Empire and trading facilities within the Empire and with foreign countries."

Put into few words the Colonial questions to be dealt with now, are: (1) If free trade cannot be established now throughout the Empire, the proposal is, by means of tariff revision, to encourage trade between different portions of the Empire, and to make this trade as free as possible; (2) To defend those portions of the Empire which have been subjected to hostile fiscal treatment by certain foreign countries, on account of preferential treatment accorded by one portion of the Empire to another, from the injurious effects of such hostile treatment.

Whether we like it or not, or whether or not theories recognise the fact, certain of our colonies do, at the present time, come within the sphere of the controlling commercial influence of foreign Powers; and similar conditions will, before long, affect other colonies which are as yet exempt from these influences. These political grounds for action require attention from us, more especially in view of colonial expansion on the part of the leading Powers-development which it is not within our capacity to avert. We must reckon with these events, and shape our policy so that they shall neither takes us by surprise, nor occasion loss to the Empire.

THE PRESENT QUESTION.

The preceding investigation of the facts and principles which make up the fiscal problem now before the country shows that certain economic questions affecting public interests requires very careful and unprejudiced attention. And that the result may, perhaps, be to prove that action by the State is necessary, in order to remedy the difficulties which now exist; and to adapt British fiscal policy to the altered circumstances of the present time.

Four leading facts have, it is believed, been established in the preceding pages :

1. There has been a continued contraction of our home food supplies; a state of things unsatisfactory from a material point of view, and opposed to the political and moral interests of the kingdom.

2. Our export trade to many valuable markets, especially in manufactured goods, has fallen off; and if existing conditions remain unchecked this decline will become more acute.

Concurrently, the proportion of the population which derives its subsistence from the soil, or from finished products, has diminished,

To the individual workman or capitalist it may be personally indifferent whether income is derived from coal mines, from machinery to be set up in foreign mills, or from various processes of manufacture carried on inland. From the point of view of the employment of the people, however, the latter are more beneficial and important than the former.

3. The colonies have now raised certain definite questions which must be considered and decided by the country.

4. The last urgent cause for fiscal enquiry and action is that a revision of Customs tariffs is now taking place on the continent. This revision requires attention as to (1) the classification of goods; (2) rates of duties; (3) allowances for tare, and (4) Customs regulations generally. There is reason to fear that the adverse effect of continental tariffs towards British trade since 1882 will shortly become still more detrimental. Should the general tenour of these arrangements continue to be unfavourable, and under existing circumstances there is no reason to anticipate any other result, the most favoured nation clause will, as at present, merely prevent separate and specific differential treatment of British goods in foreign tariffs, and will not confer any direct adyantages or security. This being the position of the case at the present time, we come to the proposals before the country. Mr. Balfour, in his speech at Sheffield on the 1st of October, after explaining that he put aside the fiscal controversy of 1846, went on to say :

on,

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"I will imagine the question put to me, 'Do you desire to reverse the fiscal tradition, to alter fundamentally the fiscal tradition which has pre vailed during the last two generations?' Yes, I do. 'And how,' I imagine my questioner going 'do you propose to alter that tradition ?' I propose to alter that tradition by asking the people of this country to reverse, to annul, and delete altogether from their maxims of public conduct the doctrine that you must never put on taxation except for revenue purposes. I say distinctly that, in my judgment, the country ought never to have deprived itself of that liberty, and it ought publicly to resume in the face of Europe and the world that liberty of which it deprived itself. Of course that liberty so resumed may be abused; I do not doubt it. It may get into incompetent hands; but it should be resumed. This country should again have what every other country in the world possesses, and that of which no other country in the world would think of depriving itself, the liberty to negotiate and something to negotiate with. The next question I can imagine being asked of me is, 'Why do you want

to resume this liberty of negotiations, seeing how well the country has prospered for all these years without it?' To that my reply is, I hope, explicit and distinct. My object is to mitigate, as far as circumstances allow, the injury done to us by hostile tariffs. Those hostile tariffs have inflicted upon us injury of a double kind. They have divided one fragment of the Empire fiscally from the other. They have diverted our industries into channels into which they would never have naturally flowed, they have restricted and hampered our export trade, and their effect has acted and reacted over the whole community-the community of consumers, the community of producers for home consumption. These are the evils, and, in addition, there is another evil, the insecurity which, I fear, some great branches of our industry suffer, and must suffer so long as we permit protective duties, in combination with trusts, to pour into this country at an unnatural price goods which, under a true system of free trade, under a system, I mean, in which every country produces according to its natural capacity, would never be able to compete with and never be able to outstrip the industries of home origin. Will the remedy be complete? Two other questions, and only two others, have to be asked. Will the remedy you propcse be complete?' To that I answer it will not be complete, even if it can be tried in its integrity; and it cannot be tried in its integrity, because I believe the country will not tolerate a tax upon food.

