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The Pamphlet Collection of Sir Robert Stout: Volume 77

Trade and Empire. — The Future of British Trade

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Trade and Empire.

The Future of British Trade.

Great attention has been directed in recent years to the subject of foreign competition, especially in regard to its effects upon our manufacturing industries; and the extent to which the manufactured products of the United Kingdom are being displaced in the home and export markets of the world has been investigated and reported upon by many observers—official and otherwise. In November, 1895, Mr. Chamberlain sent to the Governors of all the British Colonies a Despatch requesting information upon the subject of the alleged displacement of British-made goods in colonial markets. Early in 1896 the publication of a small book entitled "Made in Germany" served to still further disturb the public mind in reference to this subject, and led to the preparation of a special Report by the Board of Trade. This Report, compiled by Sir Robert Giffen and Sir Courtenay Boyle, and entitled "Memorandum on the Comparative Statistics of Population, Industry, and Commerce in the United Kingdom and! some leading Foreign Countries," was laid upon the table of I both Houses of Parliament in January, 1897. It contains a great amount of information relating to the trade and populations of the four leading commercial countries—Germany, France, the United Kingdom, and the United States; and both the statistics, and the cautious conclusions with which Sir Courtenay Boyle closes the "Memorandum," deserve the attention of all interested in the maintenance and expansion of British commerce. An equally important official publication has quite recently appeared in the form of a Blue-Book of nearly six hundred page 2 pages, containing the replies of the Colonial Governors to Mr. Chamberlain's Despatch of November, 1895.

Armed with the facts and figures contained in these official publications, and supplementing them by some drawn from the Year-Books of the Imperial Institute for 1892 and 1894, it is proposed to discuss in the following pages the present position of British trade, and the probable future that awaits it under the effects of the various proposals that have from time to time been made, for rendering our position as a commercial nation more secure.

The subject may with advantage be dealt with under the following heads—
I.The present position of the export trade of the United Kingdom as revealed by the official figures.
II.The probable future of this trade under a continuance of the existing conditions.
III.The probable future of this trade under non-fiscal reforms.
IV.The probable future of this trade under an Imperial Customs Union.

I. Mr. Ritchie's action in arranging for a Board of Trade inquiry in August, 1896, was without doubt chiefly due to the attention excited by Mr. E. E. Williams' book, "Made in Germany"; and therefore it is natural that Sir Courtenay Boyle, in the "Memorandum," should give special attention to the export and import trade between Germany and the United Kingdom. The statements contained in this book, and repeated in many of the daily and weekly trade journals, to the effect that in recent years there had been an enormous displacement of British goods in the home market by those of German manufacture, are not borne out by Sir Courtenay Boyle's figures. There has been no such recent "deluge" of German goods as the prevalence of the ubiquitous label "Made in Germany" upon their purchases had led many to believe. The Merchandise Marks Act of 1887 had merely revealed a state of affairs that had long existed. In 1880 our page 3 imports from Germany were valued at £24,355,000; in 1888 they had advanced in value to £26,724,000; in 1895 they were only very slightly beyond the value of 1888, being £26,993,000. In considering this question of imports from Germany, two points, however, require attention. In the first place, there is an indirect export from Germany to the United Kingdom, through Holland, in addition to the direct export trade. Secondly, the periodic booms and depressions in international trade cause the comparisons of figures for single years to be wholly untrustworthy as an indication of the general tendency of trade. The fluctuations in the value of the export and import trade of all countries, but especially of that of the United Kingdom and of the United States during the last twenty-five years, have been so great, that one might safely undertake to prove anything one desired, if free to make a careful selection of the figures for single years. The errors caused by this latter difficulty are, of course, eliminated by taking averages over definite periods;' the errors caused by the former can be partially eliminated by taking the aggregate value of imports from Germany and Holland, when making comparisons of the nature of those under consideration.

Following this method we find that, whilst in 1882 our average aggregate imports from Germany and Holland amounted in value to £50,070,000, in 1893 their value had increased to £54,797,000.

Since the value of the imports from Holland had not decreased in the interval, it is perfectly safe to conclude that the increase in the value of our imports from Germany during the eleven years was under £4,750,000. This is undeniably an increase, but hardly one to justify some of the exaggerated statements as to the recent "deluge" of German-made goods. The alarming fact is not the increase, but the total. Already in 1882 we were importing £50,000,000 worth of goods from Germany and Holland, but the majority of our people did not know it. The Merchandise Marks Act of 1887 revealed the fact to them, page 4 and has certainly done good service in directing public attention to a very serious state of affairs, however much it may have failed in other directions.

