Lawrence John Lumley Dundas Zetland.

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striking a testimonial to the efl&cacy of a tariff — testimony -which
is doubly gratifying in that it comes from a Free Trader. But
Tariff Reformer though I am, I do not find it possible to claim for
a small duty of five per cent on cotton piece goods quite so striking
an efi'ect as Mr J. Whittaker is anxious to attribute to it — especially
when I recall the fact that there was in operation even then an
excise duty equivalent to the import duty upon a large part of
the Indian machine-made yarn out of which the Indian machine-



INDIA AND IMPERIAL RECIPROCITY, 277

upon the industry protected, it is far from being
so to the native of India. Mr J. Whittaker, as
spokesman for the Lancashire interests, put his
case with such engaging frankness that it would
be impossible for any Indian who read his speech,
even if he had not already been convinced, to
entertain any further doubts as to the reason
for the imposition of the excise upon the Indian
industry. Had he required any further light
thrown upon Lancashire's view as to the sphere
which India should occupy in the Empire's com-
merce scheme, he would have been obliged by
Mr W. Noble, another member of the " Joint
Committee of cotton manufacturers and opera-
tives," who was good enough to say that
" Lancashire would hail with satisfaction lesfis-
lation of a kind that would tend to make India
prosperous and wealthy by encouraging agricul-
ture and a larger exportation of the produce
of its soil, which would prove the best source
of wealth to such a country."

In view of such uncompromising utterances
there appears to be little to be gained by being

made piece goods were woven. A predilection for truth compels
me to confess that the real and main cause of the falling-oflf in
the Lancashire trade with India in 1895 was a glutted market
resulting from abnormally heavy imports in 1894. The total ship-
ments of cotton goods from the United Kingdom to India during
the years 1889-93 averaged 1,919,000,000 yards per annum, whereas
the shipments in 1894 aggregated 2,276,000,000 yards.



278 AN EASTERN MISCELLANY.

anything but brutally candid, and we may with-
out further hair-splitting accept as irrefutable
India's view that the excise duty is nothing
more than a conspicuous example of the calcu-
lating selfishness of the economic policy of the
Manchester school. And we may further admit
that the fears of the Government of India as
to the treatment which might not improbably
be accorded to India, should she prematurely
signify her willingness to adhere to any scheme
of Imperial Preference, were abundantly justified.
No such danger, however, need await her if
when next an Imperial Conference is in a posi-
tion to embark upon an unrestricted discussion of
the question, she is given adequate facilities
for stating her case ; and all that is now urged
is that there are in the circumstances of British -
Indian trade undoubted possibilities of Keciproc-
ity. As the late Sir E. F. Law — one of the
signatories of the despatch of the Government
of India of 1903 — declared not long ago, "It
remains for the Home Government, which may
introduce Tariff Beform, to formulate such pro-
posals as will justify India in accepting the
policy of Imperial Preference. And such pro-
posals can be formulated." In the following
chapter suggestions will be made as to the
means by which tariff reciprocity may be secured
between India and Great Britain.



279



CHAPTER XIV.

INDIA AND IMPERIAL RECIPROCITY.

{Continued.)

We may begin our examination by endeavouring
to ascertain what advantages, if any, India has
to offer to the United Kingdom. It has already
been pointed out that the £10,000,000 worth
of goods imported into India in which the
Indian Government admitted that effective com-
petition prevailed in 1903 has largely increased,
and an enhancement of the duty on foreign goods
sufficient to give British manufacturers a sub-
stantial preference would confer no small advan-
tage on the United Kingdom The increase in the
value of the exports from the United Kingdom
to India during the past ten years has been
from £31,354,780 in 1898-99 to £50,617,819 in
1908-9. The corresponding increase in the exports
from the chief foreign countries trading with her
during the same period is given in the table on
the next page.



280



AN EASTERN MISCELLANY,



It is Indeed surprising to find how large is
the share in certain lines of manufactured goods
which is now supplied by Great Britain's foreign
competitors. In 1908-9, for instance, Japan
supplied £235,500 worth of India's imports of
hosiery against the £30,600 worth supplied by
the United Kingdom. Sweden sent £158,700



Country.


1898-99.


1908-9.




£


£


Austria-Hungary


1,618,917


2,577,749


Belgium .










1,486,955


3,446,984


France












687,897


1,207,261


Germany .












