The protectionist peril; an examination of Mr. Chamberlain's proposals, by George Herbert Perris.

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Digitized by LjOOQ IC X / Digitized by VjOOQ IC Digitized by LjOOQ IC THE PROTECTIONIST PERIL Digitized by LjOOQ IC ** 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, or the Parliament of this country, would adopt so one-sided an agreement. The foreign trade of this countiy is so large, and the foreign trade of the Colonies is comparatively so small, that a small prefer- ence given to us upon that foreign trade by the Colonies would make so small a difference — ^be so small a benefit to the total volume of our trade — ^that I do not believe the work- ing classes of thb country would consent to make such a revolutionary change for what they would think so infinitesi- mal a gain."— The Rt. Hon. Joseph Chamberlain, M.P., in opening the Conference of Home and Colonial Chambers of Commerce in London, loth /une 1896. Digitized by LjOOQ IC o THE PROTECTIONIST PERIL AN EXAMINATION OF Mr. CHAMBERLAIN'S PROPOSALS BY GEORGE HERBERT PERRIS METHUEN & CO. 36 ESSEX STREET W.C. LONDON 1903 Digitized by LjOOQ IC £cow Vo^i'^.oa.vi Digitized byCjOOQlC PREFACE T^HE following chapters are offered as a small contribution toward that "serious and scientific study *' of Mr. Chamberlain's atid similar proposals for which Mr. Balfour has appealed. I have tried to set forth in easily comprehensible form the actual facts of British trade, as they are reflected in the latest official statistics, and to show their bearing upon the problem of the day, without vain repetition of any " old shibboleths." In so wide a review • it is perhaps too much to hope that all error has been eliminated from the calculations ; and I shall be very grateful for correction. Where, in the absence of a detailed scheme, Mr. Cham- berlain has compelled me to resort to hypo- thesis, I have based myself upon those available facts by which any statesman must be bound, V Digitized by LjOOQ IC vi PREFACE and have given the speculation as real and rational a character as possible. Some parts of the volume have appeared in the Daily News ; and I am indebted to the Editor for permission to reprint them. G. H. P. 5 Henrietta Street, W.C. June 12, 1903. Digitized by LjOOQ IC CONTENTS ■ PAGB I. The Failure of Expansion . . . i II. The Pressure of Foreign Competition ii III. Our Best Customers .... 19 IV. A Significant Failure in Canada . 26 V. Mr. Chamberlain's Discouragements, and A "Volte Face" .... 36 VI. A Scheme of Preferential Trade Ex- amined ...... 53 VII. Food and Raw Material : the Crux of the Question . . .63 VIII. Mythical Wages and Impossible Pensions 81 IX. How we hold the World in Fee . . 100 X. The Price of Retaliation . .111 XI. Conclusion ..... 124 APPENDICES I. Imports and Exports : (I.) Analysis by Countries; (I I.) Analysis by Articles; (III.) Food and Raw Material; Sup- plies FROM THE Empire and Foreign Countries Compared . . • i34 II. (Three Tables.) Military Expenditure OF the United Kingdom, British Col- onies, AND Foreign Countries Com- pared ...... 141 vii Digitized by LjOOQ IC Digitized by LjOOQ IC THE PROTECTIONIST PERIL THE FAILURE OF EXPANSION THE idea of "preferential trade*' is a natural development of the Imperialism of the past decade. It represents the last desperate effort of the more extreme and logical Imperialist to meet a threefold diffi- culty — The growth of British burdens. The growth of foreign competition. The growth of Colonial Protectionism. The decay of native agriculture and the consequent dependence of this country upon oversea food supplies, to which Mr. Chamber- lain, Mr. Balfour, and Lord Rosebery alike have referred, is a minor factor, inasmuch as Digitized by LjOOQ IC 2 THE PROTECTIONIST PERIL the pressing problem is one of normal times of peace rather than of the imaginary period of a monstrous world-embracing war. We shall see before we end that the alter- native to Mr. Chamberlain's policy lies in grappling boldly with these difficulties — especi- ally in reducing our burdens, and in increasing our power ^o meet foreign competition as alone it can be permanently met. The new Imperial Protectionism is an evasion of both issues. In the first place, it presumes the indefinite continuance, and even the indefinite increase, of the costs of Empire. Mr. Cham- berlain is, indeed, largely responsible for the policy of "peggihg out claims" which has doubled the cost of our armaments in ten years, has enormously added to our debt and taxation, and has increased our responsibilities in the same period by the incorporation of new possessions at the average rate of ten millions of population per annum. Whatever may be said of other Ministers, this has indeed been Mr. Chamberlain's exclusive policy. It cannot be suggested that he has shown any anxiety to placate the foreigner, to further the use of arbitration, to seek an arrest of arma- ments, or to suppress the lust after new terri- tories. At the same time, he informs the Digitized by LjOOQ IC THE FAILURE OF EXPANSION 3 Colonial Premiers that "the weary Titan staggers under the too vast orb of his fate" — ^and his reporter does not even temper the emphasis by putting the words within quotation marks. It is necessary, therefore, that these quasi-independent commonwealths should come to our aid in the business of "civilising" "child races" and inconvenient republics off the face of the earth. With deference to Mr. Seddon, I do not think they are in the least likely to undertake anjrthing so foolish. In the meantime, it is important to bear in mind that a leading motive and aim of the Preferential Trade movement is the maintenance of the business of militarism and domination to which so many of our late