With regard to our general export trade, as compared with that of other countries, the figures given in the "Memorandum" show that when the figures for the years 1882 and 1893 are compared (taking five years' averages), only one country—the United States—shows an increase; whereas the three leading European countries each show a decrease. The increase in the case of the United States is equal to 10.2 per cent, on its export trade; the decrease in the case of the United Kingdom is equal to 3 per cent. The figures for the total exports of domestic produce1 of the five European countries and of the United States, have been reduced to diagrammatic form for purposes of comparison, and these diagrams are given on the opposite page. The irregularities of the curves prove how necessary it is to take averages over long periods for purposes of comparison between the figures of different years. The rapid fall in values of all articles of consumption no doubt explains the comparative steadiness of these averages for the European countries in the period 1882—1893; but though the fall in prices may explain this, it does not lessen the fatal significance of this want of elasticity in the value of our export trade. Germany and the United Kingdom both possess rapidly growing populations, and on this account are bound to increase their export trade not only in volume, but in value, if a retrograde movement in the wages and the comfort of the workers is to be avoided.

Sir Courtenay Boyle is evidently inclined to draw comfort from the fact that when the imports and the exports are calculated for the different countries, per head of their population, the United Kingdom stands far ahead of its rivals in trade.2 Thus, in the quinquennial

1 These totals refer only to goods produced within the country named; goods imported for export purposes are not included.

2 See also "Essays in Finance." Giffen. 1885.

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Comparative Values of Total Exports of special,(i. e. Domestic) Produce, for the 15 Years 1880-1895.

Comparative Values of Total Exports of special,(i. e. Domestic) Produce, for the 15 Years 1880-1895.

page 6 period 1890—1894, the average value of the exports per head in the United Kingdom was about double that of the exports per head of our three chief competitors; whilst the value of our imports per head was double that of the imports per head in France and Germany, and more than three times the value of the imports per head in the United States. This superiority in the value of exports and imports per head does not signify that we are more prosperous than other countries, and is rather a misleading return. The United States and Germany both produce a very large proportion of their own food-supply, whilst Germany has for some years practically supplied the whole of her home demand for manufactured goods, and the United States is following in her footsteps in this respect. The United Kingdom, on the other hand, produces a very small proportion of its food requirements, and has ceased, in these modern days, to supply the whole of the home demand for manufactured goods. The values of the imports and exports per head for the latter country are, therefore, necessarily much greater than the corresponding figures for the two former; and the difference is not a measure of greater commercial prosperity, but of our greater dependence upon foreign trade. A country with the values of its imports and exports per head at a vanishing point, might, under certain accompanying conditions, be wholly prosperous; whilst another country, with the same at a level even higher than that of our own, might be on the verge of industrial ruin. Summarised briefly, the results: of Sir Courtenay Boyle's investigations are as follows.

In the period 1880—1895 the United Kingdom and Germany have increased their populations by 4.6 and 7.0 million respectively; their export trade shows no corresponding expansion, but an absolute decline. The United States in the same period has added the enormous number of 19.4 million to its population, equal to a gain in the, fifteen years of 38 per cent., and has increased its export trade in value by seventeen millions, or 10.2 per cent.

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The present position of British Trade is, therefore, not satisfactory; and the fact that in neither Germany, France, nor the United States is the progress of trade adequate for the needs of the growing populations does not make our own position the less serious or disturbing.

II. If the United Kingdom is to maintain even its present level of prosperity under the present conditions of population and of manufacture, it is absolutely necessary that its export trade should increase in value by about £2.6 million annually. The population is increasing at the rate of 1 per cent, per annum, and there is no hope that agricultural pursuits can absorb any marked proportion of this increase under the existing conditions of land tenure, and in the absence of protective duties on food or grain. We must continue to export manufactures in exchange for food-stuffs. With a larger number each year to feed, it is, therefore, absolutely necessary to increase the value of our exports. Taking the value touched in the year 1890, as the base of calculation, it is found that an average increase of £2.6 million annually in the value of our export trade requires that the present upward movement shall continue until the year 1899, and that our export trade shall amount in value to £285,000,000 in that year. Can we venture to hope that such an expansion will be realised? The cautious tone of the conclusions at which Sir Courtenay Boyle has arrived, by a study of the figures contained in the "Memorandum," is not very reassuring in this respect. On pages 28 and 29 of his Report are to be found the following remarks—
"(1)The increase of population in Germany and the United States has recently been greater than the increase in the United Kingdom, and those countries, enjoying as they have a period of peace which has lasted for nearly a quarter of a century, have rapidly developed manufacturing and industrial power.
"(2)As with ourselves, so with those countries, the set of population has been to the towns; necessarily, therefore, page 8 there has been a more vigorous search than formerly for an outlet for the power above referred to.
"(3)We are still greatly ahead of either country in our power of manufacture for export, so much so that up to the present the gains of either in this respect have had no very serious effect upon our trade1 but beginning from a lower level, each country is for the moment travelling upwards more rapidly than we are, who occupy a much higher eminence.
"(4)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.
"(5)Their competition with us in neutral markets, and even in our home markets, will probably, unless we ourselves are 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 draw upon.
"(6)It is necessary, therefore, more than ever, that attention should be given, in the United Kingdom, to the business of manufacturing for export. It is a mistake to suppose that the increase in wealth, in foreign countries, is, on the whole, unfavourable to us. The richer neighbouring nations are, the better for us, and for the rest of the world, in the long run. But the change of conditions must 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."
This continued growth of populations dependent upon manufactures is the serious feature of the situation. Both Germany and the United States now possess urban populations nearly equal to our own. The numbers for the United States are most startling. In 1880, the urban population was estimated at eleven and a quarter million; in 1890 it had grown to eighteen and a quarter million;

