LANDMARK: 
 
 > 
 
 HISTC 
 

LANDMARKS OF 
 
 BRITISH 
 FISCAL HISTORY 
 
 BY 
 
 J. SAXON MILLS 
 
 M.A. (Camb.) 
 
 HARRISTER-AT-LAW, INNER TEMPLE 
 
 
 
 LONDON 
 ADAM AND CHARLES BLACK 
 
 1907 
 

 
 - 
 
TO 
 
 G. S. M. 
 
 GRATLE GRATIAS 
 
 1G 7 9 
 
PREFACE 
 
 This little book may perhaps help to dispel a 
 certain amount of ignorance and misconception 
 which seems to prevail as to the relation of the 
 preferential policy to our past fiscal history. 
 The information on this subject is, indeed, so 
 widely dispersed as to be almost inaccessible to 
 the general reader. I have, of course, dealt 
 only with broad facts and tendencies, but these 
 brief chapters may serve as an introduction to 
 further and more detailed study. In all cases 
 I have gone to the source for my authority, on 
 the principle that it is better peterc fontes 
 quam rivulos sectari. My sincere thanks are 
 due to the Manager of The Times for per- 
 mission to use certain material in articles 
 which I contributed to that journal, and also 
 
 VII 
 
viii PREFACE 
 
 to the Comptroller of His Majesty's Stationery 
 Office for allowing me to reproduce extracts 
 from the Return relating to Colonial Import 
 Duties, 1906, and the Statistical Abstract of 
 
 1905. 
 
 J. S. M. 
 
 Manchester, April 1907. 
 
CONTENTS 
 
 CHAPTER I 
 
 PAGE 
 
 THE OLD COLONIAL SYSTEM ..... I 
 
 CHAPTER II 
 
 FREER TRADE AND " LAISSER FAIRE " . '3° 
 
 CHAPTER III 
 
 THE NEW IMPERIALISM . . . . . -57 
 
 APPENDIX . . . . . . . .Ill 
 
 INDEX . . . . . . . . .122 
 
 IX 
 
LANDMARKS OF 
 BRITISH FISCAL HISTORY 
 
 CHAPTER I 
 
 THE OLD COLONIAL SYSTEM 
 
 In the year 1614 a certain member of Parlia- 
 ment, named Richard Martin, made a strange 
 remark in the House of Commons. He said 
 that the fortunes of the infant colony of 
 Virginia were of more importance to England 
 than the " trifles " which usually engaged the 
 attention of the honourable House. As 
 among these " trifles ' were included the 
 affairs of the Palatinate and the marriage of the 
 Prince of Wales, such a remark could not be 
 allowed to pass unheeded, and the honourable 
 member was solemnly rebuked by the speaker. 
 We can now see that Mr Martin must have 
 
 been one of the wisest gentlemen in the House 
 
 1 
 
2 BRITISH FISCAL HISTORY 
 
 at that time, because he had a perception of 
 the comparative importance of things and of 
 the sources of England's future greatness and 
 prosperity. It is often good for a nation, and 
 it is especially good for Englishmen to-day, to 
 go back to the beginnings of their political 
 and material power and to get to know what 
 are the permanent foundations on which it is 
 based. Henry the Eighth was perhaps the 
 first English statesman who grasped the fact 
 that England must seek her fortunes on and 
 beyond the seas. This country had then lost 
 its great continental possessions and had given 
 up for ever the hope of territorial expansion in 
 Europe. The royal house of England was 
 home-born and home-bred, and had no blood 
 relationships with foreign dynasties. England 
 had just cut herself off from dependence upon 
 the Papacy, so that all influences tended to 
 separate her from the European system. 
 Henry saw clearly that the defence of these 
 islands must be rather naval than military, 
 and so he set himself to the foundation of 
 the British Navy. I need not describe the 
 achievements of navigation and discovery 
 which began with the voyage of Columbus to 
 
THE OLD COLONIAL SYSTEM 3 
 
 America at the end of the fifteenth century. 
 Many efforts were made during the reign of 
 Elizabeth to plant English settlers along the 
 eastern seaboard of the new continent. By 
 the year 1610, however, the earliest British 
 colony of Virginia was well established, and 
 England had laid the first stone of what was 
 to be the greatest Imperial edifice which the 
 world has ever seen. 
 
 But it is especially important for us to grasp 
 the motives and objects which led her to 
 seek her fortunes so far from her own shores. 
 Of course one of the most powerful impulses 
 was the simple love of adventure and excite- 
 ment, the " sea-fever ' which, as a race, we 
 have inherited from our Norse ancestry, and 
 from which most of us suffer in an acute form 
 in our early years. But we find that even at 
 the beginning of our Imperial career there 
 was a philosophy or reasoned policy of colonis- 
 ation and maritime enterprise. In 1575 Sir 
 Humphrey Gilbert, an Elizabethan gentleman 
 of the best type, published A Discourse to 
 prove a Passage by the North- West to Cathaia 
 and the East Indies. He carefully enumer- 
 ated the advantages likely to arise from such 
 
4 BRITISH FISCAL HISTORY 
 
 a project. The regions to be discovered 
 would provide a market especially for English 
 cloth and thus make our weavers less de- 
 pendent on " France, Spain, Flanders, Portu- 
 gal, Hamborough, Emden, or any other part 
 of Europe." Such an over-sea trade would 
 give a great stimulus to shipbuilding and 
 develop our naval power for the purposes of 
 defence. The requirements of these new and 
 strange countries might create fresh industries 
 at home. So there would be more employ- 
 ment "for vagabonds and suchlike idle 
 persons." "Also," he writes, "we might 
 inhabit part of these countries and settle there 
 such needy people of our country which now 
 trouble the commonwealth and through want 
 here at home are forced to commit outrageous 
 offences, whereby they are daily consumed 
 with the gallows." 
 
 We are so accustomed to the existence of 
 a Greater Britain peopled by men of our own 
 race and tradition that we can scarcely imagine 
 a time when the suggestion of planting British 
 communities over the sea seemed strange and 
 original. Two of Gilbert's contemporaries, 
 Peckham and Hayes, published treatises on 
 
THE OLD COLONIAL SYSTEM 5 
 
 colonisation about the same time. These 
 writers were thinking rather of Newfoundland 
 and the American coast than of Cathay and 
 the East Indies. But they dwell upon the 
 same advantages. The Navy would be 
 strengthened by an increasing ocean-trade 
 and by a more abundant supply of shipbuild- 
 ing material, and a useful outlet would be 
 provided for younger sons and ne'er-do-wells 
 at home. Hayes is greatly interested also in 
 missionary enterprise, "it seeming probable 
 that the countries lying north of Florida, God 
 hath reserved to be reduced unto Christian 
 civilisation by the English nation." He 
 strongly comments upon "the fault and 
 foolish sloth in many of our nation rather 
 to live indirectly and very miserably to live 
 and die within this realm pestered with in- 
 habitants than to adventure as becometh men 
 to obtain an habitation in those remote lands 
 in which Nature very prodigally doth minister 
 unto men's endeavours." 
 
 But the most important point to notice in 
 these discourses is that Englishmen were 
 beginning to recognise that the national power 
 and prosperity in the future must rest upon 
 
6 BRITISH FISCAL HISTORY 
 
 three main pillars — Ships, Trade, and Colonies. 
 We have the beginnings of a science of real 
 political economy, in which politics and 
 economics are not divorced but go hand in 
 hand, working out the progressive destinies 
 of the nation. We shall see in a moment 
 how these three main sources of our power 
 and wealth — ships, trade, and colonies — were 
 jointly developed by a deliberate State-policy. 
 When root was once struck the American 
 plantations rapidly grew and prospered. I 
 need not follow the steps in that progress — 
 the Virginia Company, the landing of the 
 Pilgrim Fathers (1620), the foundation of 
 Maryland (1632), the Massachusetts Company, 
 and so forth. The result was that by the 
 time of the Commonwealth England possessed 
 an extensive colonial Empire, if we may so 
 describe it, along the shores of America and 
 in the West Indies. Already a thriving trade 
 had sprung up between the plantations and 
 the home country. Of the three factors in 
 British sea-power, two were fairly secured — 
 trade and colonies. In the third, however — 
 that is in mercantile shipping — the Dutch were 
 easily supreme. They were getting the lion's 
 
THE OLD COLONIAL SYSTEM 7 
 
 share in the shipping advantage of the British 
 plantations. British merchandise, as nearly 
 all other sea-borne merchandise of that day, 
 was carried in Dutch vessels. The Dutch 
 were the carriers of the world. Theirs was 
 almost entirely an intermediary trade. The 
 products and manufactures of their own 
 country were inconsiderable. They were the 
 general forwarding agents. They imported 
 goods which they did not consume and they 
 exported goods which they did not produce. 
 Such a trade had no secure basis, and we shall 
 see how England, who had the industries and 
 the colonies, destroyed it almost at one blow. 
 But at the middle of the seventeenth century, 
 the Dutch had an undisputed command of the 
 sea. The Dutch flag lorded it in every haven 
 from the Arctic regions to the East Indies, 
 along the entire coast of Europe and the sea- 
 board of North America. Admiral Ayscue, 
 a great Commonwealth sailor, tells us how 
 impressed he was at Barbadoes with the 
 spectacle of Dutch ships loading themselves 
 with the produce of a British possession. If 
 an English gentleman, we are told, wished to 
 send his trunks to France, he was compelled 
 
8 BRITISH FISCAL HISTORY 
 
 to ship them in a Dutch vessel to Rotterdam 
 that they might be conveyed thence, also in a 
 Dutch vessel, to Calais or Rouen. The entire 
 mercantile fleet of Europe in those days 
 numbered about twenty thousand vessels, 
 and of these fifteen or sixteen thousand were 
 Dutch. The Rhine brought to the wharves of 
 Amsterdam the vast grain harvests of Central 
 and Northern Europe, and made that city the 
 distributing centre of the European corn- 
 supply. The trade of the North Sea and the 
 Baltic had fallen to the Netherlands in suc- 
 cession to the towns of Hamburg and Bremen. 
 The Dutch fishing fleet numbered six thousand 
 vessels and employed a hundred and twelve 
 thousand seamen. Dutch ships brought 
 to Europe the merchandise, not only of the 
 Dutch, but of the Spanish, Portuguese, French, 
 and British possessions of the East and West 
 Indies and of North and South America. 
 
 It might well have seemed a hopeless task 
 to reduce such an established supremacy. But 
 Cromwell, who may be regarded as the founder 
 of our naval and industrial hegemony, set his 
 hand to the work with determined and even 
 ruthless energy. England had colonised 
 
THE OLD COLONIAL SYSTEM 9 
 
 America and the West Indies, and she had a 
 right to the full advantage of that enterprise. 
 For the security of her plantations and of her 
 ocean-trade, as well as for the maintenance of 
 her political power, the command of the seas 
 was indispensable to her. Hence, as soon as 
 Cromwell had established his power on the 
 field of Worcester, the first Navigation Act, 
 which has well been called England's " Mari- 
 time Charter," was introduced into Parliament 
 (5th August 1651). This Act was, of course, 
 only regicide legislation, so that it will not be 
 found among the Statutes of the Realm. But 
 we may turn for its exact terms to the records 
 of old Scobell, Clerk of the Commonwealth 
 Parliament. We read that on 9th October 1 651, 
 " an Act for the increase of the shipping and 
 encouragement of the navigation of this nation 
 was this day read the third time." As there 
 was no House of Lords at that time, the Bill 
 became law and was proclaimed without delay. 
 We must now look at the provisions of this 
 very uncompromising measure. Here are a 
 few brief quotations : — 
 
 " Be it enacted by this present Parliament 
 and the authority thereof that from and 
 
10 BRITISH FISCAL HISTORY 
 
 after the first day of December 1651 and 
 from thenceforwards no goods or com- 
 modities whatever of the growth, pro- 
 duction, or manufacture of Asia, Africa, or 
 America or of any part thereof .... shall 
 be imported or brought into this Common- 
 wealth of England or into Ireland or any 
 other land .... to the Commonwealth 
 belonging or in their possession, in any 
 other ship or ships, but only in such as do 
 truly and without fraud belong only to 
 the people of this Commonwealth or the 
 plantations thereof .... and whereof the 
 Master or Mariners are also for the most 
 part of them of the people of this Common- 
 wealth. 
 
 " And it is further enacted that no goods 
 or commodities of the growth, production, 
 or manufacture of Europe or of any part 
 thereof shall after the first day of December 
 1651 be imported into this Commonwealth 
 or into Ireland or any other land .... 
 belonging to this Commonwealth or in 
 their possession, in any ships .... but in 
 such as do belong only to the people of 
 this Commonwealth .... and in no other 
 
THE OLD COLONIAL SYSTEM 11 
 
 except" — here follows the chief sting of 
 
 the enactment for the Dutch — " only such 
 
 foreign ships or vessels as belong to the 
 
 people of that country or place of which the 
 
 said goods are the growth, production, or 
 
 manufacture, or to such ports where the 
 
 said goods can only be or most usually are 
 
 first shipped for transportation." 
 
 These provisions are sufficient to show the 
 
 intention of the measure. It must have put 
 
 the shutters up at once on many important 
 
 departments of the Dutch trade. It will be 
 
 noticed that Dutch vessels might still carry 
 
 to Europe the produce of the English West 
 
 Indies, but they would have to sail thither in 
 
 ballast, for the butter and cheese which were 
 
 the chief product of the Netherlands were 
 
 impossible as cargo for a long voyage to 
 
 tropical countries. It is not surprising to 
 
 find that three broad-breeched burghers, Cats, 
 
 Schaaf, and Van de Perre, landed at Gravesend 
 
 (15th December 1651) to protest against the 
 
 measure, only, however, to be informed that it 
 
 was irrevocable. 
 
 After the blessed Restoration Cromwell's 
 measure was re-enacted and extended by a 
 
12 BRITISH FISCAL HISTORY 
 
 second Navigation Act. This statute marks 
 the beginning of what is known as the 
 " Mercantile ' or old colonial system, which 
 for nearly two centuries determined the re- 
 lations between England and her colonies. 
 The Navigation Act of 1660 provided that 
 
 " No sugars, tobacco, cotton-wool, in- 
 dicoes, ginger, fustick, or other dyeing wood 
 of the growth, production, or manufacture 
 of any English plantation in America, Asia, 
 or Africa shall be shipped .... from any 
 of the said English plantations to any land 
 whatsoever other than to such other 
 English plantations as do belong to His 
 Majesty or to the kingdom of England or 
 Ireland, Wales or Berwick-upon-Tweed, 
 there to be laid on shore." 
 The object of this provision was, of course, 
 to make England the selling-market for the 
 produce of the plantations. Three years later 
 another Act (15 Car. II. c. 7) provided that 
 " No commodity of the growth, produc- 
 tion, or manufacture of Europe shall be 
 imported into any lands to His Majesty 
 belonging but what shall be bona fide and 
 without fraud laden or shipped in England." 
 
THE OLD COLONIAL SYSTEM 13 
 
 The object of this provision was to secure 
 the rapidly growing custom of the colonies 
 to the English producer and manufacturer. 
 Changes in detail were made in these regula- 
 sions from time to time. For instance, rice 
 and molasses were added in the reign of Anne 
 to the articles above " enumerated," and naval 
 stores of all kinds under George the Second. 
 But the provisions I have quoted embodied 
 the main principles of the old colonial system. 
 Much has been said about the injustice of 
 that system. Its main object, no doubt, was 
 to secure for the home countries all the 
 advantages, commercial and political, that 
 could be derived from the colonies which 
 England had planted. Nor can it be denied 
 that it inflicted upon the colonists many 
 vexatious restrictions and even some actual 
 injustice. But it would be a mistake to 
 suppose that the system was simply one-sided 
 and oppressive. If England insisted upon 
 having a monopoly for her manufactures in 
 the colonial market, she also ensured to the 
 colonies, by impregnable tariffs against the 
 foreigner, a monopoly for their staples in the 
 home country. It was understood by our 
 
14 BRITISH FISCAL HISTORY 
 
 ancestors of the seventeenth and eighteenth 
 centuries that the ideal of exchange for this 
 country was that of finished manufactures for 
 raw materials and food products. That ideal 
 was no doubt too rigidly enforced. Mercantile 
 economists were horrified at the spectacle of 
 furnace and factory springing up in New 
 England. Oppressive and even absurd legis- 
 lation was passed to prevent these industrial 
 developments in the colonies. A curious Act 
 was passed in the fifth year of George II. 
 (5 Geo. II. c. 22), the object of which was to 
 suppress the manufacture of hats. It provided 
 "that no hats or felts whatsoever shall be 
 shipped on board any ship or vessel in any 
 British plantations and also that no hats shall 
 be loaded upon any horse, cart, or any other 
 carriage to the intent to be exported to any 
 other British possession." The Act goes onto 
 provide that no colonist should be a hat-maker 
 unless he had served seven years' apprenticeship 
 and employed two apprentices, and that no 
 one should teach the industry to negroes. It 
 is unlikely that this absurd measure had the 
 effect of making the New England hatters 
 any madder than usual, for such regulations 
 
UNIVERSITY | 
 
 j 
 
 THE OLD COLONIAL SYSTEM 15 
 
 seem to have been evaded with the utmost 
 ease. 
 
