Problems of Empire/Preferential Tariffs

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A Letter to the 'Times,' June 5th, 1903.

Sir,—The policy recently outlined by Mr. Balfour and Mr. Chamberlain will, I trust, receive the serious and unprejudiced consideration of the people of this country. That it should be made the subject of party controversy, that it should be discussed on political platforms without regard to recent experience or present-day facts, and that the truth should be obscured by misrepresentation and exaggeration, as has been the case with the corn duty, would be deplorable. The decision which the people will be presently called upon to take is of vital moment to their own future, the future of the Empire, and the future of the world.

Customs duties the chief revenue of the Colonies Commercial federation on the basis of free trade within the Empire is out of the question in the immediate future for the obvious reason that most of our Colonies raise the greater part of their revenues from customs duties, that British goods form a large proportion of their imports, and that it would take time for the Colonial Governments to substitute other sources of revenue which they now derive from duties on British goods. Sixteen years ago at the first Colonial Conference, Mr. Hofmeyr proposed that every part of the Empire, whatever its tariff might be on Imperial goods, should impose a differential duty on non-Imperial goods, the proceeds of this duty to be devoted to the maintenance of the Imperial navy. Commercial federation on the basis of preferential trade within the Empire, as suggested by Mr. Hofmeyr in 1887, is the only form which Mr. Chamberlain's policy can take at the present moment.

In a paper read before the Colonial Institute in November last, I pointed out that a commercial federation which did not impose a duty on foreign foodstuffs for the benefit of the Canadian wheat-grower, or the Australian meat-producer, would be of little value to our Colonies. Mr. Chamberlain has frankly acknowledged that preferential trade means a tax on food. The question therefore which the British people have to ask themselves is whether there are any reasons which make it worth their while to submit to a tax on the necessaries of life with a possibility of a rise in price. Excluding the political arguments in favour of commercial federation, which have been dealt with by Mr. Chamberlain and Sir Robert Giffen, the following appear to be worthy of their consideration.

Responsibility of the Colonial taxpayers towards Imperial Defence. 1. The burden of defending the Empire is becoming too heavy for the taxpayers of these islands alone. The estate duties from which a large part of our revenue is now derived, press very hardly on a particular class. Many families, by their imposition, have been taxed out of their homes. An income tax of nearly five per cent, on the profits of commerce and industry is a great handicap to British trade. The duties on tea and sugar, which are as much necessaries of life for the people as wheaten bread was sixty years ago, are heavy. The rate of excise duties on beer and spirits has probably reached the limit beyond which they cannot be increased with advantage to the revenue. The late Chancellor of the Exchequer has told us that new sources of income must be found. Expenditure on Imperial purposes is growing rapidly; while for the solution of social problems fresh demands are being constantly made on the public purse. While Colonies are in their infancy their whole resources are needed for their internal development, and it is the duty of the mother country to charge herself with their defence. But our Colonies have now become important self-governing communities, and it appears only reasonable that the Colonial taxpayer should stand shoulder to shoulder with the taxpayer of the mother country, and assume his share of the responsibility for the common defence of the Empire. The more I have studied this question—and from the time when I first discussed it with Mr. Hofmeyr at the Cape in 1887, I think I may claim, without giving offence, that few people have had greater opportunities for studying it in all parts of the Empire than myself the more have I become convinced that the only possible method of securing an adequate contribution to the defence of the Empire from its Colonies and dependencies is through some form of commercial federation.

Food supply. 2. Closely connected with the defence of the Empire is the question of our food supply in time of war, to inquire into which a Royal Commission has recently been appointed. In 1901 our total imports of wheat, wheat-meal, and flour, were equivalent to 101,000,000 cwt. of wheat, while we grew 28,500,000 cwt. in the United Kingdom. Of the quantity imported, the United States sent us no less than 66,800,000 cwt., while 19,500,000 cwt. came from British possessions. We are thus dependent on the United States for one-half of the wheat we require for home consumption. A powerful Navy may give us command of the sea, but in the event of war with the United States, the command of the sea would not ensure the maintenance of our food supply. The United States Government by prohibiting the export of wheat to the United Kingdom—and such a prohibition, if the American people were with their Government in the cause of dispute, would assuredly be effective—could compel us to submit to whatever terms it chose to dictate. Though a war between the two great branches of the English-speaking race is year by year becoming a more remote contingency, and though leading men on both sides of the Atlantic are looking forward to a time when the relations of the two peoples will become closer than they are now, it cannot be forgotten that at the present time we are absolutely at the mercy of the United States, because the quantity of wheat we draw from her is so large that it could not be made good at once from any other source. Such a position is not satisfactory for a great Empire. Since the failure of the Colonial Conference to adopt any arrangement as regards preferential trade, some of the strongest Imperialists in Canada have urged the refusal of any Canadian contribution to Imperial defence (Canada alone of the Colonies has done nothing) until the British people put their food supply on a secure basis. They say, and they say with some justice, 'It is idle for us to contribute to the maintenance of the Imperial Navy when Britain would be forced to make peace within a few weeks of the outbreak of war from fear of starvation.' To render our food supply in time of war reasonably secure, to enable the British people to enter into an alliance with the American people on equal terms, it is essential that we should not be dependent for our food on any foreign country to such an extent as to render it impossible to make good from other sources the supplies which we draw from that country.

From this point of view the larger the amount of foodstuffs we can produce under the British flag, and preferably in the United Kingdom, the greater the equanimity with which we can face the possibility of war.

