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 J. A. HO BSD N 

 
 LIBRARY 
 
 UNIVERWTY OP 
 CALIF08HIA 
 
 SAN DIEGQ

 
 c^ ,
 
 THE NEW PROTECTIONISM
 
 THE NEW 
 PROTECTIONISM 
 
 BY 
 
 J. A. HOBSON 
 
 AUTHOR OF 
 "THE INDUSTRIAL SYSTEM," ETC. 
 
 T. FISHER UNWIN, LTD. 
 
 ADELPHI TERRACE, LONDON
 
 First published in 1916. 
 
 {All rights reserved.)
 
 CONTENTS 
 
 CHAPTER PAGE 
 
 I. THE REVIVAL OF PROTECTIONISM - - 1 
 
 II. DEFENCE AND OPULENCE - - - 18 
 
 III. THE TANGLES OF A TARIFF - - 34 
 
 IV. PROTECTION NO DEFENCE - - - 52 
 V. NAVIGATION LAWS - - - - 60 
 
 VI. HOW TO MEET TRADE AGGRESSION - - 73 
 
 VII. THE CASE OF AGRICULTURE - - 87 
 
 VIII. FREE TRADE AS A POLICY - - - 103 
 
 IX. THE OPEN DOOR - - - - 113 
 
 APPENDIX A - - - - 141 
 
 APPENDIX B - - - - 153
 
 PREFACE 
 
 It is not my purpose in these chapters to 
 traverse the whole field of controversy be- 
 tween Protectionists and Free Traders, culti- 
 vated so intensively during the years follow- 
 ing the Chamberlain proposals of 1903-1905. 
 During this war the fiscal problem has taken 
 a new aspect. Protectionists have found in 
 the associations and divisions among nations 
 imposed by war, and the necessities or ex- 
 pediencies of war economics, a new fund of 
 hope and opportunity for the achievement 
 of their objects. During the war the enemy's 
 trade is part of the enemy's war resources, 
 and is rightly made an object of attack. In 
 the general atmosphere of international an- 
 tagonism it is not difficult to represent this 
 same trade as inimical to our interests and a 
 potential source of danger to our country
 
 viii PREFACE 
 
 even in time of peace. The revival and 
 gi'owth of German industry and commerce 
 after the war will, it is urged, enable 
 Germany to prepare for another war. We 
 must therefore do all we can to pre^ ent 
 that revival and retard that growth. More- 
 over, German business men subordinate 
 their private profit-seeking to political 
 ends, dumping goods, invading markets, 
 driving wedges of finance, in order that the 
 " economic domination " thus obtained may 
 be placed at the service of a powerful 
 aggressive State. This State they see com- 
 bining with and subjugating its neighbours, 
 so as to form a powerful political and 
 economic system of Central Europe, which 
 will reach out its commercial and financial 
 tentacles so as to drag in other neutral 
 countries. This huge menace of a future 
 German world-power, political and economic, 
 and, when the time comes, military, is 
 paraded before the heated and confused 
 imagination of our people by our New Pro- 
 tectionists.
 
 PREFACE ix 
 
 INIy object is to inspect and test, first, the 
 substance of this economic menace, and, 
 secondly, the vaHdity of the measures by 
 which it is proposed to meet it. The New 
 Protectionism differs from the Old in seek- 
 ing to superimpose the present war map of 
 the world, with its divisions of belligerents, 
 allies, and neutrals, upon the Protectionism 
 of 1903-1905, which sought to combine pro- 
 tection for British industries with a closer 
 business connection between the self-govern- 
 ing dominions and the mother-country. To 
 extract a definite intelligible shape for this 
 New Protectionism out of the general 
 rhetoric in which it is embedded by most 
 of its exponents is no easy task. Its principal 
 organs in the Press — such as the Morning 
 Post, the NorthclifFe papers, and by recent 
 conversion the Spectator — ^do not agree 
 among themselves either as to scope, objects, 
 or methods ; and the Chambers of Com- 
 merce — more concerned with business and 
 less with politics — formulate proposals woe- 
 fully deficient in that element of " defence "
 
 PREFACE 
 
 which is of primary importance to poUtical 
 enthusiasts. 
 
 The single fact which ought to guide us 
 in our interpretation of the New Protec- 
 tionism is that the moving and moulding 
 spirit is the evident desire of groups of 
 business men to exploit the emotions of 
 friendship and antagonism generated by the 
 war and the immediate economic exigencies 
 of the situation, in order a get a public policy 
 which will yield them private profit. Multi- 
 tudes of other men are moved by patriotic 
 and other uncommercial motives to applaud 
 and to promote a Protectionist policy, but 
 all experience shows that they do little to 
 determine the form that policy takes. The 
 famous saying of Sir James F'itzjames 
 Stephen, that " The world is made for 
 hard practical men who know what they 
 want and mean to get it," finds no more 
 convincing corroboration than in the annals 
 of Protection. 
 
 The perception of this central truth is 
 doubtless obscured at present by the promi-
 
 PREFACE xi 
 
 nence giv^en by war pressure to what is in 
 its ultimate significance a sharp business 
 enterprise. The Paris Conference, for 
 example— a copy of the Report of which 
 is here given as an appendix — focuses at- 
 tention upon the Alliance as an economic 
 system for the conduct of the war, and 
 for defensive work afterwards. With the 
 economic war policy itself I am not con- 
 cerned to deal. But the measures proposed 
 for common action during the period of 
 reconstruction, and the permanent measures 
 of mutual assistance and collaboration, raise 
 issues of great moment for those who regard 
 Free Trade as economically sound, and con- 
 sider a policy aiming at a lasting severance 
 between the present belligerent groups as 
 a menace to the future peace of the world. 
 Although the document nowhere explicitly 
 commits this country to any tariff or other 
 definitely Protectionist act, it lays down a 
 line of policy which involves Protection. 
 The very language of its preamble is re- 
 plete with Protectionist assumptions. Our
 
 xii PREFACE 
 
 enemies are represented as preparing for 
 "a contest on the economic plane." Their 
 preparations " have tlie obvious object of 
 estabbshing the domination of the latter 
 (i.e., the enemy) over the production and 
 markets of the whole world, and of imposing 
 on other countries an intolerable yoke. In 
 face of so grave a peril, the representatives 
 of the Allied Governments consider that it 
 has become their duty — on grounds of neces- 
 sary and legitimate defence — to adopt and 
 realize from now onward all the measures 
 requisite, on the one hand, to secure for 
 themselves and for the whole of the markets 
 of neutral countries full economic indepen- 
 dence and respect for sound commercial 
 practice ; and, on the other hand, to facilitate 
 the organization on a permanent basis of 
 their economic alliance." 
 
 Now, in this book I examine the curious 
 assumptions of this passage — the notion of 
 trade as a " contest " in which one of the 
 trading parties secures " domination " over 
 the other, the notion that protective tariffs
 
 PREFACE xiii 
 
 and other barriers are needed for " defence," 
 and the notion that such " defence " can be 
 successfully obtained by any of these methods. 
 The assumption that German trade and 
 finance are mainly and normally State in- 
 struments — departures from " sound com- 
 mercial practice" — and that the Allies are 
 called on not merely to defend themselves 
 against this invasion and this domina- 
 tion, but also to secure the " independence " 
 of the neutral markets, is a blend of naivete 
 and ignorance to which it is difficult to do 
 full justice. 
 
 Though history lends little support to the 
 conviction that war alliances are of so firm 
 and durable a nature as to affiord a reliable 
 basis for far-sighted business arrangements, 
 Free Trade has nothing but commendation 
 for proposals for closer and more effective 
 trade relations between allies, provided they 
 are not intended, and do not in fact work 
 out, as a policy of exclusion and hostiUty to 
 other countries. Schemes for the improve- 
 ment of transport, postal and other com-
 
 xiv PREFACE 
 
 munications, for identical facilities in patent 
 law, trade-marks, and copyright, as between 
 the members of the allied countries, amount 
 pro tanto to an extension of the area and 
 liberty of human intercourse beyond the 
 national barriers, and as such are in every 
 way desirable. 
 
 But economic sanity regards with very 
 different eyes the first heading of the " Per- 
 manent Measures" — viz., "Economic Inde- 
 pendence of Enemy Countries," with its 
 opening paragraphs. " The Allies decide to 
 take the necessary steps without delay to 
 render themselves independent of the enemy 
 countries in so far as regards the raw 
 materials and manufactured articles essential 
 to the normal development of their economic 
 activities. These measures should be directed 
 to assuring the independence of the Allies, 
 not only as regards their sources of supply, 
 but also as regards their financial, com- 
 mercial, and maritime organization." 
 
 Now, though neither here nor elsewhere 
 in the Report is there any definite agree-
 
 PREFACE XV 
 
 merit to adopt a policy of Tariffs, Export 
 Duties, Navigation Acts, Financial Boycott, 
 or other specified weapons of Protectionism, 
 the policy indicated is one which plainly in- 
 volves, or indeed demands, the applica- 
 tion of such measures. "Economic Inde- 
 pendence " of the kind described, though it 
 does not preclude all commerce with the 
 Central Powers, clearly contemplates the 
 exclusion from this country of most of 
 the staple imports which have hitherto 
 come in, such as sugar, steel and iron, 
 machinery, glass and glassware, cotton and 
 woollen yarns and goods. The organization 
 of Allied commerce, finance, and maiitime 
 arrangements, for complete " independence " 
 implies not merely prohibitory taiifFs on 
 large classes of goods, but legal measures 
 for the exclusion of German capital from all 
 employment in the Allied countries, and 
 restrictive or prohibitive measures against 
 German and Austrian shipping. Whether 
 " independence " be interpreted as absolute 
 exclusion, or as security against such
 
 xvi PREFACE 
 
 economic intercourse as brings "depen- 
 dence," it can only be compassed by 
 methods of State preference or State boy- 
 cott, which constitute a radical departure 
 from the accepted economic policy of Great 
 Britain. Whatever were the specific methods 
 adopted to secure the object, it would have 
 two economically and politically disastrous 
 results. In the first place, by narrowing 
 the area of our free external markets, it 
 would diminish the total gains of British 
 industry and commerce, and render more 
 precarious the livelihood of a population 
 and a trade dependent for existence upon 
 large and assured access to varied sources 
 of overseas supplies. Secondly, by breaking 
 Europe into two nominally independent 
 but really hostile and competing economic 
 systems, it would foster conflicts in all parts 
 of the world, maintain and feed the bitter 
 memories of this war, stimulate the main- 
 tenance and growth of armaments, and 
 render another war inevitable. 
 
 Moreover, the first aggressive step in this
 
 PREFACE xvii 
 
 " war after the war " would have been taken, 
 not by the Central Powers, but by the Allies, 
 and the false charge made by German pub- 
 licists, that the main actuating motive of 
 Great Britain in entering the war was 
 jealousy of the growth of German trade 
 and a desire to crush a trade rival, would 
 receive a most specious corroboration. For 
 though the Paris Report opens by the state- 
 ment that " the Empires of Central Europe 
 are to-day preparing, in concert with their 
 allies, for a contest on the economic plane," 
 there is no evidence that any single step has 
 actually been taken towards this preparation. 
 On the contrary, even the informal proposals 
 that Austro-Hungary shall enter into some 
 economic alliance with the German Empire, 
 propounded many months ago, have met 
 with such strenuous opposition both in 
 Vienna and in Buda-Pesth that they appear 
 to have been abandoned. The first effect of 
 the Paris Conference, should it take shape 
 in any practical measures of co-operation for 
 an after-war trade policy, will be to give
 
 xviii PREFACE 
 
 fresh vigour to the German advocates of an 
 economic Middle Europe by enabling them 
 to represent their scheme as a necessary 
 defence against the economic warfare already 
 announced by the Allies. 
 
 Another obvious vice of any binding 
 economic arrangement made now by the 
 Allies for operation after the war is that it 
 impairs our freedom of action at the Peace 
 Settlement for the all-important work of 
 placing intei'national relations upon a better 
 basis of security. No League of Nations, 
 such as President Wilson and Sir Edward 
 Grey (to name but two of many important 
 supporters of this plan) still contemplate as 
 possible, could come into existence if, at 
 the close of the military conflict, the two 
 belligerent groups had already committed 
 themselves to a permanent war of commerce. 
 
 These considerations give the gravest sig- 
 nificance to the concluding paragraph of the 
 Paris Report, in which " the representatives 
 of the Allied Governments undertake to 
 recommend their respective Goveriniients
 
 PREFACE xix 
 
 to take without delay all the measures, 
 whether temporary or permanent, requisite 
 for giving full and complete effect to this 
 policy forthwith." This indecent haste can 
 only have one meaning so far as this country 
 is concerned. It is designed to enable our 
 Protectionists to reverse the permanent 
 fiscal policy under cover of a war emer- 
 gency, and by the aid of the hot passions 
 and confused judgment which such a situa- 
 tion engenders. This interpretation is sup- 
 ported by the action taken by the Colonial 
 Secretary, before the ink of this Report was 
 dry, in directing the Colonies to impose 
 forthwith, and for five years after the war, an 
 export duty of £2 a ton upon all palm-kernels 
 exported to foreign countries. Primarily 
 directed to destroy the German manufac- 
 tures of palm-oil, a basis of several important 
 products, such as soap, margarine, and oil- 
 cake, this return to our early colonial policy 
 of preference for the home market will 
 create alarm in all neutral foreign countries, 
 and will, by enhancing the uncertainty of
 
 XX PREFACE 
 
 future trade, make a speedy return to 
 normal industry after the war more difficult 
 for every nation, belligerent or neutral. 
 
 The greater part of my argument con- 
 cerns itself with a discussion of the economic 
 results which would flow from the attempt 
 to apply in practice the proposals of the 
 New Protectionism. But in a concluding 
 chapter I sketch the outlines of a construc- 
 tive policy of " The Open Door," a rational 
 alternative to the destructive policy of the 
 New Protectionists, and designed to promote 
 co-operation instead of conflict between tlie 
 Governments of the commercial nations and 
 the business groups who chiefly mould their 
 foreign policy. 
 
 A portion of the argument was published 
 recently in a series of articles in the Man- 
 chester Guardian, to the proprietors of which 
 I am indebted for permission to make this 
 further use of them. 
 
 J. A. HOBSON. 
 
 Hampstead^ 
 
 June 24, 191 6.
 
 THE 
 NEW PROTECTIONISM 
 
 CHAPTER I 
 
 THE REVIVAL OF PROTECTIONISM 
 
 The policy of Free Trade is based upon a 
 reasoned belief that all commerce is an ex- 
 change between the goods or services of one 
 person and those of another, this exchange 
 being usually effected by two monetary 
 transactions — an act of sale and an act of 
 purchase. Both parties in such commerce 
 are gainers from it, and their gains tend to 
 be equal. The material advantage of this 
 process is unaffected by the consideration 
 that the two parties may be members of 
 different political communities. The wider 
 the area, the freer and more secure the nature 
 of this intercourse, the greater is the net 
 
 1
 
 THE NEW PROTECTIONISM 
 
 gain, both to those parties directly engaging 
 in each act of commerce and to those who 
 indirectly profit by doing business with 
 parties thus enriched. The validity of this 
 economy of co-operation by division of 
 labour is as obvious in practice as in logic. 
 Almost everyone admits it on a smaller 
 scale, within the village, the province, the 
 nation. It is only disputed when it is 
 sought to apply it to the wider co-operation 
 of men and businesses in the world at large. 
 
 There are one or two errors, common to 
 all Protectionist proposals, fundamental in 
 their character, which need to be exposed 
 in the outset of every discussion of the 
 subject. 
 
 The first is the presentation of nations as 
 trading firms. Great Britain is treated as if 
 she did business, in her corporate capacity, 
 with Germany or the United States. The 
 several commercial countries are also re- 
 garded as competing with one another for 
 trade with other countries. Neither of these 
 views is correct. Great Britain does not
 
 THE REVIVAL OF PROTECTIONISM 3 
 
 trade with Germany ; individual Britons 
 trade with individual Germans, buying from 
 them and seUing to them, just as they do in 
 the case of fellow- Britons, each party seek- 
 ing and finding his private gain from each 
 transaction. It is, of course, possible to 
 add together all these separate acts of sale 
 and purchase which take place between 
 members of the different nations, and put 
 them under the collective title British trade, 
 German trade, American trade. Our Board 
 of Trade returns do this, thus unintention- 
 ally conveying the suggestion that there is 
 something different in the economic nature 
 and value of overseas trade and purely 
 domestic trade. 
 
 If this suggestion that Great Britain as a 
 nation trades with Germany and the United 
 States is a mischievous falsehood, still more 
 mischievous is the suggestion that tliey are 
 hostile competitors for trade with other 
 countries. For this is a double-barrelled 
 falsehood. The first falsehood is the per- 
 version of the actual fact that the competi-
 
 4 THE NEW PROTECTIONISM 
 
 tion for business, either abroad or at home, 
 is usually far keener and more continuous 
 between different British firms or different 
 German and American firms among them- 
 selves than it is between a British firm and 
 a German or an American firm. The second 
 falsehood is the misrepresentation of such 
 commercial competition as a struggle be- 
 tween two nations for a limited amount of 
 profitable foreign market, which the one 
 gains and the other loses. There is no sucli 
 absolute limit to the quantity of foreign 
 market. The notion that the expansion of 
 foreign markets obtained within the last two 
 decades by German or American traders is 
 a corresponding loss of markets to British 
 traders is sheer nonsense. To a large extent 
 those markets were " created " by the special 
 economic and commercial activities of the 
 German or American trader. For the rest, 
 an enlargement of our foreign markets which, 
 in default of German or American com- 
 petition, might have taken place, would 
 have involved a diminution of our home
 
 THE REVIVAL OF PROTECTIONISM 5 
 
 markets. There is no evidence that the 
 advance of German or American foreign trade 
 has caused productive power in this country 
 to remain idle to any larger extent than 
 when we were " the workshop of the world." 
 
 Sane consideration of the nature of com- 
 merce compels us to deny that the increased 
 commerce of Germans or Americans has 
 reduced the aggregate market for British 
 goods. 
 
 This treatment of nations as trading units 
 is the first item of the series of separatist 
 fallacies upon which Protectionism old and 
 new relies. 
 
 The second is the separation of the 
 interests of the seller from those of the buyer, 
 and the false assertion that the interests of 
 the former are, or ought to be, superior. 
 
 The reason why Protectionism appeals to 
 the producer and ignores the consumer is 
 evident. Every man contains within the 
 limits of his own person the whole economy 
 of world co-operation and excliange in petto. 
 As producer he makes a large surplus of
 
 6 THE NEW PROTECTIONISM 
 
 some one particular sort of goods, and 
 exchanges this surplus against an infinite 
 number of bits of surpluses of various kinds 
 made by other specialized producers in all 
 parts of the world. As producer he is one ; 
 as consumer he is many. Now, as the pro- 
 ductive side of his life absorbs the greater 
 part of his conscious organized energy and 
 attention, he comes to think it more impor- 
 tant, and to regard it as severed in its nature 
 from the consuming side. He looks more 
 closely to the amount of money he receives, 
 as profit or wages, than to the prices of the 
 goods upon which he expends that money. 
 This habitual separation of his producing 
 from his consuming self, and the superior 
 conscious stress upon the former, give the 
 Protectionist his opportunity. He makes 
 his separate appeal to the man as producer, 
 tells him that selling is more important than 
 buying, and that the money he receives is 
 more important than what he can buy with it. 
 It is through consumption that the co- 
 operative nature and value of commerce is
 
 THE REVIVAL OF PROTECTIONISM 
 
 realized. Production divides, consumption 
 unites. Hence the appeal of the Protec- 
 tionist to the nation as a body of pro- 
 ducers. 
 
 For, when the Protectionist has once 
 succeeded in getting the gain of the pro- 
 ducer accepted as the sole test of sound 
 economy, he is enabled to pursue his separatist 
 tactics farther. He can appeal to a nation, 
 not as a corporate union of producers, but as 
 a number of separate producing groups. He 
 can take each particular trade, or each 
 locality, and invite it to consider whether a 
 tariff upon the importation of the articles 
 which this trade or this locality produces 
 would not be beneficial to these producers, 
 whether tliey be capitalists or workers. This 
 so-called " practical " test of an appeal to local 
 business interests appears at first sight in- 
 controvertible. If Bradford could get high 
 import duties upon woollen goods enter- 
 ing this country, it would have a monopoly 
 of the home market, without losing any 
 foreign market it was able to supply.
 