And if the last question be asked me, 'Then do you think it is of any value?' to that I reply with equal clearness, emphasis, and decision undoubtedly it will be useful. There have been plenty of occasions in the past, and, believe me, there will be plenty of occasions in the future, when a British Minister having to conduct a great commercial negotiation will feel his hands strengthened, will feel he is indeed able to represent the interests of the great country whose foreign affairs he has to manage, if he can say to the Minister of the country with whom he is negotiating, 'We do not ask you to reverse your commercial policy, we do not ask you for anything which is impossible, but common justice and common fair treatment we do ask, and if we do not get it we will take our own measures.'"'

Mr. Balfour's speech combines two main points: first, to reverse the policy that taxation shall be levied solely for revenue purposes; and secondly, the adoption of measures to mitigate the injury now done to us by hostile tariffs, and hostile trade combinations.

Mr. Chamberlain in his speech at Glasgow on the 6th of October, sketched the outlines of the new fiscal policy which he advocated. His proposals are summarised in these words in the Times on the following day :—

"He asserted that the trade of the United Kingdom had been practically stagnant for the last 30 years. Our export trade had increased in that time by 20 millions per annum, against

110 millions in the case of the United States and 56 millions in that of Germany. The character of British trade had also changed; we were exporting less and less of manufactured goods, and importing more and more. Our exports to foreign countries had decreased by 46 millions, but those to our Colonies had increased by 40 millions. Our Imperial trade would decline unless we took the necessary steps to preserve it while there was yet time. There was still a great deal of trade with the Colonies which we could maintain and increase, and we should ask the Colonies to let us supply them with the products of industries that had not yet been created there. The Colonies were prepared to meet us; for a moderate preference they would give us substantial advantages, and he calculated that we should capture 26 millions of foreign trade to our Colonies. Such a preference would give employment to three-quarters of a million workmen, aud that would mean subsistence for nearly four millions of our population. Dwelling on the proofs recently given by the Colonies of their loyalty and devotion to the Mother Country, he asked if such a glorious inheritance was not worth preserving. We must either draw closer to the Colonies or drift apart. He emphatically stated that he did not propose any tax on raw material, but if we desired to gain the Colonies and prevent separation we must put a tax on food. The rough plan of his proposal was a twoshilling duty on foreign corn, and no duty on corn from British possessions; no duty on maize; a corresponding tax on foreign flour; a 5 per cent. duty on foreign meat and dairy produce, with the exception of bacon; a substantial preference to colonial wine and fruit, and the remission of three-quarters of the duty on tea and half that on sugar, with a corresponding reduction on coffee and cocoa. The new duties would cost the agricultural labourer 163 farthings a week, and the artisan 19 farthings, but the duties taken off would amount to 17 farthings in the case of the artisan. He estimated that the loss to the Exchequer under his scheme would be £2,800,000 per annum, but he proposed to get back that and more by what was sometimes called retaliation and sometimes reciprocity. A 10 per cent. tax on foreign manufactures would yield nine millions a year, which might be used for a further reduction of the taxes on food, and also of other taxes which pressed hardly on the community."

The two schemes are not identical in their terms, and can be taken separately. It will, however, be most convenient to consider first the objections which apply to both, and then the objections which are urged against the proposal to grant preferential treatment at home to colonial products and in the colonies to our home products.

It is alleged, first, that the present industrial and economic position of the United Kingdom is fairly satisfactory, and therefore the fiscal

question need not have been raised. I think, however, without prejudging the decision, that the grounds above set forth in support of an examination of the question, namely, the position of the agricultural interests and of our export trade and colonial wishes, and the approaching revision of foreign tariffs preclude either a direct negative or "the previous question" being a proper reply to the suggestion that Mr. Balfour's and Mr. Chamberlain's proposals shall be examined and considered. It is next urged that these proposals are opposed to free trade, which is the settled fiscal policy of this country, and must lead to international bargaining which is bad in principle. It is the fact, however, that all international engagements are contracts, and partake of the nature of bargains. This has been especially the case with commercial treaties from the earliest text we possess, that of the treaty of 509 B.C., between Carthage and Rome, to the present time. The Cobden Treaty of 1860 is a 'leading case." If other countries adopt this policy, and we stand aloof, our trade will inevitably suffer, as it does now on the Continent. Even if every country settled its Customs duties by legislation, apart from negotiation, the United States tariff shows that we should not necessarily gain thereby. It must likewise be remembered that in foreign trade exporters require the certainty of fixed tariffs for the security of their transactions. We need not be apprehensive lest new taxes should be imposed in England without discussion. As regards the counteraction of hostile proceedings on the part of other countries, Mr. J. S Mill, in his work, "Laws of Interchange between Nations," wrote "The only mode in which a country can save itself by being a loser by the duties imposed by other countries on its commodities, is to impose corresponding duties on theirs. Only it must take care that these duties be not so high as to exceed all that remains of the advantage of the trade, and put an end to importation altogether; causing the article to be either produced at home, or imported from another and a dearer market." Mr. Morley, in his "Life of Cobden," in comments upon the Treaty of 1860, says "The decisive consideration is that we can only procure imports from other countries on the cheapest possible terms on condition that those countries are able to receive our exports on the cheapest posible terms."

