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pose of exclusive privileges and tariff bargains, but with a view to the equalisation and generalisation of tariffs." The first of these new arrangements having been negotiated between Great Britain and France, the classification of goods was naturally settled to suit the trade between the two countries. Every business man knows that the classification of goods adopted for the assessment of customs duties is as important as rates of duty. France having adopted a fresh customs classification by the conventions supplementary to the treaty of 1860, adhered to it in the arrangements subsequently concluded with other Powers; and thus the new European tariffs became specially serviceable to the trade of the United Kingdom; and the benefit of their provisions was secured for our trade by means of a better worded most favoured nation article in new commercial treaties. By the commercial treaty of December 16th, 1865, with Austria, the British Government engaged to abolish the import duty on wood and timber, and to equalise the duty on wine in bottle and in cask. The principle of preferential treatment for colonial products which had hitherto been maintained in our Customs tariff came to an end, under these arrangements with Austria in 1866. The number of separate headings in the British tariff which, as before stated, were reduced to 450 after 1846, were under the commercial treaty system of 1860 reduced to 92 items in the financial year 1860-61, and to 70 in 1867-68. Mr. Gladstone, in his article on Free Trade, Railways and Commerces in the Nineteenth Century, February, 1880, summed up the effect of the Customs Act of 1860, which gave legislative sanction to the provisions of the French Treaty, as follows:-
"1. That neither on raw produce, nor on food, nor on manufactured goods should any duty of a protective character be charged.
2. That the sums necessary to be levied for the purposes of revenue in the shape of Customs duty should be raised upon the smallest possible number of articles."
protection of workers from personal injury. They wanted the free import of raw materials to be worked up in this country; and to attain this end they coalesced with the opponents of the Corn Laws. They wanted also to obtain access to European markets as being valuable (1) on account of near neighbourhood; (2) as possessing purchasing power; (3) greater security for trade purposes than distant regions; and (4) as affording quick returns, approximating to the profits of a home trade. They were not apprehensive of foreign competition either at home or abroad; and laid stress on the effect of British example in fiscal questions.
This policy was successful during several years. Comparing the total movement of trade between the United Kingdom and the principal European countries, which came into what is designated the conventional tariff system, the growth of the total movement of British trade in the years before the principal European countries came under this influence, contrasted with the figures for 1873, when the first effects of the Franco-German war had passed off, and commercial relations had resumed fair normal conditions, and with the figures for 1902, inserted here for convenience of comparison, the growth of the whole trade stands thus :
The remission of the duties on paper, sugar, and timber in following years were made in conformity with these principles.
The action of Mr. Cobden and his followers in these matters was founded on business as well as on economic grounds. The well-being of workpeople, and especially of women and children employed in factories did not find especial support either from them or Sir Robert Peel. They objected to legislation either for limiting hours of labour, or for the
On these figures I would remark again that they are only to be taken as illustrations, given in an easy shape. It may be useful to conclude this part of the subject by taking the figures of British export trade in groups of years as given by Mr. Gladstone in the article of 1880 above referred to; his explanation of the reasons for this arrangement are (if I may venture to express an opinion) sound and sufficient; they can, however, only be stated here without explanations; and they express the case strongly from the free trade and early fiscal reformers' point of view :
Million £, average.
These figures prove the growth of the trade of the United Kingdom after 1842, and especially after 1860. It must, however, be duly remembered that tariff changes do not create trade. A tariff may remove, as it may impose, restrictions upon trade. After 1842 these barriers were gradually removed here; and after 1860 they were lessened on the Continent. But these results were very largely made possible by improvements in communi
Extension of railways, development of steam navigation, the use of the telegraph, and the influence of the gold discoveries, effected great changes in commercial operations, and led to the opening up of vast regions beyond the seas. Mr. Gladstone, in the article above referred to, maintained that a sound political economy had done more than inventive genius for the enlargement of commerce and wealth. Without the latter, however, relaxation of Customs tariffs and regulations could not have afforded adequate means for the extension of international commerce during the last half-century.
THE TREATY SYSTEM, 1882-1903.