 8 THE NEW PROTECTIONISM 
 
 Similarly with Sheffield cutlery, with North- 
 ampton boots, or with any other local or 
 national industry. It is easy to show how a 
 tariff can do good to each of them, taken 
 separately. ' ' But," argues the Protectionist, 
 " a policy which can be shown to be good for 
 each must surely be good for all." This, of 
 course, is the central fallacy. If the Brad- 
 ford weaver gets Protection and nobody else, 
 he stands to gain. But if all the other British 
 trades, local and national, engaged in 
 making articles he needs in his trade — e.g., 
 wool, coal, machinery, dyes, etc. — or articles 
 of food, clothing, furniture, etc., on which he 
 spends his wages, also get Protection, each 
 duty to protect those other trades filches 
 from him a bit of the gain he stood to make 
 if the Bradford woollen trade were alone 
 protected. A general tariff protecting all 
 British trades equally would thus be found 
 to make so many deductions from the \ alue 
 of the special Protection enjoyed by the 
 woollen trade, as to convert it from a gain 
 into a loss. The higher prices of woollens
 
 THE REVIVAL OF PROTECTIONISM 9 
 
 which his Protection enabled him to get 
 would be outweighed by the added higher 
 prices of the various articles required for use 
 in his trade and for his private consumption. 
 This appeal to the separate interests of each 
 trade is sometimes known as " the distribu- 
 tive fallacy." It consists in arguing that 
 what is true of each must be true of all. It 
 is well illustrated in the hortatory method 
 in vogue in American schools, where upon 
 the Fourth of July the boys assembled are 
 reminded that every one present is capable 
 of becoming President of the United States, 
 though it is evidently impossible that more 
 than about ten in the whole country can 
 attain the position. 
 
 The whole economics of Protection is 
 thus seen to be rooted in the soil of separa- 
 tism, disruption, and antagonism. Its policy 
 is realized in a number of conflicting prefer- 
 ences and pulls, that of producer against 
 consumer, trade against trade, locality 
 against locality, capital against labour, land 
 against both, jind, lastly, nation against
 
 10 THE NEW PROTECTIONISM 
 
 nation, falsely represented as economic 
 corporations. At every point of cleavage 
 damage is wrought upon the economy of 
 human co-operation for the production, dis- 
 tribution, and exchange, of wealth. 
 
 But, it may well be asked, how has Pro- 
 tection been able to make so much way 
 against the forces of reason and collective 
 self-interest ? How have separate group- 
 interests succeeded in imposing a protec- 
 tive system in so many countries, and how 
 are they able in this country to set on foot 
 a powerful movement to overthrow the 
 established fiscal system of Free Trade ? 
 
 The history of the last half-century con- 
 denses into a few brief lessons the forces and 
 conditions which have enabled certain par- 
 ticular business interests within a country 
 to impose tariffs detrimental to the economic 
 interests of the nation as a whole. The un- 
 equal organization of the several business 
 interests within a nation for co-operative 
 work in the field of politics is of prime im- 
 portance. Modern capitalist de\elopment
 
 THE REVIVAL OF PROTECTIONISM 11 
 
 has everywhere given prominence to certain 
 staple manufactures in textiles and metals, 
 etc., which, by reason of their widespread 
 utility and importance, assumed the chief 
 role in foreign trade. It was natural that 
 whatever aids Government could render to 
 these wealthy, concentrated, enterprising 
 trades, by way of safeguarding for them the 
 possession of theirdomestic markets wherever 
 seriously threatened, and of obtaining new 
 foreign markets, should become objects of 
 political endeavour among the members of 
 these trades. To these staple textile and 
 metal trades other important capitalist in- 
 dustries have sometimes attached them- 
 selves — e.g.^ shipbuilding and shipping, 
 chemicals, leather, etc. — bringing organized 
 political pressure on their national Govern- 
 ment to get tariff protection, bounties, rail- 
 road facilities, and various diplomatic and 
 other political assistance in winning foreign 
 markets. If the members of a few strong 
 national trades can exercise a series of special 
 pulls in the construction of a tariff, or the
 
 12 THE NEW PROTECTIOiNISM 
 
 pursuance of an expensive or risky foreign 
 policy adapted to their trade ends, the good 
 of the nation as a whole, represented by a 
 weak, diffused and ill-sustained opposition to 
 their strong, concentrated and persistent 
 policy, is likely to go to the wall. This has 
 been the story of the rise and progress of 
 Protectionism in all the countries where it 
 has made way in recent times. 
 
 The strong organized trades have waited 
 for, fostered, and utilized, special political 
 emergencies in the history of their country. 
 Wars and their financial aftermath have 
 been the most- favoured emergencies. The 
 financial embarrassment wars cause to 
 Governments, coupled with the reluctance 
 of statesmen to resort to the unpopular 
 methods of a heavy increase of direct 
 taxation, have commonly afforded the op- 
 portunity to the waiting Protectionists. 
 The modern Protectionist policy of the 
 United States was a direct legacy of the 
 Civil \Vai\ Before that event the United 
 States tariffs had been tending towards Free
 
 THE REVIVAL OF PROTECTIONISM 13 
 
 Trade, the general level of the Act of 1857 
 being lower than that of any period since 
 1816. Afterwards, the Constitution not 
 permitting of an income-tax, high tariffs 
 were imposed, at first accompanied by ex- 
 cise duties ; soon the excise duties were 
 withdrawn and the import duties remained. 
 The high Protection of France and Ger- 
 many is attributable to similar causation, 
 the pressure of war debts and fresh expendi- 
 ture for armaments offering the Protectionist 
 interests their opportunity. The return to 
 high Protection by France in 1875, and in 
 Germany a few years later, was not, indeed, 
 wliolly due to fiscal needs. Trade depres- 
 sion and unemployment, attributed to a 
 dumping policy of British manufacturers, 
 helped the movement towards a " national 
 economy," the patriotic mask of naked 
 business interests. In both countries the 
 textile and metal trades were compelled to 
 work in conjunction with the agricultural 
 interest. This was due in Germany to the 
 survival of the feudal power of the land-
 
 14 THE NEW PROTECTIONISIVI 
 
 owning class in the Government, especially 
 of Prussia ; in France to the widespread but 
 very strongly defined influence of the great 
 peasant electorate. This " balance of power " 
 between two economic forces of producers, 
 naturally opposed to one another, has brought 
 about curious fluctuations and compromises 
 in the protective policy of the two countries ; 
 but upon the whole it has worked, politically, 
 for the maintenance and elevation of tariffs. 
 But this seizure of special financial and 
 economic opportunities is not a full explana- 
 tion of the success of the Protectionist 
 movement. The whole tenor of political 
 history, with its excessive emphasis upon 
 the nation as the limit of sympathy and 
 corporate obligation for the citizen, and 
 upon the opposing interests and struggles 
 between nations, has furnished an education 
 and an emotional atmosphere favourable to 
 the acceptance of Protectionists' ideas of 
 national economy. In such an atmosphere, 
 even during times of peace, it has been easy 
 to impose on the common mind notions and
 
 THE REVIVAL OF PROTECTIONISM 15 
 
 language which present trade in terms of 
 international hostility. England, Germany, 
 the United States, are rivals, fighting for 
 markets, and taking markets that " belong " 
 to " our nation," " stealing marches " upon 
 us, and otherwise seeking to injure our 
 trade. When within each State some group 
 of business interests actually controls the 
 foreign and fiscal policy, it does actually 
 produce, by tariffs, shipping laws, commercial 
 treaties, and a pushful colonial policy, a 
 sufficient semblance of economic militarism to 
 give plausible support to this fundamentally 
 false conception of international trade. There 
 does exist this real opposition between trad- 
 ing and financial groups and syndicates 
 within the several nations, which by im- 
 pudent misuse of language and of politics 
 usurp the title of their respective States. 
 So France, Great l^ritain, Germany, America, 
 and Japan, may easily be represented as op- 
 posed to one another, in their national capacity, 
 in a contest for trade and concessions in 
 China, when the truth is that some tiny
 
 16 THE NEW PROTECTIONISM 
 
 little knot of pushful merchants or bankers 
 in each country, with or without the assist- 
 ance of their Foreign OfFce, are the actual 
 contestants. 
 
 If this is the normal modern situation, it 
 is easy to understand how the military policy 
 of States, the preparations for war, the con- 
 duct of war, and the sequelse of war, play 
 into the hands of Protectionists. In a 
 dangerous world, where a nation is exposed 
 to have its foreign trade cut off during war, 
 common prudence, it is held, must impel the 
 State to make arrangements enabling the 
 nation to be as self-sufficing as possible in 
 supplies of the requisites of civil existence 
 and military use. A protective tariff is 
 advocated as a chief instrument for achieving 
 this " national economy." So Protection is 
 urged, not as an instrument of national 
 wealth, but of national defence. In con- 
 tinental Europe this consideration has been 
 paramount in modern times, when, with the 
 growth of population and improved facilities 
 of transport, the people of one country might
 
 THE REVIVAL OF PROTECTIONISM 17 
 
 drift into a dangerous dependence on the 
 people of adjoining countries for some neces- 
 sary supplies. The fear lest war might cut 
 them off from necessary foreign markets has 
 been a weapon of immense value to the 
 Protectionist interests in Germany, France, 
 and other countries with potential enemies 
 across their frontiers. ,,
 
 CHAPTER II 
 
 DEFENCE AND OPULENCE 
 
 In this country the revival of Protectionism 
 is seen to be the immediate fruit of war 
 and mihtarism. Groups of our traders, ex- 
 posed to growing foreign competition in this 
 country and in the markets of the world, 
 had long striven to plant a protective tariff 
 for British manufacturers upon the formal 
 programme of the Conservative party. The 
 landowners and farmers, injured by the long- 
 continued fall of food prices, also brought 
 what political pressure they could towards 
 the protection of "the agricultural interests." 
 But Free Trade had been too long a settled 
 fiscal policy in this country to be easily dis- 
 turbed ; the difficulties of reconciling manu- 
 facturing with agricultural Protection were 
 too evident ; " food taxes " were too un- 
 
 18
 
 DEFENCE AND OPULENCE 19 
 
 popular an electoral cry ; periods of trade 
 depression and unemployment, the one real 
 hope of our Protectionists, were not long 
 enough or bad enough to serve the 
 purpose. 
 
 The Boer War brought into play iiew 
 emotional forces and a financial situation 
 which seemed favourable for Tariff Reform. 
 The war- borrowing left a larger indebted- 
 ness, and the new naval programme, taken 
 in conjunction with the costs of long-due 
 social reforms, like old-age pensions, brought 
 a pressure on the public revenue which gave 
 plausibility to any scheme for " broadening 
 the basis of taxation." The rally of Im- 
 perialist sentiment in our self-governing 
 dominions and their active support in the 
 war gave a new, passionate emphasis to the 
 notion of a self-sufficing Empire bound 
 togetlier by a system of mutually prefer- 
 ential tariffs. The bitter criticism of our 
 policy upon the Continent, and the threats 
 of concerted intervention in favour of the 
 Boer Republics, left in our people a powerful
 
 20 THE NEW PROTECTIONISM 
 
 anti-foreigner sentiment obviously useful as 
 grist to the Protectionist mill. 
 
 Mr. Chamberlain and his Tariff Reformers 
 were right in thinking the time favourable 
 for their project. But it was not favourable 
 enough. The financial solution was not 
 grave enough ; the industrial depression did 
 not respond to expectations ; the sentiment 
 of Imperial unity was too vague ; the ad- 
 vantages of good business relations with 
 foreign countries were too obvious ; cheap 
 food was too evidently advantageous to the 
 working classes. Again, the Tariff Re- 
 formers did not get in their work in time. 
 The glamour of militarist exploits had 
 already faded, the debauch had left the 
 country with a headache and the bill. The 
 advocates of Protection in 1903 and the 
 following years were unable to substitute 
 sentiment and passion for reasoning and 
 calculation. Hard facts and the logic of 
 the situation told too heavily against them. 
 To persuade the nation that its trade was 
 going to the dogs when common experience
 
 DEFENCE AND OPULENCE 21 
 
 and official records proved the contrary, to 
 persuade the mass of busy workers that 
 tariffs were needed to cure unemployment, 
 and that if they did pay more for their food 
 they would get it back in other ways, proved 
 too difficult a task. 
 
 The trouble in this earlier Protectionist 
 campaign was that the trade interests operat- 
 ing it foimd the sentimental Imperialism, 
 patriotism, and militarism deficient in 
 volume and intensity to serve tlieir pur- 
 pose. They were forced into argument, 
 and therefore beaten. Our New Protec- 
 tionists, having a far greater and more 
 various fund of sentiment and passion at 
 their disposal, hope to avoid close economic 
 controversy, or at any rate to reduce it to a 
 wholly subordinate place in their campaign 
 for tariffs. They have learnt this lesson. 
 They will no longer find it necessary to 
 prove that Protection raises wages, enlarges 
 and secures employment, conserves and 
 develops the natural resources of the country, 
 directs foreign trade into more profitable
 
 22 THE NEW PROTECTIONISM 
 
 channels, and performs the other economic 
 miracles claimed for it by its advocates. 
 These notions are doubtless still cherished 
 by " true believers," but they are no longer 
 needed for missionary work among "the 
 heathen." Free Traders, or indifFerents, are 
 to be converted by quite a different appeal. 
 That appeal is skilfully addressed to them in 
 the admission of the great prophet of Free 
 Trade, Adam Smith himself, that " Defence 
 is much more important than Opulence." 
 In other words, we are adjured to admit 
 that mere quantity of wealth, mere volume 
 of trade, mere cheapness, may be rightly 
 sacrificed to the higher considerations of 
 national or Imperial strength and security. 
 
 Now the truth of this general statement 
 is indisputable. The emergencies of the 
 war have furnished various illustrations of 
 proper and necessary interferences with 
 liberty of trades in the higher interest of 
 national security. It has been deemed desir- 
 able to restrict or prohibit certain imports, so 
 as to reduce the consumption of luxuries,
 
 DEFENCE AND OPULENCE 23 
 
 liberate labour for useful services, economize 
 shipping, and strengthen the foreign ex- 
 changes, to say nothing of the regulation 
 and restriction of our export trade in order 
 to conserve certain supplies for our own use 
 or to prevent other supplies falling into enemy 
 hands. Except as regards the detailed 
 operation of the restrictions upon imports, 
 Free Traders have fully acquiesced in these 
 emergency measures. 
 
 But when they are asked to admit that, 
 after the military warfare is concluded and 
 " peace " is made, it will be desirable to have 
 in being for future " defence " against the 
 power of Germany an elaborate tariff, con- 
 firming and continuing the several political 
 and military cleavages which the war has 
 brought about, and that this tariff should be 
 prepared during the war, they ought to 
 apply close tests of reason before giving 
 their assent to such proposals. What is the 
 value of the suggested opposition between 
 " Opulence " and " Defence "? A tariff will 
 certainly reduce Opulence. Kut will it ini-
 
 24. THE NEW PROTECTIONISM 
 
 prove Defence ? And are not safer and 
 better economic defences available ? These 
 are the questions to be answered. 
 
 Let it be admitted that, if a nation has to 
 choose between Opulence and Defence, it 
 will do w^ell to prefer the latter. But we 
 must first have evidence that the opposition 
 exists and that the choice is necessary. 
 Regarded prima facie. Opulence is favour- 
 able, not adverse, to Defence. Poverty is 
 not strength. Money is the sinews of war, 
 as we, better than any other country, ought 
 to know. If, therefore, we are to follow a 
 course which reduces Opulence, we must be 
 clear that this pjima fade damage is more 
 than offset by other items of Defence. 
 
 What are the dangers after the war 
 against which a tariff will provide ? Need- 
 less to dwell upon the preposterous story of 
 the huge stocks of goods (£300,000,000 in 
 value, an adventurous statistician calculates !) 
 which German manufacturers and merchants 
 have already stored for " dumping " on the 
 markets of this country and of France
 
 DEFENCE AND OPULENCE 25 
 
 directly the war is over, in order to kill any 
 revival of our trade. How Germany can 
 spare from the remnants of her industrial 
 population the labour needed to perform 
 this feat, what harm it would do if Germany 
 could send in cheap stocks at a time when 
 our stocks and those of the commercial 
 world will be depleted, what sort of goods 
 Germany would take in payment, and, 
 finally, what shred of evidence exists to 
 support the silly fable — these probings must 
 suffice for the " dumping " argument. 
 
 A more plausible case for economic " de- 
 fence " on the part of Great Britain and her 
 Allies is made by dwelling upon the con- 
 structive and aggressive measures of trade 
 which the Central Empires may employ. 
 The assumption is that an unrepentant and 
 revengeful Germany will direct all her efforts 
 to the work of industrial recuperation and 
 expanding trade with three related objects : 
 first, the recovery of her internal economic 
 strength in order to be rich enough to pre- 
 pare for another war ; secondly, tlie com-
 
 26 THE NEW PROTECTIONISM 
 
 mercial and financial penetration of foreign 
 countries, including our Empire, so as to 
 wrest from us our trade supremacy ; thirdly, 
 the establishment at home or abroad of 
 monopolies of certain sources of supply or 
 processes essential for war purposes or for 
 the control of vital industries. 
 
 In order to meet this aggressive policy we 
 are to set up a tariff which shall (1) make 
 Great Britain less dependent than formerly 
 on outside supplies in war and peace ; (2) bind 
 the Empire in a closer economic unity ; (3) so 
 strengthen the trade and financial relations 
 among the Allies as to make the Alliance 
 a virtually self-sufficing economic system ; 
 (4) boycott the trade of the Central Powers. 
 It is right to add that a tariff is not to be 
 the sole instrument of economic defence. It 
 is to be supported by navigation laws, reforms 
 of the Company and Patents Acts, and a 
 complete Stock Exchange boycott, etc. 
 
 But the tariff is the main weapon. Now, 
 its defensive efficacy may be submitted to 
 two tests. Does it streiigthen the position
 
 DEFENCE AND OPULENCE 27 
 
 of this country in the event of another war ? 
 Does it render less likely or more likely the 
 occurrence of another war ? 
 
 Let us here consider the first test. 
 
 AVill the operation of such a tariff as is 
 contemplated injure the power of Germany 
 to pursue the aggressive economic policy 
 imputed to her ? She desires to huild up 
 strong internal industries, to push for foreign 
 markets and a part in the development of 
 backward countries, and for the possession 
 or control of " key " industries. Now, it is 
 evident that, if she could be cut off from all 
 trade and other economic relations with this 
 country, our Empire, and the dominions of 
 our Allies, a large part of the world would 
 be closed to her, and she would suffer. But 
 would the general injury inflicted on her 
 home industry and her foreign trade, and so 
 upon the general growth of wealth of the 
 Cjlerman nation, be an advantage either to 
 this country or to the Alliance for purposes 
 of defence ? Sin-ely not, if it weakens us as 
 much as it weakens our potential enemy.
 
 28 THE NEW PROTECTIONISM 
 
 And is it not a just assumption that the 
 stoppage of trade between two nations, or 
 groups of nations, injures or weakens both 
 equally ? I know that there are those who 
 think that in the past the Germans have 
 gained more from trade with us than we 
 have from trade with them. By this they 
 generally mean that our imports from Ger- 
 many were much larger than our exports to 
 Germany. In 1913 did we not receive from 
 Germany goods to the value of 80 millions, 
 whereas we sold to Germany only 40 millions 
 of British produce and 20 millions of colonial 
 and foreign ? There exists a curious belief 
 that Germany got the advantage of us in 
 this transaction. The presumption surely 
 ought to be the other way. For if we had 
 really received 80 millions' worth of goods, 
 and paid in return no more than 60 millions' 
 worth, the " pull " would surely have been 
 ours. In point of fact, of course, we paid 
 in exports of goods or services, either directly 
 to Germany or to other countries on her 
 behalf, the full 80 millions. Apart from
 
 DEFENCE AND OPULENCE 29 
 
 this necessity of trade balance, there is no 
 ground for the behef that, because Germany 
 sells us directly more than she buys from 
 us, she is the greater gainer. Our Protec- 
 tionists speak of our " foolish generosity " in 
 opening our markets to our enemy, who has 
 built up her commercial prosperity upon 
 our amiable weakness ! But has any busi- 
 ness firm or individual trader in this country 
 bought from Germany except for his own 
 gain ? It never occurred to him that he 
 was acting generously because he was buying 
 where he reckoned to get the best value. 
 The notion that export trade is worth more 
 than import trade is nothing but a false 
 exaggeration of the producer's standpoint. 
 
