,ooo per annum upon the most generous estimate for non- preferred " industrials." Or, if we confine our attentio-n to the Colonies, omitting India, the following statement will indicate the size of this preference : — Colonial and Provincial Government Securities ;^36i,925,ooo Transvaal Government Loan ... 40,000,000 Colonial Corporation Stocks ... 39,438,000 Colonial Railroads ... ... ... 194,522,000 ;£"63 5^885, 000 Here is an Imperial service worth a good deal more than ;^6,ooo,ooo a year. Does anyone— :Mr. Deakin, for example — seriously (89) pretend that the value of the existing Colonial prefer- ences, or of any preferences the Colonies are able to give us, amounts to anything like this sum? To balance this service alone it is necessary to show that the preferential tariffs have procured an additional quantity of trade for British exporters which yields a net profit of six millions. As we have seen, the actual sum which can reasonably be accredited to this account falls very far below this amount. The public debt of Australia and New Zealand in June, 1906, amounted to ;^300, 6 19,000, and much more than half of this was furnished by Great Britain. Can Mr. Deakin and Sir J. Ward show us any prospect of a scale of preferences to British imports into Australasia worth, let us say, ;^7i,50o,ooo in net profits? A candid consideration of the facts discloses the result that any fair debit and credit account between the Mother Country and the Colonies exhibits a large deficit on the Colonial side. Indeed, it is tolerably certain that any one of the three great items of Imperial service to which attention has been drawn — Markets, Imperial Defence, and Preferential Loans — greatly outweighs the net profit of the trade secured to us by present or prospective pre- ferential tariffs. CHAPTER VI. COSTS AND RISKS OF PREFERENCE. It involves Protection. Suppose that a British Government, accepting the view of fiscal Imperialists that it is our paramount duty to bind the self-governing- Colonies to the Mother Country by a system of preferences, were willing to meet each Colonial preference with a corresponding preference on Colonial produce brought into Great Britain, what would be the political and economic con- sequences? I. The first result would be the substitution of a protective system for our present system of free imports. The notion that any sort of q^iiid pro quo could be given to the Colonies by a mere abatement or remission of the duties on existing dutiable imports, i.e., alcohol, tobacco, tea, coffee, &c., does not deserve serious con- sideration. Though Dr. Jameson laboured the point before the Conference, and a resolution* in favour of it was carried by a majority (Botha dissenting and Laurier absent), it is quite evident that any such pro- posal would only be regarded as the " assertion of a principle," a thin edge of the preferential wedge, not as a serious contribution towards a genuine preferential system. Though certain other British possessions — India and Ceylon, West Indies and British Guiana — might stand * Cd. 3,523, page 440. 90 (9-) to gain somethlngf substantial by a reduction or re- mission on tea, coffee, cocoa, and sugar, the present or prospective contribution of the self-governing Colonies towards the dutiable imports is too trivial for any such result to ensue. These dutiable imports in 190O were valued as follows : — From Canada ••• £iS,3^8 ,, Australia 106,537 ,, New Zealand ... 163 ,, South Africa ... 16,894 The notion that a reduction of is. a pound on to- bacco could stimulate a valuable import trade from the Transvaal and Natal, or that a large trade in Cape wines could be created by preference, is simply puerile. The only article at present taxable which forms the basis of any considerable trade is Australian wine. Taking the existing- and proposed preferences on their merits, such a British preference w^ould give most to Australia, whose preference gives us least, and least to Canada, whose preference gives us most. The idea that our existing Customs duties could be utilised as a basis of Colonial preference must therefore be dis- missed at once. Duties must be imposed upon classes of imports which at present come in free, if any real preference is to be given. These imports must be goods which bulk largely in Colonial trade. If the self-governing countries were tropical, it might be possible to find articles upon which further preference might be given without protection of British industries. New duties might be put upon foodstuffs and raw materials which, though raising prices to British consumers, did not in fact " protect " any British industry. But an inspection of the large im- ports from self-governing Colonies shows this to be impracticable, for these consist of articles which com- pete directly with articles produced in Great Britain. In order to give a real preference it is necessary to tax foods and raw materials which are produced in Great Britain. (92) The following table, supplied by INIr. Asquith (May 13th) to the House of Commons, establishes this fact : — Imports of From Self- From all Governing British Colonies. Possessions. Million £ Million £. Food, Drink, and Tobacco ... 33 58 Raw Materials and Articles mainly unmanufactured ... 2-~A 5^ x\rticles wholly or mainly manufactured (including- a small quantity of unclassi- fied articles and Parcels Post) s'A i6>^ 71 i26>^ Now, our tariff reformers have generally admitted with Mr. Chamberlain that, in order to give a prefer- ence to the Colonies, it is necessary to tax food. They also admit that Incidentally this brings protection to British farmers, though sometimes, with Mr. Balfour, they urge that a duty on foreign corn, though it may protect British farmers, is not Protection, because its motive is to give a preference. But it is evident that any duty which, in fact, protects, is a protective duty, even if its prime object be revenue or preference. Therefore, the admission that taxes on foods, which cannot be offset by excise on home produce, are neces- sary to give Colonial preference, is an admission that a protective system is involved. Admitting that foreign foods must be taxed, Pre- ferentialists have usually denied that preference in- volves taxing raw materials. This denial is based on the belief that though they