The vital importance of an agricultural population. 3. 'In the decline of agriculture,' said Bismarck, 'I see the greatest danger to our permanence as a race.' Conservatives naturally wish to prevent the policy outlined by Mr. Chamberlain from being represented as protection to a particular industry. But it is on the agricultural industry that the strength of the nation to a great extent depends; for it is from the agricultural population that the best fighting material, whether for the Army or Navy, is drawn, and that the urban population is recruited. The fall in the value of agricultural produce, the large conversions of arable land into pasture, the throwing of land out of cultivation, and the consequent diminution in the demand for agricultural labour have driven workmen from the country into the towns in search of employment, competing with the labour already there, and aggravating all the difficulties of the housing problem with which the social reformer is endeavouring to grapple. There is only too much reason for believing that the decline in the agricultural population and the yearly increasing proportion of children bred and brought up under the unhealthy conditions of town life is having its effect on the stamina of the race. Although the standard for the Army has been reduced to that of a well-grown girl of 16, in Manchester in 1899, 8000 out of 11,000 men who presented themselves for service had to be rejected as physically unfit, while for the three years 1899, 1900, 1901, the percentage fit for service was only 28 per cent. Recent census statistics show that the increase of the population has been checked, while the average family in London is said in three generations to become extinct.

If the race in the mother country is physically degenerating and becoming unable to reproduce itself, the decline in the agricultural population has become a most serious national question; and I believe that Mr. Chamberlain's policy ought to be considered, and that the people of this country will be prepared to consider it from this as well as from other points of view. I say this because, whenever I have alluded to the subject at the immense number of Liberal meetings which I have addressed in the last three years in the great centres of population in England and Scotland, its importance has been appreciated by my audiences, which have been mainly composed of working men.

Unsatisfactory position of England's export trade. 4. The future of British manufacturing industries is as important as that of agriculture; and the fact that during the last ten years of the 19th century the imports into the United Kingdom increased by over 100 millions sterling per annum, whereas the exports of British produce, apart from the increased value of coal, remained practically stationary, does not indicate a satisfactory condition. That the British manufacturer is being beaten, even in the home market, by goods produced in highly protected countries, is attributed to the superior efficiency of the workshop management and the labour of his competitors; but it is also a proof that free trade is not essential to cheapness of production. Even were the management and the labour as efficient in British workshops as it is represented to be in the United States, it is doubtful whether the British manufacturer can hold his own. The American manufacturer (and the same remark applies to a lesser extent to the German manufacturer) possesses an enormous home market protected by duties well-nigh prohibitive, and through the formation of Trust companies, with their huge aggregations of capital under single control, is able to make an enormous profit on goods sold in the home market. In order to spread the general charges of his business and thus increase the profits on the goods sold at home, he sells his surplus abroad at a price, not perhaps below the cost of manufacture, but below the cost of production if the goods sold abroad were debited with their full proportion of general charges. I believe that it will become increasingly difficult for the British manufacturer to hold his own under present conditions, and that Mr. Balfour's warning in the House of Commons was amply justified by the circumstances.

Ireland. 5. Lastly, Mr. Chamberlain's proposals ought to be considered from the point of view of Ireland. During the seventeenth and eighteenth centuries the fiscal policy of the United Kingdom was regulated solely in the interests of the people of Great Britain. Irish industries were crushed by restrictive enactments imposed by the British Parliament in the interest of the British manufacturer, while Irishmen were excluded from trading with the Colonies in the interest of the British merchant. When Lord North and Mr. Pitt endeavoured to remove the restrictions under which Irish industry and Irish commerce laboured, they were met by a tremendous outcry from Lancashire and some of the principal commercial centres of Great Britain, an outcry which is characterised by the eminent historian, Mr. Lecky, as an 'ebullition of intense commercial selfishness.' If we bear in mind that, while during the era of free trade there has been an enormous increase in the commercial prosperity and the material well-being of the people of Great Britain, the population of Ireland diminished to nearly one-half, it is difficult to avoid the conclusion that the British fiscal policy of the nineteenth century has been as selfish and as detrimental to Ireland as was the policy of the centuries which preceded it. On this point the opinion of Mr. Childers, a Liberal statesman and Chairman of the Royal Commission on the Financial Relations between Great Britain and Ireland at the time of his death, is entitled to the greatest respect. In clause 91 of his draft report he says:—

'Ireland, being a country mainly inhabited by agricultural producers, could support its present population upon the corn and meat produced there without having recourse, under ordinary circumstances, to a foreign supply of those articles, and could at the same time export a surplus of these foodstuffs. The population of Ireland consumes a rather large amount, in proportion to its wealth, of spirits, tea, and tobacco. This being so, it does not appear that a fiscal system which raises no revenue from foreign foodstuffs, but does raise a rather large revenue from spirits, tea, and tobacco, is advantageous to the population of Ireland, although it may be advantageous to the population of the United Kingdom, looked at as a whole. It may even, perhaps, be said that just as Ireland suffered in the last century from the protective and exclusive commercial policy of Great Britain, so she has been at a disadvantage in this century from the adoption of an almost unqualified free-trade policy for the United Kingdom.' The above, Sir, are some of the reasons why I believe our fiscal policy should be reconsidered. The principles of free trade, as conceived and as enunciated by Cobden, may be admitted to be sound; but blind adherence to a travesty of those principles without regard to altered conditions may imperil, not only the unity of the Empire, but our very existence as a nation. Mr. Chamberlain is entitled to the respect of even his political opponents for his courage in raising the question, and both he and Mr. Balfour appear to me to deserve the thanks of every Englishman for the manner in which they have placed it before the country.

Your obedient Servant,