In England Free Trade was adopted as being the outcome of popular convictions in a social crisis, in order to alleviate or remove existing difficulties.. On the Continent no such popular movement had arisen. Tariff changes were brought about in continental countries by the Government; to use a common expression, they were imposed from above. In England the protectionist opposition continued strong for several years after 1846, and it still exerts a political influence. On the Continent the new commercial policy was much resented in The many quaters. general gain which a liberal commercial policy confers is counterbalanced, for a time at least, by the loss occasioned to various localities, special interests, and individual businesses. Circumstances favourable to the changes effected, and the healing efficacy of the lapse of time, are necessary before this irritation and sense of loss can pass away. In England, after 1846, in the next generation, Free Trade principles were generally adopted. If peace had been preserved in Europe for fifty years after 1860 free trade principles would probably have become firmly established and much further extended in operation. In 1864, Mr. Cobden was disquieted at the slow progress made in France by the free trade movement, and he was apprehensive whether the commercial treaty policy would be upheld at the date when the treaty of 1860 would be terminable. The Imperial Government in France, notwithstanding the hostile attitude of the Liberal political opposition, and of the manufacturers, persevered in their truly liberal commercial policy, and in consequence of treaties concluded during the latter years of the Empire the duration of the commercial treaty system became prolonged from 1870 when the Anglo-French treaty was terminable,
until 1877. In Austria the treaty of December 16th, 1865, with Great Britain, had been strongly opposed. Thus in Austria, and also in Germany, feelings and conditions similar to those existing in France, prevailed. The treaty system of 1860 was accordingly by no means secure; its permanence depended upon the course of events; and the course of events became unfavourable. The Franco-German war disturbed political and commercial relations. The enormous indemnity of £220,000,000, exacted by Germany, destroyed the equilibrium of the French finances, and changes in the fiscal arrangements of the country became absolutely necessary. The monetary and commercial results of this war affected all the Continent. The demonetisation of silver in 1873 prevented recovery from these disturbing causes, which became accentuated with the great fall in the value of silver in and after 1876; and by commercial failures between 1875 and 1878. There was likewise a decline in prices in this period. Contemporaneously there were changes of economic conditions, and of processes of manufacture in many localities on the Continent. The cost of military and naval armaments permanently augmented. Accordingly the Governments sought new taxes to defray these expenses; and, therefore, were disposed to adopt the views of those interests which demanded an increase of the rates of Customs duties. The French Government gave notice to terminate the two earliest commercial treaties-those with Great Britain and Belgium-with the view to effect some alteration in their fiscal policy with respect to import duties before 1877, when they could be entirely free in these matters. The aim, on the other hand, of the British and Belgian Governments was to avert differential treatment adverse to their commerce. In the end, by goodwill on each side, the French conventional tariff remained in force. By the treaty of July 23, 1873, between Great Britain and France, the duration of the arrangements of 1860 was prolonged until June 30, 1877, definitely, and until after notice for termination was given; and improvements were introduced into the shipping and other provisions of the treaty of 1860. Negotiations of an inconclusive character took place between different Powers. Austria first broke away from the treaty tariff system of 1860, and terminated her principal treaty engagements towards this country and France at the end of 1876 and 1878. This breach in the tariff system inaugurated by Mr. Cobden's
negotiations, gave an impetus to the action in France in favour of higher duties. The Lancashire and Yorkshire manufacturers, more especially, in the course of the British negotiations, did not realise the exact position of affairs. They pressed demands for tariff reductions in France, instead of endeavouring to secure the maintenance of Mr. Cobden's rates of duty, with the smallest additions thereto, which the French Government would accept. In the circumstance these demands were not reasonable; the French Government could not concede them in the existing conditions of the national finances and sentiments. The tariff arrangements which France had contracted with Great Britain came to an end in February, 1882. Belgium and other European countries made fresh tariff treatises with France, less liberal in their terms as regards foreign manufactures than those of 1860, but much better than the Customs system previous to 1860. In these new treaties, the classification of goods and the rates of duties were adopted without regard to the requirements of British trade. In this period, the Customs administration of several countries favoured the policy of a Customs tariff on a system of double columns of duties; the one of high rates for general application in the absence of sufficient reason to the contrary; the other of low rates a percentage beneath the scale in the first column-to be applied to the goods of countries to whom most favoured nation treatment is accorded. The policy in favour, is to settle the first column entirely by domestic legislation; and the second also, as far as possible. In the second column, in the course of commercial negotiations with other Powers, modifications are made, but to the smallest extent, which the other party to the treaty will accept. In 1892, France ceased to take the lead in international tariff arrangements. Germany then took this system in hand between 1891 and 1894, and concluded commercial treaties of twelve years duration with Austria-Hungary, Belgium, Italy, the Netherlands, Russia, and Switzerland. These treaties are framed to favour and develop German trade, which has prospered under their arrangement, as that of the United Kingdom progressed under the treaty system of 1860. The foregoing statement on this part of the subject is sufficient for the earlier portion of this paper; but some further remarks will be necessary in considering the industrial conditions and policy of different countries at the present time.