may be able to persuade ignorant consumers that prices will not be raised by putting duties on foreign goods, they will not be able to persuade British manufacturers that taxes on foreign supplies of raw materials will not raise their costs of production. But any scheme of British preference to imports from the self-governing Colonies, which is considerable (93) in value and even approximately fair in its distribution, as between the different Colonies, must involve taxation of foreig'n raw materials and protection of British pro- duction. Here it may be pointed out how artificial is the dis- tinction between foods and raw materials of industry. Most of the important foods which enter as imports rank, either directly or indirectly, as raw materials in some productive industry in this country. Statistics of employment show a rapid rise in the importance of food trades of the manufacturing- order, especially in confectionery, jams, pickles, mineral waters : besides these there are the great milling, brewing, and distil- ling industries, and the large number of productive and distributive trades dependent upon these. If we adopted a system of preferential duties which made no provision for India and the Crown Colonies, and confined themselves to the foods from self-govern- ing Colonies, we should still be taxing the raw' mate- rials of important British industries. Taxes on cereals would tax the feeding-stuffs for farmers, the raw mate- rials for brewers, millers, bakers, and confectioners : taxes on cattle and meat would tax the materials of graziers, butchers, hotels and restaurants, and the pre- served-meat trades, and, not less important, the tanning and leather manufactures ; even taxes on butter and fruit w'ould place a further burden on the confectionery trades. Thus, the inevitable effect of preferential duties in- volving taxation of foreign foods is to tax the raw- materials of many British industries. Xot less damag- ing would be the effect of these food taxes in raising food prices, and thus either damaging the efficiency of labour or causing a rise in money-wages and cost of production to meet this increase of food prices. Taxation or Raw Materials of Maxit-actire Necessary. But a satisfactory system of preferential duties could not rest on food alone : taxation of other raw- materials of our manufactures would be necessary. For (94) food preference would give nothing- to South Africa, while it would unduly favour Canada as compared with the Australasian Colonies, and New Zealand as com- pared with Australia. This may be seen from the following table :* — Food Imports into U.K. from Self-Governing Colonies. Animals, Living, Meats. Fish. Butter. Cheese. FOR Food. i i £ I £ Australia 1.535.377 2.307.835 New Zealand 3.535,377 1,467.628 203,344 Canada 2,536,724 3.683.599 706,331 ; 1.428,494 : 4,804,172 Newfoundland — — 210,028 j Cape Colony — — . — Natal — ■ — ■ — — Wheat Lard. AND Flour. Fruit. Totals. i i I / Australia 4,291,027 252.345 8.386,584 New Zealand — 119,160 267 {5.325.776 Canada 641.951 3,065,941 747.956 17.615,164 Newfoundland 210,028 Cape Colony — — — — Natal — 6,568 6.568 This table proves the truth of Mr. Asquith's con- tention at the Conference, " that you cannot possibly give a preference which shall be anything like an even- handed preference as between the different Colonies of the Empire unless you include in it raw materials as well as food, "f In order to give South Africa any show at all it would be necessary to tax wool, hides and skins, feathers, and perhaps copper ore. The tax on wool and upon hides will be essential, not merely for South Africa, but in order to secure something like equality ^" Constructed from Cd. 3,328, pp. 65, 56. t Page 321. (95) of treatment for Australia and Canada. To j^ive any- thinq- to Newfoundland a tax on oil would be necessary. Thus, Preference seems inevitably to land us in duties upon foods and raw materials, and a protective tariff of a particularly injurious sort, in that it hampers a number of British industries by taxing- important materials. It is protective because it imposes taxes upon foreign foods and materials which are also produced in this country, and upon which an excise would be impractic- able. But it is a particularly bad species of Protection, erring against every canon of "scientific tariffs." A *' scientific tariff " lets in free absolutely raw materials, or, if they compete with the home agricultural and mining industries, imposes a relatively low duty : as the imports contain a larger element of labour, and arrive in a more finished shape, the tariff is higher. Here, in the name of Preference, we protect against raw materials, while we let in free completely manu- factured goods. Is it not inevitable that if we once introduced this " preferential " protection, it would yield place to the more logical or scientific sort? The more astute Tariff Reformers in this country see this clearly. They design to utilise the " Imperialist " feeling- in order to drag in by a fortiori reasoning a full protective system. They are aware that Colonial preferences are, and can be, worth very little, and that the notion of a self-sufficing Empire is baseless. But they recognise that if Great Britain could once be in- duced to put on protective duties against foreign foods and raw materials, In order to give a preference to our Colonies, it would be easy to force the logic of pro- tecting British manufactures against German and American competition. Preferexce Involves Xew Taxes ox the Colonies. We saw that in each of the Colonies preference was carefully subordinated to protection. Would it be different here? We saw that Colonial preference was brought about In most instances not by remissions to (96) British imports, but by penalising foreign imports. It may seem to Canadians a good thing if we let in their produce free as now, and simply put a duty upon foreign produce. But it could not work this way, at any rate where Colonial imports are raw material for British industries. This issue was put forcibly by Mr. Harold Cox in a letter to the Morning Post: — " If you are going to tax the raw material of the English miller, how are you going to make matters square between him and his Canadian rival? Is Canadian flour to come in without a tax, while the