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industry where it is not possible to smother competition altogether. (1).
How does this analysis apply to South Africa ? The following table will clearly indicate to whom the duties are paid to a great extent:
From this table it appears that these commodities, whiclr make up a considerable part of the imports of the Union of South Africa, fall under the second class, i.e., (b), as to its incidence. What strikes one as peculiar, though, is the fact that some of these industries might not be regarded as infant industries any more, and yet they cannot capture the whole market. (3). It might be due to the fact, however, that the manufacturers of these articles are not to blame, but the taste of the consumers, or to the importation of a different class of article, or to inadequate protection. The following table seems to indicate that the country's industrial development is sound:
1. For a very careful analysis see Taussig: Some Aspects of the Tariff Question, pp. 9, 10 and 11. See also Fisk: International Commercial Policies, pp. 67, 68 and 69.
2. See Board of Trade Journal, September 19, 1918, p. 361; also Cd. 9155.
3. Cf. the case of the jam, coach and waggon, soap and candle industries.
Value (in pounds sterling) of jams, jellies, fruit syrups and pulp exported from and imported into the Union, 1910 – 1917. (1).
This tendency of South Africa of gradually displacing the foreign product and becoming self-sufficient is also clearly seen in the case of the production of sugar. The importation of sugar into the Union for the period 1911 – 1917 stood as follows: (2).
1911. 36,482 tons of 2,000 pounds each.
1917. 12,642 For 1917 1918 the output was 106,250 tons, while the annual consumption stood at 122,000 tons.
Now it has been my purpose to indulge as little as possible in arguments for or against protection, but this much is certain, that just as it is sometimes reasonable for a nation to tax itself in order to introduce some foreign industries, it is reasonable to expect from the manufacturers to try to get their industry established on a firm basis as soon as possible in order to relieve the consumers of the burden. When manufacturers: find that they cannot make their industry a success in spite of protection on the part of the Government, and serious efforts on their part, then they should give it up, and allow free trade to promote international division of labour. Free trade is a permission to specialize, particular individuals in particular geographical zones. Any interference with free trade is a limitation of this particular specialization. Nevertheless, protective duties are generally admitted to be justifiable in a country passing from the stage of extractive industry to that of manufacturing industry, to ease the transition. This is essentially the case in South Africa ; but unfortunately it is difficult in
1. O. Y. B. for 1910 – 1917, p. 443.
practice to withdraw protection from an industry that has passed beyond its infant stage.
While the Honourable F. S. Malan, Minister of Mines and Industries, is reported to have expressed himself in favour of a tariff framed on definitely protective lines, and while we see that in connection with the contemplated revision of the South African customs tariff instructions have been issued to the Federation of Manufacturers to submit their proposals at the end of 1919, (1), yet from a later report one receives the impression that the industrial policy of the country is in very moderate hands. (2). This report reads, that at the Third Annual Convention of the South African Federated Chamber of Industries recently held at Cape Town, Minister Malan, dealing with the customs tariff and the proposal for state assistance to industry, announced that reports would be available within a short time. Parliament, however, he thought, would not deal with the matter quickly, in order that time might be found to study the matter. He pointed out that the high cost of freight to South Africa operated for the moment as a protection to her industries, and that therefore the question of the customs tariff from the point of view of protection does not arise as yet although it will do so very soon. On the question of direct assistance to manufacturers the Minister did not commit himself. He considered that the state, if it should decide to give assistance, should help those manufacturers who were prepared to run the industries for national purposes and not for individual interests. He did not consider that the state, as a state, should undertake the conduct of industry. This statement of the Minister is a statement of general principle: the difficulty is to decide which industries meet the "national purposes.”