 Another form of the same error is con- 
 tained in the belief that it would injure the 
 Central Powers much more to be cut off 
 from trade with the 15ritisli Empire and the 
 entire territories of the Alliance than for the 
 latter to lose their trade with the Central 
 Powers. This no doubt would be the case 
 if the whole world consisted of these two
 
 30 THE NEW PROTECTIONISM 
 
 economic groups. It would be easier for 
 the Allies, with their empires, to make of 
 themselves a wholly self-contained economic 
 system than for the Central Powers. But 
 this is not the real problem. It ignores 
 the importance of the neutral world, and 
 the processes of " roundabout " trade. If the 
 effect of tariff walls round Great Britain, 
 the Empire, and the Alliance, is to make our 
 trade relations with the neutral countries 
 more difficult, and the trade relations of 
 Germany with the neutral countries easier, 
 the net result may be damaging and 
 dangerous. Now, this is precisely what would 
 happen. Neither the British Empire nor the 
 larger system of the Alliance can supply all 
 their economic needs from their own terri- 
 tory. They must continue to be dependent 
 on import and export trade with neutral 
 countries, especially in North and South 
 America, for important foods and raw 
 materials essential to their vital industries. 
 Although the Empire furnishes a large 
 share of our imported foods, more comes
 
 DEFENCE AND OPULENCE 31 
 
 from foreign countries. In 1913 we drew 
 65 i million hundredweight of wheat and 
 wheat flour from foreign countries as against 
 57 millions from the Empire. In some 
 years the Imperial contribution is much 
 smaller. In 1908, for instance, the simul- 
 taneous failure of crops in Australia and 
 India made us dependent for three-quarters 
 of our imports upon foreign countries. For 
 some raw materials of our staple trades 
 our dependence upon foreign countries is 
 absolute. Take, for example, cotton. The 
 Imperial supply in 1913 amounted to 
 only 71,915,000 pounds, as compared with 
 2,102,384,000 pounds from foreign sources. 
 But what of that, it may be said ? We 
 shall still continue in our present amicable 
 trade relations with the neutral countries. 
 They will still buy our goods and sell us theirs 
 as before. But will they ? One inevitable 
 effect of our tariff system would be to damage 
 our trade with the great neutral markets and 
 to improve the trade of Ciermany with them. 
 Two forces would co-operate to this result.
 
 32 THE NEW PROTECTIONISM 
 
 German manufacturers and merchants, cut 
 off from our markets and those of our AlUes, 
 would be driven to cultivate more assiduously 
 than before the markets left to them. To 
 adopt the language of our Protectionists, 
 these neutral countries would become their 
 *' dumping-grounds," and the competition 
 of these " dumped " German goods would 
 undersell our honest wares. But this is not 
 the worst. The high tariff duties which we 
 should have to put on goods from neutral 
 countries, in order to protect our own 
 produce and to give preferences to our 
 Dominions and our Allies, would give grave 
 offence to neutral countries whose goods we 
 have always hitherto admitted free. Retali- 
 ating on our conduct, they would no longer 
 give us most- favoured-nation's treatment. 
 Germany, not being hampered by so complex 
 a tariff, and being under urgent pressure to 
 " make up to " neutrals, would clearly be in 
 a position to negotiate trade treaties with 
 powerful neutrals like the United States and 
 the countries of South America upon more
 
 DEFENCE AND OPULENCE 33 
 
 favourable terms. We should, by thus turn- 
 ing over the neutral markets more largely 
 to Germany, offset any advantages which 
 might seem to accrue to us by setting up 
 the larger economic system of the Alliance 
 against the smaller system of Central Europe. 
 So far as Great Britain is concerned, we 
 should be jeopardizing some of the essentials 
 of life and trade by reducing the number of 
 separate sources of supply. Thus there is no 
 reason to suppose that an effective economic 
 boycott of the Central Powers after the 
 war, even if it could be maintained, would 
 injure them more than it injured us, or, in 
 other words, would add anything to our 
 relative power of " defence."
 
 CHAPTER III 
 
 THE TANGLES OF A TARIFF 
 
 Tariff Reformers of the last decade found 
 considerable difficulty in reconciling the 
 claims of home industries and Imperial 
 preferences, agrarian and manufacturing 
 interests, tariff for revenue, tariff for Pro- 
 tection, and tariff for retaliation. To adjust 
 the respective interests of producers and 
 consumers within these islands and the 
 Empire as purchasers of foods, raw mate- 
 rials, semi-manufactured and fully-manufac- 
 tured goods, was found by experience to 
 require considerable dexterity. Yet this 
 task was child's play as compared with that 
 which awaits our New Protectionists. For 
 upon this earlier scheme they are called 
 upon to superimpose the new war pattern 
 of a world made up of friends, enemies, and 
 
 34,
 
 THE TANGLES OF A TARIFF S5 
 
 neutrals, and to harmonize the operations of 
 the new and predominant needs of defence 
 with the national and Imperial interests of 
 the older plan. 
 
 A tariff that is good for purposes of 
 " defence " must, it will be admitted, be 
 framed so as to fulfil two conditions : ( 1 ) It 
 must bind together in unity and amity the 
 British Empire and the Allies ; (2) it must 
 make this union self-sufficing for all the 
 essential requisites of war and peace. Does 
 the proposed tariff fulfil these conditions ? 
 That tariff has to perform a more difficult 
 task than any ever yet erected by any State. 
 It has to discriminate between five different 
 bodies. It has, first, to protect the industry 
 and agriculture of the British Isles ; secondly, 
 to give preferential treatment to the Empire ; 
 thirdly, to cement the Alliance by mutually 
 favourable tariff treaties ; fourthly, to apply 
 to neutral nations a general tariff; fifthly, 
 to exclude enemy goods, or at least to secure 
 ourselves from dependence upon enemies for 
 anything essential.
 
 36 THE NEW PROTECTIONISM 
 
 But when once the existing war map of 
 the world is taken as the directive instru- 
 ment for our future commercial policy, there 
 is no tendency to confine our tariff to this 
 fivefold discrimination. So we find pro- 
 posals to distinguish friendly from un- 
 friendly neutrals. Friendliness, again, may 
 be either in conduct as war neutrals, or in 
 ordinary trade relations before the war. Mr. 
 Wickham Steed, for example, would have 
 this country and the Allies discriminate 
 between " first-class " and " second-class " 
 neutrals on the basis of their favourable 
 or unfavourable attitude during the war. 
 " States which have clandestinely sided with 
 and helped the enemy, or have deliberately 
 hampered the Allies during the war ; peoples 
 who, while able to defend themselves against 
 eventual German aggression, have yet be- 
 lieved and washed for the success of German 
 arms, must be regarded as second-class 
 neutrals."* But I observe that the draft 
 
 * " A Programme for Peace," Edmburgk Review, 
 April, 1916, p. 378.
 
 THE TANGLES OF A TARIFF 37 
 
 tariff prepared by the Committee of the 
 London Chamber of Commerce would dis- 
 criminate in the tariff treatment between 
 " Friendly Neutrals (giving the United 
 Kingdom most- favoured treatment) " and 
 " Other Neutral Countries (those giving 
 preference to other foreign countries)." Nor 
 is there any reason why the discrimination 
 should stop here. Some neutral trade is 
 more important for us than other neutral 
 trade, irrespective of the favourable or un- 
 favourable attitude such neutral Govern- 
 ments may adopt. Here is another basis 
 of discrimination. 
 
 But if we apply these distinctions to 
 neutrals, why not also to enemy countries ? 
 Not only do we desire more earnestly to 
 damage the trade of Germany than that of 
 Hungary, Bulgaria, or Turkey, but some 
 of the imports of foods and materials from 
 these countries are more valuable to us 
 (accepting the Protectionist scale of values) 
 than the maimfactured goods that come
 
 38 THE NEW PROTECTIONISM 
 
 from Germany. It would evidently be 
 advantageous to us, and disadvantageous to 
 Germany, for us to exercise a less rigorous 
 exclusion of imports from her allies than 
 from herself. 
 
 Indeed, when once business is crossed 
 with politics and military considerations, 
 there seems no limit to the complexities of 
 the tariff discrimination. A special tariff 
 for every foreign country, shifting with each 
 change in the balance of political and com- 
 mercial considerations, would be the logic 
 of the situation. Some dim perception of 
 these complications has made our New 
 Protectionists so shy of committing them- 
 selves to any close formal statement of their 
 proposals, that it is not easy to be certain 
 what they stand for. I find, however, 
 emerging from the voluminous discussions 
 in the ISlorning Post and the reports of 
 Chambers of Commerce meetings a new 
 fiscal world, which may be visualized in 
 five concentric circles :
 
 THE TANGLES OF A TARIFF 39 
 
 (Lent by the Strand Engraving Co.) 
 
 Now, how will it be possible to devise a 
 tariff that shall harmonize the conflicting 
 interests involved in this fivefold discrimi- 
 nation ? The following are some of the 
 dangers involved in tlie attempt : 
 
 1. If we give adequate protection to 
 Great Britain, we risk offending and divid- 
 ing the Dominions. P'or the revival of 
 British agriculture with a view to increased 
 food production involves taxation of all 
 overseas supplies. Tiie free market hitherto 
 enjoyed by foods and materials from the
 
 40 THE NEW PROTECTIONISM 
 
 Dominions will be lost. Whether this loss 
 is or is not compensated by the higher 
 taxation put on foreign imports, it discrimi- 
 nates in favour of British home producers 
 against the Dominions. Again, if a genuinely 
 reciprocal tariff arrangement is to " bind " 
 the Empire, Canada must let in Bradford 
 and Birmingham goods on genuinely " pre- 
 ferential " terms. Will her manufacturers 
 consent to this ? The high nominal prefer- 
 ence originally given was soon withdrawn 
 wherever competition with Canadian manu- 
 factures was involved. The dependence of 
 Canada upon manufactured imports from 
 the United States has been continually 
 growing, and the average rates of duties on 
 American goods are lower than on British. 
 Will the great Free Trade movement in 
 Western Canada acquiesce in new tariff 
 arrangements which raise the price of agri- 
 cultural machinery from the United States ? 
 it has frequently been pointed out how 
 exceedingly unequal must be the value to 
 the different Dominions of any preferences
 
 THE TANGLES OF A TARIFF 41 
 
 accorded by this country. Canada, the 
 richest, must gain most ; the value to South 
 Africa upon such exports as she sends must 
 be inconsiderable. 
 
 2. The first effect of a general tariff would 
 be to put taxes upon all the imports from 
 our Allies that hitherto have come in free. 
 The farmers and manufacturers of France 
 and Belgium, in the depth of poverty and 
 struggling to recover from the crushing 
 effects of war, will be met by new barriers 
 to our markets. French wines must be 
 taxed higher, so as to favour the produce of 
 Australia and South Africa. The embargo 
 already placed on motors and their parts will 
 be maintained by permanent taxes. Silks, 
 dress goods, poultry, fruits, and flowers, will 
 all be taxed, and it will be cold comfort to 
 the French farmers and merchants to be 
 told that other foreigners, who are not Allies, 
 are charged still more. 
 
 In France considerable alarm has already 
 been expressed in industrial and commercial 
 circles lest they should stand to lose rather
 
 42 THE NEW PROTECTIONISM 
 
 than to gain under a British post-war tariff. 
 The following resolution, passed by the 
 ** National Association for Economic Ex- 
 pansion," recently formed under the leader- 
 ship of M. David- Mennet, President of the 
 Paris Chamber of Commerce, deserves 
 attention : 
 
 " Great Britain constitutes our principal 
 market ; and British public opinion, moved 
 by lively Press polemics, seems, at least to 
 some extent, to incline toward Protectionist 
 tendencies. The National Association thinks 
 that it is urgent, in regard to the British 
 Unionist thesis, to formulate the desiderata 
 of France, and to show clearly that, while 
 our sacrifices in the common struggle give 
 us special rights, the interest of England, 
 which buys only to sell again a half of the 
 produce she takes from us, suggests that she 
 should not set up against that produce a 
 barrier which might divert it into more 
 benevolent channels."* 
 
 The same reasoning applies to Russia. 
 The large supplies of grain from Russia 
 
 * Quoted in Daily Chronicle, June 9, iyi6.
 
 THE TANGLES OF A TARIFF 43 
 
 must be taxed high enough to give protec- 
 tion to British farmers and preference to the 
 Dominions. And this at a time when, as a 
 faithful member of the Alhance, she is in- 
 vited to abandon her trade with Germany, 
 her largest and most profitable customer, 
 who took one-third of her total exports. 
 How unlikely it is that Russia will assent 
 to such proposals appears from the recent 
 discussion of the National Agricultural 
 Congress at Petrograd, when the Chief of 
 the Ministry of Trade dwelt on the utter 
 impracticability of setting up barriers on 
 trade with Germany. 
 
 The dependence of Russia upon Germany 
 for a market for her surplus foods and raw 
 materials is a "law of nature." It is based 
 upon the permanent facts of conterminous 
 frontiers and diversity of natural resources 
 and economic development. Western Russia 
 cannot dispense with German markets either 
 for import or for export trade. Here is 
 what M. Boublikoff, a financial expert and 
 a member of the Duma, said at the Congress
 
 44 THE NEW PROTECTIONISM 
 
 on the subject of the proposed boycott of 
 Germany : 
 
 " Why did Russia buy so much merchan- 
 dise in Germany ? Because she was able to 
 get it at a lower price or on more advan- 
 tageous conditions than in England or in 
 France. It is clear, then, that the cessation 
 of commercial relations with Germany is 
 equivalent for the Russian consumer to an 
 increase of the cost of living and an aggrava- 
 tion of the position of Russian credit. Is 
 impoverished Russia able to bear such a 
 burden ? There cannot be two answers to 
 that question." 
 
 Such proposals are hardly likely to con- 
 duce to mutual good-will among the Allies, 
 or the endurance of the Alliance after the 
 immediate emergency of war has passed. 
 
 3. Nor would the trouble be confined to 
 our Allies. 
 
 The establishment of a new complex tariff, 
 to operate immediately peace was restored, 
 would have a disastrous effect in retarding 
 the recovery of our industry and commerce. 
 At a time when, in any case, great un-
 
 THE TANGLES OF A TARIFF 45 
 
 certainty must prevail as to the future 
 course of trade, and when business men are 
 gravely hampered in their plans and their 
 finance, this violent dislocation is to be 
 brought about in the delicate mechanism 
 of international trade. 
 
 There is not a trade in England that 
 would not be affected injuriously in some 
 way by the complications of such a tariff. 
 
 The term " key -industry " has recently 
 been invented to describe trades which, like 
 the aniline dye trade, are supports of great 
 staple industries. The suggestion is that a 
 small number of these "key-industries" exist 
 which at all costs must be kept under British 
 control. Now, this account of industry is 
 quite illusory. There is no important trade 
 which is not dependent for its successful 
 conduct upon dozens of other trades, many 
 of them necessarily outside the limits of our 
 country, our Empire, or the Alliance. In 
 the future, as in the past, we shall have to 
 draw many of our raw materials from foreign 
 countries, which might become our enemies,
 
 46 THE NEW PROTECTIONISM 
 
 or where the sources of supply might pass 
 under enemy control. Nor can we insure 
 that all the plant and machinery and the 
 processes we find it best to use in our great 
 staple industries are home-produced. Yet 
 most of the trades producing these materials 
 or plant or conducting these processes are 
 '* key-industries " in the sense that they are 
 indispensable to the final product. To hold 
 that, by tariffs or other political instruments, 
 we can root out permanently all dependence 
 of our necessary trades upon some product 
 or process of foreign industry is a sheer 
 absurdity. And if we could, we should not 
 really fulfil the requirements of "defence." 
 For the history even of the last few decades 
 shows how easily new enemies may arise, 
 how quickly such " key-industries " change, 
 and how feeble are war alliances as securities 
 for future amity. The new doctrine that 
 we must keep all " key-industries " in our 
 own hands is an impossible doctrine for 
 any thickly peopled and highly developed 
 country. It is only made plausible by
 
 THE TANGLES OF A TARIFF 47 
 
 giving a wholly false limitation to the term 
 " key-industry." 
 
 4. So far as the object of our New Protec- 
 tion is to damage German trade by refusing 
 admission to our markets, it is clearly un- 
 attainable. Prohibitive or high tariffs can, 
 of course, preclude direct German imports. 
 But it will be very difficult to extend this 
 prohibition to German goods imported 
 through neutral countries. In respect of 
 many kinds of goods it will be easy to 
 cancel or to disguise their place of origin, 
 when it is the interest of the neutral country 
 to encourage such deceit, and of the British 
 importer to connive at the deceit. Large 
 quantities of German goods, we may be 
 sure, would find their way into our markets 
 via Belgium and Holland, Sweden, Switzer- 
 land, and Spain. They would simply cost 
 us extra carriage and the profits of another 
 middleman. 
 
 Even supposing that our regulations were 
 so stringent as to enable us to detect and to 
 exclude goods of German origin coming
 
 48 THE NEW PROTECTIONISM 
 
 through other foreign countries, the injury 
 inflicted by this process on German export 
 export trade and the protection afforded to 
 our manufacturers would be inconsiderable. 
 The German sugar, cottons, woollens, steel 
 manufactures, and toys, which we refused to 
 take from Germany, would find a larger 
 market in other European countries, dis- 
 placing their own goods for consumption 
 in those countries and diverting them into 
 our markets. What difference would it 
 make if, instead of receiving German engines, 
 Holland received those engines, and we 
 imported Dutch engines ? 
 
 Of course, the actual effects of an attempted 
 boycott of German goods would be a good 
 deal more complicated. German semi- 
 manufactured goods would go to other 
 countries for a final process qualifying them 
 for entrance to our markets. Neutral 
 countries, profiting by the larger importation 
 of German steel, dyes, yarns, machinery, 
 chemicals, etc., which were refused entrance 
 to our markets, would build up manufac-
 
 THE TANGLES OF A TARIFF 49 
 
 tures upon a better or cheaper basis than 
 ours, and would out-compete our merchants 
 in the South American or China trade. 
 
 The following list of chief staple imports 
 from Germany into the United Kingdom in 
 1913 will show to what a large extent that 
 trade consisted of goods which were raw 
 materials or instruments of production in 
 British manufactures, affecting the cost of 
 production and prices of final commodities. 
 
 Staple Imports into United Kingdom from Germany. 
 
 £ 
 Sugar 10,912,018 
 
 Glass and manufactures .. . ... 1,298,384 
 
 Cottons and yarns ... ... 7,540,867 
 
 Woollens and yarns ... ... 2,592,925 
 
 Iron and steel and manufactures 7,524,533 
 
 Machinery 2,384,142 
 
 Toys 1,183,703 
 
 Since there is no prima facie reason for 
 believing that Germans gained more by 
 selling us these goods than we from buying 
 goods which we presumably found better or 
 cheaper than we could get elsewliere, why is 
 the stoppage of this trade likely to injure 
 
 4
 
 50 THE NEW PROTECTIONISM 
 
 German trade more than British trade ? 
 How will it advantage this country to limit 
 its sources of supply of sugar and yarns and 
 machinery and chemicals, and to pay a 
 higher price for them ? For the notion 
 that we can produce all these things, as well 
 and as cheaply, within this country or the 
 Empire, without the necessity of importing 
 them from foreign countries, is unwarranted. 
 It is based upon a childish refusal to admit 
 the utility of specialization, division of 
 labour, and exchange between nations. 
 
 There is no reason for supposing that the 
 fivefold discrimination of the proposed tariff 
 would assist the " defence " of this country, 
 though it would certainly diminish its opu- 
 lence. 
 
