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THE NORTH AMERICAN REVIEW.



VOL. CLXXYII.



THE



NORTH AMERICAN



REVIEW.



EDITED BY GEORGE HARVEY.

/ 7 7

VOL. CLXXYII.




Tros Tyriusque mihi nullo discrlmine af etur.



NEW YORK:

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1 903.



l<3L(o

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Copyright, 1908, by THE NORTH AMERICAN RIYIBW PUBLISHING C*
All rights reterved.



NORTH AMERICAN REVIEW.

No. DLX.



JULY, 1903.

MR. CHAMBERLAIN'S SCHEME.

BY HAROLD COX.



MR. CHAMBERLAIN, as an astute electioneerer, has very wisely
declared that he will abstain from giving any details of his
scheme of preferential tariffs until he has received a mandate
from the country. He is thus saved from a good many difficul
ties; but a good many others remain. And the first difficulty is
this: that no scheme of preferential tariffs can be made to fit
into the general free trade policy of the United Kingdom. A pro
tectionist country can easily adopt any number of preferential
tariffs, and when England was protectionist she maintained dif
ferential duties both for foreign countries and for different por
tions of her own empire. Such differentiation is the logical re
sult of the principle of protection, the essence of which is, that
advantages are to be given to particular producers at the ex
pense of the general body of consumers, and therefore, necessarily,
at the expense of all other producers. If once this principle of
state favoritism to particular producers be accepted, it is a mere
matter of detail whether the favoritism be limited to home pro
ducers or extended to such colonial producers as are able to catch
the eye of the Colonial Secretary for the time being. If, however,
the principle of free trade be adopted, favoritism to colonial pro
ducers is as much barred as favoritism to home producers.
VOL. CLXXVII. NO. 560. 1

Copyright, 1903, by THE NOBTH AMKBIOAN RBVIKW PUBLISHIHG COMPANY. All rights reserved.



2 THE NORTH AMERICAN REVIEW.

In the case of Great Britain, the colonial favoritism which Mr.
Chamberlain advocates ought, on grounds of equity, to be even
more barred than the protection for British farmers of which
Mr. Henry Chaplin is the most prominent advocate. The British
wheat grower and his landlord would, at any rate, give something
to the nation in return for the boons which Mr. Chaplin is anxious
to confer upon them. As their incomes rose with the increased
price of grain, so would the amount of their income tax also rise.
In the case of Mr. Chamberlain's colonies, however, there would
be no return at all. The colonial producers whom he wishes to
favor pay no income tax to the Imperial Exchequer ; and nothing
is more certain than that the self-governing colonies will refuse
absolutely to make any serious contribution to the general cost
of defending the British Empire.

If, then, it is the policy of Great Britain to refuse to give any
kind of tariff favoritism to her home producers, a fortiori is she
compelled to refuse such favors to colonial producers. Mr. Cham
berlain only meets this argument with a rhetorical appeal to Im
perial sentiment. His scheme is to bind the Empire together,
even at the cost of some sacrifice to the Mother Country. How
great that sacrifice would be from a commercial point of view I
shall presently show ; but the point on which I wish now to insist
is that the primary sacrifice involved is a sacrifice of common
justice. Canada has just about the same population as Scotland.
It is impossible that even Mr. Chamberlain can bind Canada
more closely to the Empire than Scotland already is bound. Yet
Scotland has no preferential tariff; but she pays heavily for the
general defence of the Empire, while Canada pays not one cent.

The truth is that Mr. Chamberlain appears to have fallen into
confusion, by talking of the German Zollverein and of the
American Union, without troubling first to examine what are
the essential features of those great federations. The Consti
tution itself forbids the creation of tariff boundaries between the
different States of the Union. The German Zollverein, in ex
actly the same way, is founded upon the abolition of all internal
customs lines. It is difficult to exaggerate the advantages which
Germany and the United States have derived from this establish
ment of absolute free trade over a wide area of territory. Mr.
Chamberlain appears to be dreaming of similar advantages for
the British Empire ; but he has overlooked the important fact that



MR. CHAMBERLAIN'S SCHEME. 3

a Zollverein or Customs Union necessitates a common exchequer
or treasury. If the duties levied at Boston Harbor were paid into
the Massachusetts State treasury instead of into the Federal
Treasury, there would be an end of the commercial union of the
United States. In the same way, the commercial union of the
German Empire would come to an end if the separate frontier
States were allowed to collect the duties on goods from foreign
countries, and thus appropriate to themselves entirely revenue
which partly belonged to their neighbors in the interior. The
only possible way of working a customs union is by means of a
Federal customs service and a Federal treasury, and these imply
some sort of Federal parliament or council to control them.

