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The Pamphlet Collection of Sir Robert Stout: Volume 67

Protection and Freetrade

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Protection And Freetrade,

Christchurch: Printed at the "Lyttelton Times" Office Gloucester Street. MDCCCLXXXVII.

Protection to New Zealand Industries.

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My object in writing this little pamphlet is to furnish for the masses, on the eve of an important election, some information on the great question of Freetrade and Protection. In my humble opinion, there is no question of practical politice which can influence the future welfare of the Colony to such a momentous extent as this. There are numerous books by great thinkers on this subject, but the cost puts them out of the reach of all but the wealthy. I do not lay claim to depth of thought, or extensive information, but the views which I here put forth are the outcome of some years of life in the Colony with which I have thrown in my lot, and the desire to see it happy and prosperous is my aporogy for putting them before the public. Had I remained in England I might have continued to be an enthusiastic Freetrader, because I was an Englishman: I am a Protectionist in New Zealand, because I am a Colonist. I hope to make this clear to my readers later on.

In his introduction to "Freetrade and Protection," published in 1878, Professor Fawcett says: "Competent authorities have predicted that the leading political question in Australia for the next few years is not unlikely to be a keen struggle for supremacy between the advocates of Freetrade and Protection."

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This has actually happened; Victoria has adopted Protection for her industries for twenty years, and we in New Zealand have now the advantage of the results of this policy, and of contrasting the position of Protectionist Victoria with Freetrade New South Wales.

It is to these two Colonies, and also to Canada, we should look for our lesson and for our guidance, since they are far more similarly conditioned to New Zealand than the thickly peopled islands of Great Britain.

I propose now to show what Freetrade and Protection can and will do for the Colony of New Zealand, and in a future pamphlet to set out what it has done already in Victoria and New South Wales.

England's Policy during the last thirty years was of necessity Freetrade, that of New Zealand must be Protection.

Let us go back for a moment and see the condition of England in 1846, about the time of the repeal of the Corn Laws. Before the repeal of the Com Laws, which gave origin to the term Freetrade, England was in the agony of famine and threatened with domestic rebellion, caused by over-population and want of employment. In Ireland in 1845 the potato rot began, and a large proportion of the peasantry actually lived on the potato and the potato alone: in the northern and western provinces of Ireland, whole generations grew up, lived, married, and passed away without ever having tasted meat: they received little or no money as wages; a man worked for a landowner on condition of getting the use of a little scrap of land for himself on which to grow potatoes, to be the sole food of himself and his family. The potato blight therefore caused a famine. In England things were little better, for the ever increasing population could not earn wages, therefore could not buy food. England then had in 1846 a page 3 large population which would work for low wages, and great natural resources awaiting development, and just then, too, steam was coming into use.

What then did England want to feed her population and give it employment, she wanted cheap food and raw material, and Freetrade gave her both: Freetrade had its great value to England from the position and condition of England itself; and its benefit to England can only be reaped as long as that position and condition can be maintained. As long as England can get raw material from new countries, make it up into manufactured goods and sell them cheaper than the new country can produce them, so long will Freetrade be her proper policy. The freetrade in 1846 gave life to the internal trade of the country, by admitting food and raw material duty free, and thereby providing food and work for the people.

Freetrade made England, for a quarter of a century, the manufacturing depôt of the world, because from her position and condition no other nation could compete with her.

It is necessary for England, not only that she should practise freetrade, but her interests demand that all other countries do the same. Freetraders ask us to follow implicitly the practice of England, while our interests are diametrically different. England needs food to feed her abnormally large population, and raw material for them to work up into manufactured goods, and her fiscal system is arranged to bring about these results; New Zealand, on the other hand, wants population to consume its food, and work up its raw material, and Protection is the means to this end. England says, "We have the labour, and we want Colonial raw material and human food for it to operate upon, and we must have freetrade to secure them." New Zealand says, "We have the raw material and the food, and we want population to consume it."

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England's food-producing capabilities are far below the requirements of her population, therefore she must have food from other countries. New Zealand has the food and the raw material far above her present requirements, therefore what she wants is population to consume it. Freetrade for England is necessary to enable food and raw material to reach England in the easiest and cheapest manner possible, and the adoption of freetrade by other countries is necessary to enable her goods to reach their markets: because freetrade is good for England with certain requirements, does it follow that it is good for New Zealand with requirements of an exactly opposite nature?