1,151,917


3,286,510


Holland .












234,801


588,170


Italy












371,285


756,402


Japan












363,337


1,411,212


Java












130,537


4,130,875


United States












908,446


2,175,534


China (Treaty Ports)








360,675


754,373


Others 1


2,575,414


3,135,707




Total


I









9,890,181


23,470,777



and Japan £73,800 worth of matches, while the
share of this trade secured by the United
Kingdom was the insignificant one of £4900.
In iron goods Belgium alone supplied twice
as much under the heading " angle, bolts, and



^ All countries whose exports to India did not amount to £500,000
in 1908-9. Russia's exports to India, consisting almost exclusively
of mineral oil, were valued at £1,368,663 in 1898-99, and reached
£2,124,110 in 1901-2. As a result, however, of the events described
in chap, v., they fell in 1905-6 to £188,664, and in 1908-9 still stood
at only £186,446.



INDIA AND IMPERIAL RECIPROCITY.



281



rod " ; two and a half times as much " bar "
iron ; considerably more " nails, screws, rivets,
and washers," and three times as much "wire"
as the United Kingdom. The same country
also supplied seven times as much "bar" steel
as Great Britain ; while out of an import of
steel goods of all kinds, valued at £2,856,330,
British manufacturers only succeeded in securing
.£1,406,218, or less than fifty per cent. A
general idea of the extent to which our foreign
competitors have already succeeded in capturing
the Indian market may be formed from a con-
sideration of the figures set out in the following
table : —



Article.



Apparel ....
Cabinet ware and furniture
Clocks and watches
Hosiery ....
Dyeing and tanning materials
Glass and glass ware
Hardware and cutlery .
Manufactured jewellery and

plate ....
Matches ....
Steel ....
Toys, &c.
Wool manufactures

Total



Indian Imports
1908-9.



£

1,612,005
122,269
123,006
423,008
5.36,525
779,563

1,950,546

121,676

496,671
2,856,330

208,807
1,940,620



11,171,026



Share of

Foreign

Countries.



£
760,220
54,274
105,291
392,405
503,530
651,696
650,474

58,524

491,708

1,450,112

108,463

889,497



Share of the
U.K.



£

851,785
67,995
17,715
30,603
32,995

127,857
1,300,072

63,152

4,963

1,406,218

100,344

1,051,123



6,116,194 5,054,822



The above table discloses the fact that in many



282 AN EASTERN MISCELLANY.

lines of manufactured goods Great Britain's com-
petitors now take a greater share of the Indian
trade than Great Britain, and shows the existence
of a considerable field in which a preferential tariff
might exert a valuable influence.

So far we have only indicated the possibilities
of the particular form of preference contemplated
by the Government of India in their despatch of
1903. Import duties, however, do not exhaust
the capacity of India for giving preferential advan-
tages to the United Kingdom. She has in the
past made use of export duties, and does still
impose an export duty upon rice which brings in
a net sum of upwards of £650,000 to the ex-
chequer. Whether this particular duty is or is
not open to criticism is a matter of opinion. It
certainly does not fulfil the conditions demanded
by a Free Trader like Sir John Strachey, who, in
the course of his financial statement in 1878, laid
it down that, " As regards exports, duties should
be levied on those commodities only in which the
exporting country has practically a monopoly of
production." Has India, then, the monopoly of
production of any considerable article of com-
merce ? It so happens that she has. Bengal
and Assam are the only countries which produce
the fibre called jute for which a world-wide demand
exists, aggregating from 8,000,000 to 8,200,000
bales a -year. Jute, indeed, has become during



INDIA AND IMPERIAL RECIPROCITY. 283

recent years the most valuable of all India's
exports, the surplus which she was able to dispose
of in 1908-9 amounting to 17,879,903 cwt., valued
at £13,223,037. Here, then, is a commodity which
plainly fulfils the conditions laid down by Sir John
Strachey, and a small export duty upon which
would bring in a considerable sum to the ex-
chequer. Nor is there any reason to suppose
that such a duty would be objected to by Indian
politicians. On the contrary, there is every reason
to suppose otherwise, for when speaking recently
of the necessity of raising more money for educa-
tion, Mr Gokhale, after enumerating various pos-
sible sources of revenue, went on to say, "The
fifth source that I point out is an export duty on
jute — and on several other commodities. A five
per cent duty on jute will mean about a crore of
rupees."