Either Mr. Chamberlain has failed to grasp these essential
characteristics of the German Zollverein and of the American
Customs Union, or he is living in a fool's paradise with regard
to colonial sentiment. The idea that Canada, or Australia or
New Zealand would ever consent to have their customs duties
fixed by the Imperial Parliament at Westminster, collected by
Imperial customs officers and paid into an Imperial treasury is
mere midsummer madness.

It is, however, conceivable that the British Colonies, while
refusing to have their revenues swept up by Imperial tax-
gatherers, might yet be willing to exempt from all protective
duties goods coming from the Mother Country. Not only is this
conceivable, but so far as the greater part of the British Empire
is concerned, the thing is already done. England's greatest pos
session the Empire of India is governed on free trade prin
ciples; and, though small duties are levied for purposes of
revenue, they give no effective protection to Indian producers as
against British producers. Similar conditions prevail in the im
portant colonies of Ceylon, Singapore, and Hongkong, which do a
very large business with the United Kingdom on the basis, of
absolute or approximate free trade. The other tropical or semi-
tropical colonies are in much the same position. Cape Colony
and Natal have a protectionist bias; but that does not yet hurt
the Mother Country, because those colonies have not yet developed
a manufacturing industry of their own. It is, in fact, only in
Canada, Australia and New Zealand that any real protection
against British goods is to be found. So the pompous phrase
" Free Trade within the Empire," means only that Canada, Aus-



4 THE NORTH AMERICAN REVIEW.

tralia, and New Zealand should abandon the protective duties
they now maintain against the goods of the rest of the Empire,
and specially against the goods of the Mother Country. These
Colonies take less than 14 per cent, of the exports of British and
Irish goods from the United Kingdom. On the other hand,
Great Britain buys about 60 per cent, of all they have to sell.

Plain business men would probably contend that the favors
already given by Great Britain to these three colonies ought to
be sufficient to induce them to treat her goods with the same
liberality with which she treats theirs. In the first place, she
provides for their defence, and thus saves them from an expense
of many millions, sterling, a year which they would incur if they
were independent nations. She also provides them with consular
and diplomatic agents in all parts of the world, whose services are
at the disposal of all British subjects, although the inhabitants
of the United Kingdom alone pay for them. She further throws
open to all her colonial subjects posts in the civil and military
services of the United Kingdom and the great civil service of
India. Finally, she provides an open market which the colonies
mentioned find so convenient that they send there the greater
portion of their exports. If these favors do not avail to in
duce the self-governing colonies to give fair play to the goods of
the Mother Country, it may well be asked, What more do they
want?

The answer given by the Canadians is, that they want the
Mother Country to tax other people's goods in order that theirs
may have an advantage. But, supposing that this cool demand
were conceded, would the colonies treat the Mother Country as
well as she treats them? Not a bit of it! They would merely
treat her slightly better than they treat foreign countries. What
ever the Australians may do, the Canadians have made it clear
that they have not the slightest intention of abandoning the
effective protection which they now maintain against British
goods.