troubles are due. Moreover, it is at last practically admitted that territorial expansion has been a failure, so far as regards its commercial object. " It has been said sometimes that trade follows the flag, and that has been disputed. I am afraid," Mr. Chamberlain admitted at the Colonial Confer- ence last year, " that it does not do so neces- sarily, and certainly as we should desire." Mr. Chamberlain does not make confessions — especially confessions of the failure of ten years' persistent labour — without a purpose. Here the purpose is plain : Imperialism as we have Digitized by LjOOQ IC 4 THE PROTECTIONIST PERIL had it having failed, a stricter form of monopoly must be invented. The failure cannot be too clearly apprehended. Millions of pounds of British capital have been invested in these new estates ; the cost of the expeditions, armaments, and administration required to secure them has gone up by yearly leaps and bounds. The progress of invention has been ceaseless ; inter- communication has been steadily improved at home and abroad; the size of the producing community at home has been constantly in- creasing. Yet, with all this effort and sacrifice, trade hardly keeps pace with the increase of population in the older British territories, and there is no sort of compensation for the cost of more recent acquisitions. What are the broad facts ? Let us look first at the general course of our oversea trade. In 1885 the exports of British merchandise were at the low point of 213 millions sterling. From this they rose to 263 millions sterling in 1890. Then there was a drop to 216 millions sterling in 1894. The level of 1898 was midway between these points— 233 millions sterling, or exactly the same value as in 1884, before the period of active territorial acquisitions had begun. . In 1901 (even including nine millions worth of ships and their machinery exported) Digitized by LjOOQ IC THE FAILURE OF EXPANSION 5 they reached only 280 millions, or about 6 per cent above the high level of i89o. The total imports and exports (including re-exports) of the United Kingdom suffered similar fluctua- tions, running up from 618 millions sterling in 1886, to 748 millions sterling in 1890; then dropping to 682 millions sterling in 1894, and rising again to 764 millions sterling in 1898, and 869 millions in 1901. In our imports there is, indeed, a very considerable increase — a fact the significance of which we shall consider in a later chapter, and of which I need now only say that a partial explanation has been found in the extensive repurchases by the United States of American securities in the British market in recent years. So far it cannot be said that there is any serious cause for alarm as to the general volume of our external trade. It is important to re- member, also, in the first place, that foreign trade is, even in our own case, a very im- perfect measure of national prosperity ; in the second place, that owing to the general fall in prices the above figures do not fully represent the real expansion of sales in the period named; and,, in the third place, that the import, but not the export, values include cost of freight and insurance. Digitized by LjOOQ IC 6 THE PROTECTIONIST PERIL In themselves the figures are as satisfactory as could be expected, for England could hardly hope to enjoy in permanence the supreme posi- tion as the world's manufacturer which the In- dustrial Revolution and her geographical and other economic advantages gave her for a time. It is when we proceed to analyse these general results, comparing our relations respectively with foreign countries and with other parts of the Empire, and subdividing the latter again into self-governing parts — Colonies proper — and non-self-governing, or dependencies ; above all, it is when we consider the bill of costs that has to be paid largely out of the profits of this trade, that we begin to see that there is genuine cause for anxiety as to the future. In each of these three departments of our commerce, and in the mass of State expenditure which has to be charged against them, there is matter for the most serious thought. Has Mr. Chamberlain given us a true and full analysis of the situa- tion? Has he concentrated public attention upon the features which are really most grave ? Are the interests for which he is concerned those of the few or of the many? Or is he guilty of the worst offence of a commercial statesman, that of dressing a shallow thought in the gauds of a perilous sensationalism ? Digitized by LjOOQ IC THE FAILURE OF EXPANSION ^ There is much easy talk nowadays of the unity of the Empire, but no rapid progress toward that ideal can be made till the funda- mental fact of the extreme economic hetero- geneity of the Empire is accepted and under- stood The self-governing Colonies, that are now absorbing most of Mr. Chamberlain's attention, are doubtless important to us far out of proportion to their population, which (the white part of it) amounts to less than 3 per cent of the whole population of the Empire. But it is absurd to forget the immensely prepon- derant interests of the United Kingdom, and it is neither fair nor safe to ignore the interests of those immense territories which are dependent upon the wisdom of Whitehall. The following chapters, intended as they are for the British and Colonial citizen, are necessarily concerned for the most part with the triangular relationship of the British Isles, the Colonies, and foreign countries. In a fuller discussion of the subject, those less fortunate lands which hold the great body of the subjects of the King-Emperor would loom more largely. Some of them have great areas of chronic poverty, and are subject to economic disasters such as the Colonies never suffer. They show every variety of economic condition; but in one respect their Digitized by LjOOQ IC 8 THE PROTECmONIST PERIL case is almost uniform and is akin to that of the United Kingdom. The will of their British rulers has saved them from the manifold evils of Protectionism. Mr. Chamberlain has re- peatedly declared his object to be " Free Trade within the Empire." Judged by population 97 per cent, of the Empire is already under Free Trade ; and the question whether fiscal unity is to be reached by the advance of the 3 per cent., or the retrogression of the 97 per cent, is one on which India has surely as much right to be heard as Canada or Australia. The Indian Government, so far as I know, has never proposed to restrict the external trade of the great dependency.