1 This is certainly a questionable conclusion.

page 9 at the present date (1897) it cannot be far short of twenty-five millions. Such a rapid increase of population dependent for livelihood upon manufactures, necessarily demands new outlets for trade, and the exploitation of new markets. The United States is a rival in our trade, to be feared even more than Germany; for her rate of growth far surpasses that of the latter country, and her total population at the present date (1897) is certainly near, if not over, seventy million in number. Sir Courtenay Boyle in the "Memorandum" fully realises the significance of this change; but one cannot see very clearly how the recommendation to our manufacturers to become more "active" (§ 5) can reduce the seriousness of the increased competition they will be called upon to face. The industrial competition must inevitably slowly increase; no increased activity on the part of our home manufacturers can prevent it. There are other facts, in addition to those already alluded to, which increase the seriousness of the present outlook. There is no mention of these in the "Memorandum"; but they must certainly be taken into account, in attempting to forecast the future.
The nations of the East are commencing to manufacture articles and commodities for which they have hitherto been wholly dependent upon the nations of the West. Russia, India, China, and Japan are now aspiring to become manufacturing countries; and though, excepting in the case of Japan, we may expect the development of manufactures to be slow, still this double pressure of competition from the East and from the West must increase our future difficulties.1 It is hardly necessary to quote facts or figures in support of this statement regarding

1 "In the future we have to fear, not German competition, but that of our colonists beyond the seas, and perhaps that of our American cousins most of all, besides that of the cheap labour of the vast populations of climes where Europeans cannot work with advantage. It is folly to suppose that Lancashire can continue much longer to spin cotton for the world; but America, Egypt, India, Japan, and sooner or later China also, will deprive us of the trade—not Germany—for she will suffer proportionately with ourselves."—Professor Armstrong in Nature, March 4th, 1897.

page 10 the development of manufactures in the East; but to prevent any misapprehension as to its reality or importance, the following facts are given—
(a)In 1876, England supplied 82 per cent, of the total cotton yarn imported into Hong Kong, China, and Japan. In 1894 the percentage had fallen to 14½, the producer of the Indian and Japanese cotton mills having entirely displaced the Lancashire spun cotton.1, 1, 1, 1
(b)In 1875, Japan commenced to spin cotton for the home market. In 1894, the whole of the home consumption in the lower counts of yarn was supplied by the native mills, an export trade with China had been commenced, and attention was being turned to the manufacture of the finer counts for another branch of the home demand.2
(c)One of the largest and best-known Lancashire engineering works in recent years has been occupied in turning out complete machinery equipments for new cotton-mills in the East.
In view of these facts, which prove not only past success, but rapid development of the cotton-spinning industry in the East, it is interesting to note the total imports of this quarter of the world, and the proportion of this total which this country has supplied. In the years 1893—1895, the annual average was as follows—
Country. Imports. Percentage from Kingdom.
From all Countries. From U. Kingdom.
Russia £44,177,000 £11,967,000 27
India 86,072,000 62,067,000 72
China 28,700,000 5,295,000 18
Japan 12,685,000 4,193,000 33

1 Cf. Article in the Fortnightly Review, by Mr. Grundy, 1895, Vol. LVIII., p. 612; also "The Trade of the Empire," Blue-Book, 1897, p. 323.

1 Cf. Article in the Fortnightly Review, by Mr. Grundy, 1895, Vol. LVIII., p. 612; also "The Trade of the Empire," Blue-Book, 1897, p. 323.

1 Cf. Article in the Fortnightly Review, by Mr. Grundy, 1895, Vol. LVIII., p. 612; also "The Trade of the Empire," Blue-Book, 1897, p. 323.

1 Cf. Article in the Fortnightly Review, by Mr. Grundy, 1895, Vol. LVIII., p. 612; also "The Trade of the Empire," Blue-Book, 1897, p. 323.

