British goods, which in the case of expensive machinery makes itself acutely felt. It gives the British manufacturer a more than even chance over his American competitor. But here also there is an increase for America:

From United K'dom: 73,443 79,496

15,500 13,245

From United States: 95,276 78,683 39,855 16,813 (1).

The United States has a comparative advantage over England in the production of machinery, (2), and it is clear that England would not have been able to hold so tenaciously on to the market without the aid of the preferential tariff and very loyal business interests.

Having brought out some of the facts about preference, we might now enumerate some of the objections against the Imperial preferential scheme: Let us look at these one by one:

i. South Africa does not get a quid-pro-quo under the preferential scheme. We have tried to show this above by giving some statistics on the matter. It has also been pointed out that under a fully developed scheme of imperial preference, that is, when Great Britain grants preference to the other parts of the Empire, South Africa will not gain much, as her share is bound to be less than that of, say, Canada. Moreover, Great Britain takes much more from Canada of those articles on which a rebate can be granted than the former takes from South Africa.

ii. The rebates allowed on articles of British manufacture cut deeply into the revenue of South Africa, which has to rely to a considerable extent on customs duties as a source of revenue. (3).

iii. The preferential tariff in South Africa means that she has to pay higher prices for her goods than would have been necessary if she did not grant preference to British articles. Here it might be useful to say a few words as to the incidence of preference. A short quotation from Professor Taussig will clear up the whole position. He says:

1.

Half-Yearly Abstract of Union Statistics, June, 1919.

2. See Taussig: Some Aspects of the Tarig Question, p. 40. 3. Customs duties yielded in the year 1919-1920 26.7 per cent. of the total net ordinary revenue of the Union, while the income tax yielded 20 per cent. for the same year.

"The ordinary form [of reciprocal engagements] consists in the simple remission of duties to a favoured country, duties remaining on goods coming from countries not favoured. Such remission is likely not to redound to the advantage of the domestic consumer. Unless the favoured country can easily supply the whole market, or other countries are quickly admitted to the lower duties, prices are not affected, and the foreign producer reaps the whole benefit of the remission. [Under]... the treaty of 1876 with the Hawaiian Islands... sugar was admitted free from the Islands; but they were far from being able to supply all the sugar consumed; other sugar was imported, paying duty; the prices remained as high as before, and the Hawaiian planters reaped the benefit of the remission... A partial remission means a loss of revenue for the Treasury, no relief for the consumer, and a virtual bounty to the exempted producer." (1).

This reasoning can be applied in toto to South Africa's case under preference. Take, for example, the year 1920. England gets preference on curtains and upholstering fabrics, yet out of the 240,000 pounds' (sterling) worth of these goods imported into South Africa, the United States supplied 95,000 pounds' worth; for electrical machinery and material, other than cables and wires, £377,000 out of £1,777,000 worth; irrigation plant is almost wholly in American hands; America supplies 40 per cent. of the lamps and lampware; 64 per cent. of the clocks; one-half of the silk hosiery; one-third of the cotton hosiery, and so forth. (2). Preference is granted on these goods when they come from England, but the latter country cannot supply the whole market and hence Professor Taussig's reasoning applies. The British manufacturer is kept in the market by artificial means at the expense of the South African consumer, at the expense of the South African Treasury in the form of reduced customs revenue, and at the expense of cordial relations with other nations discriminated against. (3).

After the establishment of Union the antipathy to preference continued to assert itself. In the Assembly Professor Fremantle said, that preference required them to "show their

1. F. W. Taussig: Tariff History of the United States, pp. 279, 280 and 398.

2. See Board of Trade Journal, Aug. 18, 1921, pp. 173-174 for an excerpt from the Report of His Majesty's Senior Trade Commissioner in South Africa, for 1921.

3. For full treatment see Culbertson, W. S.: "Commercial Policy in War Time and After," Chapter xvi.

loyalty to the Empire by blowing its brains out," a statement which clearly indicates the speaker's attitude to preference. (1). Mr. Merriman said in the same house, a month earlier, (2): "Somebody had said something about loyalty, as if loyalty has anything to do with paying more for your goods than you ought to pay. The thing was absurd, and he did hope the minister would sweep the absurdity away." To corroborate Mr. Merriman's words, it is only necessary to quote a short excerpt from the New York Times of April 11, 1920:"Whether any material difference in this country's export trade to the British colonies and possessions will follow the adoption of preferential tariffs in those countries in favour of the mother country is as yet a question. In very many instances the principal result will be to make the peoples of the scattered portions of the British Empire pay more for what they must get from the United States, while their Treasuries will be somewhat enriched by the receipts from the customs duties. [But this factor is more than offset in the case of South Africa by the sacrifice of customs duties on British goods, which make up almost 70 per cent. of the country's import trade]. At the present time, when the effects. of the patriotic uprising in the World War are still potent, measures of the kind will meet with no serious opposition. They are, rather, heartily approved as being calculated to strengthen the bonds which unite the Empire together. Later on, however, a different spirit may prevail when the advantages of freer trade are seen. For the sake of loyalty South Africa is expected to pay higher prices for whatever the British manufacturer cannot supply to the country.