 No tariff could go any appreciable dis- 
 tance towards making the United Kingdom 
 economically self-sufficing for the necessaries 
 of life. 
 
 Exclusive dependence on our overseas 
 dominions for foods and other necessaries 
 would not reduce the submarine or other
 
 THE TANGLES OF A TARIFF 51 
 
 risks in time of war, while it would, by 
 limiting the sources of supply in time of 
 peace, cause grave fluctuations in supplies 
 and prices. A tariff involving a withdrawal 
 from our Allies of their hitherto free market 
 in this country would operate, not as a 
 cement, but as a dissolvent of friendship. 
 Nor would the stiff taxation upon neutrals, 
 necessary to furnish three lower scales of 
 preference, conciliate the commercial or 
 political friendship of these countries. 
 Finally, considered as a weapon against 
 Germany, a trade boycott, so far as it is not 
 futile, has a recoil equal to the force of its 
 discharge.
 
 CHAPTER IV 
 
 PROTECTION NO DEFENCE 
 
 The Report of the Paris Economic Con- 
 ference represented the Empires of Central 
 Em'ope as "to-day preparing in concert 
 with their allies a contest in the economic 
 plane which will not only survive the re- 
 establishment of peace, but will at that 
 moment attain its full scope and intensity." 
 In a recent interview with a representa- 
 tive of the United Press of America, Mr. 
 Runciman is reported to have said : " Ger- 
 many has announced that at the conclusion 
 of the war she will attempt to establish a 
 Customs Union of the Central Powers on 
 aggressive lines." The general idea appears 
 to be that Austro- Hungary should allow 
 German science, business enterprise, and 
 finance to develop and organize its natiu-al 
 
 52
 
 PROTECTION NO DEFENCE 53 
 
 resources and its industry, so as to make 
 the Central Powers practically self-sufficing 
 in the essentials of economic life. Joint 
 political and economic pressure would then 
 be used not only to bring their present 
 allies, Bulgaria and Turkey, within this 
 Customs Union, but to persuade or coerce 
 the smaller neutral neighbours, such as 
 Holland, Denmark, Switzerland, perhaps 
 Sweden, to come into a Middle European 
 system which would divide the Western 
 Allies from Russia and constitute the basis 
 for a formidable political and military 
 alHance. There is no evidence that any 
 such plan has gone further than the pre- 
 liminary stage of a conference between 
 politicians and economists at Berlin and 
 Vienna. The difficulties of the first step 
 in so ambitious a design, a Customs Union 
 of the two Empires, are believed by many 
 to be insurmountable. But, assuming that 
 Germany did throw her energies into this 
 aggressive project, using all her diplomatic 
 and economic resources thus to extend her
 
 54 THE NEW PROTECTIONISM 
 
 business control, in order to strengthen 
 herself for another war of conquest, would 
 a tariff be of any use to us, either for stop- 
 ping the execution of the project or for 
 assisting us to meet its menace ? 
 
 Tariff arrangements among the Allies for 
 the virtual boycott of the Central Powers, 
 so far from hindering the formation of this 
 " Middle Europe," would do everything to 
 help it. Its advocates are already pressing 
 upon its opponents the same argument 
 which our Protectionists urge, viz., the need 
 for an economic union of " defence " against 
 the economic war we propose to wage. If 
 we announced prohibitive duties on German- 
 Austrian goods, with accompanying restric- 
 tions upon shipping, finance, and other 
 economic intercourse, an immense incentive 
 would be given to the accomplishment of 
 the German scheme. Deprived of so large 
 a section of the world- market, these nations 
 would be forced partly into better organiza- 
 tion of their common resources, partly into 
 stronger pressure upon neutral markets both
 
 PROTECTION NO DEFENCE 55 
 
 in Europe and elsewhere. Since the nature 
 of our tariff, with its preferences to 
 Dominions and AlHes, would compel us 
 to make stiff terms for neutrals, the 
 countries against which we raised these new 
 barriers would by stress of legitimate self- 
 interest be brought over to the Central 
 European system. Our traders complain 
 of the ever keener competition of the 
 Germans in the growing markets of the 
 Far East and of South America. A tariff 
 upon wheat from Argentina, or tea and rice 
 from China, would hardly help us to push 
 in these countries our manufactured goods, 
 which would then be offered at higher 
 prices to cover the enhanced cost of pro- 
 duction which our general tariff would 
 involve. 
 
 A protective tariff here can do nothing 
 to check or impede German economic 
 aggression. It can only make it more 
 successfully aggressive. Would it, on the 
 other hand, strengthen our national resist- 
 ance to this aggression ? How should it ?
 
 56 THE NEW PROTECTIONISM 
 
 It can have only two chief and inevitable 
 effects. 
 
 1. It would reduce our aggregate national 
 income, and so our resources alike for armed 
 defence upon the one hand, economic 
 defence upon the other. How can the 
 advocates of a policy which diminishes our 
 funds alike for education, scientific experi- 
 mentation, and technical equipment (the 
 supreme needs for successful competition 
 with Germany) plead " defence " ? 
 
 2. It wastes the sources of public revenue. 
 A large proportion of the gross yield of a 
 tariff is consumed in expenses of collection. 
 By enabling protected industries to raise 
 their prices it throws on consumers a burden 
 of payment vastly greater than the gain to 
 public revenue. The incidence of this 
 burden is heaviest on the poorer working 
 classes, for the prices of the necessaries of 
 life are subject to the greatest increase. 
 Thus the standard of living of the workers 
 is depressed and their productive efficiency 
 impaired.
 
 PROTECTION NO DEFENCE 57 
 
 It thus appears how bad a weapon of 
 defence a general tariff is. But it has an 
 even worse defect. No other poUcy could 
 do so much to make another early war in- 
 evitable. The superficial notion that by 
 hindering the economic recuperation and 
 the commercial development of the Central 
 Powers it would cripple their projects of 
 " revenge " will bear no investigation. It 
 could have no such tendency. The an- 
 nouncement of the intention of the Allies 
 to pursue a punitive economic policy after 
 the war must confirm the false statements 
 made in Germany that England in making 
 war was actuated by feelings of commercial 
 jealousy. This would feed the spirit of hate 
 and revenge, and would help to maintain in 
 Germany the Prussian militarism we are 
 seeking to crush. This militarism would 
 animate the new economic system of 
 " Middle Europe." Tariff wars would keep 
 alive everywhere the memories of the mili- 
 tary struggle, and would be recognized as 
 preparations and incentives to an early
 
 58 THE NEW PROTECTIONISM 
 
 renewal of the struggle, as soon as one of the 
 two parties found a " favourable " oppor- 
 tunity. The " balance of power " policy in 
 the economic world would be clearly under- 
 stood to be an instrument and an index of 
 the terrible military struggle waiting in the 
 background. Not only Europe but the 
 whole world would tend to be drawn into 
 the new battle-array, as members of one 
 economic group or the other. A breaking 
 of Europe into two hostile commercial 
 systems would be an even greater crime 
 against civilization than the war itself For 
 it would be an open-eyed prostitution of 
 peaceful commerce to the purposes of inter- 
 national hostility. It would be the per- 
 petuation of a trench warfare in which 
 Custom officers would take the place of 
 soldiers. The mode of fighting would be 
 different, the aim and the animating prin- 
 ciple would be the same. The net effect 
 would be to reverse the great and fruitful 
 processes of human co-operation, not only 
 in the mutually profitable interchange of
 
 PROTECTION NO DEFENCE 59 
 
 goods, but in every other mode of inter- 
 course. International law, so much battered 
 and enfeebled by the experiences of war, 
 would be unable to raise its head again in 
 such an atmosphere, or to begin to recover 
 that authority which is indispensable to any 
 hope for European civilization. All that 
 elaborate and delicate network of communi- 
 cations by which, not only for business and 
 personal relations, but for the common tasks 
 of humanity in the world of thought and 
 science, art, literature, and philanthropy, 
 men of all nations have laboured together 
 regardless of political boundaries, would 
 suffer wreckage by this subversive enter- 
 prise.
 
 CHAPTER V 
 
 NAVIGATION LAWS 
 
 So far I have dealt with tariffs as the 
 weapon of defence and of offence by which 
 our New Protectionists propose to wage 
 "the war after the war." But there are 
 other supplementary weapons which most 
 of them, in concert with our Allies, desire 
 to employ. 
 
 Supposing it be impracticable or undesir- 
 able to impose an absolute boycott on all 
 German or other Central European goods 
 seeking entrance to our markets, admission 
 under a high tariff being preferable, there 
 are various ways of hampering such trade 
 and confining it to things that are both 
 safe and indispensable. German commercial 
 travellers can be penalized in the Allied 
 countries ; German firms can be refused the 
 
 60
 
 NAVIGATION LAWS 61 
 
 protection of our Patent Laws, and can be 
 excluded from competition for contracts. 
 Let German capital be refused the right 
 to " invade " the business companies of the 
 Allied countries ; let German companies, or 
 German-owned companies of other countries, 
 be refused quotation upon any Allied 
 Bourse. So it would be possible to " extir- 
 pate the cancer of German trade " from our 
 system. But, further, an organized attack 
 can be made upon the foreign trade of Ger- 
 many, not merely in all Allied markets, by 
 discriminating harbour dues and other ham- 
 pering conditions, but by adopting various 
 methods of attack on German shipping. 
 Why not refuse to admit into our ports all 
 German ships, or to allow them coaling 
 facilities, whether they carry German goods 
 or neutral goods ? Why not " keep British 
 trade for British ships " ? or, by the broader 
 doctrine. Allied trade for Allied ships ? 
 Some of these proposals ingratiate them- 
 selves not only with avowed Protectionists, 
 but witli some nominal Free Traders. All,
 
 62 THE NEW PROTECTIONISM 
 
 however, are subject to the two defects 
 which we saw were fatal to tariffs as methods 
 of defence— the defect that the recoil is 
 equal to the blow for offence, and the related 
 defect that " two can play at that game." 
 If we make it more difficult for Germans to 
 sell their better or cheaper articles in this 
 country, we compel our own people to buy 
 and to consume dearer or worse articles. 
 If we refuse to admit tenders from German 
 firms for advertised contracts, we restrict 
 competition, increase the probability of col- 
 lusion between British contractors, compel 
 ourselves to pay more, wait longer, or get 
 inferior work. If we deny Patent Law 
 protection, the same results ensue : either 
 we do not get the special articles our people 
 want, or we get them indirectly and with 
 greater difficulty at a higher cost. If the 
 articles we thus penalize are materials, 
 machines, or processes serviceable to some 
 British industry, as is the case with many 
 German specialities, such as electrical and 
 scientific instruments, dyes and chemicals,
 
 NAVIGATION LAWS 63 
 
 steel, etc., we load these British industries 
 with some increased cost, or some inferiority 
 of production, so hampering them for com- 
 petition in export trade, and even for compe- 
 tition in our own markets with articles 
 imported from foreign countries that take 
 advantage of the superior German methods. 
 Suppose, as is most likely, no efforts enable 
 us to make aniline dyes as well or as cheaply 
 as long years of scientific practice and busi- 
 ness organization have enabled German 
 firms to make them, our coloured textiles 
 will compete in all foreign markets at a defi- 
 nite disadvantage, not merely with German 
 goods, but with the goods of other foreign 
 countries, such as the United States, admit- 
 ting German dyes. Why should we force 
 our consumers and our business men to buy 
 at a disadvantage in order to injure German 
 sellers ? 
 
 No doubt it seems at first sight us if 
 Germany could not hit back with equal 
 force, our Imperial (and Allied) markets 
 being so much more important to their
 
 64 THE NEW PROTECTIONISM 
 
 traders than are their narrower markets to 
 ours. But the considerations just urged 
 prove the fallaciousness of this assumption. 
 For the back-stroke of our boycott against 
 German goods will be, not merely that we 
 lose the German markets for our goods, but 
 that we are seriously damaged in all the 
 neutral markets of the world. This, we 
 have already seen, will be the natural and 
 necessary consequence of a protective tariff 
 against the Central Powers. The further 
 penalties we are here considering will materi- 
 ally enhance this damage to our neutral 
 markets. 
 
 The proposal to exclude German ships 
 from all British and Allied ports and coaling 
 stations, comes with a powerful appeal to 
 many who regard a protective tariff as a 
 foolish or a highly questionable expedient. 
 The abominable outrages committed by 
 German vessels upon the high seas during 
 the war, would, it may well appear, be ap- 
 propriately punished by such a policy of 
 exclusion. Moreover, obvious considerations
 
 NAVIGATION LAWS 65 
 
 of national defence appear to favour a pro- 
 posal which will, by crippling the German 
 mercantile marine, deal a damaging blow to 
 her sea-power. A Navigation Act, there- 
 fore, takes a prominent place in the New 
 Protectionism. 
 
 In considering the value of a navigation 
 boycott in its bearing upon British com- 
 merce and British defence, we are fortunate 
 in having a clearer testimony from the pages 
 of history than is usually attainable. For 
 early in the rise of British sea-power and 
 foreign commerce we conducted a note- 
 worthy experiment along these very lines. 
 The rise of British colonial power in the 
 seventeenth century induced our Govern- 
 ment to lend assistance to our trading and 
 shipping businesses in their efforts to break 
 the pre-eminence, in some quarters the 
 monopoly, of the carrying trade enjoyed 
 by the Dutch. An Order in Council 
 of 1 640-47 prohibited the " plantations " 
 from shipping any of their produce except in 
 English bottoms. Tliis was followed by the 
 
 5
 
 66 THE NEW PROTECTIONISM 
 
 fuller policy of the Navigation Act of 1651. 
 " It provided that no produce of any country 
 in Asia, Africa, or America, should be im- 
 ported into any territory of the Common- 
 wealth save in vessels owned by Englishmen 
 or inhabitants of English Colonies, and 
 manned by crews of which more than half 
 were of British nationality ; while the pro- 
 duce of any part of Europe was to be 
 imported only in English vessels or in vessels 
 owned in the country in which it was pro- 
 duced or manufactured."* A few years later 
 the Act was further strengthened by provi- 
 sions confining colonial import and export 
 trade to English and colonial ships of which 
 the master and three-fourths of the crew 
 were English, the same conditions being 
 applied to home imports of all non-European 
 produce and to our coasting trade. In 1661 
 it was enacted that English recognition 
 should be confined to ships built in England. 
 
 * "Shipping after the War," by the Right Hon. 
 J. M. Robertson: a complete historical and economic 
 exposure of the " navigation " policy.
 
 NAVIGATION LAWS 67 
 
 While admitting that "The Act of 
 Navigation is not favourable to foreign 
 commerce or to the growth of that opulence 
 which can arise from it," Adam Smith con- 
 tended that it was advantageous as a defence 
 against the naval power of Holland. " As 
 defence, however, is of much more impor- 
 tance than opulence, the Act of Navigation 
 is perhaps the wisest of all the commercial 
 regulations of England." It is clear, how- 
 ever, that the Act was primarily designed, 
 not, as Adam Smith alleged, against Hol- 
 land's naval power, but against her carrying 
 trade and commerce. Mr. J. M. Robertson, 
 in the pamphlet from which we have already 
 quoted, cites ample testimony both from 
 contemporary writers and from later his- 
 torians to show that the Act had no more 
 value for defence than for opulence. The 
 following is his summary of the results of 
 the actual working of these Acts : 
 
 " 1. In so far as they were specially aimed 
 at Holland, they were certainly planned to
 
 68 THE NEW PROTECTIONISM 
 
 divert carrying trade from her to England, 
 not as a military menace. 
 
 "2. Their real effect was to hamper 
 English trade in all directions, one of the 
 first results being a serious increase in prices 
 and in the cost of shipbuilding. From 
 twenty to ninety years after the passing of 
 the first, English writers lament continued 
 English inferiority to Holland in shipping 
 and commerce. 
 
 "3. Failing alike to promote English 
 shipping and to depress Dutch, they obvi- 
 ously added nothing to English naval 
 power as against Holland. 
 
 " 4. We have express English testimonies 
 to the operation of superior Dutch powe7\ 
 in addition to supremacy in trade, many 
 years after the first enactment ; and it was 
 after it had run for twenty-two years that 
 the Dutch raided the Medway. 
 
 " 5. In particular, the main fields to be 
 cultivated for the furnishing of seamen, the 
 fisheries, were in no way improved by the 
 monopoly policy, and seem to have been 
 positively depressed by it. ' The numbers 
 employed in Holland by their fishery is 
 prodigious,' writes Harrison in 1744 (p. 24). 
 ' I fear ours bear no comparison.' 
 
 " 6. Even the trade between Holland and 
 England soon developed anew by way of
 
 NAVIGATION LAWS 69 
 
 systematic smuggling, which defrauded the 
 Enghsh revenue. And the provision against 
 imports of non-national produce by foreign 
 ships seems to have set the Dutch upon 
 extending their manufactures. Thus, a 
 French writer on Dutch trade in 1700, re- 
 ferring to the English Act of 1651, states 
 that the Dutch ' had not then anything 
 like the manufactures they have at this 
 moment.' "* 
 
 But if history is not encouraging to the 
 project of reviving Navigation Acts, con- 
 sideration of the economic results likely to 
 follow from a new experiment along these 
 lines is still more unfavourable. The first 
 obvious effect of excluding German ships 
 from our ports will be that British ships will 
 be excluded from German ports. Now, 
 since the British tonnage entering German 
 ports before the war was about four times 
 as great as the German shipping entering 
 British ports, this first effect of a mutual 
 boycott would be to our disadvantage. The 
 next effect would be to put all the trade 
 
 * " Shipping after the War," pp. 19, 20,
 
 70 THE NEW PROTECTIONISM 
 
 which might still be carried on between 
 Germany and Great Britain, or between 
 the Central Powers and the Alliance, into 
 the hands of neutral countries. Holland, 
 Sweden, and the new mercantile marine of 
 the United States, would be the gainers. 
 Nor would this gain to neutrals be con- 
 fined to this trade between the two hostile 
 systems. Shipowners in Germany and in 
 Great Britain wishing to engage in the 
 general carrying trade of the world would 
 find the ships carrying their national flag 
 hampered in their most profitable use by 
 these Navigation Laws. Ships carrying 
 neutral flags would enjoy a great advantage. 
 They would thus be impelled to put their 
 ships under neutral flags, and to become 
 investors in neutral shipping companies. 
 Germany would certainly be disposed to 
 take this course, both in order to reap the 
 greater profits earned under neutral flags 
 and their greater *' freedom of the sea," and 
 to secure immunity from capture in the 
 event of another war.
 
 NAVIGATION LAWS 71 
 
 It is, of course, possible that we might 
 try to meet this German shipping poHcy by 
 excluding from our ports neutral ships of 
 German origin, or belonging to companies 
 owned entirely or in large part by Germans. 
 But how can we obtain satisfactory evidence 
 of the ownership of every vessel claiming to 
 enter our ports under a neutral flag ? Is 
 every foreign Government likely to obey 
 our behest to give us an official certification 
 of the ownership of every ship which is 
 empowered to fly its colours, including an 
 up-to-date list of the holders of all shares 
 in shipping companies registered in their 
 country ? Anyone acquainted with the in- 
 tricacies of modern finance, with its com- 
 plication of Trust Companies and Holding 
 Companies, will recognize the absurdity of 
 such a notion. The mad logic of such a 
 navigation policy would, if followed to its 
 end, drive us to exclude on reasonable 
 suspicion all foreign shipping, neutral as 
 well as hostile, and to establish an all- 
 British shipping policy.
 
 72 THE NEW PROTECTIONISM 
 
 Considering our growing national depen- 
 dence upon large, free, quick, reliable sea- 
 transport for the existence of our population 
 and our industry, it would appear singularly 
 unwise to jeopardize our practical control 
 over the sea, even if we could thereby inflict 
 a graver injury to German commerce and 
 sea-power. To take such a course after the 
 experience of a war in which not only the 
 safety, but the financial stability, of our 
 nation is seen so patently to rest upon our 
 predominance in shipping would be an act 
 of inconceivable folly.
 