It is sometimes said in defence of the cynically selfish attitude
adopted by the Canadians, that they cannot afford to give free
trade to British goods, because they must, owing to their scattered
population, raise the principal part of their revenue by customs
duties. Mr. Chamberlain dealt fully with this argument at the
Colonial Conference last summer, pointing out that the difficulty



MR. CHAMBERLAIN'S SCHEME. 5

could be surmounted either by confining the customs duties to
goods not produced in the colonies, or by balancing every customs
duty on British goods by an excise duty on colonial goods. Either
system would give effective free trade, and would diminish the
burdens on the Canadian taxpayer without diminishing the Cana
dian revenues. By way of concrete illustration of this important
financial principle, which is the foundation of the English fiscal
system, it may be mentioned that, if there were a duty on tea in
Canada equal to the duty paid on tea by people of the United
Kingdom, this single duty would yield a revenue largely in ex
cess of the total revenue now yielded by the following thirty or
forty separate heads in the tariff: Adzes and axes; anvils and
vises ; boots, shoes and bootlaces ; braces ; brooms and brushes ; but
tons; aluminum, brass, copper, lead, tin, zinc, and manufactures
thereof ; candles ; carpet-sweepers, cordage and twine ; collars and
cuffs; corsets; files and rasps; glass; glue; grease; ink; needles;
paints and colors; pocket-knives; table-knives and other cutlery;
salt ; sewing-machines ; soap ; saws and other tools.

But that tea duty will not be imposed; and these protective
duties will not be swept away, because the persons who profit by
them have a commanding influence in the councils of the Cana
dian government. As long as that influence continues, so long
will Canada refuse to give free trade to the United Kingdom.

Is there, then, any immediate prospect of the protectionists in
Canada losing their power? So far as can be gathered, the
tendency is the other way. It was as a free-trader that Sir Wil
frid Laurier came into power. It was in the name of free trade
that he introduced his British preferential tariff in 1897. Con
clusive evidence on this point is furnished by his speech to the
Cobden Club deputation which presented him with a gold medal
on August 16th, 1897, for the services which they believed that
he had rendered to free trade. He then explicitly declared that
Canada had adopted the principle of free trade, and was moving
towards a practical realization of that principle by steps as rapid
as possible. After referring to the success which England had
achieved by her so-called " one-sided free trade," he concluded :

" In Canada, we can do no better than follow the example thus set us.
There are parties who hope to maintain the British Empire on lines of
restricted trade. If the British Empire is to be maintained, it can only
be upon the most absolute freedom, political and commercial. In build-



6 THE NORTH AMERICAN REVIEW.

ing up this great Empire, to deviate from the principle of freedom will
be to so much weaken the ties and the bonds which now bind it together."

Those were the views held by Sir Wilfrid Laurier in 1897, but
he had already shown that he was powerless to carry them into
practice. The Lanrier tariff of 1897 was undoubtedly inspired
by free trade aspirations, but it was dominated throughout by pro
tectionist influences. Its main feature was a reduction in the
duties on certain food-products and raw materials. This measure
was certainly of great advantage to Canada as a whole, but it
was specially of advantage to the manufacturing interest. The
only step taken against that interest was the concession of a re
bate off the general tariff to all goods coming from Great Britain.
This concession served a double purpose. In the first place, it
was a reply to the United States protectionists who had just re
fused to negotiate a reciprocity treaty with Canada. In the
second place, it enlisted patriotic sentiment on behalf of the
tariff, and so enabled Sir Wilfrid Laurier to surmount the in
terested opposition of the Canadian manufacturers. Even with
this double lever, however, he did not feel strong enough to defy
all the manufacturers, and therefore took steps to appease an
important section of that body by raising the duties on cotton
manufactures a measure which neutralized very largely, so far
as cotton was concerned, the rebate on British goods.

The Canadian premier, fresh from a free trade victory at
the polls, was unable to defy the protectionist manufacturers.
Their power has continued to grow, while his free trade declara
tions have become rarer and rarer. Whether he is still a convinced
free-trader, he alone knows; but he certainly takes care to avoid
saying so in public. It is, therefore, reasonable to infer that the
protectionist manufacturers are the dominating influence in
Canadian politics. They have made their views with regard to
preferential trade perfectly clear. At a meeting of the Manu
facturers' Association held in August last, a resolution was unani
mously passed, asking for the immediate revision of the Canadian
tariff upon lines which would more effectually transfer to the
workshops of the Dominion the manufacture of goods now im
ported from other countries. They added that they were willing
to give a substantial preference to the Mother Country, provided
that " the minimum tariff must afford adequate protection to all
Canadian producers."