Protection only protects what a country can produce to advantage for itself.

Protection places no difficulty in the way of the whole community obtaining any foreign necessary or luxury, if such cannot be produced to advantage in the protected country, but Protection is only given to those articles which can be and ought to be readily made or manufactured, and which it is to the advantage of the country that they should be manufactured on the spot. Small duties, for instance, are placed on such necessaries as Tea and Sugar, for one reason be cause they are necessaries, and secondly, because they cannot be produced in the Colony; but New Zealand has for instance hides and skins and everything necessary for the manufacture of all kinds of leather goods in abundance: Protection would place heavy duties on all leather goods, because they can and ought to be easily produced here: Freetrade, on the other hand would put no duty whatever on leather goods; or, if it was necessary for the purposes of revenue that a duty should be charged, an excise duty would also be demanded from the New Zealand Manufacturer before they left his factory, to the same amount as was exacted page 5 by the Customs from the Importer. If the policy of Freetrade becomes the policy of New Zealand, all the hides and skins and bark must he sent to England, and all the leather goods imported from England to New Zealand.

The direct result of the Policy of Freetrade in a new Country is, that its inhabitants can do nothing but grow human food and raw material for export to old countries.

The cost of every article depends not entirely but chiefly on the cost of the labour necessary for its production; consequently, the cheaper labour and capital of old countries enables them to compete successfully against New Zealand in the manufacture of any article where much labour is required for its production. The item of labour in the cost of most manufactured goods is three-fourths of the whole value of the article—that of the raw material, one-fourth; of course, in some cases, it is much more, in others less. Labour in most new countries is fifty per cent, dearer than in England. We pay here to a labourer say, five or six shillings a day, whereas in England the same amount of labour would be obtained for three or four shillings. A carpenter's wages here are, say seven or eight shillings per day, in England about five shillings or five shillings and sixpence. Taking, therefore, labour and capital at three-fourths and raw material at one-fourth, in twenty shillings worth of goods in England, fifteen shillings is labour and capital, and five shillings raw material. Labour and capital being fifty per cent, dearer, raises the price in new countries from fifteen shillings English cost of labour, to twenty-two shillings and sixpence Colonial cost of labour, or twenty-seven shillings and sixpence, as against twenty shillings, supposing the cost of the raw material equal. Against England, however, page 6 we must put the cost of the freight and expenses to carry the raw material to England, say two shillings and sixpence, and the cost of the freight and expenses of the manufactured article back to New Zealand, say one shilling—total to and fro, three shillings and sixpence in the pound; while England has seven shillings and sixpence the advantage in labour and capital, thus giving four shillings in the pound in favour of England as against New Zealand, in the output of manufactured goods. These figures are of course assumed, but they show at once the principle, that no colonial industry can flourish against the competition of the English manufacturer, unless protected to an extent equal to the advantage gained by the English manufacturer through the cheapness of the labour and capital he employs, less the extra cost he is put to for freight and expenses.

England can sell her goods cheaper than the Colonies, because she is protected by her cheap labour.

Freetraders will say labour is a free agent. Theoretically and legally of course labour is free: theoretically, a labourer who does not find work in Christchurch can go to Dunedin, or Melbourne, or Nova Scotia, if he considers either of those places more suitable for him; practically, labour is not free: hence, England's labour is protected in the sense that it cannot leave the country; it is restricted in a parallel sense to that in which Protection in the Colonies restricts the importation of English goods, and this restriction is protection to England. The distance of this Colony from England, the severance of home ties occasioned by the departure to a distant Colony, the almost prohibitive cost of passage to the ordinary English labourer or mechanic, the dread and uncertainty of the voyage to a person unaccustomed to travel, the want of information with regard to the circumstances of the Colony, the uncertainty of getting page 7 employment on arrival, with many other causes, put restrictions on emigration which, with regard to her cheap labour, is a source of protection to England. If New Zealand was only fifty or one hundred miles from Bristol or some other English seaport, so that these restrictions to emigration were removed, and absolute freetrade in labour was possible between New Zealand and England, many of the arguments urged in favour of Protection would disappear; but for the reasons given above and others, freetrade for labour is impossible. If labour was a free agent it would be as cheap here as in England (which Heaven forbid), because of the law of supply and demand, and if as cheap here as in England, the human food would be consumed here and the raw material would be worked up and sent to England as manufactured goods; for it would be much less expense to ship the manufactured article, the woollen goods or the boots, than to send wool and hides and bark, which are the goods manufactured with the labour added. As long, therefore, as England is protected by her cheap labour, New Zealand must be protected by a tariff, otherwise it is evident, no industry can be established or make head against the English manufacturer. Through the force of circumstances, England is protected by her cheap labour being secured to her and withheld from us, and in order to be on equal terms our policy should be such as to offer inducements to her people to emigrate to our shores. Colonists in favour of Protection, say, "we will not have English goods at any price," but as the colonists must have goods of the same description, they must be obtained somehow or other, and the result is, the only other way to get them is to produce them on the spot. The fewer goods taken from England the less labour is required by the English manufacturer. The law of supply and demand then comes in, and the non-employment at home and the higher rate of wages in page 8 the Colonies becomes sufficient inducement to overcome the difficulties of distance, &c., and Protection becomes the lever for populating new countries, by shifting the population to the scene of surplus food and raw material. Protection admits that the law of supply and demand is violated when the Colonies prohibit the importation of any goods by legislation; but as it is evident that the Colonies are more likely to sink to a purely agricultural state unless employment is provided by the establishment of industries, it behoves Freetrade to show Protection a better method for the establishment of industries and for obviating this result.