^ Is not this a matter too large to treat as an accident in Anglo-Colonial arrangements? Again, in any fuller attempt to expose the weak points in our commercial position and to determine how British policy can be modified to deal with them, it would be necessary straightly to face the evidence as to the trade value of the newer additions to the Empire, and to answer the question whether territorial expansion is to continue or not. Certain it is ^ The imposition of countervailing duties on European bounty-fed sugar imports is an exception to the general Free Trade policy of the Indian Government. Digitized by CjOOQ IC THE FAILURE OF EXPANSION 9 that the huge possessions which we have taken in Africa in the last few years at such enor- mous cost of life and treasure, and at such risks in the present and for the future, do not show any sign of paying for themselves. The richest of them^ the Transvaal and Orange State, have cost us between 200 and 300 millions sterling in hard cash; much of the gain, such as there is, will go not to British, but to American and German manufacturers and traders. The most certain thing about our other recent acquisitions is the growth of expenditure on -punitive expeditions and the immeasurable risks in which they are involving us. Thousands of square miles nominally British are not even explored; active, thorough, and competent administration is almost unimaginable. A Parliamentary re- turn (3rd July 1902), made by the Under- Secretary for Foreign Affairs at the instance of Mr. Evelyn Cecil, shows that the vast territories of Uganda, British East Africa, and British Central Africa, which are supposed to have a population of about 7^ millions — in- cluding perhaps 1000 Britishers all told — do not nearly pay the cost of such administration as we can give them. In its first financial year (1891-92) the revenue of British East Digitized by LjOOQ IC lo THE PROTECTIONIST PERIL Africa, about ;f 17,000, exceeded the expendi- ture by ;f400o; ten years later the revenue was only jCSi,6ig, while the expenditure had risen to ;^ 180, 11 8. The expenditure of British Central Africa is double the revenue, a loss to the British taxpayer of ;^SO,ooo a year. Uganda costs ;f224,73i (as com- pared with ;^64,ooo seven years ago), to say nothing of the capital cost of the great railway, and the revenue is only a quarter of this amount The trade of these, as of the Soudan and other territories, is a dream of the future. For these parts of the Empire a Preferential Trade scheme offers us no hope ; but evidently they cannot be ignored in any serious attempt to stop the leaks of our economic and political system. Their lesson is for the conqueror rather than the manufacturer and merchant. The right honourable gentlemen who have, in fifteen years, raised the population of the Empire from 300 to 450 millions, and its area from eight to twelve million square miles, may well be disappointed. It is when we compare the slow growth of trade with the enormous increase in the cost of armaments and Imperial administration, and these three factors with the related figures in the case of our chief com- mercial rivals, that we find cause for alarm. Digitized by LjOOQ IC II THE PRESSURE OF FOREIGN COMPETITION THE rivalry presses just in proportion as these countries — the United States, Germany, and France in particular — escape the burdens, direct and indirect, which we have undertaken. There are, of course, other factors to be considered, the chief of which ' have been ably summarised and reviewed by Sir Courtney Boyle and Sir A. E. Bateman in two very valuable Blue Books,^ In the thirty years 1 871-1900 the population of France increased by less than three millions, that of the United Kingdom by ten millions, that of Germany by over fifteen millions, that of the United States by thirty-seven millions. In the course of two or three years the American Republic will count twice as many people as ^ "Memorandum on British and Foreign Trade," 1897, Cd. 8322 ; ditto, 1902, Cd. 1199. Digitized by LjOOQ IC 12 THE PROTECTIONIST PERIL these islands. The increase of town popula- tions in Germany, and still more in the States, has in each case alone greatly exceeded the whole increase in this country ; and the totals are now: United Kingdom 42 millions, Ger- many 57 millions, United States 76 millions. Comparing the average coal production of 1870-74 with that of 1 896-1 900, we find that the increase was only 74 per cent in England, while it amounted to 106 per cent, in France, 203 per cent, in Germany, and 383 per cent in the United States. In the production of iron and steel America has long passed us ; and in- deed her economic resources are in general in- comparably larger. According to the United States Census Department, the increase of industrial capital in the decade 1 890-1900 was 51 per cent, the increase in the number of industrial establishments 44 per cent., of the average number of wage earners 25 per cent, (to 5,321,100), of total wages 23 per cent, and of value of products 39 per cent In view of such facts as these, a dispropor- tionate increase of the foreign trade, especially, of the United States and Germany as com- pared with our own, was to be expected. The facts may be briefly set forth as follows : — Digitized by LjOOQ IC PRESSURE OF FOREIGN COMPETITION 13 TOTAL EXPORTS— IN Million £, Sterling. 