 The literature of the period is full of 
 discussions on the question of commercial 
 exchange between England and her colonies. 
 From the point of view of England, at any 
 rate, the exchange of manufactured goods for 
 colonial staples was a sound principle. In 
 1721 Robert Walpole inserted in the King's 
 Speech the following paragraph : — 
 
 "We should be extremely wanting to 
 
 ourselves if we neglected to improve the 
 
 favourable opportunity given of extending 
 
 our commerce, upon which the riches and 
 
 grandeur of this nation chiefly depend. It 
 
 is very obvious that nothing would more 
 
 conduce to the obtaining so public a good, 
 
 than to make the exportation of our own 
 
 manufactures, and the importation of the 
 
 commodities used in the manufacturing 
 
 of them, as practicable and as easy as 
 
 may be." 
 
 In the interests of the plantations Walpole 
 
 considerably relaxed the restrictions to which 
 
 they were then subject. The same principle 
 
 of exchange is clearly laid down in a treatise 
 
16 BRITISH FISCAL HISTORY 
 
 written by Sir Thomas Pownall in 1765. The 
 passage affords a good idea of the political 
 economy of this era and is almost as true now 
 as then. 
 
 " The view of trade in general, as well of 
 manufactures in particular, terminates in 
 securing an extensive and permanent vent ; 
 or, to speak more precisely (in the same 
 manner as shopkeeping does), in having 
 many and good customers ; the wisdom 
 therefore of a trading nation is to gain and 
 create as many as possible. Those whom 
 we gain in foreign trade we possess under 
 restrictions and difficulties, and may lose 
 in the rivalship of commerce ; those that 
 a trading nation can create within itself it 
 deals with under its own regulations and 
 makes its own and cannot lose. In the 
 establishing colonies, a nation creates 
 people whose labour, being applied to new 
 objects of produce and manufacture, opens 
 new channels of commerce by which they 
 not only live in ease and affluence them- 
 selves, but while they are labouring under 
 and for the mother-country (for there all 
 their external profits centre) become an 
 
THE OLD COLONIAL SYSTEM 17 
 
 increasing nation of appropriated and good 
 customers to the mot her- country." 
 It is interesting to find that the policy of 
 the Navigation Act was opposed in the middle 
 of the seventeenth century by arguments 
 which are very familiar to us to-day. It was 
 complained that the Acts tended, as they 
 probably did at first, to a rise in prices. 
 These early Free Traders insisted "that our 
 native commodities and manufactures should 
 be taken from us at the best rate, and foreign 
 commodities sold us at the cheapest, with 
 admission to Dutch merchants and shipping 
 in common with the English." To these 
 arguments we find Sir Josiah Child replying 
 in 1668, in words which recall Adam Smith's 
 declaration that " defence " is more important 
 than " opulence." Sir Josiah writes : — 
 
 " My answer is that I cannot deny that 
 this may be true, if the present profit of 
 the generality be barely and singly con- 
 sidered ; but this kingdom being an island, 
 the defence whereof hath always been 
 our shipping and seamen, it seems to be 
 absolutely necessary that profit and power 
 
 ought jointly to be considered, and, if so, 
 
 2 
 
18 BRITISH FISCAL' HISTORY 
 
 I think none can deny that the Act of 
 
 Navigation hath and doth occasion building 
 
 and employing of three times the number 
 
 of ships and seamen that otherwise we 
 
 should or would do, and that consequently 
 
 if our force at sea were so greatly impaired 
 
 it would expose us to the receiving of all 
 
 kinds of injuries and affronts from our 
 
 neighbours, and in conclusion render us 
 
 a despicable and miserable people." 
 
 Elsewhere Child remarks that, were it not 
 
 for the Navigation Act, " we should see forty 
 
 Dutch ships at our own plantations for one of 
 
 England." 
 
 Throughout the Dutch literature in the 
 seventeenth and eighteenth centuries, the de- 
 cline of Dutch sea-power is invariably ascribed 
 to the English navigation laws. 
 
 It is well for this country that the ideas of 
 the mercantile economists prevailed. Watch- 
 ful state supervision, which was the essence of 
 the old colonial system, swiftly and surely 
 established our supremacy on the seas, and it 
 laid the foundations of our industrial supre- 
 macy so well and truly that by the middle of 
 last century it seemed possible to dispense 
 
THE OLD COLONIAL SYSTEM 19 
 
 altogether with artifieial restrictions and 
 supports. Even the utility of colonies which 
 had been so fully grasped during the mercantile 
 era was disputed and denied by the Manchester 
 school. It is sufficient here to say that the 
 mercantile system succeeded in its objects. 
 It established our naval and industrial leader- 
 ship, and it heightened the consciousness of 
 nationhood in the people of these islands by 
 giving them a common state policy. The 
 German economist Schmoller tells us that 
 "the essence of the system lies not in some 
 doctrine of money or of the balance of trade ; 
 not in tariff barriers, protection duties or 
 navigation laws ; but in something far greater — 
 namely, in the total transformation of society 
 and its organisation, as well as of the state 
 and its institutions, in the replacing of a local 
 and territorial economic policy by that of the 
 national state." " In its innermost kernel," he 
 repeats, " the mercantile system is nothing but 
 state-making, which creates out of the political 
 community an economic community and so 
 gives it a heightened meaning." 
 
 But if the home country throve under the 
 mercantile system, the progress of the colonies 
 
20 BRITISH FISCAL HISTORY 
 
 surpassed anything the world had ever seen. 
 Their population doubled in twenty-five years. 
 At the time of the War of Independence it 
 numbered three millions, while that of the 
 United Kingdom was still only eight. The 
 industries of the plantations were incessantly 
 refreshed by the capital of the home country. 
 It was estimated that the value of English 
 shipping employed in exporting colonial 
 tobacco alone amounted to £240,000. And 
 these English plantations were not only the 
 most progressive, but the most free and demo- 
 cratic states in the world. It is a mistake to 
 suppose that the old economic system supplied 
 the grievances which made the colonies revolt. 
 It was Parliamentary taxation for revenue and 
 not trade restrictions or tariffs for commercial 
 regulation that led to the secession of the 
 thirteen provinces. This could be proved by 
 quite a cloud of witnesses. No one surely 
 will question the explicit statement contained 
 in the Declaration of Rights drawn up by the 
 Philadelphian Congress just before the re- 
 bellion. The Declaration asserts the exclusive 
 right of the provinces in all matters of taxation 
 and internal administration, but it makes an 
 
THE OLD COLONIAL SYSTEM 21 
 
 exception of commercial arrangements. Here 
 are the words : — 
 
 " From the necessity of the case and in 
 regard to the mutual interests of both 
 countries, we cheerfully consent to the 
 operation of such Acts of the British 
 Parliament as are bona fide restrained to 
 the regulation of our external commerce 
 for the purpose of securing the commercial 
 advantages of the whole 'Empire to the 
 mother- country and the commercial benefit 
 of its respective members." 
 The colonists knew well that the benefits 
 they derived from a close economic connec- 
 tion with the mother-country far outweighed 
 all the restrictions and annoyances which it 
 involved. Edmund Burke was least of all 
 likely to commend a system of oppression and 
 injustice, and this is what he says in a speech 
 on " Conciliation with America " : — 
 
 " The Act of Navigation attended the 
 colonies from their infancy ; grew with 
 their growth, and strengthened with their 
 strength. They were confirmed in obedi- 
 ence to it even more by usage than by law. 
 They scarcely had remembered a time 
 
22 BRITISH FISCAL HISTORY 
 
 when they were not subject to such re- 
 straint. Besides, they were indemnified 
 for it by a pecuniary compensation. Their 
 monopolist happened to be one of the 
 richest men in the world. By his immense 
 capital (primarily employed, not for their 
 benefit, but his own), they were enabled to 
 proceed to their fisheries, their agriculture, 
 their shipbuilding (and their trade too 
 within the limits) in such a manner as got 
 far the start of the slow, languid operations 
 of unassisted nature. This was a hotbed to 
 them. Nothing in the history of mankind 
 is like their progress. For my part, I 
 never cast an eye on their flourishing 
 commerce and their cultivated and com- 
 modious life, but they seem to me rather 
 ancient nations grown to perfection through 
 a long series of fortunate events and a train 
 of successful industry, accumulating wealth 
 in many centuries, than the colonies of 
 yesterday ; than a set of miserable outcasts, 
 a few years ago, not so much sent as 
 thrown out on the bleak, barren shore of a 
 desolate wilderness three thousand miles 
 from all civilised intercourse." 
 
THE OLD COLONIAL SYSTEM 23 
 
 Nevertheless, we must not shut our eyes to 
 the mistakes and defects of the mercantile 
 system. The ideas of domination and pos- 
 session entered far too much into the thoughts 
 of the home country towards the colonies. 
 When the provinces had grown and flourished, 
 as we have seen, these ideas had got out of 
 date and there were no better and wiser ones 
 to take their place. The politicians and 
 statesmen of those days fell into a sort of 
 despair. It appeared unreasonable to expect 
 that two great branches of the English race, 
 severed by three thousand miles of sea, could 
 remain for ever under the same political system. 
 There were no cables, no swift ocean steamers 
 to correct the estranging influences of space 
 and time. The most enlightened statesmen 
 of the day, Chatham, Burke, Adam Smith, 
 Grenville himself, Barnard, Pownall, and others, 
 had thought of giving the colonies representa- 
 tion in the Imperial Parliament. Thomas 
 Pownall had, indeed, a vision of a British 
 oceanic Empire consisting of a federation of 
 states on equal terms and purified from all 
 the narrower and more selfish ideas of the 
 mercantile system. He had been Governor 
 
24 BRITISH FISCAL HISTORY 
 
 and Commander-in-Chief of Massachusetts and 
 South Carolina and had thought deeply on the 
 future destinies of England and her colonies. 
 A few years before the rebellion he wrote : — 
 " It is the duty of those who govern us to 
 carry forward this state of things .... that 
 Great Britain may be no more considered 
 as the Kingdom of this He only, with many 
 appendages of provinces, colonies, settle- 
 ments, and other extraneous parts, but as a 
 grand marine dominion consisting of our 
 possessions in the Atlantic and in America 
 united into one Empire, in a one centre 
 
 where the government is The taking 
 
 leading measures towards the forming of all 
 those Atlantic and American possessions 
 into one Empire of which Great Britain 
 should be the commercial and political 
 centre is the precise duty of the Govern- 
 ment at this crisis. (Such a system) must 
 build up this country to a degree of glory 
 and prosperity beyond the example of any 
 age that has yet passed." 
 Another passage from the same writer is 
 still more significant as showing the early 
 beginnings of those Imperial ideas with which 
 
THE OLD COLONIAL SYSTEM 25 
 
 we are so familiar at the present time. One 
 cannot help reflecting with regret that if these 
 ideas had been allowed to permeate English 
 statesmanship in its attitude to the American 
 colonies, England might not have lost her 
 first colonial Empire. 
 
 " The centre of power," says Pownall, "in- 
 stead of remaining fixed, as it now is, in 
 Great Britain, will, as the magnitude of 
 power and interest of the colonies increases, 
 be drawn out from the island by the same 
 laws of nature, analogous in all cases, by 
 which the centre of gravity of the solar 
 system, now near the surface of the sun, 
 would, by an increase of the matter in the 
 planet, be drawn out beyond that surface. 
 Knowing, therefore, the laws of nature, shall 
 we, like true philosophers, follow where 
 that system leads to form one general 
 system of dominion by an union of Great 
 Britain and her colonies ; fixing, while it 
 may be so, the common centre in Great 
 Britain, or shall we, without ever seeing 
 that such centre must be formed by inter- 
 communion of the powers of all the parts 
 which form the dominions of Great Britain, 
 
26 BRITISH FISCAL HISTORY 
 
 like true modern politicians, and from our 
 
 own narrow temporary ideas of a local 
 
 centre, labour to keep that centre in Great 
 
 Britain by force against increasing powers, 
 
 which will finally by an overbalance heave 
 
 that centre itself out of its place ? Such 
 
 measures would be almost as wise as his 
 
 who, standing in a scale, should thrust his 
 
 stick up against the beam to prevent it 
 
 from descending, while his own weight 
 
 brought it the faster down." 
 
 The literary style of this passage leaves 
 
 something to be desired, but it would be 
 
 difficult to find in political literature more 
 
 sound wisdom compressed in an equal space. 
 
 Everyone remembers Burke's allusion to 
 the question of colonial representation in the 
 Imperial Parliament. " Perhaps," he said, " I 
 might be inclined to entertain some such 
 thought ; but a great flood stops me in my 
 course. Opposuit natura. I cannot remove 
 the eternal barriers of creation." 
 
 By the time of the Rebellion there was a 
 general feeling that political separation between 
 England and her colonies on the American 
 continent was inevitable. The question 
 
THE OLD COLONIAL SYSTEM 27 
 
 was already being asked whether there 
 were no other regions on this planet where 
 England might again secure those over-sea 
 possessions which, as mercantile economists 
 clearly understood, are an indispensable part 
 of the economic basis of sea-state. In a 
 volume of Political Essays written by various 
 hands about this time, we find one of the 
 earliest references to the great Southern con- 
 tinent, the existence of which had already 
 been established. Dampier, Quiros, Schouten, 
 and Tasman had already explored parts of the 
 Australian coast and brought back very favour- 
 able reports of the wealth and climate of the 
 country. The extent of the continent was 
 but vaguely realised. " We call by the name 
 of Terra Australis," says a contemporary 
 writer, "all that part of our earth which lies 
 beyond the three southern points of the 
 known world in Africa, Asia, and America : 
 that is to say, beyond the Cape of Good Hope, 
 the Molucca and Celebes Islands, and Cape 
 Horn or the Straits of Maghellan. This space 
 comprehends eight or ten millions of square 
 leagues which make above a third part of our 
 globe. In this vast tract it is impossible but 
 
28 BRITISH FISCAL HISTORY 
 
 there must be to the south of Asia some 
 immense continent to keep our globe in 
 equilibrio during its rotation, by serving as a 
 counterpoise to Northern Asia." In the light 
 of subsequent events it is amusing to find the 
 essayist I have mentioned seriously question- 
 ing whether Englishmen of his day (1772) had 
 a sufficient spirit of enterprise for the new 
 achievements he recommended. He writes : — 
 " I cannot help earnestly wishing that the 
 spirit of discovery may once more arise in 
 this nation. The South Sea alone presents 
 a field for that spirit to reign in — a field 
 ample as the most daring man can wish. 
 The heroic courage, and the noble vigour 
 of our forefathers received its birth in 
 the activity which distant adventures must 
 occasion. Spain fell from her envied 
 situation as soon as this invigorating 
 impulse dwindled into the prudence of 
 gaining what was already gained, instead 
 of keeping alive for the same purpose that 
 courage which alone won it. Never did 
 British courage appear in such a glorious 
 light as in the midst of those daring 
 adventures which the spirit of discovery 
 
THE OLD COLONIAL SYSTEM 29 
 
 was so fertile in producing. The heroism 
 of later times is not comparable to it. 
 What were the vessels that demolished the 
 Armadas of Spain ; that plundered her 
 American coasts from the Line to the 
 Pole ; that circumnavigated the world in 
 the face of potent navies ? Sloops, brigs, 
 schooners, pinnaces, cockboats ! A sea- 
 man would now ask a ship of an hundred 
 guns to perform that which our Drakes 
 and Cavendishes executed in one of as 
 many tons. This, however, is no reproach, 
 it is the spirit of the age ; and that heroic 
 spirit of the fifteenth century sprung from 
 and was kept alive by the spirit of dis- 
 covery." 
 But we cannot here follow the steps by 
 which England compensated herself so magni- 
 ficently for the loss of her first colonial empire. 
 We must briefly look at the effect which the 
 secession of the American colonies had on the 
 policy of this country. 
 
CHAPTER II 
 
 FREER TRADE AND " LAISSER FAIRE " 
 
 It would be a mistake to suppose that the 
 mercantile system came to an end with the 
 Declaration of Independence. It is true the 
 Navigation Acts lost the most important field 
 of their operation, but the main principle of 
 the system, that of the commercial solidarity 
 of the Empire, was maintained, though with 
 changing expression, for sixty years to come. 
 The question now arose, what was to be the 
 commercial policy of England towards the 
 daughter states which had renounced the 
 family tie? Were the privileges which the 
 people of Massachusetts and New England 
 had enjoyed as British subjects to be con- 
 tinued to them as foreigners ? It should be 
 
 i 30 
 
FREER TRADE AND "LAISSER FAIRE" 31 
 
 remembered that the Tories in those days 
 were the party of free or at least freer trade, 
 while the Whigs were champions of protection 
 and prohibition. Pitt was inclined to adopt 
 a Liberal policy towards the new republic and 
 to open up to its shipping the trade of the 
 British West Indies. But this policy was 
 frustrated by the succession to power of Fox, 
 who was entirely opposed to the new political 
 economy. " Your Adam Smiths are nothing," 
 was the irreverent remark of this Whig leader. 
 His object was to continue the policy of the 
 Navigation Act into the new political con- 
 ditions and to place the United States in the 
 position of any other foreign country. Down 
 to the Declaration of Independence a thriving 
 trade had been carried on between New 
 England and the West India Islands in New 
 England shipping. The new regulations 
 inflicted a serious injury on that trade. Their 
 effect was clearly foreshadowed in a paper 
 presented to the House of Commons, in which 
 the following passage occurred : — 
 
 "The petitioner sees the propriety and 
 necessity of Great Britain's attention to 
 the carrying trade and her keeping as 
 
32 BRITISH FISCAL HISTORY 
 
 much of it as she possibly can for herself, 
 but he sees, at the same time, the im- 
 practicability of excluding the Americans 
 from it in the West Indian Islands, as 
 they will carry their lumber and provisions 
 to the French, Dutch, Danish, and other 
 Islands not under the dominion of His 
 Majesty, to the singular and partial emolu- 
 ments of those islands, from which they 
 will be clandestinely carried to our islands, 
 loaded with double freight, double port 
 charges, double loading and unloading, 
 charges of going through a second hand, 
 and the provisions in particular in a worse 
 and unwholesome condition." 
 Public opinion, however, in England leaned 
 strongly towards the strict maintenance of the 
 Navigation Act. That opinion was voiced by 
 Lord Sheffield in his Observations on the 
 Commerce of the American States, published in 
 1784. He writes : — 
 
 " The Navigation Act, the basis of our 
 great power at sea, gave us the trade of 
 the world ; if we alter that Act by permit- 
 ting any state to trade with our islands, 
 or by suffering any state to bring into this 
 
FREER TRADE AND "LAISSER FAIRE" 33 
 
 country any produce but its own, we desert 
 
 the Navigation Act and sacrifice the Marine 
 
 of England. But if the principle of the 
 
 Navigation Act be properly understood 
 
 and well followed, this country may still 
 
 be safe and great This country has 
 
 not found itself in a more interesting and 
 
 critical situation than it is at present. It 
 
 is now to be decided whether we are to be 
 
 ruined by the Independence of America 
 
 or not. The peace in comparison was a 
 
 trifling object, and if the neglect of any 
 
 one interest more than another deserves 
 
 impeachment, surely it will be the neglect 
 
 of this, which involves in it, not merely the 
 
 greatness, but even the very existence of 
 
 our country." 
 