material used by the British miller (i.e. foreign wheat) is to be taxed? ""^ Out of this dilemma there is only one escape — taxa- tion of Colonial produce. The Mornuig Post makes the following reply to Mr. Cox : — " Mr. Harold Cox was able to make a debating point by assuming that Tariff Reformers intend to admit Colonial produce duty-free. It ought to be too late by this time for misunderstanding on this score. If Tariff Reform is to be a means of solving the revenue difficulty, it will not he possible to refrain from making Colonial produce dutiable, although at a lower rate than the foreign produce which competes with it."t The words we place in italics deserve to be set alongside of Mr. Chamberlain's famous admission, that in order to give Imperial preference it is necessary to tax food. It was supposed that this merely meant that a tax must be put on foreign foods. It now appears that another tax, though a lower one, must be put upon Colonial foods. In other words, we are to have a reeular protective tariff with a maximum and a minimum, a general and a preferential tariff. The Agricultural Committee of the Tariff Commission have been obliging enough to de- velop this scheme, and have even suggested the follow- ing scale of duties : — * June I. 1907. + Mornijtg Post, June 4, 1907. (97) General Tariff. Prefereniiai. Tarikk. Wheat Barley, oats, rye, maize, etc. Wheaten and other flour and meal ... Animals and meat, including bacon Dairy produce, in- cluding, poultry and eggs Market garden pro- duce, including potatoes and hops Hay and straw ... 6d. per cwt. (or about 3d. per cwt. (or about 2S. per qr.). is. per qr.). Duties equivalent to Duties equivalent to those on wheat. those on wheat. IS. 3d. per cwt. j General level to be 5 per cent. j'Specific duties equiva-' , lent in general to from 5 per cent, to 10 per cent, ad vaL, though in particular cases some duties^, when calculated! may be found to be lower and in others rather higher than these limits. Subject to negotiations with the Colonies. Commenting- upon this tariff proposal, a writer in a leading trade journal^ remarks : " Under this scheme the proportion of our imports subject to duty from the self-governing Colonies is considerably increased. From Canada some 73 per cent, of our imports would be subject to duty, from Australia 33 per cent., and from New Zealand 41 per cent., but from the Cape and Natal only 0.2 per cent., and from Newfoundland only 0.4 per cent." We commend to our Colonial Preferentialists these proposals of their Imperialist friends in this country. When Australians realise that the adoption of Mr. Deakin's proposal by Great Britain will mean that Australian wheat and wool, which now enter free, will have to pay a tax, we doubt whether they will feel particularly grateful. Nor will Sir W. Laurier face his farmers with confidence when he has to tell them that their wheat has got to pay a tax on entering the British market. Not only must Canadian wheat pay a tax, but Canadian flour must pay a higher tax. * Commercial Intelligence, April 17, 1907. ( 98 ) Do our Colonial Preferentialists clearly recognise that the acceptance of this " offer " involves the im- position of duties upon all their produce which now comes in free, and have they calculated that it is worth their while to bear a tax, which they at any rate be- lieve falls on them, in order that foreign competitors may pay a higher tax? Where a protective tariff already exists it is technic- ally possible to give a preference which has the appear- ance of a gift, by lowering existing duties in favour of the preferred country, though the actual tendency is to raise the duties on the non-preferred countries. Where, as in the case of Great Britain, a protective tariff does not exist, preference can only be given by placing a tax upon the countries you desire to favour and a higher tax upon the others. In order to give preference without positively handicapping home industries you must protect. Tariffs, general and preferential, upon foods and raw materials will necessarily involve a tariff upon manufactured imports. It would indeed be absurd to place taxes upon raw materials and real wages, which must have the effect of increasing the costs of production of our manufactures and to refuse an equal measure of protection to the latter. Thus we perceive that the least measure of prefer- ence on our part involves us by inevitable logic in a complete abandonment of our free import policy. Preference Raises Prices. It would not be necessary to do more than state the tolerably obvious proposition that Colonial preference on food and raw materials will raise their price to the British consumer if it were not for the extraordinary assumption of Messrs. Deakin,^ Ward,t and LyneJ that the stimulus given by preference to Colonial pro- duction will enable the Colonies to supply all our needs as cheaply as they are now supplied. '* It is true that three-quarters of your entire supply of certain neces- * Page 233. t Page 269. + Page 326. ( 99 ) sary foods and materials is drawn from foreign countries, and only a quarter grown at home or im- ported from the Colonies, but the result of Colonial preference will be so to stimulate the flow of population to these Colonies and so to develop their agricultural and other resources, that in a very short time they will supply all that you get from foreign countries and as cheaply. " You will have your free food and your free materials as before, but from inside the Empire in- stead of from without." Thus runs the argument. This assumption seems to be that a preferential duty will in a few years' time stop the influx of foreign wheat, wool, meat, &c. , and substitute Colonial pro- duce. To the quite pertinent objection, " If the Colonies can put in all the wheat and wool we need as cheaply as the foreig-ner, why not do so without a preference? " the usual answer is : *' They will do so if only you stimulate them and guarantee them a monopoly of your market, a monopoly which cannot be abused, for inside the Empire there is ample competition." This answer is, of course, wholly inadequate. The surplus population of Europe and its surplus capital must be presumed largely to flow into the United States, Arg-entina, and other foreig"n countries, be- cause by going there it