1894. 1895- 1896. 1897. 1898. 1899. 1900. United Kingdom . 273 28s 296 294 294 329* 354 United States . i8S 168 183 218 256 265 307 German Empire 162 183 19s 197 202 225 248 France . 164 183 183 192 ia6 221 220 IMPORTS— IN Million £ Sterling. United Kmgdom . 408 416 44t 451 470 485 523 United States . 136 152 162 159 128 166 172 German Empire 210 221 231 249 269 291 306 France . 191 196 197 205 223 233 239 It will be seen that the period is one of general trade expansion, and that, while all three of these rival countries have increased their exports more rapidly than we have done, their general economic profits, as shown in im- ports, have not increased more rapidly. The * Value of new ships and their machinery exported — about nine millions sterling — now first included. Digitized by LjOOQ IC H THE PROTECTIONIST PERIL following table shows the <^ssential facts in more summary form : ^ — EXPORTS OF DOMESTIC PRODUCE (SHIPS EXCLUDED)— IN Million £ Sterling. S Years' Averages. Increase percent i88o-i8»^. 1S96-1900. United Kingdom France Germany . United States . 234 166 249 192 237 6.4 8.7 42.8 An examination of details shows rather more serious cause for reflection. French exports of manufactured articles have increased by 1 2 per cent in the last fifteen years, German by 36 per cent, and American by 154 per cent.; while, at the same time, British exports of the ^ The figures of values represent increased quantities of goods, as prices generally have fallen ; but this is the case both in exports and imports, both in the home and the foreign stat- istics. The price figures, therefore, afford a fair basis for com- parison and deduction, except that the non-inclusion of exports of ships and their machinery tells especially against the United Kingdom. Indeed, there are no others available ; the figures of weight, covering as they do the most diverse articles in shift- ing proportions, being useless for comparison except in details. Digitized by LjOOQ IC PRESSURE OF FOREIGN COMPETITION 15 same category have been practically stationary, and we have been purchasing foreign manu- factured or partly-manufactured goods at a growing rate. There is fine stuff for the alarmist here; but the scientific study of the problem for which Mr. Balfour appeals will give a dif- ferent result. In the first place, it must be reflected that the competition of what we may call artificial exports is not to be feared in the long-run ; and no one knows better than Mr. Chamberlain, who may be credited with the authorship of the Brussels Anti-Sugar Bounties Convention, that the Protectionism of Germany and the United States has resulted in a large proportion of the exports of these countries being of an artificial and non-profit- able character. But they are, of course, largely natural, arising from various kinds of economic advan- tage. An expansion of this commerce was, of course, to be expected. Cobden and the other early Free Trade leaders had that certainty fully in mind. The two permanent officials of the Board of Trade,' to whose reports we have referred, seem to me to put the matter very fairly. ** Beginning from a lower level," said Sir Courtney Boyle in 1897, "each country is for Digitized by LjOOQ IC 16 THE PROTECTIONIST PERIL the moment travelling upwards more rapidly than we are, who occupy a much higher emi- nence. If peace is maintained, both Germany and the United States, and to some extent France also, are certain to increase their rate of upward movement Their competition with us in neutral markets, and even in our home markets, will probably, unless we are ourselves active, become increasingly serious. Every year will add to their acquired capital and skill, and they will have larger and larger additions to their population to dr^^w upon." This forecast has been more than realised. In 1 90 1 the exports of the United States — 1,465 million dollars — fell little short of our own, and just one-half of them went to the British Empire ; while of American imports— 880 million dollars — only one-third came from British territories. Comparing the average of 1 896- 1 900 with that of 1880-84, our imports from the United States increased by nearly 25 per cent., while our exports thither fell 34^^ per cent. In May 1902 Sir A. E. Bateman thus summed up the situation : " The increase of population in Germany and the United States has recently been greater than the increase in the United Kingdom, and those countries have Digitized by LjOOQ IC PRESSURE OF FOREIGN COMPETITION 17 rapidly developed manufacturing and industrial power. As with ourselves, so with those countries, the set of population has been to the towns ; necessarily, therefore, there has been a more vigorous search than formerly for an outlet for the power above referred to. We are still ahead of either country in our power of manufacture for export ; but, beginning from a lower level, each country is travelling upwards more rapidly than we are who occupy a higher eminence. • • . It is necessary, therefore, more than ever, that the change of conditions should be recognised, and we can scarcely expect to maintain our past undoubted pre-eminence, at any rate without strenuous effort and careful and energetic improvement in method. The problem how best this can be done is of vital interest to all classes of the industrial and com- mercial community alike, though the assistance which the State can give