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to have preference there must be some sort of protection. This was the obstacle to Chamberlain's scheme, and, likewise, this preferential scheme is the great obstacle to the third of President Wilson's “Fourteen Points," which aimed at the equality of trade conditions and the removal of economic barriers. (1).
vii. The greatest defect of the imperial preferential scheme is that it leads to suspicion between the nations of the world. It cools friendship and might lead to retaliation. Especially in the mandated territories it will be wise to start off with fair and equal treatment for all nations alike.
To stop the inroads of American trade, Mr. Wickham, His Majesty's Senior Trade Commissioner in South Africa, suggests a “strengthening of the imperial organization." South Africa might follow suggestions and raise the preference on British goods to 5 per cent. ad valorem (2); but South Africa should remember that "the nations discriminated against are aggrieved. Suspicion arises. Retaliation is planned and put into effect,” for “it can no longer be said that a special discriminatory treaty between two peoples is their concern alone. Nor can it be said that preferences between a nation and its colonies are purely domestic questions." (3). Proceeding, the writer assures us that “resentment against British Dominions because of the discriminating tariffs will increase." And all this is due to trade insularity. Adam Smith's warning against “a nation of shopkeepers” does not seem to have fallen on fertile ground. The Dominions will discriminate, the mother country cannot discriminate on the same scale, because the United States is too interested an onlooker to be brushed aside, and for other reasons. It is for the Dominions to choose between insularity and ill-feeling on the one hand, and common sense on the other hand.
The following is an excerpt from an address made by the writer quoted above, Dr. W. S. Culbertson, member of the
1. President Wilson in his address to Congress, on January 8, 1918, advocated, as the third of his Fourteen Points, "the removal, so far as possible, of all economic barriers and the establishment of an equality of trade conditions among all nations consenting to peace and associating themselves for its maintenance.”
2. At the Annual Congress of the Association of Chambers of Commerce of South Africa, held at Lorenzo Marques, on August 25, 26 and 27, 1919, it was proposed that all goods from the United Kingdom and the Dominions should have a minimum preference of 5 per cent. ad valorem. See Board of Trade Journal, October 16, 1919.
3. W. S. Culbertson: Commercial Policy in War Time and After, pp. 296 — 297; also p. 304.
United States Tariff Commission, before the Academy of Political Science, at a meeting held at New York, on December 10, 1920 :
"A few principles suggest themselves which should guide the commercial policy of the United States in the present situation. We should insist emphatically on every possible occasion upon the enforcement of existing open-door treaties and understandings and refuse to permit them to be abrogated or evaded. We should oppose the extension of colonial control over new territories, or the granting of mandates except where accompanied by the strictest of guarantees of equality of treatment. It may even be advisable for us to seek, through newcommercial treaties the guaranty of national treatment in the colonies of those nations which still maintain the open door.
"It is necessary to recognize that preferential tariffs and restrictions constitute a problem which can not be solved by nations acting singly, or bargaining two by two. Little will be accomplished until we recognize that tariff and other preferences are essentially international problems which can be solved only by men who are willing to look beyond the narrow limits of national commercialism and to see the real interest of each nation in the harmonious co-operation of all. If no stay is given to discriminatory and exclusive practices which now mark the policy of almost every important nation, we shall go forward into a period of trade war and conflict from which we shall look even upon the conditions of this day as the happy state of a golden age from which we fell.” (1).
Our tariff discriminations might ultimately rob us of the friendship of the United States or of Japan, or of any European country which bought our feathers, wool or mohair before the
For loyalty, as Professor Fremantle says, the brains of the British Empire has to be blown out. Take for example the case of Germany: 'at the beginning of the present century the United Kingdom continued to enjoy most-favoured nation treatment by virtue of a German law which had been periodically renewed; the same treatment was extended to all the British Dominions, except Canada, which alone has hitherto been punished for its preferential treatment of British
(2). viii. The preference granted to British articles in South Africa together with protection will smother foreign competition, and consequently, British and South African manufac
1. Boston Evening Transcript,December 10, 1920.
turers will no longer be under the same necessity of striving for excellency in manufacture. There will of course be domestic and British competition, but it must be admitted that excellency in manufacture is dependent on foreign competition as well as on domestic and British competition. [n] It is always the consumer who suffers under tariff wars and tariff discriminations which are undertaken at the behest of business and especially of manufacturing interests.
ix. Another defect of the imperial preferential scheme is that it is one-sided. Professor W. Ashley seems to recognize this position and gets over the difficulty by using a bit of flattery. He says: ...“The peoples of our daughter states have far more generosity and magnanimity of sentiment than they are sometimes given credit for." (1). It does not seem as if Chamberlain, with his almost fanatical devotion to the idea of imperial preference, wished it to be one-sided. He, however, could not convert the members of his own party to his ideas (2). It has also been pointed out in a previous chapter just what scheme he had in mind.