can find a more profitable market in Great Britain and elsewhere for the agri- cultural and mining- wealth it helps to produce, than by going into Australia and Canada. How can a British preference for Colonial produce divert this flow from the United States and Argentina into Canada and Australia? Only by raising the rates of profit on investments and the wages of labour in those Colonies. This can only be done by raising the prices of the Cana- dian or Australian produce in the British market, for otherwise how can the capital and labour be got to develop land which it does not pay to develop now ? The only conceivable efficient cause of the great Colonial development Mr. Deakin and others are seek- ing to promote is higher prices for Colonial produce in the British market. And if for Colonial produce, then ( loo) for the entire supply, British, Colonial, and foreign, so far as any foreign is still allowed to enter. The notion that the Colonies can be stimulated or enabled to develop more industry and put more sup- plies in our market by any other stimulus than a rise of prices is self-contradictory. Even if preference were accorded by leaving- Colonial produce duty-free, as now, and putting a duty only on foreign produce, the price of the entire supply to British consumers must rise, or else no force is brought to bear to stimulate Colonial production. A fortiori is this true when the preference takes the form of taxing Colonial as well as, though not as much as, foreign produce. If our Fiscal Reformers had their way and put is. on Colonial wheat, 2s. on foreign, who does Mr. Deakin or Sir J. Ward think would pay this shilling, the English con- sumer or the Colonial producer? If the latter (the orthodox Protectionist's assump- tion), how is the growth of Colonial wheat to be stimulated by lowering the price the growers get by IS. per quarter? If the former pays, what becomes of the argument that preference will not raise prices for the British working-man? The alternative sometimes suggested, that the duty will '* somehow " come out of middlemen, freight or other charges, is based upon a vague and utterly erroneous notion about the services rendered in the carriage and distribution of produce and about the de- termination of the prices for these services. A preference, to be of any worth in developing the Empire and displacing foreign by Colonial produce, must raise the price paid for this produce by con- sumers to producers. The simple fact, of course, is this : We buy a great deal of wheat from Russia, Argentina, Austria- Hungary, much wool from Egypt, South America, meat from the United States, Sec, because we can get it a little cheaper or a little better than if we got it all from the Empire. If the effect of a preference Is '* some- how " to compel us to substitute Colonial produce for this foreign produce, it can only mean the substitution of a little dearer or a little worse article for a little ( loi ) cheaper or a little better. The object of the tax is to do this; and, so far as it operates at all effectively, it does it. Only so far as the consumer is made to pay is the preference an operative force at all. Intkrference with Colonial Liberties. Preference has so far been in a fluid and experi- mental stag"e : each Colony has retained and exercised complete freedom to shift its tariff and its preference as often as it likes. It has been simply a freewill offering to the Mother Country or to a sister Colony. But so soon as a Colonial preference is made the basis of a definite bargain with Great Britain, and the several preferences of the Colonies and the Mother Country are erected into an Imperial Tariff system, designed to secure a growing unity and economic self-sufficiency for the Empire, this freedom of each Colony to chop and change its tariff according to the policy of each changing Government, or the passing exigencies of Colonial finance, cannot be retained. If tariff systems are to be arranged so as to secure to the Colonies a firm, full hold upon the British market for their foods and raw materials, and to secure to British manufac- turers a regular, sufficient outlet for their surplus goods in Colonial markets, each party must be able to de- velop its agriculture and lay down its plant with some reasonable assurance that the tariffs which are to secure the market for their produce shall not suddenly be altered to their detriment. This applies not merely to the relations between Great Britain and the Colonies, but to the inter-Colonial relations. If Great Britain had specifically engaged to give a substantial preference upon Canadian wheat and Aus- tralian wool, in return for a valid preference upon her textiles and her metal manufactures, she must require some assurance that Canadian or Australian manu- factures shall not, by raising their protective tariffs, damage or cancel the preference. Each part of the Empire would have a vested interest in the tariffs of the other parts. Not only must not the formal preferences in the several tariffs be withdrawn or altered without ( I02 ) the consent of the several parties interested in them, but no chang-e in the protective portions of the tariff, no creation of new intermediate tariffs, no special com- mercial treaty with a foreign country, no system of bounties to home producers, could be permissible with- out Imperial sanction. The Colonies would find that not only the interests of Great Britain herself, but of India and of the various Crown Colonies, had to be carefully weighed whenever, for reasons protective or financial, they wished to make alterations in their tariff. The absolute control over their finances which they have hitherto possessed would thus be grievously cur- tailed. Depending, as they all do, for their public in- come upon Customs to a far larger extent than Great Britain, they would find the loss of fiscal freedom and elasticity involved a corresponding loss of liberty in the administration of their Government. If Canadian preference had been secured by express agreement with Great Britain, receiving a definite ([iiid pro quo, do Sir W. Laurier and Mr. Fielding sup- pose for one moment that they would have been free to cut down in their 1904 Budget the preference on British cloth for the benefit of Canadian woollen mills, or that