in the matter must necessarily be of a limited character." These are the broad facts we have to face at the end of a generation of continuous and rapid territorial expansion, perpetual petty warfare, and ever-increasing military expenditure. In any sphere of human activity less affected by class interest and ignoble passion, the moral of the situation would be so plain to the simplest Digitized by LjOOQ IC i8 THE PROTECTIONIST PERIL mind that it could not be disputed Com- mercial England, all her resources and advan- tages negatived by inherited burdens and a prodigal Imperial policy, is progressing, but more and more slowly. Germany, heavily weighted with military costs at home, but com- paratively free from the penalties of extensive Empire, is making rapid progress. The United States, with the smallest military and Imperial expenses of any Great Power, the greatest natural resources, and the fullest concentration upon industrial and commercial enterprise, is advancing by leaps and bounds toward the economic primacy of the world. The facts thus simply stated, the conclusion as to the future of British policy is irresistible. There is nothing for it but to return to the old path of peace, retrenchment, and reform. Digitized by LjOOQ IC Ill OUR BEST CUSTOMERS IN spite of these difficulties, however, and Imperial sentiment notwithstanding, foreign customers are still, as they have always been, our best customers ; and so nearly stationary is the proportion of foreign to Imperial trade that it would seem fated to remain so. Taking im- ports first, we find that during the last half century those coming from foreign countries have never averaged less than 71 per cent, of the whole; while in the last fifteen years of Imperial expansion, 77 per cent, of our imports have come from countries outside the Empire. The same thing is true of the exports of British merchandise, though not in quite the same degree. Whereas we, get only a fifth of our imports from British Possessions, these Posses- sions take nearly a third of our exports. For instance, in 1901 British Possessions took 113 millions sterling worth of British exports, while 19 Digitized by LjOOQ IC 20 THE PROTECTIONIST PERIL foreign countries took 234 millions sterling worth — almost exactly twice as much ; and this pro- portion has held good, with but slight fluctua- tions, for forty years. For forty years trade has gone two pounds under other flags for every one pound under our own. Percentages of Totals. Averages of Quinquennial Periods. 4^ 5^ Imports from— Foreign Countries . British Possessions . Exports (British Pro- ducts) to — Foreign Countries . British Possessions . 71.2 28.8 76 24 22.1 ,976.5 23.5 77.1 22.922, 7M 9 78.3 21.7 66.672.4 33.427.6 74.466.965.565 35 25.6 66.566.1 33.1 34.5 33.5 33-9 Even among British Possessions, the oldest only — those which cost us litde or nothing for defence and administration — are of first-rate commercial importance to us. Which are our chief customers ? First, of course, comes India — taking well over a third of our exports to British Possessions. An interesting change has taken place in the next best purchaser. Till three or four years ago it was the United States. Our second best customer is now the country we have constandy antagonised, the country Digitized by LjOOQ IC OUR BEST CUSTOMERS 21 whose commercial rivalry we feel so acutely— Germany. After Germany comes the Aus- tralian Federation and New Zealand (together), then the United States, and then France. Annual ATcragea. I ^fiHion^ Exports (British Produce) to 188S-89. 1890^. 1895-99. British India .... 31 30 28 United States . . . . 28 56 20 Australasia .... 11 20 21 Germany 18 22 France 15 15 'i Holland Total- 9 9 Foreign Countries . British Possessions . 147 156 '1? 79 78 Annual Ai ftng^ MiUkm £. Imposts from X885-89. 1890-94. 1895-99. United States .... 85 98 no France 39 44 SI British India .... 33 30 26 Australasia .... 24 30 31 Germany 25 26 27 Russia Total- 20 21 21 Foreign Countries British Possessions . 293 322 355 87 96 97 On the side of imports, and especially of food Digitized by LjOOQ IC 22 THE PROTECTIONIST PERIL supplies, our dependence on foreign countries is, of course, most strongly marked. When we turn, however, from the total volume of our oversea trade, and the condition of our home market, to our position in the outer world relatively to that of our chief rivals, there is less ground for satisfaction. An Imperialist writer, supporting Mr. Chamberlain, said the other day : " The fact is sun-clear that for British manu- factures the Continent is our declining market Our developing market is the Colonial." This certainly looks as if it ought to be true — for, though we have to meet protective tariffs in the Colonies, as well as in foreign countries, identity of language, coinage, weights and measures, and trade habits ought to count for something, not to mention Imperial loyalty. Unfortunately, no such distinction can be drawn — ^partly, no doubt, because the advantages referred to are by no means uniform, the United States owning our language, while Canada counts in dollars, and so on. At any rate, it appears that in the period 1894-99, German exports to India in- creased from 39 to 65 million marks, into Canada from 16 to 23 million marks, and into Austral- asia from 20 to 37 million marks ; while French exports to India rose from 13 to 20 million francs, and to Australasia from 2^ to 7^ million Digitized by LjOOQ IC OUR BEST CUSTOMERS 23 francs; and United States exports to Austral- asia rose from 8 to 24 million dollars, to British Africa from 4 to 15 million dollars, and to Hong Kong from 4 to 7 million dollars. These facts do indeed **give furiously to think." It may be taken for granted that the Colonies and