2 Ibid.

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Our export trade with the East is shown by these figures to amount in aggregate value to £83,000,000. It is, therefore, a most important division of our export trade, and the growth of manufactures in the East cannot be regarded with equanimity. Nor will this competition from the East be confined to one or two industries. Though up to the present date (1897) it has been chiefly confined, as regards our own country, to the cotton and jute manufacturing industries, there cannot be the slightest doubt that it will extend to others. The raw materials of manufacture are much more widely scattered than was supposed earlier in the last century. Coal and iron have been found in many countries of the globe where their occurrence was unsuspected twenty-five years ago. There is no necessity for long periods of training or education to intervene before new industries, demanding skilled labour, can be successfully carried on in these countries. Half a dozen trained Europeans, as managers and foremen, could, in twelve months, teach any industry to willing Orientals; and England and Germany contain many hundreds of such men, ready to go to any country or into any climate, if sufficient inducement be offered in the form of pay. The writer is quite aware that differences of opinion exist as to the results that may be expected in the future from this development of manufacturing industry in the East. The view held by the older school of political economists was, that growth of industry in any country in the world must ultimately benefit our own, and this view finds expression in paragraph 6 of Sir Courtenay Boyle's "Conclusions" (see page 8). In the particular case under consideration it will be pointed out that we gain in three directions. (1) The production of machinery for these mills in the East is a direct gain to our engineering industry. (2) The increased prosperity of the cotton-workers in the East, drawn from field labour or other less remunerative occupation, adds to their purchasing power, and increases the demand for "other" goods. (3) Capital page 12 and workers are set free at home, to "flow" into new industries. On examining these "gains," carefully and in detail, they are found to be much less real than they appear. The demand for machinery for these new mills can necessarily only be a transitory gain to our engineering industry. The works that have so recently been occupied in completing these orders for the East can turn out one complete mill equipment per week. This gain, therefore, to our export trade is one that will quickly pass away. Further, this supply of machinery for the mills of the far East is a "gain" that could only happen at the present date. In ten years' time Japan will certainly be in a position to supply the East with machinery more cheaply than ourselves. With regard to the second gain, that of an increased market for "other" goods, it is necessary to remember that the whole raison d'être for the establishment and growth of the cotton industry in these Eastern lands is—cheaper production. For a given output of yarn, less is paid in wages, therefore, than would have been paid for the same production of yarn at home. There is consequently a smaller sum to commence with. This sum is distributed to a larger number of operatives, for the Bombay mill-hand is not so efficient as his Lancashire rival. A larger proportion is therefore spent on necessaries of life—food and shelter; that is, upon expen-diture which benefits local industries, and not those of the United Kingdom. The surplus that remains for purchase of those "other" goods is therefore smaller than would have been the case if English operatives had spent the same wages at home; and with the growing development of manufactures in the East, the proportion of this surplus which is spent upon English-made manufactures is certain to diminish. It is, then, difficult to see how this expen-diture is to balance the loss we suffer by the transfer of the industry from this country to the East.

The third "gain" is no less illusory. Capital sunk in machinery or plant for any particular industry, does not page 13 "flow" into another without great loss. Taking the particular case under consideration, it is evident that a cotton-mill, and the machinery it contains, is of slight value except for spinning cotton. It would no doubt be pleasant for all parties if it could be used for producing—say, cycles or motor cars, and if the factory hands could all instantly adapt themselves to the requirements of these new industries. Such industrial transformations do not happen, however—except on paper. What does take place is the following: The capital sunk in the decaying industry is almost entirely lost. Of the operatives, some emigrate to the United States or to one of the other countries where cotton-mills exist, and resume their old occupation. In most cases this means their loss as consumers of British-made goods. Others drift into casual labour at home, and even if they do not become an absolute burden to the community, their purchasing power is seriously diminished. A few of the hardier ones emigrate to British Colonies, and attempt to earn their livelihood by some out-door occupation. If sufficiently strong and healthy they develop into sturdy settlers; but cotton-spinning is not a good preparation for such a life, and many no doubt ultimately succumb to its physical hardships.

This inquiry into the alleged "gains" that follow the development of industries in other countries, proves that in this particular case we shall lose much more than we gain. The whole tendency of the present industrial developments in the East is in a similar manner detrimental to our interests as a manufacturing nation, since these not only retard the expansion of our export trade, but influence adversely the home trade, by reducing the number of consumers in this country.

The two hindrances to the expansion of our export trade which have been considered, namely, the increasingly fierce competition of the Western nations, and the rapid industrial development in the East, are external ones.

A third one, now to be considered, is an internal page 14 hindrance, and is caused by the strength and number of our Trades Union organisations. These have gained, in this country, a position of the greatest importance and authority, and they have undoubtedly helped the workers in nearly all our skilled industries, and in some of our unskilled ones, to attain a level of comfort higher than that obtaining in any other European country. This improvement in the rewards of labour, and in its collective power, might be wholly advantageous were there no such thing as foreign competition, and were Trades Union officials more alive to the dangers of driving industries into foreign hands. In some few manufacturing industries, where great skill and deftness or great physical strength are necessary, it is no doubt true that high wages and short hours are most economical; and in these industries we need not fear competition from the less well-fed and over-worked artisans of Germany or Belgium. But in the majority of our industries this is not so true, and in these the better conditions of labour obtaining in this country only serve to increase the cost of production, and to handicap us in competing with the foreign-made goods in the home or neutral markets of the world.1 Unfortunately the development of Trades Unionism abroad is slow, and that equalisation of the conditions of labour in different countries which an International Trades Unionism would make possible, is very far, at present, from realisation. This check upon the expansion of manufacturing industries is not felt by Germany or Belgium; but the difficulty arising from unequal conditions of labour will become a European question when the Eastern nations have entered upon the second stage of their industrial development, and have commenced to sell, in outside markets, the products of their mills and factories. How can the European worker who regards 2s. 6d. per day as an irreducible minimum