they could qualify the preference on British rails by bounties to Canadian companies? In the Report of the Conference the resolutions of the Colonial representatives, affirming the desirability of preferential trade and urging this policy upon the Imperial Government, are followed by a resolution upon Commercial Relations to the effect that " this Confer- ence, recognising the importance of promoting greater freedom and fuller development of commercial inter- course within the Empire, believes that their object may be best secured by leaving to each part of the Empire liberty of action in selecting the most suitable means of attaining this, having regard to its own special conditions and requirements," &:c. The considerations we have named show that any effective system of Imperial preference involves less liberty of action for the several parts of the Empire, since it precludes them from determining their tariff ( I03 ) policy In the future with excUisive regard to their "own special conditions and requirements." Those who know that complete practical local in- dependence has been the secret of the success of the British Colonial system will recognise the disintegrative influence which will be introduced by the attempt to establish any sort of Imperial tariff arrangement. A Disruptive Force i\ the Empire. An Imperial system of tariff preferences w-ould be a disruptive element in the Empire, arousing feelings of jealousy among the several Colonies and antagon- ism on the part of the self-governing Colonies as a body against Great Britain. it is impossible to work out the scheme of a British preferential tariff which would do even-handed justice to the different Colonies, still more one which would do justice to the various important interests within each Colony. A preference on food imports, as we saw, W'ould do virtually nothing for South Africa, while the benefit would be distributed very unequally in the case of the other Colonies. If, on the other hand, we included the leading raw^ materials under the prefer- ential treatment, we should be driven to protect our manufactures against the new stress of foreign com- petition brought about by the enhanced prices of their raw materials. In other words, here, as in the Colonies, preference would be linked to protection, and the protective motives would prevail over the preferential, so that the scale of preferences would be regulated, not by considerations of the equitable treatment of the several Colonies, but by the needs or the political " pull " of the home Industries affected by the preferences. Neither in theory nor in practice could the British preferences be weighted so as to give advantages to the different Colonies in proportion either to their popu- lation or their trade, or to the preferences which they accord to our imports. Even under our present equal treatment incipient antagonisms have disclosed them- selves, based upon some real divergence of immediate interests. After the Boer War the efforts made to in- (io4) duce British colonisation of South Africa aroused con- siderable ill-feelings in Australia and Canada, and the present boom of Canadian development which draws into that country the lion's share of our migrating population and capital evidently militates against the development of Australia. These several countries are naturally concerned far more deeply about their own prosperity than about that of other sections of the Empire. At present, how- ever, the jealousy with which Australia eyes the ad- vance of Canada cannot beget a sense of grievance either against the sister Dominion or against the Motherland, for Great Britain does not subsidise Canadian immigration or investments at the expense of Australia. If, however, the interests of the new British protective system, or the claim of a heavy Canadian preference, or the Imperial importance of establishing securely the great new grain route from the North- west, were to involve the granting of a larger or more advantageous preference to Canada than to Australia or New Zealand, a sense of grievance would inevitably be generated in the latter. Each "injured" Colony would be compelled by the clamour of its aggrieved interests to demand some readjustment of Imperial preference, while in the meantime the trade relations between the competing Colonies would suffer. An Imperial preferential system, based, as it must be, upon a delicate adjustment of more or less con- flicting interests, must be subject to frequent revision with infinite bargaining. Each party must carefully scrutinise each charge, so as to see that the new tariff does not go against it, and that either the Mother Country or one of its sisters does not gain at its ex- pense. So likewise the several members of the Cana- dian, Australian, and South African group will be con- stantly liable to quarrel among themselves over the share of the British preference which falls to them respectively, the disruptive principle extending thus not only to the Colonial groups but to the internal rela- tions within each group. Hitherto there has never been close scrutiny into the business aspect of our relations with the several (■05) Colonies. We have never kept an exact credit and debit account with them. An Imperial preferential system which would put the Empire on a business foot- ing; would involve such scrutiny, which, as Mr. Churchill recognised," would not be likely to confine itself to balances of tariff. " It will stray further, I think, and it will examine the contributions which the self- governing Colonies make to the general cost of Im- perial defence, and will contrast those contributions with a severe and an almost harsh exactitude with the great charges borne by the Mother Country." To substitute for the bond of sentiment and of occa- sional voluntary services, which has hitherto subsisted, a rigorous system of legal monetary agreements is the surest possible method of impairing that mutual good- will which is the virtue of the British Empire. There is no more certain source of dissension among the members of a family than the common conduct of a profitable family business, however carefully the deed of partnership or trust be drawn up. The effect of an Imperial partnership for profit along the lines proposed would be, not merely to promote