Dependencies make these foreign purchases not to spite us, but because they represent some solid advantage. We hold already the great bulk of their trade. Even if by adopting the policy of the Chinese Wall we could secure the remainder, it could be but very poor compensation for the loss of our older foreign markets. A treaty of Customs Union which would throw open to us the richest market in the world, that of the United States, or even one which would give our manu- facturers an advantage in France or Germany, would be a different thing. But we are dealing with politicians whose object is a political, and not primarily a commercial or industrial one. It has already been shown that the mass of our Imperial trade does not grow more rapidfy than our foreign. This may be further illus- trated with some explanatory detail, by the following table,^ which shows the relative posi- ^ Based apon fuller tables given in the Board of Trade Memorandum. Digitized by LjOOQ IC 24 THE PROTECTIONIST PERIL tion the United States and Germany hold in our Colonial as well as in our foreign markets : — PERCENTAGE OF IMPORTS. To From United Kingdom. Germany. United States. 1893-95. 1898- 1900. 1893-95. 1898- 1900. 1893-95. 1898- 1900. European Russia 27 22 28 39 9 8 Denmark . 21 21 34 29 15 France 13 13 8 8 g II Belgium . 12 14 12 13 8 13 Italy. 20 20 12 12 9 12 Austria-Hungary 10 9 37 36 4 8 Argentine . 37 36 12 12 9 12 China 18 17 ... ••• 4 8 Japan British India . 33 21 7 8 8 15 72 64 2 2.2 1.8 1.5 Australasia 41 38 1.7 3.2 3.1 6.9 Natal 72 67 2.2 3.1 4.8 9.0 Cape . . . 81 68 3.5 3.7 4.5 10.9 Canada . 35 25 3.9 4.1 45.9 34.8 British West Indies . 44 40 .9 1.0 30.7 British Guiana . Germany . 54 53 ... 25.8 28.3 13 12 ir 17 United States . 20 18 li 12 ... These figures of the proportions of the im- port trade of various countries captured by the three chief manufacturing and exporting Digitized by LjOOQ IC OUR BEST CUSTOMERS 25 nations give so clear a view of the whole field that additional comment is hardly necessary. It will be seen that, while the only considerable decline in our European sales is in Russia, the proportions of our Colonial trade show a general falling off In India, where the fall amounts to 8 per cent, it cannot be attributed to German or American competition; but in Australia, South Africa, the West Indies, and, above all, in Canada, the United States has made per- ceptible advances at our cost, and Germany has also made very slight progress. It will also be noticed that we hold only 7 per cent, less of American than of Canadian iqiports, and that we command practically as large a share of the Argentine as of the Australasian market. The last two lines of the table show that im- ports from Germany into the United States, and from the United States into Germany, have both increased in proportion to the total import trade of either country ; while both countries take a rather smaller proportion from the United Kingdom (in the case of the States it is also a smaller actual amount) than they used to do. The great American advances in Europe, it must be remembered, largely re- present trade in foodstuffs with which we do not compete. Digitized by LjOOQ IC IV A SIGNIFICANT FAILURE IN CANADA WHY is our trade expansion checked in some places, while in others, though the actual amount increases, the proportion to that of our chief rivals does not? In par- ticular, why do they progress at our expense in our own Colonies? Is it because German and American goods are better or cheaper than ours, or is this only a small and even a dubious element in the matter? To give a complete answer to these questions would require a very elaborate analysis; and, if Mr. Chamberlain had been less urgent for a new electoral issue, it would provide a subject well worthy of the labours of a Royal Commission. Within the present limited space we can only hope to give pause to rash attempts to force the in- finitely delicate and complex organism of inter- national commerce into channels made by Digitized by LjOOQ IC A SIGNIFICANT FAILURE IN CANADA 27 political history, and then to indicate some of the more important facts that will enable us to distinguish circumstances in which differential tariffs are more, from those in which they are less, dangerous or useless. For this purpose Canada, which has figured emphatically in the preceding summaries, as in all discussions of the subject, affords us a con- crete instance of very special value. Eighteenth- century lessons have lost much of » their point for the average man of to-day, and the super- ficial observer is generally most struck by the bright side of American and European Protec- tionism. At last we have, however, a case of a British Imperial preferential tariff, the results of which may be weighed and measured without possibility of dispute. The Dominion was Mr. Chamberlain's trump card. In 1897 ^^ persuaded the Colonial Premiers who met in London to consult their colleagues as to the possibility of establishing a general Colonial preferential tariff for British goods. "Nothing whatever has come of the resolutions up to the present time," the Colonial Secretary had to report at last year's Colonial Conference. But Canada has successively reduced her old tariff in favour of British goods, the first reduction of 12^ per cent, in Digitized by LjOOQ IC 28 THE PHOTECmONIST PERIL 1897 being increased to 25 per cent in 1898, and 33 J^ per cent in igcx). The first pre- ferential rate was extended to other countries which dealt with Canada as liberally as she did with them; the later increases of the preference are only enjoyed by the United Kingdom and by certain British Colonies and Dependencies. / Mr. Chamberlain himself described the results at the Colonial Conference last year as ** alto- gether disappointing/' They may be shordy set forth in two forms, thus — INCREASE OF CANADIAN IMPORTS (1897-1901). Non-Preferential Imports . Free Imports .... British Empire Preferential Imports Total Canadian Imports • Million £. Per cent. 6i 63 6i 67 2 55 ui 63 If ... li • •• »l 46 3 48 II 60 United Kingdom Preferential Imports United Kingdom Non - Preferential Imports Total United Kingdom Imports Total British Empire Imports . Total Foreign Imports BRITISH PROPORTION OF CANADIAN IMPORTS. 