1 "It is abundantly shown by all the returns that throughout the Empire the cause which principally operates to let in foreign goods is their greater cheapness."—"Trade of the Empire," Blue-Book, 1897, p.8.

page 15 compete with the Eastern labourer who is content with one-fifth, or less, of this amount?1

The outlook, as regards the future of our export trade under the existing conditions, is the reverse of promising. Briefly summarised, our difficulties are an increasingly keen competition from Germany and the United States; the gradual loss of our trade with the East by the development of local industries; and a blind and obstinate Trades Unionism at home that refuses to recognise our dependence upon foreign markets for our continued prosperity.

III. It is not surprising that the present position of the industries of our country, handicapped as they are in so many various ways, should have led to the suggestion of remedies for the evils from which they suffer. There are only two proposals made by advocates of non-fiscal reforms that claim our attention. On page 29 of the "Memorandum," Sir Courtenay Boyle gives, in paragraphs 6 to 9, what may be regarded as the official prescription for effecting a relief of the present situation.

Paragraphs 8 and 9 are the most important, and are given in full below.

"(8) The solution of the question of how best to develop and increase our competing power, is one to which the State can only give limited assistance. The commercial position of the United Kingdom has been attained, and must be kept up in the future, by the untiring zeal and energy of the industrial community. The work of seeking out new customers, providing commodities that customers will buy, exploiting new markets, and elaborating new methods, rests with the individual. The State can only afford encouragement and help.

"(9) What the Government can do is to facilitate the supply of accurate and carefully collected information; and in the discharge of this duty I venture to think we are somewhat behindhand."

In face of the exceedingly great difficulties enumerated

1 In India, unskilled labourers receive from 3¼d. to 7½d. per day.

page 16 in the earlier part of this Chapter, these recommendations certainly seem insufficient to restore to our industries and export trade their earlier prosperity, or to maintain that annual expansion of the latter, which has been shown to be necessary. New markets cannot continually be found as we are driven from the old ones. The natural limits of the inhabited parts of the earth bar unlimited expansion in this direction. Further, some of the markets that still remain to be opened up to commerce will be under foreign control, and will be guarded by hostile tariffs—tariffs directed against goods of our own country. Under the most favouring conditions, that is, when the market is one under British influence, our fiscal policy-obliges us to allow its trade to be diverted largely to other countries; and the difficulties treated of in detail in Part II. of this Chapter, operate to prevent the greatest possible benefit resulting to our own country from its development. With regard to the question of customers and their wants, it may be admitted that our competitors, especially the Germans, are at present more pushing, and are showing a greater readiness to please customers than we ourselves; but to suppose that an equal energy on the part of our manufacturers would entirely redress the balance of trade, and counteract the whole of the disadvantages under which our export trade labours, is an optimistic belief that can only be held by refusing to recognise the seriousness of the growing pressure from competing nations, less heavily handicapped for this industrial struggle than our own.

The second non-fiscal remedy proposed, is that of a more thorough organisation of our Technical schools and colleges, and the introduction of a systematic scheme of secondary education. It is obviously impossible, within the limits of this Chapter, to enter upon any full discussion of this question; but while recognising clearly that we have not in the past paid as much attention as we ought to the scientific principles upon which our industries are based, and that the Germans have benefited by our neglect page 17 it is the writer's opinion that the beneficial effects upon our trade, which the supporters of this reform expect to see follow in its wake, are probably much over-estimated. The United States, which, in this respect, is not very differently situated to our own country, is quite as formidable a competitor as Germany; and if these two nations and our own had proceeded pari passu in this matter of technical education, it is very questionable whether the present relative proportions of the world's trade would have been greatly different. The determining factor in the case of the three countries named is quite as much that of population as of educational advantages. While fully admitting, therefore, that a greater attention to this subject by English manufacturers will tend to improve our position, the opinion must nevertheless be expressed that this reform alone, or these two non-fiscal reforms together, will not completely balance the increasing difficulties of the United Kingdom as a manufacturing country.