But from the point of view of Imperial prefer-
ence an export duty on jute possesses other than
merely revenue-producing possibilities. One would
have thought that the possession of the monopoly
of production of a valuable raw material would
have been turned to good account in the interests
of the Empire so fortunately situated. The organ-
isation of trade is, however, incompatible with a
policy of laisser-faire, and nothing, therefore, has
been done to take advantage of our favourable
position. On the contrary, our competitors have



284



AN EASTERN MISCELLANY.



been encouraged to come and help themselves
from our store — and they have not been backward
in doing so. There was a time when the United
Kingdom and India enjoyed a monopoly not only of
the production of raw jute but also of the manu-
facture of the raw material into cloth and gunny
bags. Dundee and Calcutta supplied the world.
But with the growth of protection on the conti-
nent of Europe and America this happy state of
affairs was soon brought to an end. Tariffs were
raised against the jute manufactures of India and
the United Kingdom, while the very nations who
thus struck at the British industry helped them-
selves with increasing liberality from the British
store of raw material. The method by which our
competitors are gradually transferring to them-
selves the manufacture of a raw material of which
the British Empire possesses a monopoly is clearly
shown by the following table of import duties
imposed by our three leading rivals : —



IMPORT DUTIES IMPOSED.



Country.


Raw Jute.


Cloth.


Bags.


Germany ....

United States

France .....


Free.
Free.
Free.


34 per cent.
20 per cent.
25 per cent.


31 per cent.
52 per cent.
34 per cent.



The result of the control thus exercised by our
rivals over our trade has already more than



INDIA AND IMPERIAL RECIPROCITY. 285

fulfilled expectations, while the eflfect of their
policy still continues. In 1906-7 Great Britain
still took 42 per cent of India's surplus of raw
jute; in 1907-8 her portion fell to 38|- per cent,
and in 1908-9 to 37^ per cent. During the
latter year Germany took 20| per cent ; the
United States 18j^ per cent; and France 10^
per cent, the bulk of the remaining 13 per cent
being taken by Austria-Hungary, Italy, and Spain.
The largest single buyer of jute fabrics from India
is the United States, which takes her supplies
mainly as cloth. It is surely significant, then,
that while the proportion of the total export of
raw jute taken by her rose from 14 per cent in
1907-8 to 18fjj per cent in 1908-9, her pur-
chases of Indian jute manufactures should have
fallen in value from £4,431,000 in the former
to £3,486,000 in the latter year.

In view, then, of the tactics adopted with such
success by our rivals, is there any reason why
we should not take a leaf out of their book, and
impose an export duty on raw jute with a rebate
when shipped to the United Kingdom ? ^ Would
such a duty benefit or injure the manufacturer in
India and in England ?

There are two possible objections to such a
policy. It may be argued, in the first place,

^ It would, of course, be necessary to impose an equivalent export
duty in the United Kingdom.



286 AN EASTERN MISCELLANY.

that any considerable increase in the price of raw
jute to the outside world might conceivably result
in its production elsewhere, and in the consequent
disappearance of the Indian monopoly ; and, in
the second place, that this or any other measure
of preference granted by India to the United
Kingdom would invite retaliatory measures at
the hands of other Powers. Let me dispose of
the argument affecting jute alone before dealing
with the more general question of retaliation.

It is quite true that India's monopoly in the
production of jute is due largely to cheapness,
which " has enabled it to defeat its possible sub-
stitutes, and has prevented the existence of any
suflScient stimulus for competitive production else-
where " ; and the possible effect of an export duty
upon price would be a matter to be taken into
consideration. AVhat we require to know is the
price which jute must reach before it becomes
worth while for any one to embark upon its experi-
mental production elsewhere. Fortunately we are
not altogether without guidance in the matter.
As a result of natural causes the price of raw jute
reached an unprecedented height in 1906. The
maximum and Tninimum^ prices realised during
that year were £28 and £19, 5s. per ton, while
the average price for the twelve months worked
out at £4, Os. 4d. per 400 lb. bale. This extra-
ordinary rise in the price is said to have "stimu-



INDIA AND IMPERIAL RECIPROCITY. 287

lated experimental cultivation in Khodesia, West
Africa, and other parts of the world." It would
seem, then, that efforts might possibly be made to
grow jute elsewhere, provided that there was a
prospect of a price of approximately £4 per bale
being maintained. Fortunately there is no such
prospect, the price in 1908-9 having fallen again
to an average of £2, lis. 8d. per bale, while the
general level of price may be gauged from the fact
that during the previous five years, in spite of the
inflated prices of 1906, the average price did not
exceed £2, 18s. 2d. per bale. It will be seen,
therefore, that there is no likelihood of the price
being raised, by any duty that would be likely to
be imposed, to a height sufficient to encourage
competitive cultivation elsewhere.