Dr. Jameson, when he was premier of the Cape, was especially active to get reciprocal treatment from the United Kingdom. The following is an interview which he had at Waterloo Station with a representative of the “Standard,” (3), before the Customs Union Convention was renewed in 1906 :
“Up to the year 1861 Cape wine was accorded preferential treatment in the home market, being subject to about half the duty imposed upon foreign wine. During the preferential period the import of Cape wine into the United Kingdom at one time came to close upon 700,000 gallons. After the preference was withdrawn, the import shrank steadily, until to-day it falls short of 5,000 gallons." He pleaded for favourable treatment, and stated that the loss to the “home” government “would be infinitesimal and not to be considered at all in comparison with the substantial rebate which South Africa allows on British goods... The colonies expect some returns from Great Britain. Both at the Colonial Conference of 1902 and at the Bloemfontein Conference of 1903, the question of preference in the colonial markets and the arrangements of some similar agreement in the home market were considered...
1. The Tariff Problem, p. 150.
2. See C. J. Hayes: A Political and Social History of Modern Europe, Volume ii, pp. 301 - 302 and pp. 654 — 655.
3. “South Africa,” January 13, 1906.
[n] See Prof. Edwin Cannan: Theories of Production and Distribution, pp. 403 - 404.
I might even go so far as to say that the South African colonies may at some future period abolish a preference which was always intended as a step towards free trade within the Empire, if it is found that no consideration will induce the mother country to follow the experiment... In 1904 over 200,000 pounds sterling were returned in rebate to importers of British manufactures and I believe the amount was almost doubled in 1905.”
Again at the Colonial Conference in 1907 Jameson and Moor, from Natal, pleaded for reciprocity, “however small that might be.” They pleaded for a preference on tobacco and wine especially — two of the best sources of revenue for free-trade England! Jameson thought that such a preference would help the English people, and he was told by Mr. Asquith to go and convince the English people of that. (1).
However, the principle of imperial preferential duties was adopted by the British Parliament in 1919. Rebate is granted on the duties in force for the following articles, the products of countries within the British Empire, according to the following specified tariff :
One-sixth of the duty on tea, coffee, cocoa, sugar, dried fruit, tobacco and motor spirits;
b. One-third of the duty on cinema-films, clocks, watches, motor cars, motor cycles and musical instruments; 6d. to ls. per gallon on wines and 2s. 6d. on spirits.
The rebate began on June 2 for tea and on September 1 for other goods. The value of exports from the Union to England of the most important South African products connected with this regulation stood as follows for the year 1918: dried fruit, 69,032 pounds sterling; wine 55 pounds sterling; spirits (potable) 7,441 pounds; spirits (non-potable) 40,877 pounds. (2). Here, then, there is full proof for the criticism made above of any imperial preferential scheme, however full it might be, namely that it will be very unequal. South Africa takes . many more dutiable articles from England, and articles on which a rebate can be granted, than England does from South Africa. Moreover, the results would have been more substantial if the rebates under class a. were one-third of the whole duty, and one-sixth in the case of class b. But the people who draw up preferential tariffs seem to know their work perfectly. However, the full system of imperial preferential tariffs seems to be nearing completion - this time inclusive of India and the
1. See R. Jebb: The Colonial Conference, pp. 214 — 217 and also p. 240 et seq.
2. O. Y. B. No. 3, (1910 – 1918), p. 701, (Dutch).
“home” markets as well. Whether this preference in the British markets on colonial produce will be extended and amplified, remains to be seen. It is to be hoped, nevertheless, that sound economic ideas and good international policy will prevail in the end, however dark the present outlook might seem.
A final defect of the preferential tariff scheme is that it seems to be a failure. I have indicated statistically the relative decrease in the trade of the United Kingdom with South Africa after the adoption of the preferential tariff and its extension in 1906, and the increase in the proportion of foreign trade, especially that of the United States, which has increased both relatively and absolutely. (1). This, surely, was not the ideal of its first and later advocates. These men want a selfsufficing British Empire in every sense of the word — an altogether independent economical unit among the rest of the world. There is to be no geographical division of labour, the laws of comparative costs have to be disregarded, and international co-operation is out of the question.
What the ultimate outcome of the imperial preferential scheme is going to be cannot be foretold. That it is a step towards mercantilism seems to me quite clear. It is closely connected with the idea of imperial federation, speaking of which Mr. W. A. S. Hewens says in his article on Mercantilism (2): “It is conceivable also that even so far as England is concerned there might be some return to mercantilist principles if a definite attempt were made to carry into effect a scheme of imperial federation. The object of the mercantile system was the creation of an industrial and commercial state in which, by encouragement or restraint imposed by the sovereign authority, private and sectional interests should be made to promote national strength and independence... But in effecting their objects mercantilist statesmen did, as a matter of fact, find it necessary to invent a very elaborate system of 'discriminating duties'.'
duties!." This is discouraging, but it is a fact. We started out with mercantilism, and before the end has been reached there are visible on the horizon the familiar clouds of mercantilism again. Would that the labour of economists since the advent of Adam Smith were not in vain, and that the 'enlightened' twentieth century has something better in store for the world than a revival of mercantilism.
1. Where it was at all possible I gave statistics up to 1922. The latest 0.Y.B. at my disposal in the United States was No. 3, for 1910 - 1918.
2. Palgrave's Dictionary of Political Economy, Volume ii, p. 727.