IV. Turning now to those suggested reforms which involve a change in the fiscal policy of this or other countries, it is necessary to first mention the proposals of those who believe that Free Trade principles are still likely to be accepted, at some future date, by the other nations of the earth; and who consider that the only reform for which we can hope or work, is that of the complete abolition of Protective Duties in all the markets of the world.1 The discussion of the probable effects of Free Trade all round, would, however, be exceedingly academic at the present juncture; for not one of the leading manufacturing nations shows the slightest inclination

1 Sir G. Baden Powell, in an article on "Imperial Free Trade," in the June 1897, issue of the Fortnightly Review, professes to see in Canada's recent adoption of a Preferential Tariff for goods coming from Free Trade countries a step towards the realisation of this ideal. If he seriously believes that this action on the part of Canada will lead Germany, France, or the United States to change their present Protective Policy for one based on Free Trade principles, he is certainly much more hopeful than the writer.

page 18 to change its present fiscal policy. After fifty years of argument and practical example by the United Kingdom, the only two other countries in which the people govern—France and the United States—have decided by larger majorities than ever, not only to maintain, but to increase their Protective Duties on goods of foreign origin. One may regret the fact, but it is an unmistakable proof that Free Trade principles are making no headway amongst our nearer neighbours. Free Trade all round is, therefore, a policy that it is wholly beyond our power to hasten forward, and one which we shall probably never see realised.

The remaining two fiscal reforms are more within the range of practical politics, for they only require the consent of a majority of our own countrymen in order that they should be carried into effect. These two proposals have been received with an uncompromising hostility by the present-day exponents of the old Free Trade doctrines; for they each require the imposition of Protective Duties upon some classes of imports into the United Kingdom. The "Fair Traders" would impose such duties in favour of the home producers only; those who support a scheme of commercial federation of the Empire would impose them in the interest of all the producers within its bounds. Since the second proposal is the only one of the two that is receiving serious consideration at the present time, and since the objections to be urged against it are largely common to both schemes, the discussion of the probable effects of such a change in our fiscal policy will be confined to those that might be expected to follow the establishment of an Imperial Customs Union for the Empire, that is, of Free Trade within the Empire. In the first place it is well to point out that the adoption of such a scheme would lead to a trial of Free Trade principles within a perfectly definite area of the earth's surface, yet one embracing countries of such wide area and varied climate, and people of such page 19 diverse race and character, that the conditions under which this trial of Free Trade principles would be made would be fairly representative of those which would obtain if all the countries of the world were to adopt a Free Trade policy. Since the establishment of an Imperial Customs Union would thus be, not a retrograde, but a forward movement in the application of Free Trade principles, it is certainly surprising that it has been so ruthlessly condemned by Free Traders. If it be true that a world-wide Free Trade policy would benefit all who shared in it, then it must be equally true that lesser benefits will result from the initiation of such a policy over smaller areas, if these areas be sufficiently representative of the whole.

Turning now to a consideration of the economic objections which are urged against the proposal, the most important is undoubtedly that based upon the relationship between the value of our exports and the imports of our Colonies and dependencies. If the United Kingdom at present is producing manufactured goods for export in value much exceeding that of the total imports of these classes of goods in the various portions of the Empire, it is evident that the time is not yet ripe for the establishment of an Imperial Customs Union. There must exist a fairly adequate market for our goods within the Empire, before we can afford to sacrifice many of our present markets outside it. In order to enable a judgment to be formed upon this question, it is necessary to obtain figures showing the total value of the manufactured goods exported from the United' Kingdom over a period of years, and corresponding figures for the value of the total imports of the same class of goods for the United Kingdom and other countries forming the Empire. The United Kingdom imports of manufactured goods1 are included in this estimate, because one of the chief gains that would result for us, from a scheme of commercial federation, would be that we should supply the whole of the home market with our

1 In 1892, their value was £65,440,000; in 1888, £57,793,000.

page 20 own manufactures, and that we should no longer import goods that we can make ourselves. The figures relating to the values of the exports and imports of manufactured goods for the United Kingdom have been taken from the "Memorandum," and may be regarded as trustworthy. Those relating to the values of the imports of manufactured goods for our chief colonial possessions and for India, have been obtained by an analysis of the returns from official sources, published in the Imperial Institute Year Book. The countries whose imports are included in the totals given below are the United Kingdom, India, Canada, Cape Colony, Natal, Australasia, New Zealand, and the West Indies. No claim is made for the absolute correctness of these figures, but it is believed they are sufficiently accurate to enable a judgment to be formed upon the question under discussion.
Manufactured Goods.
1888. 1889. 1890. 1891. 1892.
£ £ £ £ £
Total exports of the United Kingdom 209,276,000 219,667,000 229,868,000 214.532,000 196,621,502
Total imports of the Empire 164,055,000 173,907,000 173.819.000 183,686,000 172,695,000

These figures prove that although the Empire is not yet in a position of equilibrium, as regards the exports and imports of manufactured goods, it is not very far page 21 distant from such a point; and, since we might reasonably hope to retain some portion of the present external export trade, the deficiency shown above would be supplied from this source of trade. The proposed change is therefore not fraught with very great risks to our manufactures.