 There was no doubt much to be said for 
 
 this view. It was more necessary than ever 
 
 for us to secure the commercial and naval 
 
 advantages of our remaining colonies, and, as 
 
 a matter of fact, the Navigation Act continued 
 
 in full force for more than thirty-five years 
 
 longer. Canada, it should be said, was not 
 
 greatly affected by these controversies, for she 
 
 had known the mercantile system chiefly in 
 
 3 
 
34 BRITISH FISCAL HISTORY 
 
 the form of welcome bounties on the exporta- 
 tion of her products. 
 
 Perhaps the best proof of the efficiency of 
 the mercantile economics is the success and 
 even the ease with which England passed 
 through her gigantic struggle with Napoleon 
 Bonaparte. That prolonged drain upon our 
 resources meant, of course, a system of 
 abnormal taxation, but in spite of this our 
 industries flourished exceedingly under the 
 operation of bounties, protective duties, and 
 a constant state supervision. For example, 
 the exports of British cottons advanced from 
 £355,600 in 1780 to £18,951,994 in 1810. 
 The production of iron, which in 1796 was 
 125,079 tons, had reached in 1839 the figure 
 of 1,347,790 tons. Whatever may be our 
 views of the free trade policy in the forties 
 of last century, no one can question that 
 our industrial and maritime supremacy took 
 vigorous root under a system the very reverse 
 of laisser faire. The Napoleonic wars, how- 
 ever, left this country with a terrible legacy 
 of taxation. The duties on foreign manu- 
 factures ranged from 40 per cent, to 180 
 per cent., and were in many cases quite 
 
FREER TRADE AND "LAISSER FAIRE" 35 
 
 prohibitive. Every conceivable article of 
 importation was loaded with duties. Even 
 the raw materials of our industries were 
 subject to a heavy tariff, though in all cases 
 a considerable preference was now given to 
 the colonial product. We are told that the 
 number of Acts relating to the regulation of 
 customs amounted to fifteen hundred. Every 
 one remembers Sydney Smith's description, 
 written in 1820, of the terrible incubus of 
 taxation under which English people lived 
 in those days. 
 
 " Taxes upon every article which enters 
 into the mouth, or covers the back, or is 
 placed under the foot. Taxes upon every- 
 thing which it is pleasant to see, hear, feel, 
 smell, or taste. Taxes upon warmth, light, 
 and locomotion. Taxes on everything on 
 earth and under the earth ; on everything 
 that comes from abroad or is grown at 
 home. Taxes on the raw material, taxes 
 on every fresh value that is added to it 
 by the industry of men. Taxes on the 
 sauce which pampers man's appetite, and 
 the drug which restores him to health ; on 
 the ermine which decorates the judge and 
 
 UNIVERSITY 
 
36 BRITISH FISCAL HISTORY 
 
 the rope which hangs the criminal ; on 
 the poor man's salt and the rich man's 
 spice ; on the brass nails of the coffin, and 
 the ribbons of the bride ; at bed or board, 
 couchant or levant, we must pay. The 
 schoolboy whips his taxed top ; the 
 beardless youth manages his taxed horse, 
 with a taxed bridle, on a taxed road ; and 
 the dying Englishman, pouring his medicine 
 which has paid 7 per cent, into a spoon 
 that has paid 15 per cent., flings himself 
 back upon his chintz bed which has paid 
 22 per cent., and expires in the arms of an 
 apothecary, who has paid a licence of £100 
 for the privilege of putting him to death. 
 His whole property is then immediately 
 taxed from 2 per cent, to 10 per cent. 
 Besides the probate, large fees are 
 demanded for burying him in the chancel. 
 His virtues are handed down to posterity 
 on taxed marble, and he will then be 
 gathered to his fathers, to be taxed no 
 more." 
 This state of things was, of course, abnormal, 
 the result of war conditions. It was obvious, 
 even to the most convinced protectionist, that 
 
FREER TRADE AND "LAISSER FAIRE" 37 
 
 tariff reform on a generous scale had become 
 necessary. In 1820 the merchants of London 
 presented a petition to Parliament demanding 
 free trade and giving the first deliberate 
 expression to those doctrines which were so 
 long to control the fiscal policy of this country. 
 The transition from extreme protection in 
 1820 to the other extreme of open ports in 
 1860 was effected in three main periods. 
 The first of these, from 1823-1827, is associ- 
 ated with the name of Huskisson ; the second, 
 1842-1846, with that of Peel ; the third, 1853- 
 1860, with that of Gladstone. Though in full 
 sympathy with the tendencies of his time, 
 Huskisson was quite free from any dogmatic 
 addiction to abstract formulas. His object 
 was to liberalise the tariff, while keeping what 
 was best in the traditional English policy in 
 matters of commerce. New ideas were in the 
 air, but he was not anxious, he said, " to give 
 effect to new principles when circumstances do 
 not call for that application." He felt " how 
 much, in the vast and complicated interests 
 of this country, all general theories, however 
 incontrovertible in the abstract, required to 
 be weighed with a calm circumspection, to be 
 
38 BRITISH FISCAL HISTORY 
 
 directed by a temperate discretion, and to be 
 adapted to all the existing relations of society, 
 with a careful hand and a due regard to the 
 establishments and institutions which have 
 grown up under those relations." 
 
 Huskisson became President of the Board 
 of Trade in 1823, and at once began to deal 
 with the tangle of restrictions and prohibitions 
 which had overgrown the commercial system 
 of this country. By three measures (1823- 
 1825) he removed from the Navigation Act 
 much that was oppressive and obstructive, 
 without sacrificing the main principles of that 
 legislation. The effect of the first two (3 Geo. 
 IV. c. 44-45) may be given in Huskisson's 
 words : — 
 
 " We have permitted, firsfl^ an inter- 
 course between any countries in America 
 and our colonies in the ships of those 
 countries or in British ships ; but the first 
 of these Acts requires that the intercourse, 
 at least in the foreign vessel, should be 
 direct from the colonies to the country to 
 which the vessel belongs ; and it limits 
 very much the articles which can be im- 
 ported into the colony according to 
 
FREER TRADE AND " LAISSER FAIRE " 39 
 
 schedules in which the articles are enume- 
 rated. 
 
 " Secondly, we have permitted a direct 
 trade from the colonies in articles of their 
 growth or production to the ports of 
 foreign Europe ; but this trade is strictly 
 confined to British ships, which may also 
 carry from those ports direct to the 
 colonies certain enumerated articles of 
 foreign growth." 
 In 1825 the principle of reciprocity was 
 carried still further. The provisions of the 
 Act (6 Geo. IV. c. 114) were clearly set forth 
 by Huskisson in the House of Commons : — 
 " I am prepared to open the commerce 
 of our colonies to all friendly states upon 
 the same principle (though, of course, with 
 some difference in the detail of its modifi- 
 cations) upon which they are at liberty to 
 trade with Jersey or with Ireland. With 
 the exception of some articles which it will 
 be necessary to prohibit, such as fire-arms 
 and ammunition of war generally, and 
 sugar, rum, etc., in the sugar colonies, I 
 propose to admit a free intercourse between 
 all our colonies and other countries, either 
 
40 BRITISH FISCAL HISTORY 
 
 in British ships or the ships of those 
 countries, allowing the latter to import all 
 articles the growth, product, or manufacture 
 of the country to which the ship belongs, 
 and to export from such colonies all 
 articles whatsoever of their growth, pro- 
 duct, or manufacture, either to the country 
 from which such ships came, or to any 
 other part of the world, the United 
 Kingdom and all its dependencies ex- 
 cepted. All intercourse between the 
 mother- country and the colonies, whether 
 direct or circuitous, and all intercourse of 
 the colonies with each other, will be con- 
 sidered as a coasting trade to be reserved 
 entirely and absolutely to ourselves." 
 The reader should carefully mark the next 
 passage in this speech, because it illustrates 
 the general principle of Huskisson's reform : — 
 ' 'By this arrangement the foundation 
 of our Navigation Laws will be preserved, 
 whilst the colonies will enjoy a free trade 
 with foreign countries without breaking 
 in upon the great principles of these laws 
 in respect of foreign trade, that the cargo 
 must be the produce of the country to 
 
FREER TRADE AND " LAISSER FAIRE " 41 
 
 which the ship belongs, leaving the national 
 
 character of the ship to be determined by 
 
 the rules which apply in like cases in this 
 
 country. The importation of foreign goods 
 
 into the colonies I propose should be made 
 
 subject to moderate duties, such as may be 
 
 found sufficient for the fair protection of 
 
 our own productions of the like nature 
 
 (March 1825)." 
 
 As we shall see, the last shred of the 
 
 Navigation Acts disappeared under the regime 
 
 of laisser faire in the year 1854, when the 
 
 British coasting trade was thrown open to the 
 
 ships of foreign powers. 
 
 The distinguishing feature of the period 
 with which we are dealing was the substitution 
 of reciprocity for prohibition, and in the 
 colonial sphere of " preference " for monopoly. 
 Huskisson was not the author of the idea of 
 colonial preference. In 1808 a differential 
 duty on timber was first imposed, the duty 
 on Canadian timber being fixed at 10s. a 
 load and on Baltic timber at 45s. The tariff 
 on raw cotton first imposed by Pitt during 
 the French wars had always discriminated 
 in favour of the colonies. From 1815 the 
 
42 BRITISH FISCAL HISTORY 
 
 duties on raw cotton were gradually reduced, 
 till in 1833 they stood at 3d. a hundred- 
 weight on plantation and 2s. lid. a hundred- 
 weight on foreign cotton. The famous Corn 
 Law of 1815 fixed the price at which the 
 importation of wheat was permitted at 80s. 
 for foreign and 67s. for colonial wheat. 
 Similar advantages were given to colonial rye, 
 barley and oats, and the West Indian sugar 
 industry was efficiently protected in the same 
 way. The Imperial duties (" Reichszolle "), to 
 which Huskisson refers in the last sentence 
 of our quotations, effected the necessary 
 preference for British manufactures at the 
 colonial ports. Foreign glass and silk manu- 
 factures had to pay 15 per cent.; cotton, 
 woollen, linen, leather, paper, watches, and 
 other articles 7 per cent.; meat 3s. a hundred- 
 weight, cheese 5s. a hundredweight, and so 
 forth. It may be mentioned here that these 
 Imperial customs duties were abandoned two 
 years after the Repeal of the Corn Laws. 
 We must specify a few more of the changes 
 effected by Huskisson. The silk industry in 
 this country was placed on a new basis. 
 Duties on raw and thrown silk were reduced, 
 
FREER TRADE AND "LAISSER FAIRE" 43 
 
 and the prohibitive duty against imported silk 
 manufactures was turned into an import duty 
 of 30 per cent. The duty on imported wool 
 was lowered to Id. a pound, and instead of 
 prohibition, wool could now be exported under 
 a duty of the same amount. 
 
 The years which followed down to 1842 
 were so occupied with electoral reform that 
 the commercial policy of the country was left 
 almost untouched. But in 1842 Sir Robert 
 Peel took up the work which Huskisson 
 began. The changes he introduced were 
 based on four main principles : 1. The 
 reduction of all absolutely prohibitive 
 duties. 2. The reduction of duties on raw 
 materials to a nominal amount. 3. The ad- 
 mission of half- manufactured articles on pay- 
 ment of moderate duties. 4. The admission 
 of fully manufactured goods subject only to 
 such duties as would admit of fair competition, 
 generally about 20 per cent. This, it will be 
 seen, was a very important advance in the 
 emancipation of our trade. No fewer than 
 750 articles of commerce were affected. By 
 this time the Anti-Corn Law League had 
 begun its operations, and it is instructive to 
 
U BRITISH FISCAL HISTORY 
 
 find that Richard Cobden and his friends, who 
 were intent on repealing the Corn Law and 
 on breaking the power of the landlord, took 
 little interest in the reforms of 1842. They 
 were supported, however, by Disraeli as being 
 " in exact harmony with the principles in 
 reference to Free Trade laid down by Pitt." 
 In his speech on the 1842 Budget, Disraeli 
 insisted that Peel's policy was in accordance 
 with the tradition of the Tory party. It must 
 be remembered that the commercial treaty 
 of reciprocity was an essential element in 
 Peel's reforms of 1842. " I must say," he said 
 in that year in the House of Commons, " that 
 when we make reductions on articles imported 
 we ought to do our utmost to procure from 
 foreign countries benefited thereby correspond- 
 ing advantages for England. Nor can I deem 
 it wise to diminish the hope of satisfactorily 
 arranging these relaxations with foreign nations 
 by rashly reducing the amount of duties on 
 articles which form the bases of negotiation." 
 Peel actually announced that commercial 
 treaties were in prospect with Portugal, 
 Sardinia, Naples, the South American States, 
 and France. Not one of these treaties was 
 
FREER TRADE AND "LAISSER FAIRE" 45 
 
 concluded. When therefore Peel claimed that 
 his still more drastic Budget of 1845 and his 
 Repeal of the Corn Laws, 1846, were only 
 continuations of his policy in 1842, Disraeli 
 did not fail to point out that the idea of re- 
 ciprocity had been entirely abandoned in the 
 interval. Peel's earlier reforms might fairly be 
 described as the development of Tory policy — 
 the policy of Pitt, Bolingbroke, Shelburne, Can- 
 ning, and Huskisson. His later reforms were 
 the result of a different inspiration, Peel hav- 
 ing been converted in the interval to the 
 economic doctrine of Cobden and the League. 
 Peel did not touch the Corn Law in the 1842 
 Budget, but a new Corn Law was passed the 
 same year which considerably reduced the 
 duties on imported wheat but still secured an 
 effective preference to the wheat of the 
 colonies. In 1843 the duties on Canadian 
 wheat were reduced to Is. a quarter, with a 
 corresponding reduction on flour. 
 
 II 
 
 Here, then, we reach a clear watershed in our 
 economic history. We pass from the period 
 
46 BRITISH FISCAL HISTORY 
 
 of moderate reform represented by Canning, 
 Huskisson, Disraeli, and the earlier Peel, to a 
 period in which the doctrines of the Manchester 
 school, represented by the later Peel, Cobden, 
 Gladstone, and Robert Lowe, prevailed. Every 
 idea of protection and reciprocity was now to 
 be abandoned and our tariff to be arranged for 
 revenue purposes only. In 1845 Peel set him- 
 self once more to the work of tariff reform. 
 Repeal was the motif of this year's Budget, as 
 reduction had been in 1842. Four hundred 
 duties disappeared altogether, including the 
 duties on a large number of raw materials. The 
 most serious step was the entire repeal of the 
 duty on raw cotton, whereby the preference so 
 long given to the colonial product disappeared. 
 Peel made no effort to use these reductions as 
 the basis for commercial negotiation with 
 foreign countries. As Dr Cunningham has 
 said, " the effect of Peel's measures was a 
 complete realisation of the principle of laisser 
 faire in fiscal arrangements. The taxation of 
 the country was arranged simply and solely 
 with reference to revenue." The repeal of the 
 Corn Laws, though hastened by the autumnal 
 rains of 1845, became logically inevitable. 
 
FREER TRADE AND "LAISSER FAIRE" 47 
 
 The preference on colonial corn of course 
 disappeared at the same time. The only 
 articles on which a preference still remained 
 were sugar and timber, the former in the 
 interest of the West Indies and the latter in 
 that of Canada. The preference on sugar 
 disappeared in 1854, and that on timber in the 
 Gladstonian Budget of 1860. In 1848, as I 
 have said, the Imperial duties levied on foreign 
 imports into the colonies were abandoned, and 
 in 1854 the last relic of the old Navigation Laws 
 passed away, when the coasting trade, reserved, 
 as will be remembered, by Huskisson, was 
 thrown open to the world. 
 