England tries to impress the advantages of Freetrade on other Countries, because she requires to sell her manufactured goods to them.

England's freetrade policy supplies her with cheap food and raw material, which she makes up into manufactured goods. She must then find a market for them, she cannot buy without selling something in return: she must get back the price she has paid for the raw material, with something for interest on the capital invested in manufactories and cost of labour. A market must be found outside of England, and as long as the countries from which she draws her cheap food and raw material adopt the policy of freetrade they must be the countries who will be her largest customers for manufactured goods, since the price of labour in these new countries will not allow them to compete with the cheap labour of England. Freetrade, therefore, places Colonists who adopt it in the position of ploughmen, agricultural labourers, hewers of wood, and drawers of water, and nothing more, since no industries can be started to compete against those of England, owing to her cheaper labour and capital.

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Now this is exactly what has happened. England got large quantities of cheap food and raw material from America and Australia and New Zealand, and sent them back manufactured goods, the profit on the manufacture being retained by herself, and the cost of freight, &c., being paid by America and the Colonies. This system answered very well in the early stages of the growth of the United States and the Colonies. The boundless extent of Canada and the United States, thinly peopled, was exactly suited to produce from a very small amount of labour the food and raw material that England required, when the English duties were repealed. America benefited too as well; she secured a better market for these products: besides the almost boundless territory of America absorbed the superabundant population in the old country, and relieved England of an incubus. England's coal and iron resources became more and more valuable; all things conspired for the good of English commerce, everybody was satisfied, Freetrade was the source, they said, of all good. But after a time the conditions changed. America, when her population increased, adopted a Protective duty as far as manufactures of which she could produce the materials were concerned, and she kept on increasing and increasing her tariff till England was shut out of the market. Other countries followed in the wake of America. They saw that the result of a Protective Tariff in America was to cause the production of these articles at home, and the profit of the manufacture to be spent in the country. Germany followed suit, and there England's market was gone; her colonies were left to her, they were always first-rate customers; what a dreadful outcry was raised when Victoria began to adopt a Protective policy. Yet it was time to do so; in 1885, while the United States of America only bought the manufactures of England to the extent of ten shillings per head of her population, and Canada at the page 10 rate of two pounds per head, Australasia took six pounds worth per head!!! What more telling argument could be used in favour of Protection for us as practised in the United States and Canada?

The True Mainspring of Wealth and Prosperity is Employment.

Without Protection, manufactures cannot exist in New Zealand: it must remain a country only producing raw material and food. Our Public Works policy commenced in 1876, gave employment to our people, raised wages, and provided a market for our producers. What is to take its place and pay interest on our borrowed money unless we maintain a large population and produce wealth by skilled labour. It is admitted there is nothing; yet we are told that manufactures will grow of their own accord if we only leave them alone. Let anyone who believes this and has a few hundred pounds to spare, just try the effect of putting it into some unprotected industry, and let him compete for a year or two with England's cheap labour, and see how his balance-sheet comes out at the end of the time; I don't think he will try a second experiment.