A healthy protective policy is sometimes desirable as was pointed out above. (3). Under present conditions, while every
1. Board of Trade Journal, October 2, 1919.
3. A bounty system can hardly be recommended. Under system of bounties which was very common during the mercantilistic period, when everything was done to encourage the exports, the general tax-payer has to suffer for the interests of the manufacturer, because bounties are usually paid out of the national treasury. Drawbacks work' better, as a drawback seldom exceeds the amount of import duty paid, while this cannot be said of bounties. Bounties when granted on industries working under conditions of increasing returns are justified by Marshall on the ground that the Government loses less in money paid out than the community gains in the form
nation is doing something for the protection of their industries, while protection is in the air, while international rivalry and jealousy is stronger than ever, it will amount to nothing less than a crime for a nation especially a young nation — to fold its arms passively under the pretext that it is devoted to a free-trade policy. It might even be necessary for South Africa to revise her “dumping duty" and be especially on the alert now that the country's industrial development has made such a propitious start. In general dumping affects adversely the protected interests of a country by making possible the importation of goods at prices which the home industries cannot meet. Canada met dumping by a special “dumping duty.” South Africa has been following her example, by introducing a “dumping clause" into her tariff (Section 8 of the Customs Tariff Act of 1914). This “dumping duty” equals the difference between the selling price of the article for export and the fair market value of that article when it is used for home consumption. Dumping does not suit the consumer badly, but only the manufacturer. Hobson says: “If some German or American firms 'dump' increased quantities of goods upon our shores, other Germans or Americans must either buy more goods from us, or cause other foreigners to buy more goods from us, so that 'dumping' induces an expansion of international trade.” (1).
But although many of the cries against dumping are sheer nonsense, nevertheless, there are cases when provision against dumping is absolutely necessary. Professor Taussig (an eminent authority on international trade) neatly analyzes the position. He distinguishes between the long-time and the temporary aspects of dumping. “Dumping,” he says, “I take to mean the disposal of goods in foreign countries at less than normal price. It can take place, as a long-continued state of things, only where there is some diversion of industry from the usual conditions of competition. It may be the result of an export bounty which enables goods to be sold in foreign countries at a lower price than at home. It may be the result of a monopoly or effective combination, which is trying to keep prices within a cauntry above the competitive point.
1. J. A. Hobson:
International Trade, p. 89.
of consumer's surplus. This will be very hard to apply legislatively, and, moerover, the process must needs be slow. It might be stated, however, at a bounty might sometimes be justified when granted on an industry of great national importance.
See Marshall: Principles of Economics, Book V, Chapter 13.
Such a combination may find that its whole output cannot be disposed of at these prices, and may sell in a free market at anything it will fetch -- always provided it yields the minimum of 'prime cost' or 'direct cost.' Now if this sort of thing goes on indefinitely, I confess I am unable to see why it can be thought a source of loss to the 'dumped' country; unless indeed, we throw over all our accepted reasoning on international trade and take the crude protectionistic view in toto. If one country chooses to present goods to another for less than cost; or lets its industrial organization get into such a condition that a monopoly can levy tribute at home, and is then enabled, or compelled by its own interests, to present foreign consumers with goods for less than cost - why should the second country object? Are not the consequences precisely the same, so far as that other country is concerned, as if the cost of the goods had been lowered by improvement in production or transportation, or by any method whatever? Unless there is something intrinsically harmful in cheap supply from foreign parts, why is this kind of cheap supply to be condemned?
“The answer seems to me to depend on the qualifications stated above— if this sort of thing goes on indefinitely. Suppose it goes on for a considerable time, and yet is sure to cease sooner or later. There would then be a displacement of industry in the dumped country, with its inevitable difficulties for labour and capital; and later, when the abnormal conditions ceased, a return of labour and capital to their former occupations again with all the difficulties of transition. It is the temporary character of dumping that gives valid ground for trying to check it.” (1).
As to goods producible in South Africa, Mr. P. J. du Toit, Under-Secretary for Agriculture, gives a very interesting appendix in his book “The Farmer in South Africa' (2). He shows that in 1916 articles to the value of nearly five million pounds sterling were imported into South Africa, all of which were capable of production in the country; articles to the value of over 15 million pounds sterling were imported, which could probably all, or nearly all, be manufactured from raw materials obtainable or producible in the country; and, besides, a portion of the following: chemicals, extracts, essences for food and flavouring, furniture, hats and caps, machinery, and fertilizers representing a value of over 5 millions.
1. Taussig: The Tariff, Free Trade and Reciprocity, pp. 10 – 11.