 The last stage in the removal of trade 
 restrictions (1853-1860) was accomplished by 
 Mr Gladstone. His Budget of 1853 was based 
 on the principle of abolishing duties on half- 
 manufactured articles ; of reducing duties on 
 finished manufactures to 10 per cent., except 
 that on silk fabrics, which was kept at 15 per 
 cent ; of removing differential duties ; of 
 lowering the duties on articles of food. On 
 123 articles the duty wholly disappeared, and 
 on 133 others the duties were reduced. The 
 Crimean War postponed the logical completion 
 
48 BRITISH FISCAL HISTORY 
 
 of this policy until 1860. "There will be," 
 said Mr Gladstone, on introducing the Budget 
 of that year, "a sweep — summary, entire and 
 absolute — of what are known as manufactured 
 goods from the face of the British tariff." The 
 last duties of protection disappeared, even the 
 5 per cent, on woollen and the 15 per cent, on 
 silk manufactures. A large number of duties 
 on food imports were swept away. All re- 
 maining differential duties were abolished, and 
 the number of taxed articles, which in 1842 
 was 1052, fell to 48, of which only 15 pro- 
 duced revenue. Since 1860 this list has been 
 still further reduced. Thus the revolution in 
 our fiscal policy was completed. We had put 
 off every shred of protective armour, and 
 practically deprived our diplomacy of every 
 engine of effective negotiation with foreign 
 countries. At the same time, we had re- 
 nounced all our former trade arrangements 
 with the colonies. Henceforth we treated 
 them and permitted them to treat us on the 
 same footing as foreign countries. 
 
 I said above that the statesmen of the 
 seventeenth and eighteenth centuries regarded 
 our national power and prosperity as resting 
 
FREER TRADE AND "LAISSER FAIRE" 49 
 
 on three main pillars — ships, trade, and colonies. 
 Manchester politicians of the last century 
 thought we were in a position to dispense with 
 one of these supports. They thought we 
 could do without colonies. What was the 
 use of keeping Canada, or even India, when 
 we could do as much trade with them as 
 independent communities ? There was un- 
 doubtedly some excuse for this sense of insular 
 self-sufficiency. In the first half of last 
 century we had an almost exclusive command 
 of capital and the new mechanical inventions, 
 and a practical monopoly of the world's supply 
 of manufactured goods. It looked as if other 
 countries would be permanently content to 
 supply us with food and raw materials in 
 exchange for our products of forge and factory. 
 There was little sign in those days of any 
 serious competition abroad. Germany and 
 the United States only began their industrial 
 careers about 1850, and scarcely counted in 
 the field of trade rivalry until the seventies of 
 last century. In 1845 our exports had reached 
 the enormous total of sixty-eight millions. 
 Our best policy in these circumstances seemed 
 to be to have no^policy at all, to let things go 
 
50 BRITISH FISCAL HISTORY 
 
 their own way, to " take care of the imports 
 and let the exports take care of themselves." 
 We seemed to be entering upon the thousand 
 years of peace. The age of war and inter- 
 national rivalries was coming to an end, the 
 spirit of nationalism yielding to the sentiment 
 of world- citizenship. This being so, the main- 
 tenance of a colonial empire was regarded by 
 many as an absurd and wasteful infatuation. 
 
 It is a mistake to suppose that mere cheap- 
 ness was Cobden's motive in attacking the 
 Corn Laws and through them our old 
 economic system. His object was rather, in 
 his own words, "to enlarge the circle of ex- 
 change," to enable foreign nations to buy more 
 of our products, and to extend as swiftly as 
 possible, without regard for many important 
 political and social considerations, the markets 
 for our manufactures. Dr Cunningham writes 
 thus in his excellent work on The Growth of 
 English Industry and Commerce " : — 
 
 " The Manchester school were aiming at 
 the same object as the Mercantilists had 
 pursued during the period of Whig ascend- 
 ency : they desired to promote the 
 industrial activity of the country ; but the 
 
FREER TRADE AND " LAISSER FAIRE" 51 
 
 means they recommended were the very 
 opposite to those which had been adopted 
 in earlier days. They felt that they could 
 dispense with fostering care and exclusive 
 privileges ; this was in itself a tribute to 
 the success of the policy which had been 
 so steadily pursued for generations. The 
 maritime power of England had been built 
 up, the industry had been developed, the 
 agriculture had been stimulated, and the 
 economic life had become so vigorous that 
 it appeared to have outgrown the need of 
 extraneous help. There seemed to be a 
 danger that the very measures which had 
 been intended to support it should prove to 
 be fetters that hampered its growth." 
 By the year 1860 it had become pretty clear 
 that foreign nations were not intending to 
 follow our free trade example, as Cobden and 
 his friends had fully expected. What was to 
 have been free exchange between the nations 
 was as yet a one-sided system of free imports 
 in this country and tariffs abroad. Men like 
 Cobden and Sir Louis Mallet were not pre- 
 pared to maintain that we had no interest in 
 lowering foreign tariff walls. Cobden, there- 
 
52 BRITISH FISCAL HISTORY 
 
 fore, with the full support of Mr Gladstone, 
 negotiated the Anglo-French treaty of com- 
 merce in 1860, by which, in return for certain 
 reductions of duty in this country, extended 
 likewise to all the world, France reduced her 
 tariff on a wide range of British manufactures. 
 Free trade precisians were greatly offended 
 by a policy which savoured of " reciprocity." 
 There were people in England much more 
 Cobdenite than Cobden himself, who thought 
 that by opening our own ports we had done 
 everything possible for the advantage of our 
 trade, and that if foreign countries chose to 
 continue their protectionist tariffs, the loss was 
 theirs, not ours. Mr Morley, in his Life of 
 Cobden, defines the opposite view of the less 
 dogmatic free traders : — 
 
 " It is not free trade between any two 
 countries that is the true aim ; but to 
 remove obstacles in the way of the stream 
 of freely exchanging commodities, that 
 ought, like the Oceanus of primitive 
 geography, to encircle the whole habitable 
 world. In this circulating system every 
 tariff is an obstruction, and the free 
 circulation of commodities is in the long 
 
FREER TRADE AND " LAISSER FAIRE " 53 
 
 run as much impeded by an obstruction at 
 
 one frontier as at another It is not 
 
 enough to remove our own protective 
 duties, though Peel may have been right 
 under the circumstances of the time in 
 saying that the best way of fighting a 
 hostile tariff is by reforming your own. 
 It is the business of the economic states- 
 man to watch for opportunities of inducing 
 other nations to modify duties on imports ; 
 because the release of the consumers of 
 other nations is not only a stimulus to 
 your own production for exportation, but 
 has an effect in the supply of the imports 
 which you declare to be the real object of 
 your solicitude." 
 This insular self-sufficiency, however, pre- 
 vailed. The more rigid doctrinairism repre- 
 sented by Mr Robert Lowe asserted itself 
 against the rational policy of Cobden and 
 Mallet, and, at one time, of Mr Gladstone 
 himself. The belief in one-sided free trade 
 tacitly took the place of the original aspiration 
 to free exchange. From the year 1865 the 
 tariff walls of foreign nations have gradually 
 become higher and more impregnable. But 
 
54 BRITISH FISCAL HISTORY 
 
 our policy of isolation has remained unaffected. 
 Mr Bernard Mallet reminds uvin his recent 
 biography of his father, how the duty on 
 manufactured tobacco was reduced from 9s. 
 to 5s. ; how the sugar duties were reduced to 
 one-half and then abolished (1874), "without 
 an attempt to find out whether these reductions 
 might not have been made available to enlarge 
 the international free trade area, although both 
 cigars and sugar were articles of manufacture 
 in which the Zollverein and other European 
 trading communities were highly interested, 
 and might, as a competent observer remarked, 
 * had they been introduced in a treaty shape, 
 have been used with the greatest advantage 
 in assisting the German free traders to carry 
 those reductions of the iron duties which so 
 greatly interest us, and for which, single- 
 handed and unaided, they have hitherto 
 agitated in vain.' " 
 
 But the most striking example of our in- 
 sular self-sufficiency has yet to be recorded. 
 In 1862 and 1865 identical treaties were con- 
 cluded with Belgium and the Prussian Zoll- 
 verein, by which England undertook not to 
 accept any advantages in her own colonial 
 
FREER TRADE AND "LAISSER FAIRE" 55 
 
 markets which were not also extended to 
 Belgium and the Prussian States, and there- 
 fore, by virtue of the most-favoured-nation 
 principle, to almost all other foreign countries. 
 These instruments, which remained in force 
 for about thirty-five years, made it impossible 
 for the British colonies to give any advantages 
 in their markets to British over foreign manu- 
 factures. We appear to have gained absolutely 
 nothing in exchange for this remarkable feat 
 of self-abnegation. The treaties were scarcely 
 discussed in the House of Commons. There 
 was some debate on the provision relating to 
 the exportation of coal, but the articles which 
 concerned the colonies were apparently not 
 even mentioned either in 1862 or in 1865. 
 When the treaties were denounced at the 
 request of Canada in 1897, Lord Salisbury 
 spoke as follows in the dispatches which 
 announced their abrogation : — 
 
 " No record exists in the archives of this 
 department of the circumstances under 
 which this article (viz. 15) was adopted or 
 of the reasons which induced Her Majesty's 
 Government at the time to enter into an 
 engagement of such a nature, and it would 
 
56 BRITISH FISCAL HISTORY 
 
 appear probable that the insertion of these 
 words must have been due to oversight or 
 to a want of adequate consideration of the 
 consequences which would flow from 
 
 them The provisions of the articles 
 
 in question constitute a barrier to the in- 
 ternal fiscal arrangements of the British 
 Empire which is inconsistent with the close 
 ties of commercial intercourse which subsist 
 and should be consolidated between the 
 mother-country and the colonies." 
 Lord Lansdowne expressed a similar per- 
 plexity. The explanation is of course that the 
 nation had by this time lost all sense of the 
 economic and even the political value of our 
 colonial empire. We shall see in the next 
 chapter how this sense was gradually revived, 
 and how the colonies led the way in a move- 
 ment for a new trade-partnership between 
 themselves and the mother- country. 
 
CHAPTER 111 
 
 THE NEW IMPERIALISM 
 
 As we have seen, the economics of the laisser 
 faire school were associated with a strong 
 sentiment of an ti- Imperialism in politics. It 
 was actually part of Cobden's case for free 
 trade that it would " get rid of the colonial 
 system with all its dazzling appeals to the 
 passions of the people." With the rise of a 
 new sense of Imperial citizenship and a new 
 conception of the value and significance of our 
 colonial system, it was inevitable that a move- 
 ment should emerge for the recovery in some 
 degree of the old economic unity of the 
 Empire. We must now look for a time to 
 the course of fiscal history in the colonies. 
 
 I have related how, in obedience to the 
 new economic theories, England withdrew the 
 preferences which she granted to colonial 
 
 57 
 
58 BRITISH FISCAL HISTORY 
 
 products in her markets and on the basis of 
 which the colonies had built up their con- 
 siderable prosperity. This policy aroused the 
 greatest resentment in the colonies, and 
 especially in Canada. It is not true, as I 
 have pointed out, that our old trade policy 
 lost us the American plantations, but it 
 is scarcely an exaggeration to say that by 
 the withdrawal of these preferences England 
 risked the loss of her second colonial 
 empire. The result in Canada of the repeal 
 of the Corn Laws and the destruction of the 
 Canadian preferences in wheat and flour has 
 been overlooked in our economic histories. 
 The catastrophe is thus described in the 
 Canadian Encyclopaedia : — 
 
 " Then came the crash, and in a 
 moment the abolition of the Corn Laws 
 had not only shattered the whole Canadian 
 fiscal fabric, but had crushed the prosperity 
 of the people. For some years the entire 
 financial, agricultural, and industrial in- 
 terests of Canada were paralysed. Political 
 troubles naturally followed ; annexation to 
 the United States came to be discussed 
 in sundry influential business quarters, 
 
THE NEW IMPERIALISM 59 
 
 and a dark, sombre cloud rested over the 
 small and struggling community. In an 
 economic sense a revolution ensued. The 
 entire control of the regulation, collection, 
 and distribution of revenues was given 
 to all the colonies ; taxation was entirely 
 changed in its channels, and preferences 
 upon British goods were swept away ; 
 tariffs were framed against the other 
 British provinces as well as against the 
 mother-country ; efforts were initiated for 
 better trade relations with the United 
 States, and approved of in a letter from the 
 Colonial Secretary on 3rd June 1846 ; and 
 strenuous exertions were commenced along 
 the lines of railway and canal construction. 
 The period of fiscal pupilage had passed 
 away, never to return, although it must 
 be a matter of lasting regret that Imperial 
 considerations connected with a mighty 
 but unseen future could not have retained 
 some principle of preference for British pro- 
 ducts in the new tariffs of both England 
 and her colonies. It was a great oppor- 
 tunity for genuine statecraft, but one which 
 was allowed by the Little Englanders to 
 
60 BRITISH FISCAL HISTORY 
 
 pass into what is now the limbo of for- 
 gotten possibilities." 
 The letters and dispatches of Lord Elgin, 
 
 the wise and farseeing Governor of Canada at 
 
 this perilous crisis, fully justify this description. 
 
 Just after the repeal of the Corn Laws he 
 
 writes : — 
 
 " All the prosperity of which Canada is 
 robbed is transplanted to the other side of 
 the line, as if to make the Canadian feel 
 more bitterly how much kinder England is 
 to the children who desert her than to 
 those who remain faithful. I believe that 
 the conviction that they (the Canadians) 
 would be better off if they were annexed 
 (to the United States) is almost universal 
 among the commercial classes." 
 Again in 1849 : — 
 
 "The plea of self-interest, the most 
 powerful weapon, perhaps, which the 
 friends of British connexion have wielded 
 in times past, has not only been wrested 
 from my hands, but transferred since 1846 
 
 to those of the adversary They (sc. 
 
 the Canadians) are invited to form part of 
 a community which is neither suffering 
 
THE NEW IMPERIALISM 61 
 
 nor free-trading, which never makes a 
 bargain without getting at least twice as 
 much as it gives ; a community, the 
 members of which have been within the 
 last few weeks pouring into their multi- 
 farious places of worship to thank God 
 that they are exempt from the ills which 
 afflict other men, from those more especially 
 that afflict their despised neighbours, the 
 inhabitants of North America who remain 
 faithful to the country which planted 
 them." 
 As a measure of compensation for the loss 
 of her preferences England concluded in 1854 
 a treaty of reciprocity between Canada and 
 the United States. Free exchange was 
 established between the two countries in food 
 products and raw material. That treaty 
 lasted till 1865, when it was denounced by the 
 United States, not without a hope that the 
 loss of its advantages would compel Canada 
 to seek political union with the Republic. I 
 may perhaps anticipate events by recording 
 that in 1890 the imposition of the M'Kinley 
 tariff in the United States gave the impulse in 
 Canada towards a new treaty of reciprocity 
 
62 BRITISH FISCAL HISTORY 
 
 with the Republic across the border. The 
 Canadian Liberal party declared for a Zoll- 
 verein on the basis of complete free trade 
 between the two countries. The elections of 
 1891 in Canada were fought on this issue. 
 The leader of the Conservative party, Sir 
 John Macdonald, was firmly opposed to a 
 trade policy which he felt must tend towards 
 political fusion between the Dominion and 
 the Republic. He succeeded at the polls, and 
 the proposal has not since been revived as the 
 accepted policy of a Canadian party. But 
 there always exists in the United States, and 
 to a less degree in Canada, a body of opinion 
 in favour of commercial reciprocity between 
 the two countries. 
 
 From 1850 to 1876 is the era of the 
 granting of self-government on the English 
 Parliamentary model to the colonies in North 
 America, Australia, and South Africa. 
 Opportunities, not likely to recur, were 
 offered of settling on a permanent and well- 
 considered basis the future commercial re- 
 lations between the constituent states of the 
 Empire. There is no reason to doubt that 
 the colonies would readily have acquiesced if 
 
THE NEW IMPERIALISM 63 
 
 the various constituting Acts had forbidden 
 protective duties against British products or 
 had established at least a system of preferential 
 trading within the Empire. Speaking at the 
 Crystal Palace in 1872, Mr Disraeli said : — 
 
 " Self-government, in my opinion, ought 
 to have been conceded, when it was con- 
 ceded, as part of a great policy of Imperial 
 consolidation. It ought to have been ac- 
 companied with an Imperial tariff. .... 
 All this, however, was omitted, because 
 those who advised that policy — and I 
 believe their convictions were sincere — 
 looked upon the colonies of England, 
 looked even upon our connection with 
 India, as a burden on this country, viewing 
 everything in a financial aspect and boldly 
 passing by those moral and political con- 
 siderations which make nations great and 
 by the influence of which alone men 
 are distinguished from animals. Well, 
 what has been the result of this attempt 
 during the reign of Liberalism for the 
 disintegration of the Empire ? It has 
 entirely failed. But how has it failed ? 
 Through the sympathies of the colonies 
 
64 BRITISH FISCAL HISTORY 
 
 with the mother-country. They have 
 decided that* the Empire shall not be 
 destroyed ; and in my opinion no minister 
 in this country will do his duty who 
 neglects any opportunity of reconstruct- 
 ing as much as possible our colonial 
 empire and of responding to those distant 
 sympathies which may become the source 
 of incalculable strength and happiness to 
 this land." 
 The statesmen of this period were, however, 
 intent on the ideal of cosmopolitan trade, and 
 the chance of clearing the largest possible area 
 in the world for genuine free exchange was 
 neglected. The object of the trade provisions 
 introduced into the Acts which conferred self- 
 government on the colonies was to keep 
 them free traders towards the rest of the 
 world. They were forbidden to impose 
 duties that discriminated even between their 
 own colonial neighbours and foreign countries. 
 As it seemed unlikely that any colony would 
 care to impose a heavy duty on articles im- 
 ported from such a neighbour, this provision, 
 it was thought, would effectually prevent the 
 colonies from adopting the policy of protection. 
 
