The Return to Protection

Preference to our Colonies involves putting on tariffs against the outside world. Disguise it as we may, it is Protection.

THE proposal of Preference to parts of the British Empire over the outside world is not a new one. It prevailed for two centuries from the passing of the Commonwealth Navigation Act, and was abolished only by the Whig Government which succeeded Peel’s, and received his support. But there was this difference at any rate. Nobody thought of calling it Free Trade. It was part of the Protective system under which we lived.

Suppose we now resume the discarded principle of Preferential Tariffs. It is not capable of being carried out unless there is a tariff on which to give a preference—“the penniless traveller sings in the presence of the robber.” Thus, as the first step in Preference, we must impose a tariff. In the long contest between the Colonies and ourselves whether they are to adopt Free Trade or we are to resume Protection, the Colonies have won. The voices of Canada and Australia have shouted down the old country.

We resume Protection then.1 But it is a very peculiar Protection. Germany and America justify their protective system, and escape its worst evils, by the fact that they have Free Trade within their Empires. The United States is by far the largest Free Trade unit in the world—some of her 45 states are larger than the entire German Empire—and it may very reasonably be contended that her prosperity is due, not to Protection, but to this Free Trade. But we are not to have free trade within our Empire. Every constituent member of it is, apparently, to have the liberty of erecting what tariff it likes against other members, so long as its duties are lower to Great Britain and to British possessions than they are to the rest of the world.2 It is best described as a British Empire Series of Reciprocity Treaties.3

Disguise it as we may, it is preferential treatment for themselves against the world outside the Empire, that this small group of self-governing colonies is asking. One might even say that it is Protection for Canada and Australia. We are to impose a tariff against the world, not because we want to shut the world out, but in order that we may take the tariff off the Colonies. Considering that the imports from Canada and Australia into this country amount to £42½ millions, and that the imports from all the six self-governing colonies put altogether amount to only £59,800,000; while the imports from the Free Trade portion of the Empire amount to £47,200,000, and the imports from foreign countries to £421 millions, the demand needs looking into.4

5It shows what a hold the word has on the unpleasant memories of the nation, that the name of Protection should be vigorously protested against. Just as Mr. Gladstone thought that he had gained something when he replaced the word Boycott by the word Preferential Dealing, so do many try to insist that Preferential Tariffs are not Protection. We want to admit our kinsmen free to our house; if we emphasise it by shutting the door in the faces of our friends—well, it is merely a regrettable incident!

6Even this is not clear. New Zealand proposes to give a preference to Great Britain, but she adds that the same preference will be given to any country which gives her equal terms. All the time, so far as one can make out, Great Britain is the only part of the Empire which is not to have this privilege, but is always to give a preference to the Colonies whatever they do.

7At present the scheme has scarcely advanced beyond the enunciation of the principle. What, for instance, is to be the relation of one colony to another, or of the self-governing colonies to the other colonies, or of any colony to a “possession”; whether India and the Crown colonies are to remain free trade or to put on tariffs; whether the Protectorates, or countries in the anomalous condition of Egypt, are to be included; whether there is to be preference as regards all the imports taxed; or even what the position of revenue taxes is to be:—all these are details waiting the mandate of the country before they are discussed. One might hint that the possibility of such a scheme—to say nothing of its advantage—depends on the working out of the details.

8See Annual Statement of Trade (Cd. 1617), 1903, vol. ii., p. 6, and Board of Trade Blue Book, p. 408.

• 1“When, on Pike’s Peak in Colorado, the thermometer is down to 12° or 13°, and, in the North-west is only a few degrees above freezing point, in New England it will be moderately cool—say 43°; in the Mississippi valley it will be comparatively warm—say 52°; and in Florida it will be at summer heat—75°.”—Lawson, American Industrial Problems, p. 43.
• 2The above figures of Imports and Exports, taken from the Statistical Abstract 1903, do not include Bullion and Specie, of which we imported, in 1902, £21,629,000 of gold (£8 millions from South Africa, £3¼ millions from India, £5 millions from Australia), and £9,764,000 of silver (£8 millions from the United States), and exported £15,409,000 of gold and £10,716,000 of silver. Nor do they include, either as imports, exports, or re-exports, excisable foreign merchandise transhipped under Bond, (£13,683,000). To the imports should be added £5,380,000 of diamonds from the Cape, not declared to the Customs. It may be noted that fish of British take, landed in the United Kingdom, are not included among imports. The value of these in 1901 was £9,000,000.
• 3Without going into the mysteries of banking, it may suffice to say that the reason why payment for foreign goods is not made by cheque is that each country’s banking system does not extend beyond its own shores.
• 4It is strong testimony to the literal “trust” which underlies the credit system that, in the great majority of home transactions, the promise is not put in documentary shape at all; goods are sold on customary terms of credit, and paid on a mere reminder that payment is due. Perhaps there is no better instance of the recognition of a “common interest” and a “general will” among whole peoples than this.
• 5IT would be rather short-sighted to gauge the importance to us of foreign trade by the fact that it is perhaps only one tenth or one eighth of our total trade. If the United States were to shut herself up inside a prohibitive wall of tariffs, she would still be almost self-sufficient. But we lie between 50 and 60 degrees north latitude; ours is a very small country at best, with a dense population; and we have, besides, sunk much of our capital and specialised much of our labour in industries which depend on other countries for their material and for their market. It seems, too, as if we were destined by nature to be ocean carriers.
• 6Our foreign trade, then, altogether amounts to £877,000,000; made up of £528,000,000 of Imports, and £349,000,000 of Exports (£65,000,000 of these being re-exports). These are values of solid Commodities brought in and taken out over British seas; and—partly as reflex and consequence—of the 32,000,000 gross tons of shipping in the world, we own the half.
• 7Nor yet is the way in which payment is made essentially different. In due time, home goods are paid by a cheque; foreign goods, by a bill of exchange. Indeed, in many cases, when goods are put on board ship, the Bill of Lading is given to a bank here, which does not give it up till cash is paid abroad, the bank meantime giving an advance to the exporter to a large proportion of the value. In either case, the sender gets his payment, in British money, through his own bank, and each transaction ends with a payment. The export of goods, again, from other countries to us takes place in exactly the same way—merchants and manufacturers, there also, sending out goods for a profit, getting paid in their own money, and the transaction ending with the payment.
• 8It takes a little thinking to realise that, in home trade, payments are made by setting debts against debts, and that this is merely another way of saying, “setting goods against goods.” You send me £100 worth of goods, and I, for the moment, am in debt, and send you a record of it in the shape of a promise to pay in three months. On the other hand, I send you £100 worth of goods, and you give me a promise to pay in three months. The promises may be bought and sold and pass into other hands; in any case, they remain in existence as debts for three months. At the end of that time they are brought together and cancel each other. What really has happened, of course, is that the one sending of goods has been put in contra-account against the other. So banking is just a vast complex system of contra-accounting—value of goods represented for the moment by documents put to the debit and credit sides of bankers’ books. Happily, this need not be dwelt on, because, in international trade, the foundation of the contra-account is quite obvious and prominent.