suspicions and jealou- sies among the partners, but to make dangerous breaches between the self-governing Colonies as an aggregate and Great Britain. In any Imperial settle- ment and readjustment of the tariff system the voice of Great Britain must overrule the voices of these Colo- nies. For Great Britain, bearing on her shoulders the destinies of India and the Crown Colonies, Posses- sions, and Protectorates, could never consent to a method of determining tariff changes which gave her a voting power equal to that of Canada or Australia. Whether trade or population or any other basis of representation is taken, the British representatives in an Imperial Tariff Conference must be able to out- vote the united representatives of the self-governing Colonies when an issue arose dividing them. The inevitable effect of one or two keen conflicts, in which the united Colonies were overborne by the Government of the Mother Country, would be to arouse a strong ■^ Cd. 3,523, pjige 402. (io6) anti-Imperial policy and party in the Colonies, which would clamour, possibly, for the " cutting of the painter." On the other hand, if the paramountcy of the British interests were not secured, and the majority of the Colonial representatives were able to force tariff regulations deemed detrimental to the interests of the Mother Country, an equally strong anti-Colonial party would be created here. Mr. Churchill depicted in a most convincing manner the dangerous feeling against the Colonies w^hich might easily be generated in this country :* — " Great fluctuations occur in the price of all com- modities which are subject to climatic influences. We have seen enormous fluctuations in meat and cereals, and in foodstufi^s generally from time to time in the world's markets. Although we buy in the markets of the whole world, we observe how much the price of one year varies from that of another year. These fluctua- tions are due to causes beyond our control. We cannot control the causes which make the earth refuse her fruits at a certain season, nor can we, unfortunately,, at present, control the speculation which always arises when an unusual stringency is discovered. Compared to these forces, the taxes which you suggest should be imposed upon food and raw materials might, I admit, be small ; but they would be the only factor in price which would be absolutely in our control. If, from cir- cumstances w^iich we may easily imagine any of the great staple articles which were the subject of prefer- ence should be driven up in price to an unusual height, there would be a demand — and I think an irresistible demand — in this country that the tax should be re- moved. The tax would bear all the unpopularity. People would say : * This, at any rate, we can take oft\ and relieve the burden which is pressing so heavily upon us. ' But now see the difficulty in which we should then be involved. At present all our taxes are under our own control. An unpopular tax can be removed ; if the Government will not remove it they can be turned out and another Government can be got from the people by *Ccl. 3,523, pages 405-6. (I07) election to remove the tax. It can be done at once. The Chancellor of the Exchequer can come down to the House and the tax can be repealed if there is a suffi- cient demand for it. But these food taxes by which you seek to bind the Empire together- these curious links of Empire which you are asking- us to forge laboriously now, would be irremovable, and upon them would de- scend the whole w^eight and burden of popular anger in time of suffering. They would be irremovable because fixed by treaty with self-governing Dominions scattered about all over the w'orld, and in return for those duties we should have received concessions in Colonial tariffs on the basis of which their industries would have grown up tier upon tier through a long period of time. Although, no doubt, another Conference hastily as- sembled might be able to break the shackle which would fasten us, to break that fiscal bond which would join us together and release us from the obligation, that might take a great deal of time. Many Parliaments and Governments would have to be consulted, and all the difficulties of distance would intervene to prevent a speedy relief from that deadlock. If the day comes when you have a stern demand, and an overwhelming demand of a Parliament in this country, backed by the democracy of this country suffering acutely from high food prices, that the taxes should be removed, and on the other hand the Minister in charge has to get up and say that he w'ill bring the matter before the next Colo- nial Conference two years hence, or that he will address the representatives of the Australian or Canadian Gov- ernments through the agency of the Colonial Office, and that in the meanwhile nothing can be done — when you have produced that situation, then, indeed, you will have exposed the fabric of the British Empire to a wrench and a shock which it has never before received, and which anyone who cares about it cannot fail to hope that it may never sustain." Damaged Relation's with Foreign Countries. Not less injurious would be the damage done to our peaceable relations with foreign nations, from whom (loS) we are invited suddenly to withdraw the free market which they have so long- enjoyed to their benefit and ours. It is futile to urge that foreign nations can have no reasonable ground for complaint against us, for placing taxes on their goods entering our markets equivalent to those they place upon our goods entering their markets, or for favouring our Colonies at their expense. The foreign manufacturers, merchants, and farmers who are injured by the loss of our market, or by the neces- sity of submitting their goods to customs duties which were not imposed before, will feel a sense of injury, and wull arouse in their country a feeling of resent- ment against Great Britain W'hich will be none the less dangerous because it is unreasonable and un- just. Nor is this all. The diminution of our import and export trade with these foreign countries, which it is the chief object of the Preference system to bring about, involves a weakening of the surest and most concrete bonds of common interest between our nation and theirs, and thus damages the most substantial guarantee