 CHAPTER VI 
 
 HOW TO MEET TRADE AGGRESSION 
 
 Many who reject the idea of a general tariff 
 in this country, either for national defence 
 or as part of a future economic war, are 
 quite rightly disposed to consider whether 
 steps should not be taken to prevent certain 
 articles and processes, which are important 
 for war purposes or for the maintenance of 
 vital industries in this country, from passing 
 under foreign control. 
 
 Those who apprehend an aggressive policy 
 in the future in trade and finance on the part 
 of our present enemies mean two different 
 things. Sometimes they mean that these 
 States, by subsidies and other public aids, 
 will set themselves to establish and to foster 
 certain industries and branches of trade 
 abroad, in order to have a monopoly, or a 
 
 73
 
 74 THE NEW PROTECTIONISM 
 
 superior position, in the event of war. Some- 
 times they merely mean that their traders 
 and industriaUsts, backed by the banks, will 
 pursue a pushful policy abroad, and by skil- 
 ful investments or energetic touting obtain 
 control of important sources of supply or 
 markets. In the latter case the "aggres- 
 sion " i^ nothing but successful economic 
 competition regarded from the standpoint of 
 the unsuccessful competitor. Great Britain 
 in this sense has been, and still is, the most 
 aggressive of nations, pushing her successful 
 trade and her control of the natural resources 
 of foreign countries far further than her 
 rivals. The British control of the huge re- 
 sources of Argentina, for example, is far 
 more complete than that of German traders 
 and financiers in any foreign country. 
 
 It is no doubt possible to hold that behind 
 all this German trade and investment stand 
 the German State and its militarist policy. 
 That the German State has kept in closer 
 organic relations than our State with in- 
 dustry and trade, both internal and foreign,
 
 HOW TO MEET TRADE AGGRESSION 75 
 
 fostering and supporting it by educational 
 policy, transport subsidies, tariff bounties, 
 consular assistance, etc., is not a matter of 
 dispute. The advances made by German 
 trade and finance in all parts of the world 
 within the last twenty years have been, 
 however, almost entirely the results of 
 private business enterprise. The application 
 of chemical and physical science to the 
 industrial arts ; the training in commerce 
 and in languages ; the detailed study and 
 cultivation of new markets ; the financial 
 assistance given, after expert inquiry, to 
 new industrial and commercial proposals, 
 the main causes of German commercial 
 development, are primarily due to the 
 intelligence, industry, and organization, of 
 business firms operating, not for political 
 service, but for profits. 
 
 To pretend that all this activity is in the 
 main a screen and an instrument of Prussian 
 State policy, aimed to penetrate all countries 
 of the world commercially and financially, 
 in order to convert this economic into
 
 76 THE NEW PROTECTIONISM 
 
 political control, is idle vapouring, whether 
 it proceeds from angry bagmen or from 
 statesmen who should be "responsible." 
 Take as a conspicuous example the follow- 
 ing passage from a speech delivered at 
 the opening of the Paris Conference by 
 M. Briand :* 
 
 " The war has shown us the extent of 
 economic slavery to which we were to be 
 made subject. We must realize that the 
 danger was great, and that our adversaries 
 were on the eve of success. Then came the 
 war. The war, with the immense sacrifices 
 which it demands, will not have been in 
 vain if it brings about an, economic liberation 
 of the world, and restores sane commercial 
 methods. We are all determined to shake 
 off the yoke which was being forced upon us, 
 and to resume our commercial intercourse 
 in order freely to join it to that of our 
 Allies." 
 
 What is signified by the passages here 
 italicized, or by corresponding language in 
 the preamble of the Report of the Paris 
 
 * Times Report, June 15, 1916.
 
 HOW TO MEET TRADE AGGRESSION 77 
 
 Conference ? What economic slavery was 
 Germany seeking to impose on France, and 
 on the world, from which this war will 
 liberate them ? Germans (not Germany) 
 were no doubt increasing the volume of 
 their foreign trade ; their manufactures were 
 entering new markets in various countries. 
 Wealthy Germans were investing an in- 
 creasing quantity of savings in mining, rail- 
 road, and industrial companies in France, 
 Italy, Belgium, and other European coun- 
 tries, as well as large sums in similar business 
 enterprises in the United States, South 
 America, and elsewhere. What of that ? 
 In what real sense has the United States 
 been subject to " economic slavery " because 
 her business men have borrowed enormous 
 sums from European investors to make their 
 railways and open up their resources ? If 
 some of the spare capital of Germany in 
 recent years has gone into French companies 
 engaged in developing iron and coal, does 
 M. Briand seriously contend that this has 
 injured or imposed " domination " upon
 
 78 THE NEW PROTECTIONISM 
 
 France— 2.^., that Frenchmen would have 
 been better off if they had not borrowed 
 abroad larger quantities of useful capital at 
 lower rates than they could get at home ? 
 In some French and Italian enterprises 
 German investors, or even German banks, 
 doubtless exercised a preponderant control, 
 as British investors or financial companies 
 do in Argentina and many other countries. 
 But in what sense has the war exhibited 
 these operations as " economic slavery," 
 unless in the sense in which Socialists regard 
 all capitalist control in this light ? 
 
 The German State has doubtless had a 
 powerful secret service in many foreign 
 countries, and may have utilized branches of 
 German firms abroad as sources of political 
 information. The widespread employment 
 of German clerks in foreign commercial 
 houses has undoubtedly given German firms 
 a fuller knowledge of the business conditions 
 of their foreign competitors than commercial 
 firms in England possess. 
 
 But all these arts and practices are nothing
 
 HOW TO MEET TRADE AGGRESSION 79 
 
 else than an intelligent seizure of legitimate 
 business opportunities. What German firms 
 have been doing, our firms also should have 
 been doing, and, so far as we have been 
 successful, have been doing. The notion 
 that all this expanding German trade and 
 finance have been the cat's-paw of the aggres- 
 sive German State is baseless. The capitalists 
 who rule German industry, trade, and finance, 
 are out for profits, not for political aims, and 
 their success would have been impossible on 
 any other terms. Like business men in every 
 other country, they get what use they can 
 from the Government, in the way of educa- 
 tion, transport, tariffs, and diplomatic pres- 
 sure. But the suggestion that German 
 traders, bankers, colonists, are merely ad- 
 vance agents of the German State is one 
 of those impositions upon credulity which 
 would not have been possible in any other 
 atmosphere than that of war. There is no 
 better illustration of this credulity than the 
 easy acceptance by " the man in the street " 
 of the familiar charge against Germans of
 
 80 THE NEW PROTECTIONISM 
 
 pursuing a policy of " scientific dumping." 
 The only intelligible meaning to this term 
 would be that of a deliberate policy of a 
 German cartel or " monopoly " to pour goods 
 on to our markets at cut-prices, so as to ruin 
 British competitors, drive them out of trade, 
 and then improve their goods at prices 
 raised so as to recoup them for the earlier 
 cut-prices by which they acquired the market. 
 1 believe a good many people believe this is 
 what " the Germans " have been doing. But 
 nobody can point to any actual trade where 
 they have done it. In theory, no doubt, 
 it is a possibility, though the conditions of 
 success would be very difficult. In practice 
 it has been found impossible to dump suc- 
 cessfully in a Free Trade country. " It has," 
 says Mr. Macrosty,* " been demonstrated by 
 abundant German experience that dumping 
 does not pay, and that it is more advan- 
 tageous for a domestic trust or cartel that 
 export trade should be so regulated as to 
 yield the maximum of profit." 
 
 * "The Trust Movement in British Industry," p. 342,
 
 HOW TO MEET TRADE AGGRESSION 81 
 
 It is pretty safe to assume that German 
 and other rival traders and investors are, 
 broadly speaking, out for profit, and for 
 profit only, and that they place their money 
 or their goods wherever the prospect of gain 
 is greatest and most secure. 
 
 There may be cases, however, where 
 private business or scientific enterprise has 
 made some discovery, or opened up some 
 trade, which has a special political or military 
 value. An instance would be that of the 
 metal tungsten, used for hardening steel, 
 the bulk of the sources of which are said to 
 have been secured by Germans. Such cases, 
 where they can be shown to exist, might 
 legitimately be removed from the ordinary 
 category of trade for our present discus- 
 sion, and classed with those other trades in 
 Germany or elsewhere which are admittedly 
 aided and encouraged by the State, in part, 
 for military considerations. So far as any 
 State for " aggressive " purposes directs its 
 " national economy " in such a way as to 
 endanger our supplies either of military 
 
 6
 
 82 THE NEW PROTECTIONISM 
 
 requisites or of any necessity of life in the 
 event of war, it is manifestly the duty of our 
 State to take whatever means are necessary 
 to meet such "aggression." For instance, if 
 it were necessary to secure ourselves against 
 the sudden withdrawal in war-time of the 
 supply of some vitally important goods in 
 which we were in danger of complete de- 
 pendency upon an enemy, it would be quite 
 legitimate to prohibit the entrance of such 
 goods, provided that we were able to establish 
 a domestic substitute under conditions which 
 were not those of an ordinary " protected " 
 trade. There are various ways in which 
 this could be done. If importation was 
 prohibited, the excessive profits which " pro- 
 tected " private businesses might make could 
 be checked either by Excise duties or by a 
 special profit tax, or by some such regulation 
 of prices to consumers as is attached to the 
 working of gas companies and other semi- 
 public monopolies. Or, simpler and better 
 still, such industries could be established and 
 worked as public monopolies. This would
 
 HOW TO MEET TR.ADE AGGRESSION 83 
 
 be for various reasons the more desirable 
 course. For, in the first place, in most if not 
 all cases where real danger to our national 
 defence was apprehended, the industry would 
 relate closely to some class of armaments. 
 Now, although in war itself it may be neces- 
 sary to call upon private engineering firms 
 to supplement the State supplies of arms, it 
 ought clearly to be the function of the State 
 to carry on the ordinary production of arms 
 in its own factories and workshops, not 
 allowing great private vested interests in war 
 to grow up within the body of the nation. 
 If, therefore, the aggressive trade policy of 
 any foreign State threatens to deprive our 
 State of articles essential for our defensive 
 services, the production of such articles 
 clearly falls within the proper scope of State 
 enterprise. It is to this national organiza- 
 tion of defensive industries, and not to 
 tariffs, that we should look for our defence. 
 
 But outside this restricted circle of war 
 requisites there are a number of industries 
 producing trade materials or consumable
 
 84 THE NEW PROTECTIONISM 
 
 goods which we have "allowed" to pass pre- 
 dominantly or completely into foreign and 
 sometimes German hands. Four articles are 
 especially prominent in illustration of this 
 economic peril — dyes, monazite, tungsten, 
 and beet sugar. Now, an exceedingly per- 
 tinent commentary on these articles was 
 made in a letter to The Times of March 30 
 by Dr. F. A. Mason, who remarks : " The 
 four subjects noted — tungsten for steel- 
 making, monazite for the production of gas 
 mantles, synthetic indigo, and beet sugar — 
 do not appear at first sight to bear much 
 relation to one another, but their mention 
 with remird to German industrial success 
 and British failure is no fortuitous one. The 
 link connecting them all may be summed 
 up in one word — chemistry. There is no 
 branch of science, pure or applied, which has 
 been so shamefully neglected in the past as 
 chemistry. Practically all the important in- 
 dustries in which we have been left behind 
 by Germany have been those in which the 
 chemist is predominant." Admittedly all
 
 HOW TO MEET TRADE AGGRESSION 85 
 
 the industries in which Germans are pre- 
 eminent are those in which science, educa- 
 tion, and business organization, count heavily. 
 In order to defend ourselves, the obvious 
 method is to cultivate these factors of success. 
 Will a tariff help us here ? The general and 
 natural tendency of Protection is to dis- 
 courage energy, experiment, and progress, in 
 technical and business methods. To decline 
 competition and to shirk behind a tariff 
 wall is not only a cowardly, but a singularly 
 foolish, way of meeting the superiority of 
 our trade rivals in certain industries. If 
 this superiority is built on brains, science, 
 and organization, we had better build our 
 " defence " upon the same basis. Only thus 
 can be got a really reliable defence. For the 
 most striking fact in this type of scientific 
 industry is that it is continually growing 
 and changing. The so-called " key-industry " 
 of to-day will not be the '* key-industry " of 
 to-morrow. War is an eye-opener in this 
 matter. Sir Hugh Bell, in writing on the 
 subject, makes a criticism which I commend
 
 86 THE NEW PROTECTIONISM 
 
 to short-sighted Tariff " Reformers," whose 
 instrument would be always lagging behind 
 the real need of the nation : " Who can say 
 what, when war is next waged by mankind, 
 will be the ' key-industry ' ? Peradventure 
 some delicate alloy of steel involving the use 
 of a rare metal. Shall we ' protect ' (heaven 
 save the mark !) all rare metal industries, 
 lest one of them should be found the way 
 to the dominion of the air, as may easily be 
 the case ?" * 
 
 Would not it be safer to set about im- 
 proving our processes of education, so that 
 we may have at least an equal chance with 
 Germany, or any other nation, in discovering 
 and developing new " key-industries " ? 
 
 * "Trade after the War," April, 191 6.
 
 CHAPTER VII 
 
 THE CASE OF AGRICULTURE 
 
 There is one great fundamental industry 
 which deserves separate consideration in this 
 problem of economic defence — agriculture. 
 The belief that the decline of farming is 
 an injurious factor in our recent history 
 is by no means based exclusively on con- 
 siderations of militarism and defence. The 
 decay of rural industries and the concentra- 
 tion of our population in great cities, re- 
 moved from wholesome regular contact with 
 Nature and devoted more and more exclu- 
 sively to mechanical and commercial pur- 
 suits, have been sources of deep concern 
 for hygienic, {esthetic, and moral reasons. 
 Those concerned for the quantity and quality 
 of our population have pointed with alarm 
 to the dwindling proportion of the popula- 
 
 87
 
 88 THE NEW PROTECTIONISM 
 
 tion living in the country, where the birth- 
 rate remains higher and the infantile 
 mortality lower than in the towns, and 
 where, in spite of a selective drawing of 
 the best stock into towns, the general 
 standard of health and longevity is higher. 
 These general criticisms have, however, 
 been greatly reinforced by considerations of 
 national defence. Larger families born and 
 bred in the country are wanted for cannon 
 food. And the degree of our dependence 
 upon overseas supply of food is now more 
 than ever realized as a national danger. 
 
 It is natural, therefore, that various pro- 
 posals for stimulating agriculture, keeping 
 population on the soil, and improving the 
 conditions of life in our villages, should be 
 to the fore. This is no place for a general 
 discussion of the merits of this branch of 
 " social reform." It must suffice to note 
 the part Protectionism is likely to play 
 in it. 
 
 By character and tradition the landowners 
 and farmers of this country, as of many
 
 THE CASE OF AGRICULTURE 89 
 
 others, are Protectionists. But at the 
 present time they are the more incited to 
 seek Governmental aid in the form of tariffs, 
 bounties, remissions of rating, etc., because 
 the recent pohtical campaign, to which 
 Mr. George was seeking to commit the 
 country before the war, was causing them 
 serious alarm. If they were to be called 
 upon to raise agricultural wages to a decent 
 minimum, to assist in the creation of " free " 
 cottages, and the estabhshment on a large 
 scale of small holdings, and to assent to 
 other means of raising the independence of 
 the labourers, they were impelled more 
 urgently to demand from the Government 
 some simple guarantees that their rents and 
 profits shall not be swallowed up by these 
 improvements of the conditions of labour. 
 They must be secured against the incal- 
 culable inrushes of foreign foods into our 
 markets. Prices of food must be kept at a 
 level which will make farming possible, and 
 give the farmers sufficient security of out- 
 look to "do their best by the land." To
 
 90 THE NEW PROTECTIONISM 
 
 keep out foreign foods is the expedient 
 generally advocated, and though town Pro- 
 tectionists have learnt the lesson of the 
 1906 and 1910 elections, and avoid com- 
 mitting themselves to any sort of food tax, 
 the landed interests are not easily shaken 
 from their fixed policy. Though the pro- 
 gramme of the London Chamber of Com- 
 merce allows most foods to come in free, no 
 political Protectionism, having regard to 
 considerations of Imperial union, would be 
 likely to endorse this liberty. This simple 
 claim of the farmer is likely to remain a 
 millstone on the neck of the iS^ew Pro- 
 tectionism. 
 
 It would, of course, be possible to deal 
 with the agricultural claims by way of 
 bounties instead of tariffs. Sir L. Chiozza 
 Money has recently revived this proposal, 
 urging that a bounty upon agricultural 
 produce should be applied to stimulate and 
 organize our home supplies. Imported 
 foods might enter free of duty as before, 
 but a bounty on home-grown foods would
 
 THE CASE OF AGRICULTURE 91 
 
 put more of our land into effective use, so 
 increasing the proportion of our home 
 supply. Some of the difficulties raised by 
 the bounty policy, as usually advocated, are 
 met by the more audacious scheme outlined 
 by Sir Leo,* who would make his bounties an 
 instrument of a general organization of our 
 agriculture by the State. The comparative 
 failure of the rising price of wheat in recent 
 years to stimulate an increase of the 
 acreage under wheat is doubtless attribut- 
 able partly to the slowness of the agricultural 
 mind to respond to economic stimuli, partly 
 to the insecurity of tenure of most farmers, 
 partly to the fact that other food prices 
 have also risen, and last, not least, to the 
 fact that the gain from higher prices is 
 liable to be taken by landowners in higher 
 rent. If anything effective is to be done 
 along these lines, agriculture as a whole 
 must be brought under a general State 
 surveillance ; there must be security for the 
 maintenance of the higher profits of farming; 
 
 * Weslminsler Gazelle, May '.i\, If) lb'.
 
 92 THE NEW PROTECTIONISM 
 
 the labourer, as well as the farmer, must 
 get his share of agricultural prosperity. 
 
 " I picture the State as commanding the 
 whole question of food-supply, just as it has 
 commanded the sugar-supply in this war, and 
 just as it has partly commanded the meat- 
 supply in this war. My conception is that 
 the State, having after due consideration 
 decided to apply varying proportions of 
 British soil to different agricultural purposes, 
 shall buy up and control the home supply, 
 paying to the producers such a price as will 
 enable them to maintain themselves at a 
 proper standard of life. The minimum wage 
 in agriculture becomes part and parcel of 
 the plan." "Thus controlling the British 
 output of, let us say, grain, meat, and dairy 
 produce, the Government would next pro- 
 ceed to make arrangements with the British 
 Dominions overseas to purchase from them 
 their surplus productions of wheat." " As 
 to other supplies, the food surpluses of 
 Argentina or the United States or Denmark, 
 there is no reason why the British Govern-
 
 THE CASE OF AGRICULTURE 93 
 
 ment should not act similarly, or alterna- 
 tively admit such foreign produce at some 
 moderate rate of duty." 
 
 In order, therefore, to meet the obvious 
 defects of an ordinary bounty scheme, it is 
 proposed to establish a State monopoly in 
 the supply of food. A State department is 
 apparently to supersede all the present regu- 
 lative motives of supply and of demand, 
 fixing the quantity of all the different sorts 
 of uses to which our land is to be put, and 
 the quantity of " surpluses " of various kinds 
 to be bought, first, from our different 
 Dominions, and, secondly, from different 
 foreign countries ; finally it is to control an 
 intricate machinery of distribution in order 
 to supply to every consumer in the country 
 the State rations which it has been calculated 
 he ought to be allowed to buy and to con- 
 sume. For if the State organizes the supply 
 of foods, fixing the prices it pays to the home, 
 the colonial, and the foreign producer, and 
 the quantities it buys from each, and fixing, 
 on the other hand, the selling prices to the
 
 94 THE NEW PROTECTIONISM 
 
 consumer (including the manufacture in the 
 numerous food-making industries), the nation 
 is virtually put on rations. And this not as 
 a temporary war but as a permanent peace 
 measure ! 
 
 In a parenthetic paragraph Sir Leo ex- 
 presses his belief that it would be "wise and 
 profitable " for the State to acquire by pur- 
 chase the whole of our agricultural lands. 
 Indeed, it is tolerably obvious that, unless 
 this step were taken, the bulk of the bounty 
 money paid by the State for high-priced 
 agricultural produce would pass into the 
 hands of landlords in raised rents. 
 