MR. CHAMBERLAIN'S SCHEME. 7

A preference on such terms as these is clearly delusive. In Mr.
Chamberlain's own language less than a year ago:

" So long as a preferential tariff, even a munificent preference, is still
sufficiently protective to exclude us altogether, or nearly so, from your
markets, it is no satisfaction to us that you have imposed even greater
disability upon the same goods if they come from foreign markets,
especially if the articles in which foreigners are interested come in under
more favorable conditions."

The sting of the last phrase in the above quotation lies in the
fact that, under the so-called British preferential tariff, the aver
age duty on the sum total of American goods entering Canada is
less than the average duty on British goods. The reason is very
simple. A large part of the goods sent by America to Canada
consists of raw material admitted free or at very low duties,
whereas practically the whole of the goods sent from the United
Kingdom to Canada consist of fully manufactured articles on
which high duties are charged. Consequently, the general effect
of the Canadian tariff is rather to encourage American than Brit
ish trade. The results may be seen in the following striking fact:
During the five years preceding 1897, the British imports into
Canada represented one-third of Canada's total imports; during
the five years that have since elapsed, the proportion of British
imports has sunk to a quarter.

This delusive preference Mr. Chamberlain proposes to buy.
What is the price that the people of the United Kingdom will
have to pay for the purchase ? The answer to that question is
admirably stated in the resolution passed by the Congress of Co-
operators held at Doncaster on June 1st, 1903 :

"That this Congress, representing two millions of working-class con
sumers, takes the earliest opportunity of entering its emphatic protest
against any tampering with the Free Trade policy of the country by any
system of preferential tariffs, believing that the same would increase the
cost of food to the poorest, diminish remuneration and the area of em
ployment, promote international ill-will and consequent growth of mili
tarism; further, it strongly condemns the proposal to exploit the poverty
and patriotism of the people in a cause which, in addition to promoting
strife between the great nations of the world, will tend to crush the
growing policy of friendship between the two great branches of the
Anglo-Saxon race."

It is most gratifying to see that this body, representing what
has well been called the aristocracy of the English working



8 THE NORTH AMERICAN REVIEW.

classes, laid stress, not merely on the injury Mr. Chamberlain's
scheme would inflict on their class interests, but also on the even
wider mischief that would be done by the stimulation of interna
tional strife, and in particular by the creation of ill-feeling be
tween England and the United States. England, in adopting a
policy of protection, whether for the benefit of her colonies or of
favored classes at home, would only be doing what France and
Germany and the United States already do. These countries
would, therefore, have no right to resent her action. But, in mat
ters of trade relations, it is unsafe to argue as if nations were
individuals. A trading nation is an aggregate of individuals,
with divergent and often opposite interests. The individuals in
the United States who are responsible for the heavy tariff against
British goods, are the manufacturers. They would not be hurt if
England were to impose a heavy duty on American wheat for the
benefit of Canadian wheat growers. The man who would be hurt
would be the American farmer, with whom England has no cause
of quarrel. If he saw his business ruined by Mr. Chamberlain's
scheme, his bitterness against the authors of that ruin would not
be mitigated by the reflection that his own countrymen had for
years been acting unfairly to British industries. He would prob
ably also reflect that these same countrymen of his had, during
the same period, been acting with equal unfairness to himself,
by depriving him of the opportunity of buying what he wanted
where he could get it best. So far as Mr. Chamberlain's scheme
was effective, it is certain ,that a great wave of distress would
pass over the wheat-growing sections of the United States, and
the consequent hostility against England would be deplored, I
believe, not less sincerely by Americans than by Englishmen.

As regards Germany, the position presented to the House of
Commons by Mr. Chamberlain and Mr. Balfour was grotesque
in its inaccuracy. Both ministers spoke as if Germany had been
guilty of some kind of high treason against the British Empire,
because she applied her maximum tariff to Canadian goods, when
Canada applied her maximum tariff to German goods. " Ger
many refuses to recognize Canada as part of our Empire." So
stated both these ministers; and the House of Commons ex
pressed its indignation with an angry murmur. The real fact is
that Germany was only carrying out the doctrine laid down by
Lord Salisbury, when, at the request of Canada, he denounced



MR. CHAMBERLAIN'S SCHEME. 9

in 1897 the Anglo-German commercial treaty of 1865. Under
that treat}^ it was not possible either for Canada to favor England
as compared with Germany, or for Germany to favor England
as compared with Canada. Lord Salisbury in denouncing this
treaty said : " For many years, the British self-governing colonies
have enjoyed complete tariff autonomy, and, in all recent commer
cial treaties concluded by Great Britain, it has been customary
to insert an article empowering the self-governing colonies to
adhere or not at will."