of peace. We shall still be competing with Germany, the United States, and other industrial countries for many neutral mar- kets ; our vast Imperial territorial interests will still raise controversial issues betw^een us and them. It will be easier for an international difference to ripen into a quarrel, and a quarrel to lead to an outbreak of hostilities, when the sense of injury is rankling in many a foreign manufacturer and merchant who has lost a profitable trade with Great Britain or some Colony, and when a war is no longer opposed by strongly organised commercial and financial interests in the two countries, to whom a war would be disastrous. Woi^LD Imperii. Our National Subsistence. Finally, in case of a war between Great Britain and a great naval Power, the national peril would be greatly enhanced by a policy which rendered us de- pendent for our food supply and the raw materials of our manufactures upon our Colonies. (io9} So far is this danger from beini^ adequately recog- nised, that one of the chief arguments of Preferentialists is directed to maintaining- the very opposite, viz., the increased resisting strength which Imperial self-suflici- ency would bestow. Mr. Smartt, for instance, argued thus :* — "We are always told that while the Navy holds the seas, England will be able to feed herself ; but supposing you had a great European war, and you had a combination of great wheat-producing coun- tries against you, and by your policy you re- fused to encourage Canada, Australia, and other por- tions of the Empire — with their enormous resources— the command of the seas would be useless if the coun- tries who grow wheat were banded against you, and would not ship that wheat to feed your starving popu- lation." " A combination of great wheat-producing coun- tries " ! The great wheat and wheat-Hour exporting countries outside the British Empire are the United States, Russia, Roumania, Austria-Hungary, and Argentina. Does Mr. Smartt seriously suggest the probability of such a combination? Is our fiscal policy to be guided by so preposterous a supposition ? On the other hand, what would be our situation if, as is quite possible, we were to weaken the pledges of peace which a great and expanding trade with foreign States provides? It would be foolish to shut our eyes to the possibility of a war with a nation possessing a powerful navy and capable of harrying our Imperial transport trade. Suppose a war with Germany, France, or the United States. A hostile navy would, in accord- ance with the present laws of war, be entitled to seize or destroy the ships carrying our wheat supply from Canada, i\ustralia, and India. If, then, we had, by preferential tariffs, displaced the wheat which now comes to us from foreign lands by an all-Imperial wheat supplv, the whole of the supply required to feed four-fifths of our people would be exposed to the attacks of our enemy. On the other hand, if we retained our Cd- 3.5^3. P'»ge 34Q. (no) present large dependence upon foreign sources of sup- ply, the enemy would not be entitled to stop the entrance of the wheat unless they had accomplished the impossible task of making an effective blockade of all our ports. An all-Imperial wheat supply would mean a serious risk of national starvation in case of war with a single strong naval Power. Summary of Injuries. We have already seen that neither by Imperial preference nor by any other method is it possible to realise the vision of a self-sufficing Empire. Even were it possible, it would not be desirable. No preferential stimulus that we could offer would go far towards such self-sufficiency. We should still have to draw a great part of our food and raw materials from foreign nations irritated by the protective duties put upon their imports into our country. In order to make the preference efficacious, we should have to build it on to a protective system, which would impose upon our people the waste and the corruption which protection everywhere involves. Far from binding the Colonies closer to each other and to the Mother Country, it would introduce into our Empire a powerful and persistent disruptive force, substituting for the present Imperial sentiment passions of greed, jealousy, and suspicion, which genuine divergencies of business interest, disclosed in the negotiations for tariff changes, would continually feed. Each Colony would be con- stantly competing with the rest to get the lion's share of the preferential market, and would haggle with the Mother Country for better terms of preference; the dominance of the Home Government, by virtue of her larger population and her protectorship of the " un- free " Empire, would be a constant offence to the self- governing Colonies, generating a new disruptive power, anti-Imperialism in the Colonies, anti-Colonialism in Great Britain. Finally, preference must certainly loosen our rela- tions with the leading foreign powers, increase the (I..) risks of an outbreak of hostilities, and gravely jeopardise our food supply in the event of war. Two Results of the Conference. Our examination of the proceedings of the Colonial Conference in the light of the determinate facts and forces of recent political and industrial history yields two plain results. In the first place, the proposal of a system of pre- ferential tariffs as an instrument for binding the self- governing Colonies closer to one another and to Great Britain, and for thus securing the solidarity and economic self-sufficiency of the British Empire, is stripped of any shreds of plausibility it appeared to possess. The smallness of the gain which any sort or size of Colonial preferences could secure to Great Britain, in compensation for the magnitude of the losses and the risks incurred by the abandonment of our free import system involved in our adoption of any real preference to the Colonies, makes it undeserving of consideration as a practical proposal. To suppose, in- deed, that this or any exposure will at once kill Colonial preferences as a political device and a party cry, would be to impute to politics a measure of rationality they do not possess. But while the Protectionist Party here will doubtless continue to wave this Imperialist flag from platforms as before, astuter workers for Fiscal Reform will see the advisability of keeping