 But surely it is a reductio ad absurduvi of 
 the " bounty " system when it is seen to 
 require for its defence the nationalization of 
 land and the socialization of the entire food 
 trade of the country. For Socialists have 
 generally and rightly recognized that agri- 
 culture is the branch of industry least 
 adapted for direct State administration, by 
 reason of the infinite variety of local con- 
 ditions and the other irregularities of
 
 THE CASE OF AGRICULTURE 95 
 
 materials and processes which render it re- 
 fractory to rigorous routine. Most of those 
 who favour the ownership and control by the 
 State of railroads, mines, and the great staple 
 manufactures, recognize that the direct in- 
 centives of pri^ ate individual gain and liberty 
 of working are essential to get the best out 
 the soil. 
 
 That the State can do much to stimulate 
 and improve agriculture must be admitted. 
 But the assistance does not lie along the 
 road of tariffs or bounties. The real need 
 is to release agriculture from the rusty 
 chains of medieval land tenure, and to place 
 it on a modern business footing, affording 
 to the employer and the worker the hopes 
 and prospects of gain requisite to evoke 
 their intelligent and efficient industry. Re- 
 form of hind tenure, scientific and business 
 training for the farmer's son, skilled crafts- 
 man's wages and personal liberty for the 
 wage-earner (with the option of an inde- 
 pendent livelihood upon a small holding), 
 improved and cheapened transport for agri-
 
 96 THE NEW PROTECTIONISM 
 
 cultural produce, local co-operative associ- 
 ations for marketing and for credit — these 
 are the chief desiderata for enlarging the 
 yield of British agriculture. The State 
 ought to contribute liberally to these pur- 
 poses — legislatively, by removing the decay- 
 ing relics of feudal tenure ; administratively, 
 by the public services of education, trans- 
 port, and cheap credit. 
 
 To take money from the consuming public 
 or from the gains of other industries in order 
 therewith to subsidize a favoured industry 
 of agriculture, by means of tariffs or boun- 
 ties, is bad politics and worse economics. 
 
 Finally, regarded as defence, the pro- 
 tection of agriculture is fatally defective. 
 Although it may theoretically be possible 
 to show that, by a general application of 
 modern science and intensive cultivation, a 
 sufficient quantity of food could be raised 
 upon our national soil to support our whole 
 population, nobody seriously supposes that 
 this can or will be done. The utmost that 
 is looked for as the result of Protection or
 
 THE CASE OF AGRICULTURE 97 
 
 agricultural reform is some not very marked 
 reduction of our dependence upon overseas 
 supplies. We cannot hope, with our great 
 and still growing population, to be able in 
 the future to feed ourselves in the event of 
 a war in which we might be cut off from 
 overseas supplies. Nor will considerations 
 of defence encourage us to rely upon the 
 Empire for all the surplus food-supplies we 
 shall continue to require. For statistics 
 show that even in recent years, with the 
 immense development of Canadian resources, 
 the Empire does not furnish us, in ordinary 
 years, with much more than a third of the 
 imported foods we require. The statistics 
 of our imports of wheat and flour* show 
 how precarious it would be for us to rely 
 upon Imperial resources, which in a bad 
 year cannot supply us with more than a 
 quarter of our needs. The large number 
 and variety of the foreign sources of supply 
 upon which hitherto we have been drawing- 
 are seen to be the essential conditions of a 
 
 ' See table on p. 98. 
 
 7
 
 98 
 
 THE NEW PROTECTIONISM 
 
 our 
 
 regular and reliable food-supply for 
 population. Any weakening or reduction 
 of these sources of supply, by tampering 
 with our freedom of imports, under the 
 pretext of Imperial union or preference for 
 Allies, would imperil our national existence. 
 
 * Great Britain's Imports of Wheat and Flour 
 PER Cent. 
 
 1915. 
 
 1912. 
 
 1908. i 1907. 190(3. 
 
 1 
 
 1904. j 
 
 British Empire : 
 
 
 
 
 
 
 1 
 
 Canada 
 
 23-62 
 
 21-91 
 
 16-42 
 
 13-15 
 
 11-79 7-10 j 
 
 India 
 
 13-53 
 
 20-53 
 
 2-70 
 
 15-81 
 
 11-22 21-60 1 
 
 Australia ... 
 
 0-18 
 
 10-40 
 
 5-35 
 
 7-36 
 
 7-57 9-62 ! 
 
 New Zealand 
 
 Total British) 
 Empire j 
 
 Foreign Countries : 
 
 — 
 
 0-23 
 
 — 
 
 — 
 
 007 0-29 1 
 
 1 
 
 37-33 
 
 .53-07 
 
 24-47 
 
 36-32 
 
 30-65 
 
 38-61 
 
 
 
 
 
 
 
 
 
 
 
 
 
 United Slates 
 
 49 41 
 
 20-88 
 
 36 
 
 28 
 
 28-94 
 
 32-53 
 
 16-20 
 
 Russia 
 
 0-77 
 
 7-26 
 
 4 
 
 72 
 
 9-89 
 
 14-30 
 
 20-37 
 
 Argentina ... 
 
 11 90 
 
 15-30 
 
 29 
 
 18 
 
 19-00 
 
 17-20 
 
 18-48 
 
 Roumania 
 
 — 
 
 0-64 
 
 1 
 
 18 
 
 2-20 
 
 2-27 
 
 0-94 
 
 France 
 
 0-09 
 
 0-45 
 
 
 
 46 
 
 0-87 
 
 0-81 
 
 1-88 
 
 Austro-Hungary ... 
 
 — 
 
 0-13 
 
 
 
 32 
 
 0-52 
 
 0-77 
 
 0-87 
 
 Bulgaria ... 
 
 — 
 
 0-10 
 
 
 
 09 
 
 0-36 
 
 45 
 
 0-13 
 
 Turkey 
 
 0-02 
 
 0-26 
 
 
 
 32 
 
 0-40 
 
 014 
 
 0-31 
 
 Chile 
 
 — 
 
 0-53 
 
 2 
 
 03 
 
 0-07 
 
 — 
 
 0-78 
 
 Germany ... 
 
 — 
 
 0-67 
 
 
 
 57 
 
 0-48 
 
 0-31 
 
 0-52 
 
 Other Countries 
 1 Total 
 
 0-48 
 
 0-71 
 
 0-38 
 
 0-95 
 
 0-57 
 
 0-91 
 
 02-67 
 
 46-93 
 
 75-53 
 
 63-68 
 
 69-35 
 
 61-39 
 
 * statist, June 17, 1915.
 
 THE CASE OF AGRICULTURE 99 
 
 The advantages Great Britain possesses 
 in her natural resources, her situation, her 
 internal and external means of transport, 
 her volume of capital, are greater than those 
 of Germany. It is in the intelligent organi- 
 zation and direction of these advantages 
 that we have fallen behind. Better scientific, 
 technical, commercial, and general educa- 
 tion among all classes of our people, trained 
 intelligence in industry, is the first desider- 
 atum. But in order to get this use from 
 education we must first believe in educa- 
 tion. Faith must precede works. This is 
 a hard saying for a people which has selected 
 for one of its few public economies in war- 
 time a " letting down " of all its educa- 
 tional services. 
 
 Our numerous colonies and protectorates 
 scattered over the world should give our 
 men of commerce an immense advantage 
 over other nations, as outlook towers and 
 vantage grounds for trade and for invest- 
 ments. But the modern successful trader 
 must learn languages, mix on terms of easy
 
 100 THE NEW PROTECTIONISM 
 
 intercourse with foreigners of different races, 
 colours, and grades of civilization, learn their 
 habits and material needs, and the best 
 ways of satisfying thein : he must study his 
 potential markets in detail. If he is too 
 proud or too indolent to do this, he will 
 be " left " behind by Germans, Dutchmen, 
 or Swiss, who will better conform to tlie 
 requirements of the situation. 
 
 As for our complaints that the German 
 Consulates render so much more valuable 
 assistance to their traders than do ours, the 
 remedy is obvious. It consists in a thorough 
 reform of the selection, the personnel, and 
 the work, of our Consulates. It should be 
 their function to make a continuous organized 
 study of commercial opportunities, to follow 
 the industrial developments of the country, 
 to know what public or private contracts 
 are available for foreign competition, and to 
 lose no time in communicating this informa- 
 tion to the liome Government for circulation 
 in this country. 
 
 Finally, we must meet the superior
 
 THE CASE OF AGRICULTURE 101 
 
 financial penetration by means of which the 
 great German banks have operated in 
 foreign countries, not by silly accusations of 
 " aggression," but by intelligent imitation. 
 Credit is the great instrument of expanding 
 trade. We have in Great Britain a huge 
 latent reservoir of unused or ill-used credit. 
 Though our banks are not in their existing 
 structure adapted to the more adventurous 
 work done by such institutions as the 
 Deutsche Bank in launching and financing 
 great industrial and trading enterprises, 
 other modes of organizing credit for such 
 purposes are open to us. One of the reve- 
 lations of the war has been that of the 
 great national reserve of credit available in 
 time of need for galvanizing into life the 
 stiffening sinews of our banking and financial 
 system, and for supporting the vast expen- 
 diture upon the war of our country and our 
 Allies. The establishment of Credit Insti- 
 tutions in tliis country, furnished with suffi- 
 cient capital to play the part taken by the 
 German banks in initiating and maintaining
 
 102 THE NEW PROTECTIONISM 
 
 new projects whose soundness has been 
 attested by expert inquiry, is a proposition 
 which is ah'eady commending itself to 
 enhghtened financiers. What part the joint- 
 stock banks may take in such an institution, 
 what part the Government, is a matter for 
 discussion. But the utility, even the neces- 
 sity, of some such organization of credit, if 
 our commercial and investing classes are 
 to compete on equal terms with those of 
 Germany, is generally admitted. 
 
 When, then, we inquire what tlie weapons 
 are with which Germany has made her 
 great " invasions " in the world markets and 
 international finance, we find that they are 
 weapons of organization forged by brains, 
 will, and industry, and are within our grasp 
 if we also have the brains and will and 
 industry to forge them. If we have not, 
 the cowardly protection of a tariff will not 
 serve us ; for, instead of acting as a stimulus 
 to efficiency and enterprise, it will be a 
 screen for slackness and incompetence.
 
 CHAPTER VIII 
 
 FREE TRADE AS A POLICY 
 
 The attempt to discredit Free Tnide as 
 a policy which has endangered this country 
 in time of war rests on a particularly reckless 
 perversion of the facts. For the course of 
 the war has shown that the staying power 
 and fighting strength of Great Britain de- 
 pend in the last resort upon our naval and 
 mercantile supremacy at sea and our 
 dominant position in world commerce and 
 finance. Now, these factors are themselves 
 the products and expressions of our Free 
 Trade policy. Our ownership of half the 
 shipping of the world and our control of 
 commerce over the great world-routes could 
 only have been developed and maintained 
 by our policy of free ports and markets. 
 The vital importance of our mercantile 
 
 103
 
 104 THE NEW PROTECTIONISM 
 
 marine for transport and other subsidiary 
 war purposes, as well as for the maintenance 
 of necessary supplies for the needs of our 
 civil population, requires no argument. The 
 swift, full, and easy access to the markets 
 of neutral countries, for the supply of the 
 requisites of war and peace to ourselves and 
 our Allies, has been the greatest, and will 
 probably prove the determinant, advantage 
 we possess over our enemies in a protracted 
 war. This advantage is the direct outcome 
 of Free Trade. The good-will shown to our 
 cause by most neutral nations is not at- 
 tributable entirely, as we are prone to think, 
 to the justice of our cause or the considerate- 
 ness of our conduct on the sea. To a large 
 extent it is a half-conscious acknowledgment 
 of the superior liberality of our commercial 
 policy. 
 
 Not less important is the contribution of 
 Free Trade to the financial strength that 
 has enabled us to bear the great economic 
 burdens of a war in which we have been 
 able to render invaluable aid in goods and
 
 FREE TRADE AS A POLICY 105 
 
 money to our Continental Allies. It is not 
 merely that Free Trade has developed our 
 industry and commerce on sound and profit- 
 able lines, so enriching the nation as to 
 enable it to find for a great emergency the 
 huge financial resources we have provided 
 in the last two years. But the facts that 
 London has been the financial centre for the 
 entire world, and that the financial direction 
 of world-commerce and of the distribution 
 of the savings of the world has been mainly 
 in our hands, are indissolubly connected with 
 Free Trade. Now, this supremacy has been 
 of incalculable value in helping us to finance 
 the war. We have been able to draw in for 
 our immediate needs huge liquid funds of 
 capital laid out in financing world-commerce, 
 and to establish relations of credit and ex- 
 change in the United States and elsewhere, 
 resting ultimately upon our financial and 
 commercial prestige. Should we revert to 
 Protection, and break Europe into two rival 
 economic systems — throwing many of the 
 neutrals into close fiscal relations with the
 
 106 THE NEW PROTECTIONISM 
 
 Central Powers, the unquestioned supremacy 
 of the " bill on London " would be lost, and 
 a most injurious blow would have been in- 
 flicted on our control of world finance and 
 commerce. Setting on one side the general 
 effect of such a weakening of our national 
 resources, we cannot fail to recognize how 
 damaging this loss would be to the cause 
 of national defence in the event of another 
 war. 
 
 " But, at any rate," it is sometimes said, 
 " you must admit that Free Trade has failed 
 as a pacific agency." We can admit no such 
 thing. If the example set by this nation 
 had been followed by the other Powers, and 
 nevertheless this world-war had broken out, 
 it might have been contended that Free 
 I'rade had failed. But why does it seem 
 even plausible to suggest that, because a 
 number of Protectionist nations quarrel and 
 come to blows, and Free Trade Britain is 
 drawn in, Free Trade and not Protection 
 has failed ? No one who has followed recent 
 Continental history can ignore the fact that
 
 FREE TRADE AS A POLICY 107 
 
 tariff wars between Germany and Russia, 
 Austria and Italy, and the oppressive tariff 
 placed by Austria on Servia, have been active 
 influences in fomenting national hostilities 
 and in stimulating preparations for this 
 war. 
 
 British Free Trade could not keep the 
 world at peace. But it has helped to keep 
 Britain at peace. Can anyone seriously 
 suppose that in this dangerous world Great 
 Britain would have been permitted to gain 
 and to hold so huge a territorial Empire 
 scattered over the wide world, or to wield, 
 virtually uncontested for so long a time, the 
 supremacy of the seas, had not the natural 
 jealousy and envy of other Powers been 
 abated by the freedom and equality of com- 
 merce which we gave to traders of all nations ? 
 The closer Protection and the discriminative 
 tariffs of our self-governing dominions, taken 
 together with the threats of a withdrawal 
 of our free Imperial markets, are among the 
 admitted causes of the later war-policy of 
 Germany. If we had claimed the most
 
 108 THE NEW PROTECTIONISM 
 
 profitable fifth of the whole inhabited world 
 for our exclusive markets, and had treated 
 tlie manufacturers and traders of all other 
 rising commercial nations as trespassers, it 
 cannot be doubted that a combination of 
 European nations would long ago have 
 banded themselves against this arrogant 
 monopoly. 
 
 Protection is not a good defence either as 
 a normal trade policy or in Avar-time. If 
 any simple test is wanted, it is furnished in 
 the fact that as soon as the war started the 
 great Protectionist belligerents, one after 
 another, dropped their food tariffs. Italy 
 reduced her duties on food in October, 1914, 
 and abolished her corn tax in the follow- 
 ing February. In October, 1914, Austria 
 abolished her corn tax. In September, 1914, 
 the German duties on bread, beans, butter, 
 eggs, poultry, prepared foods, cereals and 
 fiour, meat and fish, were abolished. So 
 much for the defence value of Protection 
 in war-time ! And yet these countries are 
 comparatively self-sufficing in their food-
 
 FREE TRADE AS A POLICY 109 
 
 supply. How much worse a defence would 
 a tariff prove for us ! 
 
 But if Protection fails to provide that 
 self-sufficiency in war-time, which is its 
 ostensible object, what shall be said of it 
 as a method of war finance ? While Great 
 Britain by a series of increases of direct 
 taxation, almost wholly falling upon cur- 
 rent income has raised the revenue from a 
 pre-war level of 175 millions to a figure 
 estimated in 1916-17 to amount to 509 
 millions, what have the Protectionist nations 
 done towards meeting their costs of war out 
 of current revenue ? Virtually nothing. The 
 speech of Dr. HelfFerich, Finance Minister 
 for Germany, in the Reichstag, August 20, 
 1915, is a sufficient testimony to the help- 
 lessness of Protectionist finance to meet 
 emergencies : " I explained in March the 
 reasons which determined the German 
 Government against the imposition of war 
 taxes during the period of the war. These 
 reasons will stand. We do not desire to 
 increase by taxation the heavy burden which
 
 no THE NEW PROTECTIONISM 
 
 war casts upon our people, so long as it is 
 not absolutely necessary. As things are, 
 the only method seems to be to leave the 
 settlement of the war-bill to the conclusion 
 of peace and the time after peace has been 
 concluded." In other words, Germany has 
 been obliged to borrow every penny she has 
 spent upon the war. Nor is that all. This 
 year (1916), in order to meet the growing 
 interest on the debt, Dr. Helfferich pro- 
 posed taxes estimated to yield 24 millions a 
 year. But that sum will furnish a good deal 
 less than one-quarter of the interest of the 
 war- borrowing actually incurred. Worse than 
 that, closer inspection makes it evident that 
 with this new taxation Germany will still be 
 unable, not merely to contribute to the cur- 
 rent costs of war, but to find the revenue re- 
 quired for her imperial expenditure upon an 
 ordinary peace footing. As the Cobden Club 
 shows in an able leaflet : " This means not 
 only that Germany has not paid a penny 
 out of income for the war, but that she 
 has been obliged to borrow about half her
 
 FREE TRADE AS A POLICY 111 
 
 ordinary peace expenditure as well." The 
 same story is true of the other belligerent 
 countries, and for the same reason. Tariffs 
 are broken reeds for war emergencies. Coun- 
 tries that trust to them for revenue in war- 
 time are foredoomed to failure. For just 
 when more money is wanted less is supplied. 
 In most belligerent countries import trade 
 is heavily diminished, and with this diminu- 
 tion the yield of import duties falls. The 
 rates cannot be increased at a time when 
 restricted supplies are raising prices. On 
 the contrary, duties upon necessaries must 
 be reduced or repealed, as we see has 
 actually happened. This financial defect, 
 perilous to national defence, is inherent in 
 a protective system. It is no mere chance 
 that has imparted so nmch elasticity of 
 revenue to our national finance. The 
 simple reason is that, whereas in war Ger- 
 many, France, Russia, Italy, rely upon in- 
 direct taxes for the great bulk of their 
 current revenue, this country is raising 72 
 per cent, of her revenue by direct taxation.
 
 112 THE NEW PROTECTIONISM 
 
 Free Trade has enabled us not merely to 
 make a considerable and growing contribu- 
 tion to our own current war expenditure, 
 but to undertake the added burden of find- 
 ing huge sums for the assistance of our Allies. 
 Only by means of the immense and various 
 commerce with foreign countries, built up 
 by our habitual policy of free markets, by 
 the predominant power of our navy and 
 mercantile marine — itself at once the pro- 
 duct and the support of our free markets — 
 and by the vast resources of credit and 
 financial machinery established for the con- 
 duct of this commerce, could Great Britain 
 have made what will prove to be the deter- 
 minant contribution to the resistance by 
 which the superior military preparations of 
 Germany will be worn down.
 