Prince Bismarck, in a memorandum dated October 13th, 1875, expressed his opinion

"that nothing but reprisals against their products will avail against those States which increase their duties to the harm of German exports." On the principle which underlies this part of the question, Mr. Gladstone's advice may be cited "if you want to benefit the labouring classes and to do the maximum of good, it is not enough to operate upon the articles consumed by them, you should rather operate upon the articles that give them the maximum of employment." (Morley's Life of Gladstone," vol. 2, p. 57.) Further, Mr. Cobden's words, relative to the state of affairs in 1842, are equally applicable to the present conditions of some trades. "We are sowing the seeds broadcast for a plentiful harvest of workmen in the Western world," . . . . “ they are going in hundreds and thousands to those States to open works against our own machines, and to bring this country to a worse state than it is now in. There is nothing to atone for a system which leads to this." Some expressions used here are those of a Parliamentary speech; but it fits in with the position of affairs in which British manufactures are compelled, in order to carry on business, to erect factories in foreign countries, and to induce their workmen to leave their English homes for new abodes in foreign towns.

As regards tariff wars, we do not possess full information respecting the events of recent years. While recognising that in principle retaliation is permissible, and that to allege that it is an impracticable policy is at variance with facts, it should be considered in each instance whether and how far this action is expedient in itself; and, if an affirmative opinion is formed, to what extent this action is feasible. The conclusion depends upon the answers to these two inquiries. As regards the fear which has been expressed lest foreign Powers should retaliate in their turn, as was the case in some instances mentioned in this paper, while this contingency should not be overlooked, and its possible effects duly reckoned, yet, in all matters affecting foreign relations, care should be taken not to use language for party purposes which will prejudice interests already injured by hostile tariffs or trade combinations. It is to be remembered that it has been proved that the reform of continental Customs tariffs after 1860 was effected by the coercive action of the French Government in withholding (until satisfactory arrangements were come to) the benefits of the Cobden Treaty tariff; this

reform was not effected by reasoning upon free trade nor by the gratuitous concessions of our tariff. The reciprocity provisions of the McKinley legislation of 1890 have also been very efficacious in opening markets to United States goods, and in extending their trade. The Executive in the United States possesses also a general power "whenever and as often as the President shall be satisfied that the Government of any country producing and exporting" certain specified goods, "imposes duties or other exactions upon the agricultural or other products of the United States, he may deem to be reciprocally unequal and unreasonable" to penalise their exports to the States.

In the twenty years during which I had personal cognisance of these negotiations, foreigners were often apprehensive of British retaliation. The value of British markets are fully realised abroad; and provided due caution is observed, in my opinion the good results likely to follow by release from present restrictions would outweigh any possible adverse results, which in our case would in any event be of only a transient character.

It is further alleged that the proposed new policy will bring back in this country the evil condition of things which existed previously to the reform of the Customs Laws. It has been shown, however, that circumstances independent of these reforms had much to do with the improvement in industrial and economic conditions after 1842. But it is not in any way proposed (as I understand) to revert to the Customs system in force here previous to 1842. The Continental countries which have gone back from the policy of 1860, have not reverted to the anterior Customs system; their present tariffs, although protectionist and adverse to British trade, are much better than those in force in 1860.

The last general objection to be noticed is that the new fiscal system will increase Parliamentary difficulties, and will lead to Parliamentary corruption. It does not, however, seem possible to predict the exact shape which new Parliamentary difficulties will take -in some form or other they always exist, and it is part of the business of statesmen to surmount them. As regards Parliamentary corruption, the case is probably overstated-like many general statements made in England in public discussions. It is not proved on the Continent as an influence which affects the administration; and evils, alleged to exist in the United States, are to be attributed to com

binations and trusts rather than to the regular protectionist policy of the Republic.

Turning now to objections against the proposed colonial preferential system, it is urged

1. That it has been already tried and has failed. The fact is, however, that it did not "fail;" when duties were remitted on articles of which the colonial supply formed a portion of imports, the preference accorded to these colonial products of course came to an end.

2. That it will loosen and not strengthen the ties between British foreign possessions and the United Kingdom. This contingency is a caution rather than an objection; and it is to be expected and hoped that if the country adopt the proposed new system in principle (which on this point is in compliance with the formal application of the duly constituted representatives of the self-governing colonies, all matters that may present difficulties, or possible misunderstanding, will receive adequate attention, and be fully considered and safeguarded.