It should be mentioned that Russia did not
enter directly into the western European commercial system in 1860; but confident expectations were entertained that a liberal fiscal system might be introduced there. The complications which ensued after 1870 caused disappointment here also. In January, 1877, Customs duties were ordered to be levied in gold, which in effect raised their amount by about 15 per cent. The cost of the war with Turkey in 1887-8, and expenses for internal development, required additional income; and the tariff was increased generally in 1881-82, in 1884-85, and again in 1887 and 1900. These augmentations, and those of the German tariff in 1879, 1885 and 1887, led to recrimination between the two States; and to the tariff war of 1893-4, which will be explained further on. The present Russian tariff is drawn up on the double column basis; it came into force in January last, and is of a highly protectionist character, and it is likely therefore to influence German fiscal policy in this direction.
Turning now to the United States, before the civil war of 1861 the Customs administration of the United States was liberal in its 'application; its bearing towards foreigners. was lenient, and it exerted a decided influence in the action taken in these matters in this country. The civil war necessarily disturbed previous financial arrangements. A larger public revenue was needed. In these altered circumstances the workpeople and manufacturers united in demanding, in the increase of taxation between 1861 and 1865, that the Customs tariff should be so regulated that the workmen and manufacturers might secure the home market for their labour and their goods; and the country should provide for its industrial wants. A protectionist policy was accordingly enunciated, and adopted by Congress with very general approval. In December, 1887, President Cleveland sought to check the profuse expenditure which had grown up under the large revenue of recent years, and to reduce it to the wants of an economical peace establishment. He was defeated at the presidential election of 1888, and the existing protectionist policy was made more stringent. The McKinley tariff came into force in October, 1890; it increased duties and granted bounties; and the simultaneous Administrative Act made the Customs regulation more onerous to passengers, as well as to trade. The McKinley legislation further established the principle of reciprocity in tariff arrangements with foreign
countries, by restricting the wider interpretation of the most favoured nation clause, and limiting reductions of Customs duties to countries that granted to the United States, under special reciprocity agreements, concessions held to be equivalent to minimum duties allowed by Congress. The continued wasteful public expenditure, and the high tariff, occasioned a reaction in public opinion; and by the Wilson Act of August 28, 1894, raw materials were, to some extent, made free, and other slight alterations were adopted. But the protectionist fiscal policy regained public support; and by the Dingley Act of July 24, 1897, duties were again raised. This Act is the present Customs law of the Republic; its leading provisions are stringent protection in favour of native labour, and the monopoly of the home market for American goods. The conveyance of merchandise between ports of the territories of the Union-between New York and Honolulu for example is declared to be coasting trade, and is restricted to the national flag; and by means of reciprocity arrangements it is sought to bring neighbouring countries under the commercial and political sphere of influence of the United States.
The principle underlying the changes of fiscal policy in European continental countries since the lapse of the commercial treaty system of 1860, and also in the United States, is that home industries should be developed by legislative action in order that the home markets should be supplied, as far as possible, by home products. The aim of this policy is to make each country, generally, self-supplied, and not dependent on foreign supplies. In Europe the policy of regulating trade by treaty is still, to a large extent, maintained. In France and Germany it is further sought to raise, as far as possible, food supplies within the country. In all these States the Government and Legislature favour by various means the additional aim of securing outlets abroad, both in regular trade and for the disposal of surplus products. In British colonies, as a general rule, popular opinion favours a policy of encouragement to home industries by duties on imported goods, and in certain instances by bounties on production.