THE NEW IMPERIALISM 65 
 
 It was hoped that their economic orthodoxy 
 would thus be assured. As it is well to go to 
 the sources, the exact words of the Australian 
 Act may be quoted. Section 27 of the Act of 
 1850 (13 & 14 Vic, c. 59) runs :— 
 
 " It shall be lawful for the Governor 
 and Legislative Council of New South 
 Wales, Victoria, Van Dieman's Land, 
 South Australia and West Australia, to 
 impose and levy such duties of custom as 
 may seem fit on importation into such 
 respective colonies of any goods, etc., 
 whether the produce or the manufacture 
 of or imported from the United Kingdom 
 or any colony or any foreign country : pro- 
 vided also that no new duty shall be so im- 
 posed upon the importation into any of the 
 said colonies of any article the product 
 or manufacture of or imported from any 
 particular country or place which shall not 
 be equally imposed on the importation into 
 the same colony of the like article the pro- 
 duct or manufacture of or imported from 
 all other countries or places whatsoever." 
 Matters, however, were not to remain long 
 on this footing. In 1861 the North American 
 
66 BRITISH FISCAL HISTORY 
 
 colonies were empowered to arrange among 
 themselves their inter-colonial tariffs, and by 
 the British North America Act (30 & 31 Vic, 
 c. 3) all impediments to reciprocal trade 
 between these colonies were removed. By 
 section 91 of that Act " the regulation of trade 
 and commerce' was expressly conferred as a 
 power upon the Federal Parliament. The only 
 restriction remaining was that all legislation 
 giving the foreigner commercial advantages 
 over the English trader was to be reserved for 
 Imperial consideration. In 1878 even this 
 restriction was removed, the Imperial power 
 relying henceforth on the general prerogative 
 of the veto. 
 
 The Australian colonies soon began to de- 
 mand similar freedom. About the year 1870 
 there was a movement on foot for a customs 
 union among the various Australian states. 
 The provision of the constitution which pre- 
 vented any colony from giving preferential 
 treatment to goods imported from a neighbour- 
 ing colony was an insuperable obstacle to any 
 such union. If the Australian colonies es- 
 tablished inter-colonial free trade they would 
 be compelled to extend that policy to all 
 
THE NEW IMPERIALISM 67 
 
 foreign countries as well as to Great Britain. 
 In 1871, at an inter-colonial conference held at 
 Melbourne, resolutions were passed demanding 
 the removal of all such restrictions. Mr 
 Duffy, the Premier of Victoria, went so far as 
 to assert that " obstinacy on the part of the 
 Imperial Government would weaken and ought 
 to weaken the allegiance of the colonies." To 
 these demands Lord Kimberley objected that 
 they tended to diminish the right of the 
 Crown to conclude treaties binding upon the 
 colonies. It should be noticed that there was 
 no strong force of colonial opinion at the back 
 of these demands. They were brought for- 
 ward at the instance of Messrs Duffy and 
 Berry, who represented Victoria at the con- 
 ference, and they were deprecated by the 
 representatives of the other colonies on the 
 ground that they tended to Imperial disinte- 
 gration. Mr Duffy himself was the author in 
 1870 of a remarkable proposal that in case of 
 war between England and any foreign country 
 the colonies should remain neutral. The 
 effect of this would have been that English 
 ships of war would have been treated as 
 strangers in colonial ports and compelled to 
 
68 BRITISH FISCAL HISTORY 
 
 leave as soon as they had received the scant 
 civilities accorded equally to England and the 
 foreign power with which she happened to be 
 at war. By the exercise of a little firmness 
 at this time England might have secured the 
 same advantages as were to be accorded to the 
 colonies inter se, or at least a considerable 
 measure of preference over the imports from 
 foreign countries. In 1873, however, another 
 conference was held by the Australian colonies, 
 and at the instance of the same not very 
 Imperially-minded colonial statesmen the same 
 demands were made. Thereupon Lord Kim- 
 berley yielded and introduced the Australian 
 Colonial Duties Act. This measure completed 
 the economic as distinct from the political 
 disintegration of the Empire, the only re- 
 striction still imposed by the mother- country 
 on the colonies being that they were not 
 permitted to differentiate in favour of the 
 foreigner against English imports. The de- 
 bate on this Bill was significant as showing 
 that there was still a body of opinion in 
 England not prepared to surrender the last 
 relics of the economic solidarity of the Empire. 
 It is true the opponents of the Bill were intent 
 
V 
 
 
 THE NEW IMPERIALISM 69 
 
 chiefly upon asserting in the colonies the 
 principle of cosmopolitan free trade rather 
 than upon securing for England a special right 
 of free or privileged access to the markets of 
 the Empire. Still the speech of Earl Grey, 
 who represented the older school of Imperial 
 statesmen, is interesting because it shows that 
 the old mercantile ideas and the conception of 
 an empire united commercially as well as 
 politically were not wholly dead. Earl Grey 
 said : — 
 
 " If the colonies and the United King- 
 dom are in any true sense to form one 
 Empire, it is obvious that there must 
 exist some single and permanent authority 
 to ensure that, on subjects of general and 
 common interest, all the separate com- 
 munities that form the Empire shall act in 
 concert, and shall co-operate with each 
 other. Each distinct community may be 
 free to act for itself in its own internal 
 administration, but unless all are subordi- 
 nated to the Imperial authority where the 
 general interest is concerned, there is no 
 Empire. But, among the subjects which 
 are most clearly of common concern, next 
 
70 BRITISH FISCAL HISTORY 
 
 to their joint defence against aggression, 
 comes that of a common commercial 
 policy. This, till of late years, has been 
 universally held to be so obviously true as 
 to be beyond dispute. In the early days, 
 indeed, of our colonies, the opinion held 
 both here and throughout Europe was 
 that colonies were only valuable for the 
 commercial advantages to be derived from 
 them. The mother-country insisted on a 
 monopoly of supply to the colonies, and 
 they in return were allowed either a 
 monopoly or the privilege of supplying on 
 better terms than other countries certain 
 articles of produce to the parent state, the 
 right of regulating the manner in which 
 this intercourse was carried on being 
 exercised without dispute by Parliament. 
 .... And when at length there came a 
 change of opinion as to the wisdom of the 
 old system of colonial trade, and when it 
 was swept away and the system of free 
 trade was established, it was not even 
 imagined that the Imperial Parliament and 
 Government were to forego their old 
 authority of settling what was to be the 
 
THE NEW IMPERIALISM 71 
 
 commercial policy of the whole Empire. 
 On the contrary, it was considered that the 
 policy of free trade would be deprived of 
 much of its advantage if it were not con- 
 sistently followed throughout the Empire." 
 To Lord Kimberley's representations he 
 replied : — 
 
 " I cannot concur in this view of the 
 subject, and, if it is to be acted on, I 
 should wish to know in what manner the 
 Queen's authority is to be maintained at 
 all. If that authority is not to be upheld 
 by requiring the colonies to conform to 
 the general commercial policy of the 
 Empire ; if the Imperial Government is 
 to have no voice in determining upon the 
 commercial measures of the colonies, and 
 we are even to allow them to impose 
 protective duties more hostile to British 
 interests than the duties of most foreign 
 nations, it seems to me that it will become 
 a very serious question whether it will be 
 
 well to maintain the connection Is 
 
 it not probable that the people of this 
 country may say, * If we are to exercise 
 no power over the colonies, nor to derive 
 
72 BRITISH FISCAL HISTORY 
 
 any advantage from them, we decline to in- 
 cur the responsibility of protecting them' ? ' 
 The Bill was, however, passed in deference 
 to Lord Kimberley's dictum that " to impose 
 a veto was a very serious matter indeed." 
 Section 3 of the Act (36 Vic, c. 22) runs as 
 follows : — 
 
 " The legislature of any one of the 
 
 Australian colonies shall, for the purpose 
 
 of carrying into effect any agreement 
 
 between any two or more of the said 
 
 colonies or one or more in New Zealand, 
 
 have full power to remit or impose duties 
 
 of importation from any other said colony : 
 
 provided always no duty shall be imposed 
 
 or remitted as to importation from any 
 
 particular country which shall not be 
 
 equally imposed or remitted upon the 
 
 importation of the like articles from any 
 
 other country." 
 
 The colonies were henceforth at liberty to 
 
 impose any protective duty they pleased on 
 
 imported goods, both English and foreign, the 
 
 incidence of the duty being the same in both 
 
 cases. By the denunciation of the Belgian 
 
 and German treaties it is now open to all 
 
THE NEW IMPERIALISM 73 
 
 the colonies to give preferential treatment to 
 British goods, though not to discriminate in 
 that way between foreign countries. 
 
 England bears in another respect a large 
 share of the responsibility for the regime of 
 protection upon which the colonies now 
 entered. The anti- Imperial utterances of 
 Cobden, Bright, and other British statesmen 
 and officials had the natural effect. The 
 colonies were perpetually reminded that their 
 connection with the mother-country was only 
 temporary, and that sooner or later they must 
 set up as independent states. They acted 
 accordingly. They prepared themselves for 
 economic as well as for political independence. 
 England, moreover, had deliberately elected 
 to draw her food products and raw materials 
 chiefly from regions outside her political sway. 
 The development of her broader acres beyond 
 the seas was thus checked, and the colonies were 
 diverted, whether they would or not, from 
 those agricultural pursuits which represent 
 their chief asset. Protection even against the 
 manufactures of Great Britain became the 
 inevitable result. The net effect is briefly 
 described by Professor Fuchs, in his excel- 
 
74 BRITISH FISCAL HISTORY 
 
 lent work, Die Handelspolitik Englands und 
 seiner Kolonien. " A marvellous spectacle," he 
 writes, "has thus been presented to the world. 
 England has not succeeded in realising even in 
 her own colonies that ideal of free trade to which, 
 in her expectation of sixty years ago, the entire 
 civilised world was about to be converted." 
 
 The revival of interest and belief in our 
 Imperial system and the new sentiment of 
 common empire-citizenship date from the 
 early eighties of last century. Among many 
 causes that contributed to this revival the 
 following are perhaps the most important : — 
 
 1. The Manchester school of politics had 
 lost a good deal of its prestige. Its original 
 view of the relations between the employer 
 and the employed was completely discredited. 
 Laisser faire had given way to a system of 
 rigorous and all-pervading regulation of in- 
 dustrial methods. The confident anticipation 
 of Cobden and his frienbls that foreign nations 
 would follow the free trade example of 
 England showed no sign of being realised. 
 On the contrary, the fiscal systems of our chief 
 competitors were growing more and more 
 protective. It was natural that there should 
 
THE NEW IMPERIALISM 75 
 
 be some revulsion of opinion from the anti- 
 Imperialism and the other political ideas 
 associated with the Manchester economics. 
 
 2. It was about this time that the full effect 
 of the vast development that had taken place 
 in oversea communication began to be felt. 
 Burke's " Opposuit Natura' had lost much 
 of its force. Space and time no longer dis- 
 couraged, as formerly, the idea of a united 
 empire. 
 
 3. The rapid growth of the colonies and the 
 development of their social and political life 
 on democratic lines began to excite the interest 
 and admiration of the English people. British 
 capital found a field for investment in the 
 colonies, and thus became interested in their 
 political connection with the mother-country. 
 
 4. Despite all the indifference which 
 England had displayed to the maintenance 
 of the colonial system, the colonists showed 
 no signs of " cutting the painter." Their con- 
 tinual assurances of loyalty to the mother-land 
 and the Crown could not but awaken a 
 corresponding sentiment in this country. 
 
 5. The creation of the Germanic empire, 
 the increasing power of the United States, 
 
76 BRITISH FISCAL HISTORY 
 
 the beginnings of colonising ambition on the 
 part of other foreign nations, all suggested 
 that the day of small nationalities was past, 
 and that future history would be filled with 
 the competition of vast political organisations. 
 
 There can be no doubt, too, that Mr 
 Disraeli's administration from 1874 to 1879 
 had tended to quicken the national spirit and 
 to excite a new pride in our Imperial heritage. 
 Nor must we forget the common reverence 
 and devotion felt to the furthest frontiers of 
 the British dominions for the august lady who 
 had sat for nearly fifty years upon the English 
 throne. The Jubilee of 1887, with the visual 
 evidence it afforded of the world-wide sway of 
 the British Crown, gave an immense impetus 
 to the new Imperial sentiment. 
 
 During all these years eloquent voices had 
 not been wanting to protest against the 
 separatist tendencies so popular with English 
 statesmen and economists. Carlyle, Froude, 
 Sir George Grey, Tennyson and others kept 
 the English tradition alive. Carlyle re-ex- 
 pressed again and again in later years the 
 Imperial faith he had thus confessed as early 
 as 1843 in Past and Present: — 
 
THE NEW IMPERIALISM 77 
 
 " England's sure markets will be among 
 
 new Colonies of Englishmen in all quarters 
 
 of the Globe. All men trade with all 
 
 men, when mutually convenient ; and are 
 
 even bound to do it by the Maker of men. 
 
 Our friends of China, who guiltily refuse 
 
 to trade — in these circumstances had we 
 
 not to argue with them, in cannon-shot at 
 
 last, and convince them that they ought 
 
 to trade ? ' Hostile Tariffs ' will arise, to 
 
 shut us out, and then again will fall, to 
 
 let us in ; but the Sons of England, 
 
 speakers of the English language were it 
 
 nothing more, will in all times have the 
 
 ineradicable predisposition to trade with 
 
 England." 
 
 The correspondence of Carlyle and Sir 
 
 George Grey shows how fully they were 
 
 agreed on what the philosopher describes as 
 
 " the hide-bound political economy system," 
 
 which seemed to have no regard but for the 
 
 material interests of the people. In his 
 
 Short Studies on Great Subjects, Froude 
 
 wrote (1870) :— 
 
 " Shall there be a British Empire of which 
 the inexhaustible resources shall be made 
 
78 BRITISH FISCAL HISTORY 
 
 available for the whole commonwealth ? 
 Shall there be tens of millions of British 
 subjects rooted in different parts of the 
 globe, loyal all to one Crown and loyal to 
 each other, because sharing equally and 
 fully in a common patrimony ? Or shall 
 there be an England of rich men in which 
 the multitude are sacrificed to the luxuries 
 of the few — an England of which the 
 pleasant parks and woodlands are the 
 preserves of the great ; and the millions, 
 the creators of the wealth, swell and starve 
 amidst dirt and disease and drunkenness 
 and infanticide ? " 
 To an objection which is still frequently 
 
 heard to-day, Froude replied : — 
 
 " We invite them to reflect that although 
 our colonies might be considered an em- 
 barrassment if they were embedded in 
 continents and accessible only through the 
 territory of other nations, yet that with a 
 water highway they are so disposed as to 
 contribute to a mercantile state such as 
 ours not weakness but enormous strength." 
 The revived sense of Imperial citizenship 
 
 naturally found expression in various proposals 
 
THE NEW IMPERIALISM 79 
 
 for establishing closer relations between the 
 states of the Empire. The movement towards 
 Imperial unity took three main directions : the 
 political, the defensive, and the commercial. 
 The colonies have shown no great desire for 
 political consolidation in the first place. They 
 have not looked with much favour on the idea 
 of contributions in money to the defensive 
 resources of the Empire. Such contributions 
 have rather the character of " tribute ' and, 
 in default of a common federal executive, the 
 colonies would have no voice in the expendi- 
 ture of the funds they would vote. They 
 have deliberately chosen to advance towards a 
 federated empire along the commercial path, 
 and it must be admitted that historical pre- 
 cedent supports them in that decision. Long 
 before Mr Chamberlain brought forward his 
 definite fiscal proposals he had said, " There is 
 a universal desire for closer union. It is 
 essential to the existence of the Empire. It 
 can be most hopefully approached from the 
 commercial side." It is now a quarter of a 
 century since the movement for economic 
 re-union between the home country and the 
 colonies took its first practical steps. As 
 
80 BRITISH FISCAL HISTORY 
 
 early as 1881 the Canadian Government tried 
 to obtain the removal of the obnoxious clauses 
 in the Belgian and German treaties, but with- 
 out success. In 1886 the Colonial and Indian 
 Exhibition and a Congress of Chambers of 
 Commerce of the Empire suggested more 
 strongly the idea of a commercial partnership 
 in the common interests of England and her 
 colonies. A great impulse was given to the 
 Imperial sentiment by the Jubilee of 1887. 
 Federation proposals were ruled out of the 
 programme of the conference ; but this did 
 not prevent Sir Samuel Griffith, Premier of 
 Queensland, from moving the question 
 " whether it should not be recognised as part 
 of the duty of the governing bodies of the 
 Empire to see that their own subjects have 
 preference over foreign countries in matters of 
 trade." A more definite proposal was made 
 by Mr Hofmeyr, the leader of the Afrikander 
 party at the Cape. He moved "to discuss 
 the feasibility of promoting closer union 
 between the various parts of the British 
 Empire by means of an Imperial tariff of 
 customs to be levied independently of the 
 duties payable under existing tariffs on goods 
 
THE NEW IMPERIALISM 81 
 
 entering the Empire from abroad, the revenue 
 derived from such tariffs to be devoted to 
 the general defence of the Empire." This 
 Imperial toll was to be 2 per cent, ad valorem, 
 levied in every part of the Empire on foreign 
 importations alone. These proposals met 
 with much sympathy in the Conference, but 
 outside they were severely denounced by 
 orthodox free traders in general and by the 
 Cobden Club in particular. About the same 
 time the minority report of the Royal Com- 
 mission on Trade Depression recommended 
 that the United Kingdom should impose a 
 duty of 10 per cent, on a long list of foreign 
 importations, and that the colonies should give 
 us preferences in return for the advantages 
 they thus received. 
 