iv. A fourth defect of imperial preference is that it means an artificial bolstering-up of British trade and industry. It is a degraded protection, and like real protection, never gets enough. The amount granted in rebates increased since the customs Union of 1903 was contracted. In his annual address the President of the Johannesburg Chamber of Commerce stated (3): "The rebate of duties in South Africa on goods from Great Britain and from reciprocating British colonies amounts to no less than 486,331 pounds sterling in 1909, and although opinions differ as to the wisdom of preference, the remission of so large an amount of duty must, I think, have been of

1. and 2. Pulsford: Commerce and the Empire, p. 150. See also Hansard of June 24, 1914, p. 3810.

3. Commercial Year Book of the Johannesburg Chamber of Commerce for 1909, p. 106.

considerable benefit to British manufacturers in their competition with Continental and American manufacturers." Sometimes it thus appears as if preference is not only an outgrowth of what is called loyalty, but also of cold business interests. The British manufacturer is satisfied so long as his business is a success by means of the aid given him through preference. All evidence seems to point to the fact that England is quite safe by adhering to a policy of free trade as long as the manufactures of rival nations are excluded from her colonies to a greater or less extent. There is to be free trade within the Empire and protection against all "foreigners."

Just to indicate the way in which preference works, let us take a single example: Let Dr. Jameson testify: (1) "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. A Rhodesian correspondent has just written as follows: 'When we ordered one 40-stamp mill we obtained tenders from a number of American firms. The engineers, in reporting on the tenders, informed us that an American tender was lowest in price, but that the preference in Rhodesia in favour of British manufactures would make the British mill cheaper.' There is one instance in which an order worth several thousands was given to a British firm solely on account of preference."

There are, however, indications that preference will be scientifically worked out in the future, and that the self-interest of the Dominions will lead to a check of the continued demand for an increase of preference. At the Imperial Customs Conference which was called together by the Board of Trade in response to a suggestion of the Government of the Union of South Africa, and which met in England on February 28, it was recommended that:

1. The Dominions should only grant preferential rates of duty on goods of which the final process of manufacture has taken place in the United Kingdom or other Dominion or Colony which, under the laws of the various Dominions, is entitled to preference.

2. Where the whole process of manufacture of goods from raw materials of foreign origin has been carried out in the United Kingdom, preferential rates of duty should be granted by the Dominions even though the value of this process of manufacture in the United Kingdom amounts to less than

1. Interview which a representative of the "Standard" had with Jameson at Waterloo Station.

the 25 per cent. prescribed by the customs authorities of the various Dominions. (1).

v. Imperial preference, unless very carefully granted, will hamper the development of South African industries. This opinion, as was pointed out above in a footnote, is not shared by the present Government of the Union of South Africa. (2). But we have seen that Canada watered down her preference on British goods between 1904 and 1906, when her manufacturers found that the preferences harmed their own industries. (3). Naturally a reduction of customs duties on imported articles which can be made in South Africa, whether these articles come from South Africa's sister, her mother, or any other place, means so much less protection to her industries. The protection might be high enough against the "foreign" article, but the lower duty lets in the imperial article. Thus the Report of the South African Federated Chamber of Industries on the Revision of the Tariff suggested, that, “in the event of the present rebate to Great Britain and British Dominions being increased, the net duty protecting the interests of the Union manufacturers shall not be less than at present in existence." (4). Moreover, the very existence of imperial preference, unless very carefully manipulated in South Africa, as was, for example, done in Canada and Australia, will lead to an unhealthy and very undesirable situation. The country will never be able to adopt a healthy protective policy for the sake of her young industries. No, there will be stagnation. Protection will never be high enough to exclude all articles indiscriminately. Care will always have to be taken to safeguard the interests of the British manufacturer in South Africa in spite of the fact that the "foreigner" is excluded.

vi. The imperial preferential scheme stands four-square in the way of any future attempt at free trade and better relations between the different nations of the world. In order

1. Board of Trade Journal, April 28, 1921.

2. Reference is made here to the footnote giving Minister Burton's reply to the question of Senator Wolmarans, whether the Government did not share the opinion that the preferential tariff was working against the establishment of factories in the Union; the reply of the Minister was in the negative.

3. For the way in which it was done, see "Reciprocity and Commercial Treaties," United States Tariff Commission (1919), page 363, (bottom).

4. Board of Trade Journal, April 29, 1920, p. 593.