 CHAPTER IX 
 
 THE OPEN DOOR 
 
 So far I have discussed the New Protec- 
 tionism as a comphcated form of folly. 
 But it is more than that. It is a crime — I 
 had almost written the crime — against 
 civilization. For its effect, as its intention, 
 would be to perpetuate the present strife by 
 stamping the divisions made for war upon 
 the world of commerce afterwards. Whereas 
 the whole trend of civilization has been to 
 bind the peoples of the world into closer 
 unity of interests and activities by the grow- 
 ing interdependence of commerce, these pro- 
 posals are directed to a reversal of the 
 movement. Not merely do they seek to 
 cut across the whole delicate network of 
 commercial and human intercourse, but they 
 make precisely that severance which is most 
 113 8
 
 114 THE NEW PROTECTIONISM 
 
 injurious to the future of humanity. To 
 break Europe into two hostile and rival 
 economic bodies, intriguing against one 
 another in all the neutral countries of the 
 world, would be to endow with permanency 
 the political system of contending alliances, 
 which has been the chief cause of past in- 
 security. This political antagonism would 
 be loaded with economic interests which, 
 once established, would be very difficult to 
 displace. The question of the just deserts 
 of Germany and the desire to impose upon 
 her economic punishment are not a real 
 issue. For we have seen that the constitu- 
 tion and working of modern commerce are 
 such as to disable Protection, or other modes 
 of commercial severance, from inflicting any 
 injury which does not equally recoil upon 
 the party inflicting it. Nor are the private 
 sensibilities and animosities of Britons who 
 desire to have no commercial dealings in 
 the future with Germany in question. No 
 trading firm or individual in this country is 
 precluded from putting into operation on his
 
 THE OPEN DOOR 115 
 
 own behalf* a complete boycott of German 
 goods. It is his desire to impose his policy 
 upon other firms and other persons, who 
 may still wish to seek their advantage by 
 buying and selling in the best market that 
 is in question. 
 
 The adoption of a State policy which, by 
 stopping all healing intercourse between the 
 members of the belligerent groups, would 
 keep alive and exacerbate all the bitterest 
 memories of war, would be nothing short 
 of treason against the cause of civilization. 
 For commerce has always been the greatest 
 civilizer of mankind. All other fruits of 
 civilization have travelled along trade routes. 
 The caravans which crossed the great Asiatic 
 plains, the boats which conducted the earliest 
 commerce up and down the great river 
 courses, carried the first seeds of science, 
 religion, art, law, and of mutual understand- 
 ing and good -will, among ever -widening 
 circles of mankind. C'ut off commerce, and 
 you destroy every mode of higher inter- 
 course. Substitute commercial war for free
 
 116 THE NEW PROTECTIONISM 
 
 exchange, and you reverse the current of all 
 civilization and drive back to barbarism. 
 
 The full pacific virtues of Free Trade and 
 the constructive policy which it requires 
 have seldom yet been recognized, even by 
 professed Free Traders. This is due to a 
 failure fully to appreciate the profound 
 change that has come about in the economic 
 internationalism of the last half-century. 
 Trade, in its simple meaning of exchange 
 of goods for goods, does not cover the new^ 
 industrial, commercial, and financial rela- 
 tions between members of different countries. 
 Cobden was admittedly mistaken in thinking 
 that the perception of their obvious self- 
 interest must rapidly lead all other nations 
 in the world to liberate their trade as we 
 had done, and that this universal Free 
 Trade would afford security against future 
 war. His error lay in failing to perceive 
 that, though the interest of each people as 
 a whole lay in freedom of commerce, the 
 interests of special groups of traders or pro- 
 ducers within each country would continue
 
 THE OPEN DOOR 117 
 
 to lie along the lines of privilege and pro- 
 tection, and that until democracy became 
 a political reality these organized group 
 interests might continue to mould the fiscal 
 policy of their several States. 
 
 But though this consideration has retarded 
 the pacific influence of commerce, it has not 
 been a direct and potent influence for inter- 
 national dissension. While the refusal of 
 nations to open their markets on equal 
 terms to foreigners retards and chills friend- 
 ship, it does not normally promote hostility. 
 It is the struggle for colonies, protectorates, 
 and concessions in undeveloped countries, 
 that has been the most disturbing feature 
 in modern politics and economics. Foreign 
 policy in recent decades has more and more 
 turned upon the acquisition of business ad- 
 vantages in backward parts of the world, 
 spheres of commerce, influence, and exploita- 
 tion, leases, concessions, and other privileges, 
 partly for commerce, but mainly for the 
 profitable investment of capital. For it is 
 tlie export of capital, the wider and more
 
 118 THE NEW PROTECTIONISM 
 
 adventurous overflow of the savings of 
 the capitalists of the developed Western 
 countries, that constitutes the new and 
 dominant factor in the modern situation. 
 Larger and larger quantities of capital are 
 available for overseas investment, and 
 powerful, highly organized firms and groups 
 of financiers seek to plant out these savings 
 in distant lands, where they can be loaned 
 to spendthrift monarchs or ambitious Govern- 
 ments, or applied to build railways, harbours, 
 or other public works, to open and work 
 mines, plant tea, rubber, or sugar, or to 
 serve the general money lending operations 
 which pass under the name of banking. 
 Many hundreds of millions of pounds 
 during recent years have been flowing from 
 the creditor nations of Europe into this 
 work of " development," which forms the 
 main material ingredient in what is some- 
 times called the " march," sometimes the 
 " mission," of civilization among backward 
 peoples. 
 
 It is the competition between groups of
 
 THE OPEN DOOR 119 
 
 business men, financiers, and traders, in the 
 several nations, using the offices of their 
 respective Governments to assist them in 
 promoting these profitable business enter- 
 prises, that has underlain most of the 
 friction in modern diplomacy and foreign 
 policy, and has brought powerful nations 
 so often into dangerous conflict. To 
 prove this statement, one has only to name 
 the countries which have been the recent 
 danger-areas : Egypt, Morocco, Tripoli, 
 Transvaal, Persia, Mexico, China, the Bal- 
 kans. Though in every case other considera- 
 tions, racial, political, dynastic, or religious, 
 are also involved, sometimes more potent in 
 the passions they evoke, the moving and 
 directing influences have come from traders, 
 financiers, and bondholders. Through the en- 
 tanglements of Anglo-French political policy 
 in Egypt runs the clear, determinant streak 
 of bondholding interests. The kernel of the 
 Moroccan trouble was the competition of 
 the Mannesmann and the Schneider firms 
 over the "' richest iron ores in the world."
 
 120 THE NEW PROTECTIONISM 
 
 Mining financiers moulded the policy of 
 South Africa towards annexation of the gold 
 reef. Tripoli was in essence a gigantic 
 business coup of the Banco di Roma. In 
 Mexico history will find a leading clue to 
 recent disturbances in the contest of two 
 commercial potentates for the control of oil- 
 fields. Persia came into modern politics as 
 an arena of struggle between Russian and 
 British bankers, seeking areas of profitable 
 concessions and spheres of financial in- 
 fluence. In China it was the competition 
 for railroads and for leases and concessions, 
 followed by forced pressures, now competing, 
 now combining to plant profitable loans. 
 Turkey and the Balkans became an incen- 
 diary issue to Western Europe because 
 they lay along the route of German econo- 
 mic penetration in Asia, a project fatally 
 antagonized by Russian needs for " free " 
 Southern waters. 
 
 The pressure of demand from organized 
 business interests for preferential economic 
 opportunities in backward countries is the
 
 THE OPEN DOOR 121 
 
 driving force behind the grievances and 
 aspirations of thwarted nationahsm, pohtical 
 ambition, and imperiaHstic megalomania. 
 A recent writer* has thus condensed these 
 facts of history : " It is essential to remem- 
 ber that what turns a territory into a diplo- 
 matic problem is the combination of natural 
 resources, cheap labour, markets, defence- 
 lessness, corrupt and inefficient government." 
 If the Free Trade policy is to fulfil its 
 mission as a civilizing, pacifying agency, it 
 must adapt itself to the larger needs of this 
 modern situation. Free Trade is indeed the 
 nucleus of the larger constructive economic 
 internationalism ; but it needs a conversion 
 from the negative conception of laissez faire^ 
 laissez aller, to a positive constructive one. 
 The required policy must direct itself to 
 secure economic liberty and equality not for 
 trade alone, but for the capital, the enterprise, 
 and the labour, which are required to do the 
 work of development in all the backward 
 countries of the earth, whether those coun- 
 
 * Mr. Lippmann, " TJie Stakes of Diplomacy," p. 9S,
 
 12fe THE NEW PROTECTIONISM 
 
 tries " belong to " some civilized State or 
 are as yet independent countries. This 
 fuller doctrine of the Open Door, or equality 
 of economic opportunity, cannot, however, 
 be applied without definite co-operative 
 action on the part of nations and their 
 Governments. 
 
 This needs plain recognition. For to some 
 who have perceived the dangerous diplomatic 
 emergencies arising from the support given 
 by Governments to the private business 
 ventures of their nationals it has appeared 
 the easiest escape to advocate a doctrine of 
 mere political disinterestedness. Let Govern- 
 ments give their traders, investors, and finan- 
 ciers, to understand that, while they are at 
 liberty to enter any business relations they 
 like with the members or the Governments of 
 other nations, they are not empowered to 
 call upon their Government for assistance, 
 either in establishing or pushing such busi- 
 ness, or in redressing any injuries which may 
 be done to them or their property interests. 
 Sucli business, unauthorized by Government
 
 THE OPEN DOOR 123 
 
 and undertaken for private profit, must carry 
 its own risks. Why, it is asked, should 
 persons who have staked their property 
 in countries where they know the Govern- 
 ment to be corrupt, the administration of 
 law to be uncertain, the treatment of 
 foreigners to be unjust, and who presumably 
 have discounted these very risks in the 
 terms of their investments or their trade, 
 be at liberty to call upon their Governments 
 to use the public resources of their country to 
 rescue them from these risks and to improve 
 the value of these private speculations ? The 
 logic of this attitude appears irrefutable. 
 But the politics are utterly unpractical and 
 inconsistent with humanitarian progress. 
 No Government has ever maintained, or can 
 ever maintain, a merely disinterested attitude 
 towards the trade or other economic relations 
 of its nationals with foreigners. Govern- 
 ments admittedly are concerned with the 
 industry and commerce, foreign as well as 
 domestic, of their respective peoples, obtain- 
 ing for that industry and commerce such
 
 124 THE NEW PROTECTIONISM 
 
 conditions as may secure for private effort 
 and enterprise the best results. In this 
 capacity they have always been accustomed 
 to use the diplomatic machinery to secure 
 for their " national " trade such liberties and 
 opportunities in foreign lands as are attain- 
 able by arrangement with foreign Govern- 
 ments. Most of these arrangements consist 
 in the removal or abatement of legal, fiscal, 
 or other " artificial " restrictions, or in pro- 
 moting the general safety of life and pros- 
 perity of their nationals. This work, done 
 by diplomatic intercourse, special treaty 
 stipulations, consular representations, etc., 
 is work done by the State for the interest of 
 the public as a whole. It is designed to 
 strengthen and improve the commercial and 
 other relations between the countries in 
 question. But since this business is, in fact, 
 conducted by certain firms or persons, whose 
 interests are particularly engaged in it, the 
 benefits of this State action are directly and 
 chiefly reaped by them, and come home in 
 enlarged private gains. But no one can
 
 THE OPEN DOOR 125 
 
 advocate the total abstention of Govern- 
 ments from this work, on the ground that 
 its direct gains are not equally distributed 
 throughout the nation, but are of more 
 advantage to certain individuals and classes 
 than to others. The general effect of this 
 consular and other Governmental action is 
 to secure larger and freer opportunities 
 for trade and investment for all members 
 of the nation capable of engaging in sucli 
 business, and some of the value of these 
 enlarged business opportunities comes home 
 to the nation as a whole in its capacity 
 of a " consuming public." 
 
 It is doubtless a more controversial issue 
 how far it is legitimate for a Government 
 to employ political pressure to assist or 
 advance the particular claims or interests of 
 a firm or syndicate pushing a special financial 
 deal, or contract, or concession, upon the 
 Government or people of a foreign country, 
 or to confer the semi-official autliority of a 
 charter upon a company claiming a monopoly 
 of trade or developmental activities in some
 
 126 THE NEW PROTECTIONISM 
 
 " backward area." But these practices have 
 been so deep-set in the grooves of history 
 that it is impossible to expect from any 
 State a simple policy of renunciation. Busi- 
 ness men have always looked to their Govern- 
 ments to secure for them fair or, if possible, 
 preferential opportunities in business with 
 foreign countries, and they have never looked 
 in vain. Upon the whole, it would be urged, 
 this policy of pushful business, aided by 
 political support, has made for enlarged and 
 freer commercial intercourse, and has been 
 essential in the work of developing distant 
 markets and more remote resources. It is 
 inconceivable that Great Britain or any other 
 civilized nation would be willing to renounce 
 such political aids while other nations still 
 retained them. Is it more conceivable that 
 all Governments by simultaneous agree- 
 ment should stand aside, giving no more 
 support to their nationals in foreign trade 
 or investments ? Yet nothing can be more 
 certain than that this competing support of 
 Governments to foreign business enterprises
 
 THE OPEN DOOR 127 
 
 of their countrymen must, if it continues, 
 ripen new dangerous diplomatic situations, 
 and form the substance of conflicting foreign 
 pohcies and competing armaments. No 
 League of Nations, no Hague Conventions, 
 or other machinery for setthng international 
 disputes, are likely to furnish any reasonable 
 security for peace or for reduced armaments, 
 unless this problem of conflicting interests 
 in the profitable exploitation of new markets 
 and backward countries can be solved. Now 
 there is only one line along which solution is 
 possible. We cannot revert to strictly private 
 enterprise, Governments looking on with 
 folded arms, while private companies, with 
 armed forces of their own, fasten political 
 and economical dominion upon rubber or 
 oil or gold fields in Africa or South America, 
 enslaving or killing off the native population, 
 as in San Thome or Putumayo, and using 
 up the rich natural resources of the country 
 in a brief era of reckless waste. Tlie only 
 alternative is to advance to a settled policy 
 of international arrangen^ent for securing, if
 
 128 THE NEW PROTECTIONISM 
 
 possible, that this commercial and develop- 
 mental work shall in the future be conducted 
 on a basis of pacific co-operation between the 
 business groups in the respective countries 
 under the joint control of their Governments. 
 This process of economic penetration and 
 expansion cannot stop. As more nations 
 advance farther along the road of capitalist 
 industry, the overflows of trade and capital, 
 seeking more distant and more various fields 
 of enterprise, will be stronger in their pres- 
 sure. This pressure has been the driving 
 force in the modern Imperialism of the 
 Western nations, stimulating them to dis- 
 cover " spheres of legitimate aspiration," 
 " spheres of influence," " protectorates," 
 " colonies," " places in the sun," and forcing 
 their Governments into dangerous situa- 
 tions. The process cannot stop. But it 
 may be possible to extract from it the 
 poisonous sting of international rivalr3\ 
 Why should not these necessary economic 
 processes of expansion and development be 
 carried on l)y pacific international arrange-
 
 THE OPEN DOOR 129 
 
 ments ? The germs of such arrangements 
 are to be found in the Congo Conference of 
 Berhn in 1881-85, in which were repre- 
 sented England, Germany, Austro-Hungary, 
 Belgium, Denmark, Spain, the United 
 States, France, Italy, Holland, Portugal, 
 Russia, Sweden-Norway, Turkey. " This 
 Conference stipulated freedom of commerce, 
 interdiction of slave-trade, and neutraliza- 
 tion of the territories in the Congo district, 
 and secured freedom of navigation on the 
 Rivers Congo and Niger."* A somewhat 
 similar international agreement was made, 
 first in 1880 at the Madrid Convention, 
 afterwards in 1906 at the Alge(^'iras Con- 
 vention for the economic internationalization 
 of Morocco. Though in the earlier Conven- 
 tion only the nations immediately interested 
 were represented, the most notable outcome 
 was the extension to all nations of " the 
 most-favoured nation treatment," hitherto 
 confined to France and Britain. The treaty 
 was signed by all the Western European 
 
 '■ Oppenheim, " International Law," vol. ii., p. 71. 
 
 9
 
 130 THE NEW PROTECTIONISM 
 
 Powers and by the United States. Far 
 more explicit, however, were the provisions 
 for equaUty of economic opportunity fur- 
 nished by the Act of Algec^iras. It provided 
 not only for equality of trade, but for strict 
 impartiality in loans and investments ob- 
 tained from foreign countries. Still more 
 important, the advantage of international 
 over purely national control is shown in the 
 provisions made for protecting the legitimate 
 rights of the backward country which is the 
 object of economic penetration. 
 
 As to the public services and the construc- 
 tion of public works, the Act declared that 
 in no case should the rights of the " State 
 over the public services of the Sheereefian 
 Empire be alienated for the benefit of 
 private interests." If the Moorish Govern- 
 ment had recourse to foreign capital or 
 industries in connection with the public 
 services or public works, the Powers under- 
 took to see that " the control of the State 
 over such large undertakings of public in- 
 terest remain intact " ; tenders, " without
 
 THE OPEN DOOR 131 
 
 respect of nationality," should regulate all 
 orders for public works or the furnishing of 
 supplies ; no specification for orders should 
 contain either " explicitly or implicitly any 
 condition or provision of a nature to violate 
 the principle of free competition or to place 
 the competitors of one nationality at a dis- 
 advantage as against the competitors of 
 another"; "regulations as to contracts 
 should be dravi^n up by the Moorish 
 Government and the Diplomatic Body at 
 
 angler. " 
 
 This Agreement presents an excellent 
 model for the larger policy of the Open 
 Door, in defining the economic relations of 
 the Governments and peoples of advanced 
 towards backward countries. If all backward 
 countries, whether under the political control 
 of some European or other " advanced " 
 State or still politically independent, were 
 formally recognized by Conventions of 
 the civilized Powers as similarly open to 
 
 * "Ten Years of Secret Diplomacy," by E. D. Morel, 
 p. 31.
 
 13^ THE NEW PROTECTIONISM 
 
 the trading and investing members of all 
 countries on a basis of economic equality, 
 with adequate mutual guarantees for the 
 enforcement of the treaty obligations, the 
 greatest step towards lasting and universal 
 peace would have been taken. 
 
 It would need, however, to be supple- 
 mented and supported by other steps in 
 order to achieve the full policy of equality 
 of economic opportunity and to safeguard 
 the interests of the inhabitants of backward 
 areas thus brought within the area of 
 economic internationalism. The substance 
 of the Open Door policy may be stated in 
 the following four proposals, which, in order 
 to be effective, should be incorporated in a 
 general Treaty or Convention signed by all 
 the Powers : 
 
 1. Freedom of access for traders and goods 
 of all nations to trade routes by land, river, 
 canal, or sea, including the use of rail 
 terminals, ports and coaling-stations, police 
 protection and other facilities, upon terms of 
 equality. Countries like Servia or Poland 
 must not be at the mercy of possibly hostile
 
 THE OPEN DOOR 133 
 
 neighbours for commercial access to the out- 
 side world. The export of wheat from 
 Russia and Roumania must not be impeded 
 in the future, as often in the past, by the 
 closing of the Dardanelles. No Power must 
 hold the keys of the Mediterranean or the 
 Pacific. The Panama and Kiel Canals must 
 be placed on the same basis of free use as 
 the Suez Canal. No Power must reserve 
 the right to close trade-gates at any time to 
 traders of other nations. 
 
 2. Equal admission to markets and other 
 trading facilities to be accorded by all Powers 
 to foreign traders in all their dependencies. 
 
 This provision (an extension of the existing 
 British practice) would leave it open to the 
 Powers to retain tariff and other protection 
 for their home markets. It would simply 
 preclude them from extending the area of 
 Protection to colonies, protectorates, and 
 spheres of influence. Self-governing colonies, 
 already possessing and exercising full control 
 over their commercial and fiscal policy, 
 would also be excluded from this stipulation. 
 
 3. Equal opportunities for the investment 
 of capital in every form of business enter- 
 prise and for full legal protection of all 
 property for members of all nations in the 
 dependencies of other nations. 
 
 4. The establishment of International
 
 134 THE NEW PROTECTIONISM 
 
 Commissions to secure equality of treatment 
 for the commerce, investments and other 
 property interests, of the subjects of the 
 treaty Powers, in all backward or unde- 
 veloped countries not under the political 
 control of any Power. Such Commissions 
 might by concerted action exercise a re- 
 strictive control over the nature of the trade 
 with " lower races," precluding, for example, 
 the importation of arms or alcoholic liquors. 
 They might also exercise a supervising 
 authority over the loans and investments 
 made by financiers to the Governments or 
 private persons in these backward countries, 
 and over the methods of business exploita- 
 tion employed by the agents of the investing 
 companies. 
 