 Deputations, resolutions, and Parliamentary 
 discussions followed in rapid succession. In 
 1890 the " Dunraven Debate" took place in 
 both Houses of Parliament. Lord Salisbury 
 dwelt upon the obstacles to the idea of com- 
 mercial union. Something like a revolution 
 would be necessary in English economic 
 opinion. He concluded thus : — 
 
 " Whenever such a modification of 
 
 6 
 
82 BRITISH FISCAL HISTORY 
 
 English opinion takes place — if ever it 
 does take place — so that this idea of dis- 
 crimination of duty in favour of colonial 
 produce shall be a fiscal possibility, I at all 
 events shall not oppose the wish of my 
 noble friend to have the matter thoroughly 
 discussed between us and the colonies." 
 In 1891 Lord Salisbury received a deputa- 
 tion of the United Empire Trade League. 
 Once more he dwelt upon the obstacles, and 
 once more he concluded : — 
 
 " On this matter public opinion must be 
 framed or formed before any Government 
 can act. No Government can impose its 
 own opinion on the people of this country 
 in these matters. You are invited, and it 
 is the duty of those who feel themselves to 
 be the leaders of such a movement and the 
 apostles of such a doctrine to go forth and 
 fight for it, and when they have convinced 
 the people of this country their battle will 
 be won." 
 
 It is worth recalling that already, in 1885, 
 Lord Salisbury had thus expressed himself on 
 the question of closer trade relations within 
 the Empire : — 
 
THE NEW IMPERIALISM 83 
 
 " There is another similar question — I 
 
 will not now go into it, but I want to 
 
 touch upon it merely to indicate a similar 
 
 confusion of matters that have nothing to 
 
 do with free trade as if they had something 
 
 to do with free trade — viz., the question of 
 
 altering our duties in favour of our colonies 
 
 — that is to say, drawing our colonies 
 
 nearer to ourselves by abolishing, so far as 
 
 may be, the customs houses that separate 
 
 the two. I do not put it before you as a 
 
 matter that is free from difficulty. I do 
 
 not deny that in many points you will find 
 
 every obstacle hard to overcome. But 
 
 what I demur to is that you should be 
 
 forbidden from entertaining the idea of 
 
 differential duties in favour of the colonies 
 
 as though it were an economical heresy." 
 
 In the same year, 1891, the Canadian 
 
 Government laid on the table of the Federal 
 
 House an address to the Queen praying for 
 
 the denunciation of the German and Belgian 
 
 treaties. This request was politely refused. 
 
 It is somewhat startling to find that the 
 
 Chamber of Commerce in Manchester — the 
 
 very citadel of Cobdenism — passed a unanimous 
 
84 BRITISH FISCAL HISTORY 
 
 resolution about this time (20th May 1890) 
 practically in favour of preferential trade with- 
 in the Empire. Mr E. Burgis moved : 
 
 '* That in the opinion of this chamber no 
 treaties of commerce shall in future be 
 concluded unless a clause be therein in- 
 serted to the effect that preferential treat- 
 ment of its colonies by any Power shall 
 not be considered action of a nature to 
 justify any claims by the other contracting 
 party or parties under the most-favoured- 
 nation clause." 
 The mover, according to the records of the 
 chamber, said that in future the most-favoured- 
 nation clause ought not to preclude us from 
 giving preferential treatment to our colonies 
 and dependencies abroad. " If the proviso (in 
 the resolution) was carried into effect in future 
 treaty engagements, there could be no en- 
 tanglement with foreign states over the 
 favoured-nation clause, and nothing would 
 stand in the way of our adopting such a 
 commercial policy as would tend to the main- 
 taining and strengthening of the whole British 
 Empire." The resolution was unanimously 
 carried, and the chairman was requested to 
 
THE NEW IMPERIALISM 85 
 
 forward copies of it to the Prime Minister and 
 the Secretary for the Colonies. Surely no better 
 evidence could be given of the rapid growth 
 of these political and commercial ideas nearly 
 seventeen years ago. In 1891 the Chambers 
 of Commerce of Great Britain and Ireland, 
 assembled in Dublin, also passed a unanimous 
 resolution in favour of closer trade relations 
 within the Empire. In March of the same 
 year Mr Foster, Minister of Finance in Canada, 
 declared absolutely in the Dominion House 
 against a Zollverein with the United States 
 and for a preferential arrangement between 
 Great Britain and the other colonies. The 
 next month a resolution was carried in the 
 Canadian Parliament, in which Canada ex- 
 pressed her readiness to reduce her tariff on 
 British manufactures if England would recipro- 
 cate. In the same year a special commission 
 of the City of London branch of the Imperial 
 Federation League reported its decision that 
 any form of federation must include a customs 
 union. 
 
 The movement thus established spread 
 rapidly. It is scarcely possible or necessary to 
 follow it henceforth in detail. In 1894 the 
 
86 BRITISH FISCAL HISTORY 
 
 Ottawa Colonial Conference declared for pre- 
 ferential trade within the Empire. Again in 
 1897 there passed through the streets of 
 London in glittering pageantry representatives 
 of every state of the Empire, in every clime 
 and in every stage of development. Since the 
 Jubilee of 1887 the movement for an Imperial 
 Customs Union had greatly advanced in 
 strength and definition. It was now generally 
 recognised throughout the colonies that 
 economic must precede political consolidation, 
 and this view has found growing favour with 
 English Imperialists. Mr Chamberlain was of 
 course fully alive to the significance of the 
 movement and in general sympathy with its 
 objects. But he was still impressed with the 
 many difficulties which the idea of closer 
 commercial union must encounter. In his 
 opening speech at the Conference of 1897, he 
 sketched the history of the German Zollverein, 
 which began as a commercial convention but 
 "finally made possible and encouraged the 
 ultimate union of the Empire." It began 
 indeed with such a system of preferential trade 
 between the various states as it was now pro- 
 posed to establish between England and her 
 
THE NEW IMPERIALISM 87 
 
 colonies. Mr Chamberlain admitted, however, 
 that " the fiscal arrangements of the different 
 colonies differed so much among themselves, 
 and all differ so much from those of the 
 mother-country, that it would be a matter 
 of the greatest complication and difficulty 
 to arrive at any conclusion which would 
 unite us commercially in the same sense in 
 which the Zollverein united the Empire of 
 Germany." 
 
 The colonies were, however, resolved to do 
 their part in the movement, but, before they 
 could begin, the mother- country must free 
 them from the shackles imposed by the Belgian 
 and German treaties. On the last occasion 
 when this request was made it was refused. 
 Canada had, however, begun to modify her 
 tariff with a view to a preferential policy, and 
 it was impossible, if there had been any desire, 
 to resist the unanimous will of the colonies. 
 The following resolutions were passed at the 
 conference : — 
 
 " 1. That the premiers of the self-govern- 
 ing colonies unanimously and earnestly 
 recommend the denunciation at the earliest 
 convenient time of any treaties which now 
 
88 BRITISH FISCAL HISTORY 
 
 hamper commercial relations between 
 Great Britain and her colonies. 
 
 " 2. That in the hope of improved trade 
 
 relations between the mother- country and 
 
 her colonies, the premiers present undertake 
 
 to confer with their colleagues with a view 
 
 to seeing whether such a result can be 
 
 properly secured by preference given by 
 
 the colonies to the products of the United 
 
 Kingdom." 
 
 The treaties were at once denounced, and 
 
 Canada proceeded to accord preferences to 
 
 British imports, thus inaugurating what must 
 
 be regarded as a new epoch in our Imperial 
 
 history. The following were the steps in her 
 
 application of the policy of preference : — 
 
 "From 23rd April 1897 a reduction of 
 one-eighth of the customs duty for goods 
 produced by and imported direct from 
 countries whose customs treatment of 
 Canadian produce was on the whole as 
 favourable as that accorded by the 
 Canadian tariff to the produce of those 
 countries. From 1st July 1898 this pre- 
 ference increased to one-fourth. From 
 1st August 1898 the preference confined 
 
THE NEW IMPERIALISM 89 
 
 to goods produced in and imported direct 
 from the United Kingdom and British 
 colonies and possessions." 1 From 1st July 
 1900 the preference increased from one- 
 quarter to one- third." 
 Mr Chamberlain again presided at the 
 Coronation Conference of 1902. Again he 
 manifested his sympathy with the new move- 
 ment, and again dwelt upon lets and hindrances. 
 He expressed some disappointment with the 
 English trade benefit from the Canadian 
 preference. Since then, however, the ad- 
 vantage, as indicated by trade statistics, has 
 become clearly manifest. 2 The results of the 
 Conference, so far as regards commercial 
 relations, were expressed in the following 
 resolutions : — 
 
 Preferential Trade 
 1. "That this Conference recognises that 
 
 1 The Belgian and German treaties ceased from 30th July 1898. 
 
 2 The effect of the Canadian preferences has been to convert 
 a steadily decreasing into a rapidly advancing export trade from 
 the United Kingdom to Canada. For the seven years before 
 the preference (1890- 1897) the figures of British exports to 
 Canada as given in the Statistical Abstract (1905) fell from 
 ,£6,827,023 to ,£5,171,851 ; for the seven years after the 
 preference (1898- 1904) the figures rose from .£5,838,000 to 
 £10,624,221. 
 
90 BRITISH FISCAL HISTORY 
 
 the principle of preferential trade between 
 the United Kingdom and His Majesty's 
 Dominions beyond the seas would stimulate 
 and facilitate mutual commercial intercourse, 
 and would, by promoting the development of 
 the resources and industries of the several 
 parts, strengthen the Empire." 
 
 Free Trade not Practicable 
 
 2. "That this Conference recognises that, 
 in the present circumstances of the colonies, 
 it is not practicable to adopt a general system 
 of free trade as between the mother-country 
 and the British Dominions beyond the seas." 
 
 A Preference in the Colonies for 
 British Goods 
 
 3. " That with a view, however, to pro- 
 moting the increase of trade within the 
 Empire, it is desirable that those colonies 
 which have not already adopted such a policy 
 should, as far as their circumstances permit, 
 give substantial preferential treatment to the 
 products and manufactures of the United 
 Kingdom." 
 
THE NEW IMPERIALISM 91 
 
 A Preference in the Mother -Country for 
 Colonial Products 
 
 4. "That the Prime Ministers of the 
 colonies respectfully urge on His Majesty's 
 Government the expediency of granting in the 
 United Kingdom preferential treatment to the 
 products and manufactures of the colonies 
 either by exemption from, or reduction of the 
 duties now or hereafter imposed." 
 
 Action by the Colonies 
 
 5. " That the Prime Ministers present at 
 the Conference undertake to submit to their 
 respective Governments at the earliest oppor- 
 tunity the principle of the third resolution 
 above given, and to request them to take 
 such measures as may be necessary to give 
 effect to it." 
 
 The representatives of the colonies are 
 prepared to recommend to their respective 
 Parliaments preferential treatment of British 
 goods on the following lines : — 
 
 Canada. — The existing preference of 33^ 
 per cent., and an additional preference on 
 lists of selected articles — 
 
92 BRITISH FISCAL HISTORY 
 
 (a) By further reducing the duties in 
 
 favour of the United Kingdom ; 
 
 (b) By raising the duties against 
 
 foreign imports ; 
 
 (c) By imposing duties on certain 
 
 foreign imports now on the free list. 
 
 Australia. — Preferential treatment not 
 yet defined as to nature or extent. 
 
 New Zealand. — A general preference by 
 a 10 per cent, all round reduction of the 
 present duty on British manufactured 
 goods, or an equivalent in respect of 
 lists of selected articles on the lines pro- 
 posed by Canada, namely : — 
 
 (a) By further reducing the duties in 
 
 favour of the United Kingdom ; 
 
 (b) By raising the duties against 
 
 foreign imports ; 
 
 (c) By imposing duties on certain 
 
 foreign imports now on the free 
 
 list. 
 The Cape and Natal. — A preference of 
 25 per cent, or its equivalent on dutiable 
 goods, other than specially-rated articles, 
 to be given by increasing the duties on 
 foreign imports. 
 
THE NEW IMPERIALISM 93 
 
 We shall see shortly how the colonies have 
 fulfilled these undertakings of 1902. 
 
 Meantime England had been guilty of a 
 slight lapse from rigid free trade orthodoxy. 
 By the War Budget of 1902 the old registra- 
 tion duty of one shilling per quarter on im- 
 ported wheat was revived. This duty produced 
 over two million pounds of annual revenue 
 without raising the price of bread in this 
 country. The friends of Imperial trade pre- 
 ference had hoped that, once imposed, it might 
 be employed by England as a method of 
 responding in some slight degree to the ad- 
 vantages she was now receiving in the colonial 
 market. The presence of Mr Chamberlain in 
 the Cabinet encouraged these hopes. There 
 was some surprise, therefore, when Mr Ritchie 
 announced in his Budget Speech of 1903 that 
 the duty was to be wholly repealed, on foreign 
 as well as on colonial wheat. This was a 
 striking assertion of fiscal correctitude, for the 
 colonies had definitely requested that the duty 
 should be repealed on colonial wheat alone. 
 About the same moment Mr Fielding, the 
 Dominion Minister of Finance, was introducing 
 his Budget in Canada. He regretted, he said, 
 
94 BRITISH FISCAL HISTORY 
 
 that the Imperial Government were disposed 
 to think the Canadian preference of only- 
 sentimental value. He believed its material 
 value was greater to British trade interests than 
 was admitted. Canada had offered, at the 
 instance of Mr Chamberlain, a further pre- 
 ference, on condition that a preference in the 
 British markets was granted in return. 
 Canada must allow a reasonable time for the 
 British Government to consider this proposal, 
 especially as Mr Chamberlain had been neces- 
 sarily away from England. If eventually 
 Great Britain should not grant the prefer- 
 ence and did not regard the Canadian prefer- 
 ence as being of material value, there could 
 not be any complaint from the British side if 
 the Canadian preference was modified or with- 
 drawn. 
 
 Mr Ritchie's action was the more remarkable 
 because of the controversy which had arisen 
 between England and Canada on the one hand 
 and Germany on the other with regard to the 
 fiscal policy of the British colonies. 
 
 The general question of the commercial 
 relations between England and her colonies 
 was indeed brought into the forefront of 
 
THE NEW IMPERIALISM 95 
 
 English politics by the action of Germany in 
 retaliating upon Canada for the advantages 
 the Dominion had accorded to the home 
 country. Early in 1898 the Canadian Tariff 
 Act was amended, and after 1st August of 
 that year the preferences were expressly con- 
 fined to the United Kingdom and to certain 
 British colonies " whose customs tariff was 
 on the whole as favourable to Canada as the 
 British preferential tariff was to such colony or 
 possession." The ordinary Canadian tariff 
 applied, of course, without distinction to all 
 foreign countries. But though the Anglo- 
 German treaty had been denounced, Germany 
 was not content with that position of equality 
 with all other foreign countries in the Canadian 
 market. She insisted upon enjoying the same 
 privileges as the mother-country herself. She 
 therefore took action in June of that year, 
 when the Bundesrath expressly excepted 
 Canada from the most-favoured treatment, 
 which she continued to Great Britain and the 
 other British colonies. Canada drew the 
 attention of Her Majesty's Government to the 
 action of the Bundesrath, and a letter of protest 
 was addressed to the Colonial Office by Lord 
 
96 BRITISH FISCAL HISTORY 
 
 Strathcona, the High Commissioner of the 
 Dominion. This letter pointed out that 
 Canada accorded to Germany exactly the 
 same privileges as to other foreign powers and 
 expressed a hope that Germany would consent 
 to reverse her decision. The protest was 
 forwarded to our Ambassador in Berlin, who 
 communicated it to the German Government. 
 Baron von Bichthofen, in a note of 5th August, 
 maintained that the action of Germany was 
 reasonable, inasmuch as Canada had deprived 
 her of privileges which she had enjoyed for 
 more than thirty years. In the autumn of 
 1901 Canada discussed the question again 
 with the German Consul at Montreal, but 
 without any satisfactory result. Having thus 
 patiently waited for five years, the Canadian 
 Government decided that it could no longer 
 submit quietly to the injury inflicted by the 
 German policy on Canadian trade. It was 
 therefore provided by Act 15 of 1903 that 
 when any foreign country treated imports 
 from Canada less favourably than imports 
 from other countries, a surtax amounting to 
 one-third of the duty under the general tariff 
 should be imposed. This clause, though 
 
THE NEW IMPERIALISM 97 
 
 general in its terms, applied only to Germany, 
 and took effect on 17th April 1903. 
 