the pro- posal in the vague, partly because they must henceforth admit that the adoption of Colonial Preference involves taxing both foods and raw materials, partly because they will recognise that any attempt to give con- crete expression to the proposal will expose its antagonism alike to the protective as to the retaliatory principles which form their true objective. This inherent conflict between the protective and the preferential motives we have seen already illus- trated in the brief history of the Colonial Preferences. So superior are and must remain the means of enforc- ing the protective claims that these preferences, after a flickering, precarious existence, will cither disappear (II2) or survive as graceful ornaments in the Colonial protec- tive systems. In the second place, it is made manifest that, while the Colonies will welcome any conference or council of a deliberative nature, in which free discussion of matters of common interest takes place between Government and Government, and while they are pre- pared for further co-operation in the furtherance of commerce or defence, they will not lay dov/n in any formal contract any shred of legislative or administra- tive liberty they already possess. As free agents they will discuss and negotiate and, as far as possible, co- operate for the common good of the Empire, but in every matter they will retain the right of initiation and of ratification for their peoples and their Govern- ments. Not merely do they recognise the paramountcy of their interest in preserving in their own hands the guidance of their political destiny as individual Colonies and as Colonial aggregates, but they now understand, as they did not in the first flush of Imperial sentiment attendant on the Boer War, that any formal political union upon closer terms with the Mother Country, such as has been suggested, must involve not merely a diminution of their Colonial liberties but the assump- tion of an unknown and an uncontrolled quantity O'f new Imperial burdens. Mr. Chamberlain's words, so often quoted, remain as true as ever, and may be deemed the expression of a final truth : " The link which unites us, almost invisible as it is, sentimental in its character, is one which we would gladly strengthen ; but, at the same time, it has proved itself to be so strong that certainly we would not wish to substitute for it a chain which might be galling in its incidence."* * Cd. 1,299, page 3. PKINTEU BY CASSKLL AND COMPANY, LIMITED, LA BELLE RAfVAGE, LONl OX, E.C. List of Publications: Leaflets. 14- Taxing Foreign Wheat. By Gkorge w. Medley. 4pp. 28. Free Trade or Fair Trade ? By James E. Thorold Rogers. 42. The Good Old Times. 2pp. [2pp, 53. Sir Robert Peel on "One-sided Free Trade." 2pp. 97. Wages and Protection. By George w. Mbdley. 2pp. 17. The Forgotten Factor. By Lord Farrer. 4pp. 18. Taxation of Commodities. By Harold Cox. 4pp. 22. Free Trade and Prosperity. 4pp- 23. The Canadian Preferential Taritf. By Harold Cox. 8pp. 28. A Century of British Exports. With diagram. 4pp. 34. The Benefits of Free Trade. Address by Mr. Albert Spicer. 35. A Shipowner on Shipping Subsidies. 4pp. [8pp. 39. Food and Folly. By Harold Cox. 12pp. 40. Mr. Balfour on Protection. 2pp. 41. Mr. Chamberlain on the Canadian Tariff. 4pp. 42. The Burden of Empire. 4pp- 43. The Zollverein Scheme. By Sir Swire Smith. 8pp. 44- Appeal from Labour Representatives. 4pp- 45. German Exports and German Wages. 2pp. 46. A Protectionist's Paradise. 2pp. 48. The Humours of Protection. By Lord Welby. 4pp. 49. The Cotton Trade and Protection. By C. w. Macara. 50. Mr. Chamberlain and the Cobden Club. 4pp. [4pp- 52A.Working Class Leaders' Protest against Preferential Tariffs. i6pp. 54. "Ruined" Industries (IL)— The Tin Plate Trade. By Sir J. J. Jexkixs. 8pp. 55. Those Foreign Doors. Bv H. Viviax. 4pp. 56. " Ruined " Industries (IIL)— The Brass Trades. By j. Cuthbertson. 4pp. 57. Co-operation and Free Trade. 2pp. [4pp. 58. My Sentiments on the Fiscal Question. By Alfred Morris. 59. Retaliation— Is It Feasible ? By Sydney Buxton, m.p. 8pp. 60. Commercial Travellers and Free Trade. 4pp. 62. " Ruined " Industries (IV.)— The Silk Trade. By Matthew Blair. 4pp. 6^. Imports and Exports. By Russell Rea, ^LP. 4pp. 64. Engineering and Free Trade. By George Barnes. 4pp. 65. The Candlemakers' Petition. After Bastiat. 4pp. 66. Cobden on Armaments and Expenditure. 8pp. 67. Cobden on Internacional Peace. Spp. 69. Mr. Chamberlain and Agriculture. 12pp. 70. The Cost of the Sugar Convention. ByG. H. Ferris. 4pp. 71. Foreign and Colonial Tariff Barriers. 2pp. 72. Why Foreign Nations have gone back to Protection. By J. S. Mann. 12pp. 73. Another Chamberlain Myth : British Exports to the Colonies and to Foreign Countries. 2pp. [4pp. 74- Unemployment : Its Causes and Remedies. ByF.w.HiRST. Retrenchment and Finance: Memorandum by the Cobden Club in view of the Budget Discussions for the year 190G-1907 "Cobden Club Circular," Quarterly, id. List of Publications: Pamplilets. The A B C of Free Trade. By E. N. Buxton. Price 3d. American Progrress and British Commerce. By Harold Cox. Price 3d. The Balance of Trade. By The Right Hon. G. Shaw- Lp:fevre. Price 3d. A British Customs Union. By His Honour Judge Shaw, K.C. Price 3d. The Brussels Convention and Free Trade. Price 3d, Cobden's Work and Opinions. By Lord Welby and Sir Louis Malet. Price Id. A Short Life of Richard Cobden. By Frances E. Cook. Price Id, Free Trade and British Commerce. By Lord AvEBURY. Price 3d. Free Trade and British Commerce. By A. Mon- GREDIEN. Revised 1903. Price 3d. Free Trade and the English Farmer. By "One of His Friends." Price 3d, Why Danish Farmers are Free Traders. By A. Peschcke Koedt. Price 3d, Things Seen and Things Unseen. Translated from the French of F. Bastiat. Price 3d. The Effect of Protection on Wages. By the late I<0RD Playfair. Price Id. Fact versus Fiction: The Cobden Club's Reply to Mr. Chamberlain. Price Id. The Results of the Sugar Convention. By G. H. Perris. Viice 2d. Shipping and Free Trade. By Russell Rea, M.P. Price 3d. The Lessons of History on Free Trade and Protection. By Sir Spencer Walpole. Price 2d. The Two Theories of Foreign Trade. By Russell Rea, M.P. Price 3d. CASSELL & COMPANY, Limited, Ludgate Hill, London. 6AYLORD BROS. Int. Syr*cui«, N. Y. Stockton, Calif.