1886-1897 (before Preference) . 40J to 28J per cent 1898-1900 (25 per cent. Preference) . 24J „ 1901 (33J per cent Preference) . ajj „ Digitized by LjOOQ IC A SIGNIFICANT FAILUBE IN CANADA 29 It is, perhaps, too soon to conclude — the more preference the less trade. But Mr. Chamberlain may well be ''disappointed." To the man in the street, uninstructed as to the character and conditions of international commerce, it' may appear strange that we should be actually losing ground in a market where we have a 33J per cent, tariff prefer- ence. To those who have studied the facts, even superficially, there is no mystery what- ever about the Canadian episode. With the exception of the factor upon which we have laid stress — the disadvantage at which we stand in competition with the United States by reason of our military and other Imperial burdens — the main causes of this failure are clearly explained in Mr. Chamberlain's own special Blue Book, the report of last year's Colonial Conference.^ They may be summed up under two heads: (i) Natural Conditions; (2) Colonial Protectionism. The largest increases in recent Canadian imports have been in iron and steel goods, grain and breadstuffs, coal, meat and dairy produce, wood, and cotton. These are the things the Dominion wanted most, and it will be seen at once that they are not all things we 1 Cd. 1299, pp. 85-87, etc. Digitized by LjOOQ IC 30 THE PROTECTIONIST PERIL are well prepared to supply. Moreover, as the author of the Board of Trade Memorandum, to which reference has been given, says : " We should not expect to find any material effect exerted by the preferential tariff in the case of heavy and bulky goods, in which freight bears a high proportion to total value ; and it is precisely in these classes of goods that the main increase of Canadian imports has recently taken place. It is also in these classes of goods, e.g. coal, grain, raw cotton, timber, iron and steel, and heavy manufactures thereof, such as bridges, girders, rails, engines, etc., that the United States, by geographical contiguity, as well as by wealth of natural resources, is to a large extent beyond reach of any competi- tion from the United Kingdom in the Canadian market, even if aided by a much greater preference than that now accorded." A plainer warning than this from the permanent officials of the Board of Trade could not be desired. Two illustrations are added: In the case of bituminous coal, it appears, the preference would only amount to about lod. per ton; and in the case of pig-iron to less than 4s. per ton, **both small amounts compared with cost of freight." Now the groups of articles we have named account for seven out of the Digitized by LjOOQ IC A SIGNIFICANT FAILURE IN CANADA 31 ten millions sterling by which Canadian imports from the United States increased between 1897 and 1 901, and for eight out of the fourteen and a half millions by which the total imports increased. So much for the natural advantages of the neighbouring Republic as a factor. Again, while the Canadian Government may be willing to let the British trader off in some cases with a lighter toll than the utter foreigner, there is something it is more anxious about than the condition of British trade, namely, the advance of Canadian manufactures. For these, raw cotton, for instance, is needed; but there can be little comfort for us in a preference of one-third on our cotton fabrics, while United States raw cotton goes in free of duty. This difficulty will naturally increase as Canadian industries grow; and the institution of iron and steel and other bounties indicates how little inclination the manufacturers of the Colony have toward what they, along with Mr/ Cham- berlain, may like to call the ** old shibboleths," the ** economic pedantry," of Free Trade. As the Board of Trade puts it (and again I venture to beg Mr. Chamberlain to read his own Blue Books): **It must also be remembered in considering the figures that Canadian policy Digitized by LjOOQ IC 32 THE PROTECTIONIST PERIL remains Protectionist in spite of the preference to British goods, and that the Canadian tariff as a rule discourages the importation of manu- factured goods more than that of raw materials. Although, therefore, British, goods enjoy a preference compared with the same goods im- ported from odier countries, the average ad valorem rate of duty on British imports, taken as a whole, is still higher than the averagre duty levied on all imports, and much higher than the average duty levied on imports from the United States." In fact, Customs duties reckoned upon the whole amount of British imports into the Dominion amounted in 1901 to 18 per cent, of the value of those imports ; while on Ameri- can imports they amounted to only 1 2 per cent. Thus we have .the odd result that under a much-lauded Imperial preferential tariff poor old Mother Country contributes nearly two- thirds as much as the United States to Canadian revenue, though she sells less than two-fifths as much merchandise ! The explanation of this apparent anomaly lies in the fact already re- vealed — American imports are let in free or are taxed more lightly because they are more needed than our manufactured articles, which the Dominion wants to produce at home. Even