Now as to the possibilities of retaliation on the
part of other Powers. The United States is, as
already mentioned, the largest single purchaser of
Indian jute manufactures, and is also a purchaser
on an increasing scale of raw jute ; and it might
be aro^ued that if India were to discriminate
against her in favour of Great Britain, she might
retaliate by imposing duties on Indian jute manu-
factures. But she does already impose very high
duties upon Indian jute manufactures, and could
scarcely increase them without injury to herself,
especially in view of the fact that she is dependent
upon India for her supplies of the raw material.



288 AN EASTERN MISCELLANY.

But quite apart from these considerations, the
United States is scarcely in a position to take
exception to the step proposed, since she is herself
pursuing a precisely similar policy. A duty of
£1, 10s. per ton is imposed on Manila hemp ex-
ported from the Philippines, the United States
manufacturer being given a rebate of the duty,
provided that the hemp is imported to the States
in an American vessel.-^ It is, indeed, quite clear
that in the view of the United States a country
is fully entitled to arrange any preference she
may think fit with her Colonies and Possessions
without thereby providing justifiable ground for
hostile action on the part of other countries.
The American Tarifi* Act of August 5, 1909, for
instance, provides for a wide scheme of preference
between the United States and the Philippine
Islands. Under section 5 of the Act the pro-
ducts and manufactures of the Philippines, except
rice, and with certain limitations as to quantity
in the case of sugar, tobacco, and cigars, are
admitted into the United States free of duty,
the products and manufactures of the United
States being likewise admitted duty free into
the Philippine Islands. Remission of export
duties is also provided for in the following para-
graph of the same section : " All articles, the
growth, product, or manufacture, as hereinbefore

1 'India and the Empire,' by M. de P. Webb, CLE., p. 97.



INDIA AND IMPERIAL RECIPROCITY. 289

defined, of the Philippine Islands admitted into
the ports of the United States free of duty under
the provisions of this section and shipped as here-
inbefore provided from the said islands to the
United States for use and consumption therein,
shall be hereafter exempt from payment of any
export duties imposed in the Philippine Islands."

This view seems to have met with pretty
general acceptance, and it has been stated quite
recently in an important official publication that
*' It may now be regarded as a settled principle
that trade arrangements between parts of the
British Empire are to be considered matters of
a domestic character, which cannot be regarded
as discriminatory by any foreign Power," ^ It is
obvious that if this is so, the retaliation argument
against preference falls to the ground ; yet so
strongly has this argument been urged in the
case of India that it may be well to direct atten-
tion to the unusually strong position which that
country occupies, even apart from a general ac-
ceptance on the part of all the Powers of the
principle above enunciated.

While the Government of India in their
despatch of 1903 were at pains to lay stress
on the serious effect which retaliation on the
part of foreign countries might have upon

1 Report of the Royal Commission on Trade Relations between
the West Indies and Canada.



290



AN EASTERN MISCELLANY.



India, whose ability to discharge her obligations
depends so largely upon the state of her export
trade, they showed at the same time that they
were fully aware of the strength of her position.
" We are fully alive," they wrote, " to the value
of the safeguard that we possess in the fact that
so much of our exports consists of the materials
used in foreign industries ; and we believe that in
normal conditions foreign nations will be deterred
by the powerful motive of self-interest from strik-
ing at us, lest in doing so they might injure
themselves."

The strength of India's position in this respect
is clearly demonstrated by a consideration of the
figures set forth in the following table : —

PEINCIPAL EXPOETS OF INDIAN MEECHANDISE.



Articles.


1906-7.


1907-8.


1908-9.




£


£


£


Jute, raw ....


17,892,000


11,982,000


13,223,000


Cotton, raw


14,652,000


17,135,000


13,179,000


Eice


12,353,000


13,559,000


10,.592,000


Jute manufactures


10,477,000


12,198,000


10,491,000


Hides and skins .