3. That if it leads to an extension of colonial trade, as is intended, the result will be that the basis of taxation will not be broadened— which is an object in view. This point is a matter which may come up for attention in the future, but does not require attention now.

4. That the proposed tariff revision must include food, among duty paying goods, and therefore it will increase the cost of living in this country. It is part of the proposal that duty shall be levied on certain articles of food; but if the rates of duty are not high, it is quite possible that no permanent increase will ensue, and in any case it will be small; and it will be counterbalanced by gains in other directions. Further (as it is expected will be the case), if employment is enlarged, the country will gain, and not lose, by this policy.

5. That the policy of preferential treatment is specifically injurious to the cause of free trade both in the colonies and at home. The fact is, however, that if Customs tariffs exist within a State, and for fiscal reasons it is not possible to establish free trade between different parts of these dominions, it cannot really be said that to charge duties on the products of one part of the Empire imported into another, lower than the rates charge upon the like goods of foreign origin, is opposed to free trade. To bring the conditions of trade between the United Kingdom and Australia and Canada, nearer to those of trade between Cornwall and Caithness, rather than those of trade between the United Kingdom and

France, Germany, or the United States, is an approximation rather than a hindrance to free trade within the Empire. This course cannot surely be said to be an evil in itself, and to be opposed to public interests.

6. Lastly, it is urged that this system of preferential trade will not benefit this country; that colonial manufacturers will still be protected. We cannot desire Colonial Governments to do what in colonial public opinion would be regarded as a sacrifice of their industries reduction of duties cannot fail, however, to benefit our manufacturers and our export trade to some extent, in their competition with foreign traders.

It is to be remarked with regard to all these objections, that not one of them is of a constructive nature. No aid is afforded towards the settlement of the discussion before the country. Some speakers simply recommend that the existing state of affairs shall be let alone. The grounds which now call of action, the validity of which it is hoped has been satisfactorily established—namely, present economic conditions, the formal requests of the Colonies, and the position of foreign tariffs-under mere inaction an unsound policy. Some form of better education seems to be the only definite alternative policy which is offered. This Society fully appreciates the value of improved education. I have been a member of our Examinations Committee for many years; and the fact that last year 17,000 students entered for this Society's examinations proves that much work is already done in this direction, and that it is appreciated. But education in itself does not cover the ground of the present discussion. The education of the school is a preliminary stage, and leads up to the instruction to be acquired in the workshop or in the office. Education is an aid of much value, but in itself it is on a different plane from the conditions which govern the commercial, industrial, and economic position of a country. If we hold that in the existing state of things, action by the State is needed, we must deal with the proposals before the country. These proposals should be considered fairly on their merits, and not be put aside, either by irrelevant arguments, inadequate counter schemes, or simple disregard of the appeals of public interests. Assuming then, in proceeding with the consideration of the subject, that these proposals may, in principle, be admissible, it yet remains to be decided whether they are advisable and feasible. Suggestions in favour of an affirma

tive reply, in principle, have been submitted; but the details of the policy to be adopted are not yet worked out and placed before the public. Our functions here are limited to some few aids towards the ultimate decision. As regards foreign countries, we only claim to exercise ourselves rights and powers which they exercise. As regards the colonies, confirmation, where it has not already been given, is wanted from the proper constitutional authority of the principles laid down in the resolutions of 1902 of the premiers of the self-governing colonies.

In connection with any revision of our tariff, I would repeat an observation made by Mr. Gladstone that, "In levying Customs duties we have often before us only a choice of inconveniences; and the real question is not whether inconvenience exists, but whether it is of such an amount as to form a material hindrance to the particular branch of trade." The adoption of the following rules would seem to serve the purposes for which such revision is now required, both in the United Kingdom and the colonies.

First, that the tariff should be fairly short, the number of articles included in it being limited as far as possible;

Secondly, simple-easy to be understood by traders and by revenue officers;

Thirdly, fair-the rates of duties not to be exaggerated in amount.

Fourthly, remunerative-the rates of duties in amount, and as regards the goods on which they are to be levied, not to be so high as to lead to smuggling, nor to call for any compensatory excise charges on home products, which are vexatious and a hindrance to trade, and also costly in application. A leading principle in framing a Customs tariff should be to bring in the largest revenue with the lowest expense in collection.

It does not seem that there would be any serious difficulty in expanding and revising the tariff of the United Kingdom by means of these rules to the proposals now before the country.

It would seem that the whole subject will soon have been sufficiently argued, and that trade interests will demand an early settlement of the controversy. The question is-the re-adjustment of British tariffs-home and colonial-to meet present requirements; namely, to supply revenue; to broaden the basis of taxation; to develop colonial trade; to defend our agricultural and manufacturing interests; to safeguard the home