Digitized by LjOOQ IC A SIGNIFICANT FAILUBE IN CANADA 33 in regard to such of these articles as are sub- stantially aided by the tariff and not greatly handicapped by freight charges, the preferential scale has at best only retarded a previous decline. Textile fabrics and yams form two- thirds of British exports to Canada subject to the special tariff (3^ millions sterling) ; and in the last five years they have hardly kept pace with similar imports from other sources not enjoying preferential treatment. This is mainly due to the fact that France, Japan, and Germany are beating us in silk goods. If, then, we had disposed of foreign com- petitors altogether — the United States and the bright young kingdom which is knocking at the Pacific doorway of the Dominion, as well as Germany and France — if we had a path clear of rivals, there would still be a barrier against us as effective as those we meet with in the Old World, in the shape of a highly Protectionist tariff. And that Canada, the brave pioneer of the preferential tariff policy, is a bad offender in this respect is suggested by the fact that she takes of our cotton and woollen stuffs, per head of her population, only from a fifth to a third as much 'as the Australian Colonies; while of general British imports per head she takes 3 Digitized by CjOOQ IC 34 THE PROTECTIONIST PERIL only one-quarter, as much as Victoria, one-fifth as much as New South Wales, and one-sixth as much as New Zealand. The ** Canadian Memorandum " appended to the Colonial Conference Blue Book admits these facts, and makes a triple plea regarding them. In the first place, " Great Britain can- not hope to compete in the Canadian market to any appreciable extent in the raw materials we require," which, on the other hand, "are largely produced in the United States." In the second place, "it may be stated that the textile industries, particularly woollens and cottons, are very well established in Canada, and made rapid strides in the last decade. The manufacturers naturally expect a share of the home market, and as their establishments develop they correspondingly look for a larger share. ... It might be noted that the Canadian Government has been attacked by Canadian manufacturers on the ground that the prefer- ence is seriously interfering with their trade." And in the third place, " referring to the argu- ment that the consumption of British textiles and British goods generally in Australia and New Zealand is much higher than in Canada, it is submitted that this is largely due to the fact that the manufacturing industries are more Digitized by LjOOQ IC A SIGNIFICANT FAILURE IN CANADA 35 highly developed in Canada than in the Colonies stated." In other words, the trouble will increase and not diminish as time goes on; and the other Colonies are likely to follow suit when they reach the same stage of industrial development ! England is paying heavily for the misplaced eloquence and ingenuity of those who like to describe Free Trade as an "old shibboleth." Digitized by LjOOQ IC MR. CHAMBERLAIN'S DISCOURAGE- MENTS, AND A "VOLTE FACE" IN the face of facts we have recited, Mr. Chamberlain's little Colonial Office party last year (at which, it should be remembered. Cape Colony and the late Republics, as well as India and the Crown Colonies, were not represented) voted five resolutions on the sub- ject of Imperial Preferential Trade, The first, ignoring experience, endorsed the principle. The second declared that " it is not practicable to adopt a general system of Free Trade as between the Mother Country and the British Dominions beyond the Seas." In other words, the Colonial Premiers forced Mr. Chamberlain to recognise the Protectionism of the small parts of the Empire which they represent as an irremovable obstacle to British industrial and mercantile progress. The third resolution counselled the other Colonies to give preferen- M Digitized by LjOOQ IC CHAMBERLAINS DISCOURAGEMENTS 37 tial treatment to the United Kingdom; and the fourth urged that the United Kingdom should return the compliment. Finally, the Premiers undertook to recommend their re- spective Governments to adopt preferential tariffs. So far this last resolution has had no sub- stantial result save that the Canadian Govern- ment has promised to still further increase the preferential scale if the United Kingdom will in return give tariff preference to Canadian products. Both through the High Commis- sioner and in direct communication with British Ministers, the Canadian Government have from the first distinctly claimed that, in consideration of the existing preference, " Canadian food pro- ducts should be exempted in the United King- dom from the duties recently imposed " ; they make such a measure a definite condition of any further Canadian favours, and even threaten to withdraw the existing advantage if compen- sation be not given. It was at this interesting point that the Free Trade party in the Cabinet decided to put its foot down. Mr. Chamber- lain explained to his constituents on 15th May last that he would personally have responded to the Canadian invitation as ''a fair offer, a generous offer," but that, speaking for the Digitized by LjOOQ IC 38 THE PROTECTIONIST PERIL Government as a whole, he had to reject it, on the ground that "it is contrary to the established fiscal system of this country, and that we hold ourselves bound to keep an open market for all the world, even if diey close their markets to us." On the same day Mr. Balfour replied to Mr. Chaplin's deputation that if "a trifling duty upon food imports" was required to be imposed by way of Imperial preference, or as a measure of •* fiscal war," the demand must come "not from the repre- sentatives of one industry, or of two industries —