PROTECTIONIST POLICY IN FOREIGN
We have now to endeavour to appreciate the facts which underlie the preceding statements. Free trade favours the importation of goods from abroad, accompanied, however, by
injury to many interests, localities, and businesses. Under present circumstances in the world Customs duties form an important part of the fiscal revenue of the State indispensable for public purposes. In newly organised countries any large system of direct taxation is practically impossible. In older and more settled countries the requirements of the public services are at the preset time so heavy, with small prospect of any diminution of these charges, that Customs duties are there also a financial necessity. The object of existing protectionist policy is to secure for native industry the supply of the home market, to establish and develop foreign trade, and to get rid of surplus stocks without delay by selling off cheaply in foreign markets, whenever the absence of a Customs duty allows this operation to be effected.
On the general question Sir Robert Giffen well expressed the case in his paper on the use of import and export statistics in June, 1882. He said the question whether free trade or protection favours most the prosperity of a people cannot be treated practically from a material point of view alone: political and moral considerations must come in." "I could quite understand a free trader admitting a protectionist system to be the best materially; and a protectionist admitting the free trade system to be the best materially; and yet each on moral and political grounds preferring the less advantageous system in a material view. But how difficult to trace out all the effects of an economic régime in the moral and [political sphere. Even materially there can hardly be adequate statistics." It is easy to allege or to prove theoretically that a protectionist policy does harm from certain points of view. It is a different thing to examine the whole subject practically, to estimate exactly the "harm" so accruing in its actual circumstances, and to reckon whether, and to what extent, this "harm is counterbalanced in other directions." Mr. Gladstone (Morley's "Life of Gladstone," ii., 68) recognised that budgets alone (that is the policy to which they give effect) do not make prosperity. Customs tariffs are only one of the factors which have to be taken into account in connection with industrial enterprise, and only express the fiscal and economic policy for the time being of the State by which each tariff is adopted. The broad fact is that during the 19th century, happiness, knowledge, and public welfare have largely advanced in the world; it has been a century of progress in all civilised lands; and
of great diminution of areas of misgovernment. There has been a wide distribution, as well as a vast accumulation of wealth, under dissimilar economic and fiscal systems. Free trade, it is maintained, augments the total wealth of a country. On the other hand, it is contended, that in a manufacturing free trade country workpeople are subject to permanent or temporary loss of employment from the influx of goods from abroad at seasons and in quantities which cannot be foreseen. Workpeople cannot readily change their occupation; a silk weaver cannot become a coal miner, nor an agricultural labourer an engineer. Practically, change of occupation is difficult. Under present industrial conditions, a fiscal policy which will ensure necessary contributions to the public revenue, and subsistence for the people, would seem to afford advantages to the whole community (and especially to the agricultural, industrial, and shipping interests), which would counterbalance any injury or loss that might be occasioned by a judicious and moderate Customs tariff.
Recent diplomatic and consular reports show that in Germany a protectionist policy is likely to be continued, and that it may even be more accentuated. There seemз also to be some chance of the formation of a Central European Customs Union; and that the Netherlands may revert to preferential trade arrangements between Holland and the Dutch Colonies. There does not appear to be any prospect of a change in the fiscal policy of other European Powers, nor in American or Colonial protectionist countries. It is true that the Democratic party in the United States include financial reform in their programme, but many events must happen before any reduction of Customs duties could be made in the United States; and the Wilson tariff of 1894 does not encourage sanguine expectations in this direction. There are also free trade parties in the other countries referred to, but their political influence is in all instances weak, at least for the immediate future. The necessity to rely upon indirect taxation is not confined to new countries. The Swiss Federal Government cannot impose direct taxes, and is compelled therefore to raise its revenue from indirect taxation, of which Customs duties form the principal part. The German imperial administration is largely dependent upon indirect taxatien, and especially customs duties. And in most continental countries the demands on the exchequer for military services now leads to an irresistible