Every person cannot be a farmer. Freetrade leaves no alternative for the population of young countries to be other than husbandmen, soil cultivators, producers of food and raw material. Every father knows that his sons are not all born with the same aptitudes and the same tastes. In a new country, Protection is the only means that will prevent some in every family from being encumbrances and drones; the more channels that are open for their diverse tastes the less likely are children to be a burden on their parents; yet without Protection, if they have not the taste for agricultural pursuits, there is nothing left for them to do. Farmers' sons, too, are born with diverse instincts: some for agriculture, some for mechanics, some for trades, some page 11 for professions, &c. Providence never intended the whole of Australasians to be shepherds and the whole of England to be manufacturers; yet under Freetrade such would be the case to a great extent. Protection, by opening a way for manufacturing industries in the Colonies, would give scope for every variety of natural gifts.

Protection does not make Protected articles dearer.

When an article is thoroughly protected there immediately springs up a trade rivalry in the manufacture or production of the article, which reduces it to the minimum of cost at which labour and capital can be employed to produce it. Competition would bring prices to their proper level. Even if farmers had to pay more for their clothes and implements they would more than recoup themselves by the higher price they would obtain for their produce, and by the saving of the freight and charges on their produce. If Protection makes the protected article dearer, how do Freetraders explain the fact that our agricultural implements come chiefly from protected America, and that many articles are now imported from protected Germany rather than from freetrade England. Sir John Macdonald, the Premier of Canada, speaking of the results of the Protective System which has been largely tried there with great success, says: "I am largely responsible for the national policy of Canada, a policy which has been, and perhaps is now, severly criticised on this side of the sea—a policy of revenue secured by tariff. There is nothing to show that this policy has, in any respect failed in its intention. The balance of advantage has been largely in its favour; indeed, high as party feeling runs in Canada, even the Opposition have ceased to attack the protective policy, or as both parties have agreed to style it the 'national policy' of our Govern page 12 ment. Our policy is to protect such staple industries as are capable of a practically unlimited expansion, and to admit raw material free which cannot be produced at home. "When we commenced to tax woollen and cotton goods, we were assured that the consumer would be ruined, and driven out of the country by high prices. What has been the result? Our manufacturers of cotton and cloth are in a position of increasing prosperity, and to-day the consumer is able to buy his goods more cheaply than lohen Canada was upon a Freetrade basis." If Protection makes the protected article dearer, how comes it, as I shall show hereafter, that Protected Victoria has for one of its best customers in her manufactured products her freetrade rival, New South Wales. The agricultural classes would in reality be great gainers by a prohibitive policy. New Zealand has to choose for extra revenue between an increase in the Customs, an increase in the Property Tax, and an increase in the Railway Hates. If the country settlers know their own interests they will see that it is far more desirable to support an increase in the tariff than to be subjected to the other alternatives which must necessarily press upon them. A letter that appeared in the Otago Daily Times, signed by "Arable" puts the case so well and strongly for the farmers that it is well worth quoting. It says: "So constantly is it asserted that the farmers would be losers by a protective policy, that I trust you will kindly allow me briefly to point out a few reasons upon which many of us base a contrary opinion. No doubt outgoings would be slightly increased, but this not nearly to the extent that some suppose. The typical working farmer lives with his family mainly upon the produce of his farm. He might have to disburse a few shillings a year extra upon cotton materials; and this would be the chief item of his increased expen- diture, for already boots, woollen goods and agri- page 13 cultural implements of colonial manufacture are in a majority of cases, from their greater durability, deservedly preferred; and upon these last the expe- rience of other countries shows that Protection would, by increased competition, exercise a cheapening influence. On the other hand, we believe that, although Protection is by no means such a vital question for the farmer as it is for the townsman, the former must necessarily share in the prosperity of the latter. With the revival of better times would come Adam Smith's corner stone of prosperity—an in creased home market, and an improved sale for butter, milk, eggs, hay, fruit, &c., &c. This would far more than recoup the farmer the small additional cost of his household expenditure, to say nothing of those by-crops which, under Protection, he could grow at a profit, such as linseed, mustard, &c. Again, United States' statistics establish the fact that the value of farm land maintains a constant ratio with the number of manufactories in the district, a fact so appreciated by the small freeholders that they are almost to a man Protectionists, as recent investigations and the hope less minority of Freetraders in Congress conclusively show. Can we take a better guide in matters of self- interest than the shrewd American?"