 On the same day Sir Frank Lascelles, our 
 Ambassador in Berlin, reported to the Marquis 
 of Lansdowne that Baron von Richthofen 
 had informed him that as the South African 
 colonies had also decided to give a preference 
 on British goods, it was a matter for considera- 
 tion whether Germany should not exclude 
 them as well as Canada from most-favoured- 
 nation treatment ; and that if the Australian 
 colonies should also give such favours to the 
 mother- country, it would become difficult to 
 obtain the consent of the Reichstag to the 
 continuance of most-favoured treatment even 
 to England herself. A few days later Baron 
 von Richthofen repeated this threat of retalia- 
 tion on England in a conversation with our 
 Ambassador. These matters were brought 
 before the notice of the German Government in 
 a dispatch of the Marquis of Lansdowne, dated 
 20th June 1903, which concluded thus: — 
 
 " Should the German Government 
 persist in the attitude which they had 
 taken up in this matter and extend to the 
 products of other British colonies and even 
 
98 BRITISH FISCAL HISTORY 
 
 to those of the United Kingdom, whose 
 tariff is at the present moment based upon 
 the most liberal principles, the discrimina- 
 tion which they have enforced against 
 Canada, a very wide and serious issue must 
 inevitably be raised, involving the fiscal 
 relations of this country and the German 
 Empire." 
 The feature of these proceedings which 
 most impressed the British public was the 
 determined intrusion of the German Govern- 
 ment into the family affairs of the British 
 Empire. This intrusion seemed the more 
 impertinent because Germany, as we have 
 seen, was exactly on the footing of other 
 foreign countries, and because England, who 
 was thus threatened with punishment for the 
 filial conduct of her daughter states, imported 
 German goods free, while Germany herself 
 imposed on British goods an extremely high 
 protective tariff. The action of Germany was, 
 however, the natural result of that economic 
 disintegration of the Empire whose course 
 we have briefly reviewed. There was some 
 reason in Baron von Richthofen's rejoinder 
 to Lord Lansdowne that "if the English 
 
THE NEW IMPERIALISM 99 
 
 colonies are to be in position to follow out 
 their own customs policy, other countries must 
 be allowed to treat them as separate customs 
 territories." Such a position, it is true, in- 
 volved a slight inconsistency ; for, as Lord 
 Lansdowne pointed out, if the British colonies 
 are to be regarded as independent fiscal units, 
 it would be unreasonable to penalise England 
 for any commercial policy they might adopt. 
 These proceedings, however, suggested several 
 important questions to the English people. 
 Would they be willing, if Germany carried 
 out her threats, to defend this country and the 
 colonies, though the defence should involve 
 some departure from their existing free trade 
 policy? Did they really value those pre- 
 ferences in the colonial ports whose significance 
 was understood and whose results were 
 dreaded by their German rivals ? Were they 
 ready to perpetuate those advantages by 
 meeting the colonial aspirations towards closer 
 trade relations within the Empire? The 
 German Government had unconsciously started 
 a movement in this country which was to 
 bring under review the entire fiscal policy of 
 the British system. 
 
100 BRITISH FISCAL HISTORY 
 
 It was in May 1903 that Mr Chamberlain 
 announced to the country his definite pro- 
 posals of fiscal reform. As Secretary of State 
 for the Colonies he had done immense service 
 in developing the sense of common Imperial 
 citizenship, and he had been in full sympathy 
 at least with the objects of the colonies in 
 promoting closer trade relations among them- 
 selves and with the mother- country. Hither- 
 to, however, he had dwelt upon the great 
 practical difficulties arising from the fiscal 
 system of this country, which must confront 
 any such scheme of Imperial consolidation. 
 But the progress of events, the action of 
 v^~ Germany, the development of the policy in 
 the colonies, perhaps his own visit to South 
 Africa at the end of 1902, served among other 
 influences to mature a resolution which must 
 have been gradually forming in his mind. As 
 the colonies proceeded to fulfil the promises 
 they had made at the Conference of 1902, a 
 situation was arising to which no Imperially- 
 minded statesman could remain indifferent. 
 The question for this country was : Could our 
 long-established fiscal system be so modified 
 as to enable us to reciprocate the colonial 
 
THE NEW IMPERIALISM 101 
 
 preferences and thus secure the full advantage 
 of an Imperial trade partnership, without 
 imposing an additional and appreciable burden 
 in this country on the shoulders least able 
 to bear it ? From both a political and 
 an economic point of view it seemed highly 
 desirable, if not indispensable, that this 
 country should join the movement. Closer 
 trade relations were the road by which the 
 colonies had deliberately elected to advance 
 towards closer political relations. The ever- 
 intensifying competition in international trade 
 compelled this country to consider any feasible 
 project for securing to our manufacturers a 
 privileged share in the expanding over-sea 
 trade of the British colonies and possessions. 
 Trade statistics showed that while our exports 
 of manufactured goods to foreign countries 
 had for many years been declining, such 
 exportations to the markets of the Empire 
 had enormously increased. A glance at pages 
 32 and 33 of the Blue Book (Cd. 1761) 
 published in August 1903 will show the trade 
 conditions on which fiscal reformers largely 
 based their case. The time seemed to have 
 come for a complete re- consideration of our 
 
102 BRITISH FISCAL HISTORY 
 
 fiscal system. A measure of protection against 
 unfair foreign competition appeared to many 
 as necessary as a constructive policy of trade 
 union with the colonies. Mr Chamberlain 
 endeavoured to meet both these requirements 
 in the policy which he commended to the 
 nation. He proposed to levy a tax of two 
 shillings per quarter on foreign corn (except 
 maize) ; a corresponding duty on flour ; a 
 5 per cent, duty on foreign meat (except 
 bacon) ; a 5 per cent, duty on foreign dairy 
 produce. Remissions of duty, to compensate 
 for any rise in price of these food products, were 
 to be granted on tea, sugar, coffee, and cocoa. 
 There was also to be a preference for colonial 
 wines and fruits, and a 10 per cent, duty 
 on competitive foreign manufactures. Raw 
 materials were left untouched, in accordance 
 with the sound principle applied under all 
 existing protective systems. 
 
 Mr Chamberlain commended his policy 
 to his fellow-countrymen in a series of memor- 
 able speeches which appealed not only to the 
 material interests but to the wider Imperial 
 instincts of the people. His proposals proved 
 to be a highly disturbing influence in our party 
 
THE NEW IMPERIALISM 103 
 
 life, though Lord Rosebery's prediction that 
 the issue would cut diagonally across both 
 parties was not quite fulfilled. The Liberal 
 Imperialists declared almost in a body against 
 the new policy, so that the Liberal party 
 remained largely unaffected. But a strong 
 body of Unionists, including many influential 
 leaders, were rigidly opposed to any change 
 whatever in our fiscal policy. Mr Chamberlain 
 resigned his position as Secretary of State for 
 the Colonies in the autumn of 1903, so as to 
 be unimpeded in his work as "a missionary 
 of empire." Mr Balfour, as leader of the 
 Unionist party, was somewhat less free to 
 throw himself unreservedly into the new 
 movement, though he never failed by voice 
 and pen to express his belief in the necessity 
 for a change in our fiscal system. The letter 
 which he wrote to Mr Chamberlain on 
 14th February 1906 marks the final adoption 
 of fiscal reform as part of the official policy 
 of the Unionist party. He said : — 
 
 " My own opinion, which 1 believe is 
 shared by the great majority of the Unionist 
 party, may be briefly summarised as 
 follows : T hold that fiscal reform is and 
 
104 BRITISH FISCAL HISTORY 
 
 must remain the first constructive work 
 of the Unionist party ; that the objects 
 of such reform are to secure more equal 
 terms of competition for British trade and 
 closer commercial union with the colonies ; 
 that while it is at present unnecessary to 
 prescribe the exact methods by which these 
 objects are to be attained and inexpedient 
 to permit differences of opinion as to these 
 methods to divide the party, though other 
 methods may be possible, the establishment 
 of a moderate general tariff on manu- 
 factured goods, not imposed for the purpose 
 of raising prices or giving artificial protec- 
 tion against legitimate competition, and 
 the imposition of a small duty on foreign 
 corn are not in principle objectionable and 
 should be adopted if shown to be necessary 
 for the attainment of the ends in view or 
 for purposes of revenue." 
 The General Election of January 1906 
 resulted in an overwhelming Parliamentary 
 defeat for the Unionist party. Fiscal re- 
 formers had not expected a popular assent 
 to the new policy at the first appeal to the 
 country, and the issue was undoubtedly 
 
THE NEW IMPERIALISM 105 
 
 confused by other questions and influences. 
 In spite of a large majority in Parliament, 
 three-eighths of the electorate had declared for 
 a change in our fiscal system. The colonies 
 cannot fail to be impressed with the fact that 
 the cause of Imperial trade-preference has 
 been definitely adopted by one of the two 
 great parties in this country. There are many 
 evidences that the ideals and maxims of the 
 free trade era are rapidly losing their hold on 
 the minds of the democracy. The continued 
 severity of foreign tariffs, the pressing need 
 in this country for new sources of revenue, the 
 gradual development of the system of prefer- 
 ence within the Empire, the Imperial sentiment 
 of the democracy — all these influences are 
 tending to undermine the principles which 
 have so long determined our fiscal system. 
 
 A complete statement of the preferences 
 now given by the colonies to the trade of the 
 United Kingdom will be found in the Ap- 
 pendix. Australia as yet affords no advan- 
 tages to the mother-country. In 1906 the 
 Deakin Ministry made proposals for the 
 establishment of reciprocal trade not only 
 with the United Kingdom but with South 
 
106 BRITISH FISCAL HISTORY 
 
 Africa and New Zealand. The Federal 
 Customs duties were to be raised all round, 
 so that some rebate might be allowed 
 on British produce and manufacture. The 
 labour party insisted that this advantage 
 should be given only to British goods shipped 
 in British vessels which employed exclusively 
 white labour. These proposals were incon- 
 sistent with certain existing treaties of com- 
 merce and navigation, and the Bill as carried 
 through the Commonwealth Parliament was 
 vetoed by the Imperial Government. 1 There 
 can be no doubt, however, that Australia will 
 before long redeem the promises she made 
 at the Conference of 1902. No definite 
 scheme has yet been suggested for the associa- 
 tion of India and the Crown Colonies with 
 an Imperial Zollverein. Sir Roper Leth- 
 
 1 " Compatriot," in the National Review (November 1906), 
 thus comments on the Australian proposals : — 
 
 " The Australian Commonwealth has raised a question similar 
 to that we had to face when we denounced the German and 
 Belgian treaties in order to make way for Canadian Preference. 
 The Commonwealth wishes to give us a Preference not only 
 with regard to goods but also shipping, a Preference which is 
 equivalent to a considerable subsidy to our mercantile marine. 
 This proposal is at present blocked by twelve treaties of com- 
 merce and navigation which make such Preferences impossible. 
 Of these twelve treaties, half were concluded before the colonies 
 
THE NEW IMPERIALISM 107 
 
 bridge, in a little book on India and Imperial 
 Preference, has indicated the great prospective 
 advantages to be gained by the inclusion of 
 the vast population and the immense material 
 resources of our Indian Empire. " With the 
 adoption of Imperial preference," writes this 
 high authority, " the United Kingdom and 
 India alone will constitute the greatest, richest, 
 and most populous fiscal unit and free trade 
 area that the world has ever seen — far more 
 important in all these aspects than the United 
 States of America, which now form the biggest 
 area possessing internal free trade and fiscal 
 unity." 
 
 Almost more important than the preferences 
 given to the United Kingdom is the network 
 of commercial treaties already established 
 among the colonies themselves. South Africa, 
 
 had the power to say whether they would accede or not ; to the 
 others some of the Australian colonies acceded, of their own free 
 will, while other colonies declined to accede. The treaties 
 clearly prevent the Australian Commonwealth from acting in the 
 way it desires ; they would also stand in the way of similar 
 action on our part. But the question of playing fast and loose 
 with treaty obligations does not arise, for all the treaties may be 
 denounced after due notice except one, that with Morocco, in 
 which mutual consent is necessary. The other countries con- 
 cerned are Austria- Hungary, Colombia, Egypt, Greece, Honduras, 
 Italy, Japan, Liberia, Paraguay, Russia, and San Salvador." 
 
108 BRITISH FISCAL HISTORY 
 
 Canada, and New Zealand are linked together 
 in a mutually advantageous partnership, and 
 Australia and South Africa have come to a 
 similar agreement. It should be noticed that 
 all these arrangements are based on the prin- 
 ciple of reciprocity. No colony grants any 
 concession to another except in return for 
 some corresponding advantage. The prefer- 
 ences as between the colonies and the United 
 Kingdom are still one-sided, this country 
 refusing to make any departure from her 
 present fiscal policy. 
 
 It is possible that the Canadian preferences 
 to British trade may be injuriously affected by 
 the Dominion Budget of 1906. A three-fold 
 tariff scheme is established, an intermediate 
 scale of duties being interposed between the 
 general and the British preferential tariff. 
 Foreign powers prepared to give reciprocal 
 advantages may be placed on this intermediate 
 scale, which ranges about 10 per cent, below 
 the general tariff. Any power so acting will 
 diminish pro tanto the British preference. 
 The Canadian Gazette compares the two 
 systems by the following table : — 
 
THE NEW IMPERIALISM 109 
 
 Old Tariff. New Tariff. 
 
 On German / A prohibitive \ 
 
 Goods 1 surtax. I ^ i 
 
 f Duties averag- l Dutie * averaging 31^ per 
 
 On U.S.A Goods I ing 35 per cent * 
 
 ( cent. J 
 
 On British Goods | Duties averag : Dutie f avera S in & 2 3 Per 
 
 ( ing 23 per cent. cent. 
 
 The 12 per cent. M pull ' which the United 
 Kingdom enjoyed on the old tariff would thus 
 be reduced to 8J per cent, over any foreign 
 power which took advantage of the new 
 Canadian offer. It is probable that Germany 
 will negotiate for a position which would not 
 only free her from the surtax, but give her a 
 substantial share of the British preference. 
 In the United States there is always a strong 
 body of opinion in favour of reciprocity with 
 Canada. It is by no means impossible that 
 unless England is willing to negotiate on her 
 own behalf and afford some preference for 
 Canadian over foreign produce, she may lose 
 those advantages in Canadian ports which 
 have become indispensable to her manufactures. 
 
 The British democracy cannot defer its 
 decision on this question indefinitely. The 
 political and economic objects which have 
 prompted the colonies in this movement 
 cannot be realised unless the United Kingdom 
 
110 BRITISH FISCAL HISTORY 
 
 comes in and completes the circle. A con- 
 clusive refusal on the part of this country to 
 meet the colonies would discourage or even 
 destroy the whole idea of closer trade relations 
 between the states of the Empire and probably 
 break up the arrangements already made. If 
 England thinks that in spite of intensifying 
 competition she can continue to base her power 
 and prosperity on the ideal of cosmopolitan 
 trade, and that she has no advantage to gain 
 from a firmly established trade-union within 
 the Empire which she has created, she will of 
 course adhere to her present fiscal policy. 
 But if she decides that the opportunities of 
 securing closer political relations within the 
 Empire and of re-establishing her material 
 power on an assured and ever-widening basis 
 are not to be neglected, she will make such a 
 moderate departure from her fiscal system as 
 those objects may require. The decision will be 
 full of destiny for the future of the Empire. It 
 is hoped that this little book may help to indicate 
 the organic relation between the current ques- 
 tion and our Imperial history, and the tremen- 
 dous issues involved in a decision which now rests 
 wholly with the people of the home country. 
 
APPENDIX 
 
 EXISTING COLONIAL PREFERENCES 
 TO THE MOTHER-COUNTRY 
 
 (From Blue Book, Cd. 3195) 
 
 New Zealand 
 
 Preferential Trade. — Under the New Zealand " Pre- 
 ferential and Reciprocal Trade Act, 1903" (No. 78 of 
 1903), which came into force on 16th November 1903, 
 it is provided that on the undermentioned articles, not 
 being the produce or manufacture of some part of the 
 British Dominions, the following duties are imposed : — 
 Cement : — An additional amount equal to the amount 
 payable under the General Tariff. 
 
 Basket and wicker ware, n.o.e., not being ^ 
 furniture ....... 
 
 Bicycles, tricycles, and the like vehicles ; also 
 finished or partly finished or machined 
 parts of same, n.o.e., including weldless 
 steel tubing cut to short lengths 
 Boots, shoes, and slippers, n.o.e. ; goloshes, 
 clogs, patterns, vamps, uppers, and laces . 
 Candles ....... 
 
 Carriages, carts, drays, wagons, and peram- 
 bulators, and wheels for the same 
 China, procelain, and Parian ware 
 
 v^lOCKS ....... 
 
112 
 
 BRITISH FISCAL HISTORY 
 
 Cordage and rope, n.o.e. 
 
 Cream of tartar ..... 
 
 Earthenware, stoneware, and brownware 
 
 Fancy goods and toys .... 
 
 Firearms, all kinds .... 
 
 Fish, potted and preserved . 
 
 Furniture and cabinet ware, n.o.e., and other 
 than iron. ..... 
 
 Glass, crown, sheet, and common window 
 
 Glassware ; also plate glass, and glass 
 polished, coloured, and other kinds, n.o.e. 
 globes and chimneys for lamps . 
 
 Hardware, ironmongery, and hollow-ware 
 
 Hops ....... 
 
 Iron nails ...... 
 
 Iron pipes and fittings for same, including 
 main cocks ..... 
 
 Lamps, lanterns, and lamp wick . 
 
 Musical instruments, viz., pianos . 
 
 Paperhangings ..... 
 
 Paper, wrappings — viz., blue candle, glazed 
 cap, glazed casings, small-hand, lumber- 
 hand, and tissue ..... 
 
 Paper, wrapping, other kinds, including 
 brown, cartridge, and sugar papers. 
 
 Plate and plated ware ..... 
 