The second objection urged against the proposal is a similar one with regard to the relation between the value of the imports of food-stuffs into the United Kingdom and the value of the exports of these by our Colonies and dependencies. Here, again, it is claimed that a balance in value of exports and imports must exist, before the proposed change can be regarded as one free from economic danger.

The results of an investigation similar to that undertaken in the case of manufactures and covering the same eight countries are given below.

Food-Stuffs.
1888. 1889. 1890. 1891. 1892.
£ £ £ £ £
Total imports of the United Kingdom 156,966,000 171,440,000 173,854,000 184,760,000 184,803,000
Total exports of the Empire 42,878,000 43,873,000 49,195,000 55,137,000 53,294,000

These figures prove that the Empire is very far distant from a position of self-dependence in regard to its food-supply. No one can doubt, however, its ability to produce page 22 sufficient food to feed its peoples. Canada and New Zealand, to say nothing of the home country, possess excellent corn-growing districts, and Professor James Long1 has calculated that 55,000 farmers, settled on 100-acre farms in Canada, could supply the present deficiency in wheat. Nor would it be absolutely essential to the success of a scheme of commercial federation for the Empire, that before the inauguration of the change, the food-supply should be wholly produced within it. An excessive production of any commodity within its bounds might lead to economic difficulties; but a deficiency in production could always be supplemented from without by purchases from other countries.

Turning now to a consideration of the objections of lesser importance, the first that claims notice is the plea that the change would cause an increase in the price of both food-stuffs and manufactured goods. This may probably be accepted as a true statement, since it is cheapness alone that causes food-stuffs of non-colonial origin to find a market in this country; and it is cheapness, again, that causes manufactured goods of foreign make2 to supplant British-made goods in the home and colonial markets.

But the importance of this objection depends chiefly upon the extent of this rise in prices; and those who regard it as a fatal one to any scheme of commercial federation, seem to forget that the margin between the costs of British-made goods and those of foreign manufacture, or between the costs of colonial produce and that of countries external to the Empire, is only great in comparatively few instances.3 In the majority of cases the difference in the cost of production is small; and yet such slight differences are sufficient to turn trade into foreign channels, and to hamper the development of some home or colonial industry. The trade competition between

1 Nineteenth Century, 1896, p. 21.

2 "Trade of the Empire," Blue-Book, 1897, p. 8.

3 In these cases, of course, it might be necessary to impose no duty.

page 23 producers scattered over such a world-wide Empire would certainly tend to keep the prices of food-stuffs and manufactured goods within reasonable limits; and, if necessary, a law prohibiting the formation of gigantic trusts or monopolies in the more important industries, would still further guard against any undue inflation of prices.

Nor must it be forgotten, in considering this question of a possible rise in price, that many of the foreign articles which displace those of home or colonial origin in the United Kingdom are produced under conditions of labour which we forbid; and that the difference in price is, in many cases, chiefly due to this difference in conditions of labour.

By our continued purchase of such goods we are thus assisting to maintain, in other lands, conditions which we have condemned as bad at home. The inconsistency is obvious. Under equal conditions of labour and equal laws, there are few articles of food, or dress, or luxury, that could not be produced as cheaply within the British Empire as without it. The price, then, that we should be called upon to pay for these, after a scheme of commercial federation for the Empire had been inaugurated, would only be a fair one, and in accordance with the standard of living which had received the general sanction for our labouring classes. That being so, no true lover of his country could cavil at the slightly higher price he might be obliged to pay.

Another objection that may be urged against the scheme is that such a safe-guarded commerce would lead to stereotyped methods of production and of manufacture; and that the spur which, under the present conditions of international commerce, is always acting to keep producers and manufacturers up to the highest level of efficiency and ready to adopt the latest inventions, would be abolished. The answer given to the previous objection contains the answer to this one. The competition between producers page 24 and manufacturers scattered over such an enormous Empire would certainly suffice to keep methods of production at a high level of efficiency, if a law against trusts and monopolies were in existence. Competition would still exist; competition from those possessing unfair advantages as regards labour conditions or State bounties would alone be destroyed.

The third and final objection which will be considered is that based upon the present fiscal policy of our Colonies. It has been argued that Free Trade within the Empire is impossible, because most of our Colonies raise their revenue chiefly from Customs duties on imports, and to exempt imports of British origin would leave them with a very large deficit in their Budget accounts. But commercial federation demands only preferential treatment of goods produced within the Empire, and it is a matter of indifference whether this is obtained by admitting British goods free and imposing a small duty on those of foreign origin, or by imposing a large duty on the latter and a small one on the former. The effect in the latter case is that while the revenue is maintained at the required level, a preferential treatment is also accorded to goods of certain origin, and this is the plan which has been adopted by Canada, as regards the United Kingdom and New South Wales. If a colony desired to collect its revenue in this way, it would be free to do so under a scheme of commercial federation.