In this letter we find the farmer's case put very clearly and distinctly, and in a manner altogether convincing. Unless local industries are encouraged to a larger extent than they are at present, the Colony will become merely a consuming depôt for the results of cheap labour in other places.

England is fast failing us as a market for our raw produce.

Every thinking person who has watched the tendency of our trade with England during the last few years must come to the conclusion that its condition is of page 14 itself a sufficient reason to justify a Protective policy. Under Freetrade we produce food and raw material for export to England to be worked up into manufactured goods, and returned. Under Freetrade it has been shewn that this is all we can do; but how do English markets pay us even for our produce? The average price of wheat has been lower during the last three years than at any time during the last hundred years, and now is scarcely worth growing. The price of wool at home a year or two ago did not leave a bare margin to the produce; our frozen meat at three pence half-penny per pound is unremunerative, and tallow is unsaleable. In conversation with a gentleman, a very high authority from Calcutta, only a few days ago, he informed me that in two years time the cheap labour of India, and the completion of railways, would allow of Indian wheat being placed on the market in London at twenty-five shillings per quarter. Russian petroleum, as soon as the steamers with tank accommodation are completed which are now being built, will lower the price of tallow to such an extent as to make it almost worthless; and can there be any doubt that the enormous tracks of South America, now being opened up by English enterprise, and stocked with thousands, I might say millions of sheep, can have other than a detrimental effect on the price of the produce of our flocks?

With these facts staring them in the face, what will our farmers say to the prospect of being shut out from the Home market, and no sufficient population to consume their produce in New Zealand? I cannot do better on this head than quote from a letter in the Launceston Examiner, in 1885, the following remarks: "England's 'closed ports'—and her ports are more effectually closed at the present moment than if she had imposed an ad valorem duty of 20 per cent, on our products a dozen years ago—drive us to the page 15 necessity of changing our system of commerce. Freetraders ought in justice to themselves to propound an alternative. They have pointed us to India and Ceylon; we have been told Japan is a good market; we have been advised to try America and other places, with barren results. Seeing Freetrade has failed us, Protectionists are justified in asking a trial for Pro- tection. If England cannot pay us for soil products, surely we ought to be allowed to consume what food and raw material is required to furnish ourselves with manufactured goods. It may be said there is no hindrance to manufacturers, but there is a hindrance; while English capital and English labour, at the low rates ruling for both, are allowed to operate on Colonial food and raw material at the low rate England offers for them, we are not prepared to compete on equal terms. We are not willing to subject our workmen to the low rates of wages English workmen have to sub- mit to, and capitalists will not invest in manufactories at the low rate of interest English money has to accept. To compete with England, we must descend to English trade equalities, and that we cannot do. To do so we might as well go back to England; in fact, this is Freetrade law."

I am aware that the views that I have put forward here will be distasteful to many of my friends. I shall be told, I have no doubt, that I have not yet learned even the rudiments of Political Economy. Be it so. I err in that respect with many of the most able men, both in this Colony and in Victoria, in America and in Germany, who have broken away from the orthodox notions of the Cobden Club, and have set at defiance the fine sounding theories of Professors, exercising instead a little plain common sense. The theories that have been propounded as suitable for England and English trade, may be perfectly sound when applied to the page 16 circumstances and condition in which England has been placed during the last thirty years. They are valueless, in my opinion, when applied to a different country, differently circumstanced. Common sense tells me that the man who can get skilled labour in India at two shillings a week can place wheat on the London market cheaper than I can, that he can manufacture goods and bring them to New Zealand cheaper than I can make them, unless I can get New Zealand white labour at the same price, (which God forbid); and common sense tells me, too, that my neighbours, however much they may love me, will buy those goods rather than mine; it tells me, too, that we can manufacture goods just as suitable to our requirements as the English maker, if we are not forced out of the market by unfair competition, and that we must protect our manufacturers by a tariff, just as England's cheap labour and capital, her position and resources, answer the purpose of a tariff to protect her manufacturers; it tells me, too, that it is better to take for our example a Colony circumstanced similarly to ourselves rather than an Old World state, and that as self-interest is inducing certain sections of our people to support Freetrade, so the motive of self-interest must be employed on behalf of the people at large for the people's benefit.

W. H. Spackman.

213, Hereford Street, Christchurch

Printed at the "Lyttelton Times" Office, Christchurch.