 Pumps and other apparatus for raising water 
 
 Bicycles and tricycles, fittings for, viz., 
 rubber tyres, pneumatic tyres, outside 
 covers, and inner tubes ; rubber and cork 
 handles, and pedal rubbers ; also drop- 
 forgings and stampings, ball-bearings, 
 weldless steel tube in full lengths, rims, 
 forks and spokes in the rough . 
 
 c 
 
 3 
 O 
 
 S 
 ote' 
 
 <U fc-H 
 
 u _ 
 
 <u 
 
 <v 
 
 o <u 
 
 ° c 
 c 3 
 
 g £ 
 
 * s * PL 
 
 <3 *** 
 R 
 
 :•§ 
 
 IS 
 
 C 
 < 
 
 ^ 
 « 
 
 u k 
 a; q 
 
 O 
 
 1 When the produce or manufacture of some part of the 
 British Dominions these articles are free of duty on importation 
 into New Zealand, 
 
APPENDIX 113 
 
 Gas engines and hammers, and oil-engines 
 Gumboots ...... 
 
 Iron and steel cordage .... 
 
 Iron, plain black sheet, rod, bolt, bar and 
 
 l )ltlti' ...... 
 
 Printing-paper ..... 
 Rails for railways and tramways . 
 Sailcloth, canvas, and unbleached double 
 
 warped duck ..... 
 Surgical and dental instruments and appliances ) 
 
 
 C 55 
 
 O 
 
 The Preferential and Reciprocal Trade Act of 1903 
 further provides, with respect to all the above-mentioned 
 articles, that — 
 
 (a) The full duty shall be payable unless there is 
 
 produced to the Collector an invoice of the 
 goods having written or printed thereon a 
 certificate signed by the sender or consignor, 
 in such form as may be prescribed by the 
 Commissioner, stating that the goods are 
 bona fide the produce or manufacture of 
 some part of the British Dominions named 
 in the certificate. 
 
 (b) No such invoice shall relate to any goods other 
 
 than those to which the certificate refers. 
 
 (r) Where such goods are imported in packages, 
 such packages shall not contain any goods 
 other than those specified in the invoice, 
 and if any other goods are found in any such 
 package they shall be forfeited. 
 
 (d) Every importer or agent of an importer who 
 produces any invoice or certificate under this 
 
 1 When the produce or manufacture of some part of the 
 British Dominions these articles are free of duty on importation 
 into New Zealand. 
 
 8 
 
114 BRITISH FISCAL HISTORY 
 
 section knowing the same to be false in any 
 particular is liable to a fine not exceeding 
 i?100, or, at the option of the Commissioner, 
 to treble the value of the goods specified in 
 such invoice. 
 
 In the form of certificate prescribed to be used for 
 entry of goods under the Preferential Tariff from and 
 after 1st April 1905 (Commissioner's Order No. 744 of 
 21st June 1904), it is laid down that a substantial 
 portion of the labour of one or more of the countries 
 entitled to preferential treatment must have entered 
 into the production of every manufactured article to 
 the extent in each article of not less than one-fourth of 
 its value in its present condition, ready for export to 
 New Zealand. 
 
 In the case of the non-production of the prescribed 
 certificate (owing to accident) at the time of the im- 
 portation of the goods which the Collector has reason 
 to believe are the bona fide produce of the British 
 Dominions, the full amount of duty paid may be held 
 on deposit by the Collector at the port of importa- 
 tion, and returned to the importer if the invoice with 
 the certificate is produced within six months from the 
 date of payment of the deposit (Order in Council of 
 7th November 1904). 
 
 It is required that goods imported into New Zealand 
 shall be accompanied by the original manufacturer's 
 invoice. 
 
 [Note. — Information as to the exact form of the cer- 
 tificates of origin required for the entry of goods under 
 the New Zealand Preferential Tariff may be obtained 
 at the office of the Commercial Intelligence Branch 
 of the Board of Trade, 73 Basinghall Street, E.C.] 
 
 The following provisions are also enacted in the Act 
 No. 78 of 1903, respecting Reciprocal Trade relations 
 with any part of the British Dominions and with 
 Foreign Countries : — 
 
APPENDIX 115 
 
 Reciprocal Trade. — Where any country being part 
 of the British Dominions reduces or abolishes, or pro- 
 poses to reduce or abolish, the duty on any product or 
 manufacture of New Zealand, the Governor may enter 
 into an agreement with that country to reduce or abolish 
 the duty on any article or articles the produce or 
 manufacture of such country to an extent that the 
 estimated revenue, so remitted, shall equal as nearly 
 as possible the estimated revenue remitted by that 
 country : 
 
 Provided that no such agreement shall have effect 
 until ratified by the Parliament of New Zealand. 
 
 Where any country not being part of the British 
 Dominions reduces or abolishes, or proposes to reduce 
 or abolish, the duty on any product or manufacture 
 of New Zealand, the Governor may, subject to or by 
 virtue of a treaty with His Majesty, negotiate with 
 such country for an agreement with that country to 
 reduce or abolish the duty on any article or articles 
 the produce or manufacture of such country to an 
 extent that the estimated revenue, so remitted, shall 
 equal as nearly as possible the estimated revenue re- 
 mitted by that country : 
 
 Provided that such agreement shall not have effect 
 or be operative until ratified by an Act of the Parlia- 
 ment of New Zealand. 
 
 South Africa 
 
 Preferential Tariff. — Under Article III. of the South 
 African Customs Union Convention of 1906, which 
 came into force on 25th May of that year, 1 a rebate of 
 
 1 The imposition of the new duties on match splints, timber, 
 galvanised, etc., sheets, skimmed condensed milk and second- 
 hand clothing, was, in some colonies, suspended for a time, but 
 the duties on the above articles were all in force on ist October 
 1906, except in the case of match splints imported in all colonies 
 (except the Cape), the duties on which are to come into force on 
 1st January 1907. 
 
116 BRITISH FISCAL HISTORY 
 
 the duties is allowed on articles, the growth, produce, 
 or manufacture of the 
 
 United Kingdom 
 
 imported into the Union for consumption therein. 
 The rebates granted are as follows : — 
 
 (a) On certain goods charged with specific rates of 
 
 duty, a rebate of varying amount, for which, 
 see under the various articles in the body of 
 this return. 
 [Such rebate is equivalent to about 3 per cent. 
 ad valorem.} 
 
 (b) On goods liable to mixed rates of duty (i.e., 
 
 specific and ad valorem rates), and also on 
 
 goods liable to ad valorem rates of duty, a 
 
 rebate of 3 per cent, ad valorem. 1 
 
 Provided that the manufactured goods and articles 
 
 in respect of which such rebate as aforesaid is granted 
 
 are bona fide the manufactures of the United Kingdom, 
 
 and that in the event of any question arising as to 
 
 whether any goods or articles are entitled to any such 
 
 rebate, the decision of the Minister or other Executive 
 
 Officer in whom the control of the Customs Department 
 
 immediately concerned is vested, shall be final. 
 
 Article IV. provides that a similar rebate to that 
 granted to goods imported from the United Kingdom 
 under like provisions, may be granted to goods and 
 articles, the growth, produce, or manufacture of any 
 British Colony, Protectorate, or Possession, granting 
 equivalent reciprocal privileges to the Colonies and 
 Territories belonging to the South African Customs 
 Union. 
 
 Under the above Article, the same rebate is granted 
 to goods, the growth, produce, or manufacture of the 
 
 1 Consequently, goods subject to a duty of 15 per cent, ad 
 valorem would, if entitled to rebate, be liable to a duty of 12 
 per cent, ad valorem only. 
 
APPENDIX 117 
 
 Dominion of Canada. 
 
 By Article V. it is provided that every contracting 
 party to the Customs Union Convention shall collect 
 the Customs duties payable upon all goods imported 
 within its borders from outside the limits of the Union 
 for removal from the collecting Colony or Territory 
 into any other part of the Union, and recover for and 
 pay over to the Government of the Colony or Territory 
 into which the goods are so removed for consumption, 
 the duties so collected by it on such goods, subject to 
 a deduction of 5 per cent, of the duty collected. 
 
 The Customs Regulations provide that no rebate 
 will be allowed unless there is produced on importa- 
 tion, for the purpose of proving that the goods are 
 bona fide the manufacture of the United Kingdom or 
 the Dominion of Canada, to the proper Customs 
 Officers — - 
 
 (a) A signed statement by the suppliers on the 
 
 invoice, or 
 
 (b) A certificate of origin duly signed by the 
 
 manufacturers, or 
 
 (c) Such other or further evidence as may be 
 
 required. 
 
 In order to obtain the rebate of duty on manu- 
 factured articles, not less than one-fourth of their value, 
 in the condition ready for export to South Africa, 
 must have entered in their production in the United 
 Kingdom, or the Dominion of Canada. 
 
 [Note. — Information as to the exact form of the 
 certificates of origin required for the entry of goods 
 under the South African Customs Union Preferential 
 Tariff' may be obtained at the Office of the Commercial 
 Intelligence Branch of the Board of Trade, 73 Basing- 
 hall Street, E.C.] 
 
 The Customs Union Convention of 1903 was super- 
 seded by the Convention of 1906, which came into 
 
118 BRITISH FISCAL HISTORY 
 
 force on 25th May 1906. The new Convention was 
 agreed upon at a Conference held at Pietermaritzburg 
 in March of that year by representatives of the Govern- 
 ments of — 
 
 Cape of Good Hope. Orange River Colony. 
 
 Natal. Transvaal, and 
 
 Southern Rhodesia. 
 
 At the same time provision was made for the ad- 
 mission to the Union of — 
 
 Basutoland. Swaziland, and 
 
 Bechuanaland Protectorate. Barotzeland (North- 
 
 western Rhodesia). 
 
 , Canada 
 
 British Preferential Tariff (a) (b). — Under the pro- 
 visions of the British Preferential Tariff Act ,37 of 1898, 
 as amended by Act 15 of 1900 : — 
 
 " Articles which are the growth, produce, or manu- 
 facture of any of the following countries may, when 
 imported direct (c) into Canada from any of such 
 countries, be entered for duty or taken out of ware- 
 house for consumption in Canada at a reduction of one- 
 third of the duty " :— 
 
 (a) The British Preferential Tariff Act 37 of 1898 superseded 
 the Reciprocal Tariff on 1st August 1898, and the reduction of 
 one-fourth of the duty allowed under Act 37 of 1898 was, under 
 Act 15 of 1900, increased to one-third as from 1st July 1900. 
 
 {b) Under Act 11 of 1904, which came into force on 8th June 
 of that year, certain fixed duties are imposed on woollen fabrics 
 (except blankets, flannels, bed-comforters and counterpanes), 
 cordage and twine, table-ware of china, etc., and common window 
 glass, when imported under the British Preferential Tariff. 
 
 (c) Goods imported in transit through an intermediate country 
 will be taken as imported direct on production of bill of lading, 
 etc., proving that the goods were originally intended for Canada. 
 
APPENDIX 119 
 
 The United Kingdom. Leeward Islands — con- 
 
 Bermuda. tinned 
 
 British West Indies : St Kitt's and Nevis. 
 
 Bahamas. Montserrat. 
 
 Jamaica. Dominica. 
 
 Turk's and Caicos Trinidad and Tobago. 
 
 Islands. British Guiana. 
 
 Windward Islands : British India. 
 
 Grenada. Ceylon. 
 
 St Vincent. Straits Settlements. 
 
 St Lucia. New Zealand (from 26th 
 
 Barbadoes. February 1904). 
 
 Leeward Islands : South African Customs 
 
 Virgin Islands. Union (from 1st July 
 
 Antigua. 1904). 
 
 Also any other British Colony or Possession the 
 Customs Tariff of which is, on the whole, as favourable 
 to Canada as the British Preferential Tariff, above 
 referred to, is to such Colony or Possession. 
 
 Provided, however, that manufactured articles to be 
 admitted under such preferential tariff shall be bona 
 fide the manufactures of a country or countries entitled 
 to the benefits of such tariff, and that such benefits 
 shall not extend to the importation of articles into the 
 production of which there has not entered a substantial 
 portion of the labour of such countries. Any question 
 arising as to any article being entitled to such benefits, 
 shall be decided by the Minister of Customs, whose 
 decision shall be final. 
 
 The British Preferential Tariff provides that the 
 above reduction of duty shall not apply to wines, malt 
 liquors, spirits, spirituous liquors, liquid medicines, 
 and articles containing alcohol ; tobacco, cigars, and 
 cigarettes ; and further that the reduction shall only 
 apply to refined sugar when evidence, satisfactory to 
 the Minister of Customs, is furnished that such refined 
 
120 BRITISH FISCAL HISTORY 
 
 sugar has been manufactured wholly from raw sugar 
 produced in the British Colonies or Possessions. 
 
 The Customs Regulations provide that, in order to 
 obtain rebate under the British Preferential Tariff, 
 exporters must furnish a separate invoice to the 
 Customs Authorities for goods entered under this 
 tariff, and that the certificates of origin required must 
 be written, printed, or stamped on the invoice. It is 
 laid down in the certificates prescribed that not less 
 than one-fourth of the value of every article, in its 
 condition ready for export to Canada, must have 
 entered into the production of every manufactured 
 article in the countries entitled to preferential treat- 
 ment. 
 
 The same reduction (of one-third of the duty) is 
 allowed upon raw sugar when imported direct from any 
 British Colony or Possession. 
 
 [Note. — Information as to the exact form of the 
 certificates of origin required for the entry of goods 
 under the British Preferential Tariff of the Dominion 
 of Canada may be obtained at the office of the Com- 
 mercial Intelligence Branch of the Board of Trade, 
 73 Basinghall Street, E.C.] 
 
 Surtax on German Goods. — It is also provided by 
 Act 15 of 1903, which came into force on 17th April 
 1903, that— 
 
 " Articles which are the growth, produce, or manu- 
 facture of any foreign country which treats imports 
 from Canada less favourably than from other countries 
 may be subject to a surtax equal to one-third of the 
 duty " imposed under the Canadian General Tariff. 
 
 The Minister of Customs has decided, under powers 
 granted him by the above Act, that the goods of 
 the following country are subject to the surtax in 
 Canada : — 
 
INDEX 
 
 123 
 
 German trade-competition, 49. 
 Germany and Canada, 94, 95, 96, 
 
 97. 109. 
 Gilbert, Humphrey, 3. 
 Gladstone, Mr, 37, 46, 47, 48, 52, 
 
 53. . 
 Gladstonian Budget of i860, 47, 48. 
 
 Grenville, 23. 
 
 Grey, Earl, 69. 
 
 Grey, Sir George, 77. 
 
 Griffiths, Sir Samuel, 80. 
 
 Hayes, 5. 
 
 Henry the Eighth, 2. 
 Hofmeyer, Mr, 80. 
 Huskisson, 37-47. 
 
 Independence. Declaration of, 30, 
 
 India and preference, 106. 
 
 Jubilee of 1887, 76, 80. 
 of 1897, 86. 
 
 Kimberley, Lord, 67, 68, 71. 
 
 Laisserfaire, 34, 41, 46, 57, 74. 
 Lansdowne, Marquis of, 56, 97, 98, 
 
 99- 
 Lascelles, Sir Frank, 97. 
 Lethbridge, Sir Roper, 106, 107. 
 Liberal Imperialists, 103. 
 London merchants, petition of, 37. 
 Lowe, Robert, 46, 53. 
 
 Macdonald, Sir John, 62. 
 M'Kinley tariff, 61. 
 Mallet, Mr Bernard, 54. 
 
 Sir Louis, 51, 53. 
 Manchester Chamber of Commerce 
 
 resolution, 83. 
 Manchester School, 19, 46, 49, 74, 
 
 Martin, Richard, 1. 
 Maryland, 6. 
 
 Massachusetts Company, 6. 
 Mercantile or old colonial system, 
 
 12, 13, 14, 18, 19. 
 Morley, Mr, 52. 
 
 National Review, 106. 
 
 Navigation Acts, 9, 12, 17, 18, 21, 
 
 3°> 3 1 . 32, 33, 38, 4i, 47- 
 New England, 31. 
 
 New Zealand, 92, 106, 108. 
 
 Ottawa Colonial Conference, 86. 
 
 Peckham and Hayes, 4. 
 Peel, 43-46, 53. 
 Petition, West Indian, 31. 
 Philadelphian Congress, 20. 
 Pilgrim Fathers, 6. 
 Pitt, 31, 44, 45- 
 Political Essays , 27. 
 Pownall, Sir Thomas, 16, 23, 25. 
 Preference, 41, 42, 45, 46, 47, 57, 
 58, 59, 85, 87, 88, 89, 90, 91. 
 
 Richthofen, Baron von, 96, 97, 98. 
 Ritchie, Mr, 93, 94. 
 Rosebery, Lord, 103. 
 
 Salisbury, Lord, 55, 81, 82. 
 
 Schmoller, 19. 
 
 Scobell, 9. 
 
 Self government, colonial, era of 
 
 grant, 62, 66. 
 Shelburne, 45. 
 Sheffield, Lord, 32. 
 Ships, trade, and colonies, 6, 49. 
 Smith, Adam, 17, 23. 
 Smith, Sydney, 35. 
 South Africa, 106, 107, 108. 
 Statutes, 14, 38, 39, 65, 96. 
 Strathcona, Lord, 96. 
 
 Tory party, 31, 44, 45- 
 
 United Empire Trade League, 82. 
 United States, 49, 58, 75. 
 
 Virginia, 1, 2, 6. 
 
 Walpole, Robert, 15. 
 
 West Indies, 6, 9, n, 31, 47. 
 
 Whigs, 31. 
 
 Zollverein, German, 86, 87. 
 
 
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 TARIFF QUESTION 
 
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