10,230,000


7,301,000


8,312,000


Seeds


8,681,000


11,210,000


7,785,000


Tea


6,572,000


6,867,000


6,929,000


Cotton yarn


6,931,000


5,982,000


6,454,000


Opium ....


6,205,000


5,782,000


6,23.3,000


Lac


2,333,000


2,722,000


1,863,000


Wool, raw ....


1,618,000


1,402,000


1,389,000


Wheat and wheat-flour


5,227,000


6,097,000


1,241,000


Cotton manufactures .


1,181,000


1,196,000


1,238,000


Coffee


664,000


743,000


927,000



The immense preponderance amongst Indian ex-
ports of rmv agricultural iwoduce is here clearly



INDIA AND IMPERIAL RECIPROCITY. 291

brought out. In spite of the fact that the un-
favourable season of 1907-8 caused a decline in
the exports during 1908-9 of raw cotton, rice,
seeds, and especially wheat, raw materials and
unmanufactured articles formed 44*8 per cent, and
articles of food and drink 21*7 per cent of the
total exports, as against the 24*5 per cent repre-
sented by manufactures.^ A careful study of the
table shows, indeed, that the vast bulk of the
goods exported are goods which form the life-blood
of the industries of the countries importing them,
or articles of food and drink, and suggests the
correctness of the conclusions come to by the late
Sir E. F. Law after a most painstaking examina-
tion of the character of the trade between India
and the chief foreign countries. Summarised, his
conclusions were that the United States was not
in a position "to do India much harm"; that
Germany was "far from being in a position to
retaliate with success" ; that France was "not in
a favourable position to retaliate " ; that Belgium
and Austria-Hungary " could not retaliate with
effect " ; that it was unlikely that Italy " could
aiford strong measures of retaliation " ; and that
the position of Indian trade with Kussia was " so
adversely one-sided and unfavourable to Indian
interests that it would appear reasonable, in any

^ Of the total value of manufactured goods exported, nearly half
is accounted for by jute goods, of the raw material of which India,
as has already been explained, holds the monopoly.



292 AN EASTERN MISCELLANY.

case, to discriminate against her products, unless
she agreed to make considerable concessions in
favour of the Indian export trade."

It is maintained, then, that foreign countries
would be unlikely to retaliate by imposing or
increasing duties upon Indian products, since it
would be to their obvious disadvantage to do
so ; and secondly, that even if they were to do
so, such duties would, in the majority of cases,
be ineffective in restricting the sale of the com-
modities affected. Once more, we are able to
appeal to experience in support of our con-
tention. In 1903 Russia imposed a sur - tax
upon Indian tea, as a measure of retaliation
against Great Britain for prohibiting the impor-
tation of Russian sugar, under the terms of the
Brussels Convention. Here, then, we have a
test as to the reality of " the danger to India
of reprisals by foreign nations." In this case,
the facts belie the fears of the Government of
India, and fully bear out the contention above
made that retaliatory duties imposed by foreign
powers " would not be effective in restricting
the sale of the commodities affected." Indeed,
far from the imports of Indian tea into Russia
being restricted, they steadily increased through-
out the whole of the period (1903-1908) during
which the sur-tax was in force, the figures being
as follows — imports of Indian tea into Russia
in 1901-2, one and a half million pounds (weight),



INDIA AND IMPERIAL RECIPROCITY. 293

and in 1908-9, eighteen and a half million pounds
— an increase of 1200 per cent in seven years.

Perhaps enough has been said to show that
India has substantial advantages to offer to the
United Kingdom, and that she is in a position to
make her offer without running any great risk
of injury at the hands of Great Britain's com-
mercial rivals. The question which must now
be asked, and if possible answered, is — Has
Great Britain anything to offer to India in
return ?

The mere fact that the bulk of Indian exports
consists of raw material suggests at first sight
that there is not much scope for preference to
Indian products in any scheme of Imperial
Reciprocity. There are, however, exceptions to
this generalisation. A transference of taxation
from tea to foreign manufactured goods would
obviously be of advantage to the Indian tea
industry, the existing rate of duty being main-
tained on tea grown outside the limits of the
Empire. A preference might likewise be given
to Indian coffee, and much might be done by
an alteration of the English duties on tobacco
to remove the unfair advantage at present ac-
corded to the American product. " Indian


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