 Whether these Commissions should en- 
 deavour to interpret " equality of oppor- 
 tunity " by some process of apportioning 
 special spheres of interest and enterprise to 
 the members of tlie several Powers, or 
 whether they should encourage direct co- 
 operation in the work of investment and 
 development between business men of dif- 
 ferent nations, is a question into which I 
 need not enter here. But readers may be
 
 THE OPEN DOOR 135 
 
 reminded that control by International 
 Commission is no untried method of regu- 
 lating the diverse and conflicting interests 
 of States. Four International Commissions 
 have been instituted for dealing with ques- 
 tions of navigation, on the Danube, the 
 Congo, and the Suez Canal. Three Inter- 
 national Commissions have concerned them- 
 selves with questions of sanitation on the 
 Lower Danube, at Constantinople, and at 
 Alexandria. Three others are concerned 
 with the interest of foreign creditors in 
 Turkey, Egypt, and Greece, while a per- 
 manent Commission relating to sugar 
 bounties was set up in 1902 by the Brussels 
 Convention. 
 
 Why should not some such machinery by 
 Commission be extended and endowed with 
 adequate administrative powers, so as to 
 form the nucleus of an efficient international 
 Government regulating those economic re- 
 lations between the advanced and backward 
 peoples which are the most dangerous causes 
 of dispute between modern Governments ?
 
 136 THE NEAV PROTECTIONISM 
 
 Taken in conjunction with the other 
 appHcations of the Open Door, this direct 
 endeavour to give a positive construction to 
 the principle of equahty of opportunity 
 would seem to he the most feasible and 
 efficacious way of dealing with the gravest 
 practical problem of our time.* 
 
 This policy I present as the true alterna- 
 tive to the reactionary policy of economic 
 nationalism urged by our New Protec- 
 tionists in the name of defence. The true 
 defence, the only possible security against 
 future wars, is to extend and strengthen the 
 bonds of economic and human intercourse 
 between members of all nations, to remove 
 the causes of economic antagonism which 
 have hitherto bred dissension, and to substi- 
 tute conditions of fair competition and fruit- 
 ful co-operation. The issue is indeed a 
 grave one. Are ^ve to aim at breaking up 
 the economic world into self-contained 
 
 * A vigorous and well-informed advocacy of Inter- 
 national Commissions is contained in Mr, Lippmaim's 
 "The Stakes of Diplomacy" (Henry Holt and Co.).
 
 THE OPEN DOOR 137 
 
 nations, or groups of nations, not indifferent 
 but actively hostile to one another in all 
 parts of the earth, and incessantly engaged 
 in fighting one another by tariffs, boycotts, 
 Navigation Acts, and every weapon and 
 barrier they can command, reducing the 
 total productivity of the earth, increasing 
 the difficulties of transport and commerce, 
 and enforcing the application of an ever- 
 growing proportion of each nation's wealth 
 to war preparations which ever tend to fulfil 
 the fearful purpose for which they are de- 
 signed ? Or are we to trust to the salutary 
 effects of a Free Trade which has not yet 
 been adequately tried, and to tlie extension 
 of its principles to the new conditions of 
 international intercourse by the establish- 
 ment of public international control and 
 guarantees ? Place the risks and the diffi- 
 culties of this latter policy as high as you 
 choose, they fall immeasurably short of 
 those to which the former policy exposes 
 this nation and the world. The path of 
 safety, as of opulence, lies in the forward
 
 138 THE NEW PROTECTIONISM 
 
 movement towards economic international- 
 ism, not in a reversion towards a national 
 economy which for a country with our past 
 and present is impracticable, and, were it 
 practicable, would be none the less a be- 
 trayal of civilization for ourselves and for 
 humanity.
 
 APPENDICES
 
 APPENDIX A 
 
 RECOMMENDATIONS OF THE 
 
 ECONOMIC CONFERENCE OF THE 
 
 ALLIES HELD AT PARIS, 
 
 June 14, 15, 16, 17, 1916 
 
 I 
 
 The representatives of the Allied Govern- 
 ments have met at Paris under the presi- 
 dency of M. Clementel, Minister of Com- 
 merce, on June 14, 15, 16, and 17, 1916, for 
 the purpose of fulfilling the mandate given 
 to them by the Paris Conference of March 28, 
 1916, of giving practical expression to their 
 solidarity of views and interests, and of pro- 
 posing to their respective Governments the 
 appropriate measures for realizing this soli- 
 darity. 
 
 II 
 They declare tliat after forcing upon them 
 the military contest, in spite of all their 
 
 11. 1
 
 142 THE NEW PROTECTIONISM 
 
 eflbrts to avoid the conflict, the Empires of 
 Central Europe are to-day preparing, in 
 concert with their allies, for a contest on 
 the economic plane, which will not only 
 survive the re-establishment of peace, but 
 will at that moment attain its full scope and 
 intensity. 
 
 Ill 
 
 They cannot therefore conceal from them- 
 selves that the agreements which are being 
 prepared for this purpose between their 
 enemies have the obvious object of establish- 
 ing the domination of the latter over the 
 production and the markets of the whole 
 world, and of imposing on other countries 
 an intolerable yoke. 
 
 In face of so grave a peril, the repre- 
 sentatives of the Allied Governments con- 
 sider that it has become their duty, on 
 grounds of necessary and legitimate defence, 
 to adopt and realize from now onward all 
 the measures requisite, on the one hand, to 
 secure for themselves and for the whole of 
 the markets of neutral countries full economic
 
 APPENDIX A 143 
 
 independence and respect for sound com- 
 mercial practice ; and, on the other hand, to 
 facihtate the organization on a permanent 
 basis of their economic alhance. 
 
 For this purpose the representatives of 
 the A Hied Governments have decided to 
 submit for the approval of those Govern- 
 ments the following resolutions : 
 
 A 
 
 MEASURES FOR THE WAR PERIOD 
 
 I 
 
 The laws and regulations prohibiting 
 trading with the enemy shall be brought 
 into accord. 
 
 For this purpose — 
 
 A. — The Allies will prohibit their own 
 subjects and citizens and all per- 
 sons residing in their territories 
 from carrying on any trade with — 
 
 1 . The inhabitants of enemy countries 
 
 whatever their nationality. 
 
 2. Enemy subjects wherever resident,
 
 144 THE NEW PROTECTIONISM 
 
 3. Persons, firms, and companies, 
 whose business is controlled 
 wholly or partially by enemy 
 subjects, or is subject to enemy 
 influence and whose names are 
 included in a special list. 
 
 B. — They will prohibit the importation 
 into their territories of all goods 
 originating in or coming from 
 enemy countries. 
 
 C. — They will devise means of estab- 
 lishing a system enabling contracts 
 entered into with enemy subjects 
 and injurious to national interests 
 to be cancelled unconditionally. 
 
 II 
 
 Business undertakings owned or operated 
 by enemy subjects in the territories of the 
 Allies will all be sequestrated or placed 
 under control ; measures will be taken for 
 the purpose of winding up some of these 
 undertakings and of realizing their assets,
 
 APPENDIX A 145 
 
 the proceeds of such reahzation remaining 
 sequestrated or under control. 
 
 Ill 
 
 In addition to the export prohibitions 
 which are necessitated by the internal situa- 
 tion of each of the Allied countries, the Allies 
 will complete the measures already taken 
 for the restriction of enemy supplies, both 
 in the mother-countries and in the Domi- 
 nions, Colonies, and Protectorates — 
 
 1. By unifying the lists of contraband 
 
 and of export prohibition, and 
 particularly by prohibiting the 
 export of all commodities de- 
 clared absolute or conditional 
 contraband ; 
 
 2. By making the grant of licences for 
 
 export to neutral countries from 
 which export to enemy teni- 
 tories might take place coiidi 
 tional upon the existence in such 
 countries of control organiza- 
 
 10
 
 146 THE NEW PROTECTIONISM 
 
 tions approved by the Allies ; or, 
 in the absence of such organiza- 
 tions, upon special guarantees 
 such as the limitation of the 
 quantities exported, supervision 
 by Allied consular officers, etc. 
 
 B 
 
 TRANSITORY MEASURES FOR THE 
 
 PERIOD OF COMMERCIAL, INDUSTRIAL, 
 
 AGRICULTURAL, AND MARITIME 
 
 RECONSTRUCTION OF THE 
 
 ALLIED COUNTRIES 
 
 I 
 
 The Allies declare their common determi- 
 nation to insure the re-establishment of the 
 countries suffering from acts of destruction, 
 spoliation and unjust requisition, and decide 
 to join in devising means to secure the 
 restoration to those countries, as a prior 
 claim, of their raw materials, industrial and 
 agricultural plant, stock and mercantile fleet, 
 or to assist them to re-equip themselves in 
 these respects.
 
 APPENDIX A 147 
 
 II 
 
 AVhereas the war has put an end to all 
 the treaties of commerce between the Allies 
 and the Enemy Powers, and whereas it is of 
 essential importance that, during the period 
 of economic reconstruction which will follow 
 the cessation of hostilities, the liberty of 
 none of the Allies should be hampered by 
 any claim put forward by the Enemy 
 Powers to most-favoured-nation treatment, 
 the Allies agree that the benefit of this 
 treatment shall not be granted to those 
 Powers during a number of years to be fixed 
 by mutual agreement among themselves. 
 
 During this number of years the Allies 
 undertake to assure to each other so far as 
 possible compensatory outlets for trade in 
 case consequences detrimental to their com- 
 merce result from the application of the 
 undertaking referred to in the preceding 
 
 paragraph. 
 
 Ill 
 
 The Allies declare themselves agreed to 
 conserve for the Allied countries, before all
 
 148 THE NEW PROTECTIONISM 
 
 others, their natural resources during the 
 whole period of commercial, industrial, 
 agricultural, and maritime reconstruction, 
 and for this purpose they undertake to 
 establish special arrangements to facilitate 
 the interchange of these resources, 
 
 IV 
 
 In order to defend their commerce, their 
 industry, their agriculture, and their naviga- 
 tion, against economic aggression resulting 
 from dumping or any other mode of unfair 
 competition, the Allies decide to fix by 
 agreement a period of time during which 
 the commerce of the Enemy Powers shall 
 be submitted to special treatment, and the 
 goods originating in their countries shall be 
 subjected either to prohibitions or to a 
 special regime of an effective character. 
 
 The Allies will determine by agreement 
 through diplomatic channels the special 
 conditions to be imposed during the above- 
 mentioned period on the ships of the Enemy 
 Powers.
 
 APPENDIX A 149 
 
 V 
 
 The Allies will devise the measures to be 
 taken jointly or severally for preventing 
 enemy subjects from exercising, in their 
 territories, certain industries or professions 
 which concern national defence or economic 
 independence. 
 
 PERMANENT MEASURES OF MUTUAL 
 ASSISTANCE AND COLLABORATION 
 AMONG THE ALLIES 
 
 I 
 
 The Allies decide to take the necessary 
 steps without delay to render themselves 
 independent of the enemy countries in so 
 far as regards the raw materials and manu- 
 factured articles essential to the normal 
 development of their economic activities. 
 
 These steps should be directed to assuring 
 the independence of the Allies not only so 
 far as concerns their sources of supply, but 
 also as regards their financial, commercial, 
 and maritime organization.
 
 150 THE NEW PROTECTIONISM 
 
 The Allies will adopt the methods which 
 seem to them most suitable for the carrying 
 out of this resolution, according to the nature 
 of the commodities and having regard to 
 the principles which govern their economic 
 policy. 
 
 They may, for example, have recourse 
 either to enterprises subsidized, directed, or 
 controlled, by the Governments themselves, 
 or to the orrant of financial assistance for the 
 encouragement of scientific and technical 
 research and the development of national 
 industries and resources ; to Customs duties 
 or prohibitions of a temporary or permanent 
 character ; or to a combination of these 
 different methods. 
 
 Whatever may be the methods adopted, 
 the object aimed at by the Allies is to 
 increase production within their territories 
 as a whole to a sufficient extent to enable 
 them to maintain and develop their economic 
 position and independence in relation to 
 enemy countries.
 
 APPENDIX A 151 
 
 II 
 In order to permit the interchange of 
 their products, the AUies undertake to 
 adopt measures for facihtating their mutual 
 trade relations both by the establishment 
 of direct and rapid land and sea transport 
 services at low rates, and by the extension 
 and improvement of postal, telegraphic, and 
 otlier communications. 
 
 Ill 
 
 The Allies undertake to convene a 
 meeting of technical delegates to draw up 
 measures for the assimilation, so far as may 
 be possible, of their laws governing patents, 
 indications of origin, and trade-marks. 
 
 In regard to patents, trade-marks, and 
 literary and artistic copyright, which have 
 come into existence during the war in 
 enemy countries, the Allies will adopt, so 
 far as possible, an identical procedure, to be 
 applied as soon as hostilities cease. 
 
 This procedure will be elaborated by tlie 
 technical delegates of the Allies.
 
 152 THE NEW PROTECTIONISM 
 
 D 
 
 Whereas for the purposes of their common 
 defence against the enemy the Alhed Powers 
 have agreed to adopt a common economic 
 pohcy, on the Hnes laid down in the Resolu- 
 tions which have been passed, and whereas 
 it is recognized that the effectiveness of this 
 policy depends absolutely upon these Resolu- 
 tions being put into operation forthwith, the 
 representatives of the Allied Governments 
 undertake to recommend their respective 
 Governments to take without delay all the 
 measures, whether temporary or permanent, 
 requisite for giving full and complete effect 
 to this policy forthwith, and to communicate 
 to each other the decisions arrived at to attain 
 that object. 
 
 Board of Trade, 
 
 June 21, 1916.
 
 APPENDIX B 
 
 SUGGESTED TARIFF ADOPTED 
 
 BY THE COUNCIL OF THE LONDON 
 
 CHAMBER OF COMMERCE, 
 
 May 25, 1916 
 
 llATIi:S OF DUTIES UNDER TENTATIVE TARIFF 
 
 (a) AVholly mauufac- 
 
 Enemy 
 Countries. 
 
 Neutrals. 
 
 Allies. 
 
 British 
 
 Empire 
 
 Countries. 
 
 30% 
 
 20% 
 
 105^ 
 
 *10% 
 
 tured jjoods 
 
 ad vaL 
 
 ad val. 
 
 ad val. 
 
 ad val. 
 
 (h) Sem i- manufac- 
 
 15% 
 
 10% 
 
 5% 
 
 *5% 
 
 tured goods aud 
 
 ad val. 
 
 ad val. 
 
 ad val. 
 
 ad val. 
 
 articles used 
 
 
 
 
 
 solely as raw 
 
 
 
 
 
 materials 
 
 
 
 
 
 (c) Foodstuffs, maiiu- 
 
 n% 
 
 5% 
 
 21% 
 
 *2^% 
 
 foctured 
 
 ad val. 
 
 ad val. 
 
 ad val. 
 
 ad val. 
 
 (d) Foodstuffs, raw - 
 
 5% 
 
 2i% 
 
 Free 
 
 Free 
 
 (e) Raw materials 
 
 Free 
 
 Free 
 
 Free 
 
 Free 
 
 (f) A\^ines, spirits, 
 
 War 
 
 A\ar 
 
 AVar 
 
 War 
 
 beer, tobacco, 
 
 rates 
 
 rates 
 
 rates 
 
 rates 
 
 and other ar- 
 
 plus 
 
 
 
 
 ticles now sub- 
 
 •50% 
 
 
 
 
 ject to duty 
 
 
 
 
 
 * Subject to any rebate eciuivalent to preference accorded 
 goods from the United Kingdom. 
 
 Note. — Should any neutral country accord a tariff ])refer- 
 ence to any other country, a surtax equivalent to the prefer- 
 ence to 1)0 imposed on goods imported into the United 
 Kingdom. 
 
 153
 
 PRINTKD BY 
 
 BILLING AND SONS, LIMITED, 
 
 GUILDFORD, ENGLAND.
 
 National Power and Prosperity. BycONRAD 
 
 GILL, M.A. With an Introduclion by rKOFESsoR 
 GEORGE UNVVIN. Cloth, 4s. 6d. net. 
 
 The study of economic history provides many facts and principles of 
 the greatest value to all who are trying to unravel the causes of the present 
 crisis. It shows, for example, how largely the policy of German states- 
 men has been guided by a mistaken view of the growth of English trade ; 
 how they have deliberately tried to copy the policy which they believed to 
 have produced the commercial greatness of England. It shows, too, how 
 far the same policy of " Mercantilism," which was in force all over Europe 
 in the seventeenth and eighteenth centuries, has determined international 
 relations down to the present time, and how far it has helped to produce 
 the great wars of the last three hundred years. This essay on " National 
 Power and Prosperity " describes the Mercantile System both in theory 
 and in practice, and shows its good features and its many defects. The 
 book bears closely on vital questions of the day, especially in the chapters 
 on the survivals of Mercantilism in Germany and elsewhere ; the economic 
 and non-economic causes of warfare; the political power of the State and 
 the welfare of Society ; and the final chapter, which attempts a cautious 
 prophecy. 
 
 European International Relations. By j. a. 
 
 MURRAY MACDONALD, M.F. Cloth, 2s. 6d. nut. 
 
 The idea of national freedom and independence, which has recently pre- 
 vailed in Europe, assumes that each State has, or has a right to have, 
 within itself all the requirements, moral and material, of a complete and 
 self-sufficing life. To consent to be dependent for any of these require- 
 ments on its neighbours would be to consent to derogate, to the extent of 
 the dependence, from its own unrestricted freedom of action, and to 
 deny the absoluteness of its own sovereignty. 
 
 If this idea is accepted, there never can be any real community of in- 
 terest between nations, nor any permanent peace. So long as two or 
 more sovereign States exist there will be a struggle for supremacy between 
 them, till at last one all-powerful State will subdue to itself all the other 
 States of Europe, and ultimately also of the world. This is one of the main 
 questions studied in Mr. Macdoiiald's important work, 
 
 T. FISHER UNWIN, Ltd., i, ADELPHI TERRACE, LONDON.
 
 The State as Manufacturer and Trader : 
 
 A CRITICISM BASED ON ECONOMIC, INDUSTRIAL 
 AND FISCAL RESULTS FROM GOVERNMENT 
 TOBACCO MONOPOLIES. By A. W. MADSEN, 
 B.Sc. (Edin.). Cloth, 7s. 6d. net. 
 
 Mr. Madsen takes as outstanding- examples of State industry the 
 Government Tobacco Monopolies in France, Italy, Austria, Japan, Spain, 
 and Sweden, and analyzes the business management, the finances, and all 
 the operations of these nationalized concerns. Manufacturing and book- 
 keeping-methods; the relations of the State with employes, retailers and 
 consumers; the quality and assortment of goods sold — all come under 
 searching examination. In particular, the shortcomings of the Monopolies 
 both as commercial departments and as engines of taxation are clearly 
 demonstrated. Comprehensive statistics complete the author's instruc- 
 tive, though damaging, investigation into this branch of Government 
 activity in manufacture and trade. 
 
 Instincts of the Herd in Peace and War. 
 
 By W. TROTTER. Cloth, 3s. 6d. net. 
 
 This book is essentially concerned with the exposition of two ideas : first, 
 that the science of psychology can without any sacrifice of scientific 
 method be made use of for guidance in the actual conduct of practical 
 affairs; and, secondly, that any real understanding of man's behaviour 
 must depend upon a knowledge of the relation his mind bears to those of 
 the lower animals, and especially of such of them as resemble him in 
 conduct. 
 
 The principal generalizations which are relied upon in the interpretation 
 of the confused problems of human affairs were evolved in times of peace, 
 and are, therefore, not exposed to the suspicions which must attach to 
 ideas conceived in the intemperate air of war. Nevertheless, the circum- 
 stances of warfare provide an almost inexhaustible store of material from 
 which specimens of human behaviour can be drawn. 
 
 A hypothesis of German personality and social constitution is put 
 forward which attempts to explain their characteristics, to afford hints for 
 the guidance of military policy, and a rational theory of the objects of the 
 war and the unappeasable hostility of which it is the expression. 
 
 T. FISHER UNWIN. Ltd., i, ADELPHI TERRACE, LONDON.
 
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