Having considered the objections that are usually urged against the proposal under discussion in detail, a few of the advantages which it offers may be briefly noticed.

The first and most important is, that it would appear to promise that steady increase in the demand for our manufactured goods which was shown in the earlier part of this Chapter to be essential to our continued prosperity! as a manufacturing nation. The Empire is largely made up of countries and lands very partially occupied and developed. The growth of population in such countries page 25 is always more rapid than in the overcrowded European countries; and therefore there is every prospect that, had we the monopoly of the market for manufactured goods that these countries offer, the necessities of the more slowly increasing manufacturing population at home would be fully met. The second advantage is, that it would remove the danger which now threatens some of our industries, of extermination by State-subsidised foreign ones (e.g., our colonial sugar industry) or by foreign industries carried on under much less onerous conditions of life and labour.1 With regard to the latter there is, it is true, an alternative to extermination:—The reduction of the workers' standard of wages and comfort to the foreign level, at present that of Germany, later on that of Japan, Russia, or China. Our workers appear to regard the latter as the greater evil of the two; and so far have shown little disposition to accommodate themselves to the exigencies of international trade competition. This change in our fiscal policy, which is so often described as one which will benefit the capitalist alone, is, in reality, one that will chiefly benefit the worker. The capitalist will still suffer competition from his brother capitalist, whereas the worker will be protected from the competition of foreign workers, whose standard of wages and comfort is lower than his own.

The final gain which will be mentioned is, that this change would tend to strengthen the bonds between the Mother Country and her Colonies, and would prepare the way for that later political federation of the Empire which all Britons proud of their name and race hope someday to see established. Commercial federation must either precede political federation or accompany it, and there are many reasons why its occurrence first would be the more desirable. A mother country producing manufactured goods chiefly for use at home or in her colonies,

1 Since this was written, this danger has greatly increased, owing to the "dumping" policy of huge Trust Companies in the United States and of the "Cartels" in Germany.

page 26 and colonies producing food-supplies and raw materials for the mother country, would be obliged by the necessities of this interchange in goods to study and take the deepest interest in each other's welfare. Such a study and interest would be an immense assistance in developing the resources of the Empire, and would produce that deeper knowledge of the needs and claims of each portion of it upon which a scheme of political federation might be safely based.

In closing the consideration of this proposal, it may be well to remark that the commercial federation of the Empire, involving, as it will, alteration in our fiscal relations with other countries, can only occur when a very decisive majority in the United Kingdom has been won over to its support. The extension of the franchise has placed the final decision upon questions of this character in the hands of the working classes. Their education on this subject will be a matter of time, and it is perfectly clear that their support will only be won for the change by convincing them that it is one which will benefit not only the Empire, but themselves. Some may assert that this fact will prove an insuperable obstacle to the realisation of this dream of an Imperial Unity. Time will show. The conversion of the working classes to the imperial idea may, after all, happen with startling rapidity.1

The conclusion to which this discussion of the future of our trade has thus led, is, therefore, that the creation of an Imperial Customs Union appears to offer the most promising means of escape from our present and future difficulties.

It may indeed be questioned whether such a self-dependent Empire is possible, and whether the increased speed

1 "I am convinced that there are thousands—and perhaps millions—of Englishmen who, while shrinking from sacrificing the integrity of our Free Trade policy to bolster up weak industries or in support of private interests, would yet willingly and gladly see it modified to promote the great cause of Imperial Unity."—Extract from article entitled "England's Opportunity," by Henry Birchenough, Nineteenth Century, July, 1897.

page 27 of production of all the commodities of exchange, now possible owing to the use of new sources of power, improved methods of manufacture, and machines of wonderful ingenuity, has not made the supply of wider and wider areas of the earth, and greater and greater numbers of its population, an absolute necessity of commercial existence. If this view be correct, and if the present industrial organisation of society is such that no nation, however wide the area of earth which it may cover, nor however great the number of its people, can exist by merely supplying with the necessaries and luxuries of life those who live under its flag, then there would seem to be only two possible paths of future development.

The first—that leading to a reorganisation of society upon a socialistic basis—demands for its ultimate success vast numbers of utterly unselfish individuals. The evolution of these, under modern conditions of life, is slow, and it is the writer's opinion that the average man is becoming daily more selfish and less inclined to sacrifice himself in any way for the general welfare of the race. The number of those who give an intellectual assent to the principles of State-socialism may possibly be increasing (in Germany this is certainly the case), but there is no corresponding growth of that spirit of self-sacrifice which is essential to the success of the Socialist's ideal.

The second path of industrial development is that upon which we are at present travelling. It leads to an international industrial warfare of the most savage intensity. This warfare, if it be permitted to proceed to its logical issue, can have but one result—the reduction of the standard of life and comfort in all countries to the lowest level at which human beings in any part of the world are willing to exist.