The Anglo-German treaty of 1865 limited this " complete
tariff autonomy " so far as Germany was concerned. Therefore
it was denounced. After the denunciation, Canada was free to
enter into any arrangements she pleased with Germany or with
England. The Germans were, therefore, not merely authorized,
but were compelled, to treat Canada as a separate fiscal unit.
Negotiations for a treaty of commerce between Canada and Ger
many were at once commenced, but hitherto have failed. It is
surely not the first time in the history of the world that two coun
tries, each actuated by a strong protectionist bias, have failed to
arrive at a mutually satisfactory treaty of commerce. Where the
blame lies for the failure need not be considered. In this case,
as in others, it is probably divided equally. The important point,
however, is that Germany has taken no step whatever that can
fairly be called aggressive. Pending the negotiation of a treaty
of commerce, she has merely placed Canada on the list of non-
treaty countries. What else could she have done ?

As a matter of fact, this " insult " does not appear greatly to
have affected the growth of trade between Canada and Germany;
for, according to Mr. Fielding, the Canadian Minister of Finance,
exports from Canada to Germany increased from $1,045,000 in
1897 to $2,142,000 in 1901. They further rose to $2,693,000 in
1902. In these circumstances, the action of Canada in imposing
a special surtax upon German goods, as an avowed act of commer
cial war, is more worthy of a petulant child than of a grown na
tion. Yet this is the quarrel in which the 42,000,000 people of the
United Kingdom are invited to take a hand.

And at what a cost ! Ever since England adopted free trade,
she has enjoyed the enormous advantage of most-favored-nation
treatment in all the markets of the world. Other countries worry
about the details of commercial treaties ; England reaps the bene-



10 TEE NORTH AMERICAN REVIEW.

fit. That is a primary advantage of her free trade position, which
would disappear instantly if she embarked upon a tariff war for
the benefit of a colony which itself maintains a heavy tariff
against her goods. The other and greater advantage which she
would lose would be the enormous boon of cheap food and cheap
raw materials. Mr. Balfour, in trying to minimize Mr. Cham
berlain's scheme, said that there was no intention of taxing raw
materials, and Mr. Chamberlain repeated this with the important
safeguard that he would not commit himself for all time. At
present, all he asked for was a tax on food. He was wise thus to
guard himself, for in practice the distinction between food and
raw materials cannot be maintained. Dr. Johnson remarked that
oats are a food of men in Scotland and of horses in England. In
the same way, maize is a food for men in the West of Ireland and
for cattle in England and Scotland. Even wheat is sometimes
used as a feeding stuff when poor in quality, and the offal obtained
in grinding wheat is always so used. Therefore, a tax on any
one of these staples is a tax, not merely on the food of the people
who have to pay for running the British Empire, but also a tax
on the raw materials of important British industries. Again, a
tax on foreign cattle or sheep would tend to raise the price, not
only of beef and mutton, but also of hides and skins, horns and
hoofs, the raw materials of a number of important industries.

The question has a still wider aspect; for, from the point of
view of the manufacturer, the food of the workman is one of the
raw materials of the industry. If the price of the workman's food
is raised, one of two things, must happen, either wages will rise
or they will not. Evidently, it is the former alternative which
Mr. Chamberlain contemplates. But if the manufacturer has to
pay higher wages his cost of production is increased, and he is less
able to compete in the markets of the world, including the
colonial markets. Thus Canada stands to get a double gain, on
Mr. Chamberlain's own hypothesis, out of Great Britain's loss.
Her farmers will benefit by the rise in prices of their food ex
ports, and her manufacturers will benefit by the increased dis
ability under which their British rivals will be placed.

Let us now take the other alternative, that the wages paid to