yM^\. \^ ^kl'^^ r FOEEiaJSr BOUNTIES ON THE EXPORTATION OF SUGAR. A. LETTER Of Dec. 2nd, 1880, feom THE BOARD OF TRADE TOGETHER WITH A. REPLY Of Dec. 16, 1880, from the WORKMEN'S NATIONAL EXECUTIYE FOR THE ABOLITION OF rOHEION SUGAR BOUNTIES. MANCHESTER : J. ROBERTS, PRINTER, CHAPEL STREET, SALFORD. 1880. /e LETTER FROM THE BOARD OF TRADE. *'To Messrs. J". Monteith, President, and Thomas M. Kelly, Assistant-General Secretary, "Workmen's JS'ational Executive Committee for the Abolition of tlie Foreign Sugar Bounties. " Gentlemen, 1. "Mr. Farrer's letter of the 29th of October has already- conveyed to you the opinion of Her Majesty's Government that the proposal to impose specific duties in this country, in order to countervail the bounties given in certain foreign countries, on sugar or other articles, cannot be entertained ; but the communi- cation in which you make this proposal, and the reports which you and others have forwarded of meetings in the provinces and else- where on the same subject, show that considerable misapprehension exists as to the real issues involved, and the Board of Trade think it right, under these circumstances, to give at some length the reasons which led Her Majesty's Government to adopt the above conclusion. 2. " The imposition of a duty for any purposes other than those of revenue would be an exception to the practice which has pre- vailed in this country since the policy of free trade was adopted — a policy on the benefits of which, especially to the working classes, it is unnecessary to dwell. REPLY OF THE WORKMEN'S COMMITTEE. To the Hon. Evelyn Ashley, M.P., Secretary to the Board of Trade. Sir, In acknowledging with thanks the receipt of your letter of the 2nd inst., we desire respectfully to reply to the statements and arguments contained in its twenty-four paragraphs. 1 . "We quite agree with your first statement, that considerable misapprehension exists as to the real issues involved in the question of countervailing the effect of foreign export bounties, but we believe that a careful examination of the resolutions passed at the public meetings to which you allude, and of the arguments by wmch those resolutions were supported, will show that the misapprehension is not on our part. We further maintain that the evidence taken before the Select Committee on Sugar Industries has resulted, as shown in the report of that Committee, in conclusions diametrically opposed to those now adopted by the Board of Trade. We would, moreover, respectfully point out that opinions of no mean authority have been given in favour of the conclusions of the Select Committee, and have received the support of members of Parliament on both sides of the House, who have stated their views very distinctly in favour of the policy recom- mended by the Select Committee, and have shown by the clearness of their arguments that they in no way misapprehend the real issues involved. 2. It is clearly pointed out in the evidence before the Select Committee that several countervailing duties, such as those on spirits and transparent soap, are imposed in order to secure equality of competition for British producers on British markets. Such countervailing duties are evidently not levied for revenue purposes. Even if this were not so, it is manifest that bounties are an exceptional evil, and therefore require exceptional treat- ment. But apart from this, it may be pointed out that the LETTEK FEOM THE BOAED OF TRADE. 3. "During the last 40 years there has been an unexampled advance in the prosperity of the country. Capital has accumulated, pauperism has diminished, wages have increased, the hours of labour in most employments have diminished, the cost of almost every article of food and necessity has been lessened, and the general welfare of the masses has been promoted. 4. ''The strongest justification must, therefore, be found for any exception to the policy which has promoted such beneficial results. REPLY OP THE WORKMEN'S COMMITTEE. 5 effect of a duty to countervail a bounty is to treat tlie bounty as revenue, thus accepting it for the benefit of the whole nation and to the injury of none, instead of allowing it to be received by the consumers of a particular commodity, to the immediate loss of an important industry and to the ultimate injury of the consumers themselves. 3. We are fully alive to the great benefits of free trade. It is precisely because we desire to maintain them that we ask that they shall be extended to the sugar trade, and that the pernicious effect of export bounties shall be arrested. Mr. Giffen very truly pointed out, in his evidence before the Select Committee, that bounties might be met by a reduction of wages and profits. This necessary result of an infringement of free trade directly counteracts the beneficent effects which you describe. Under a system involving an artificial reduction of wages and profits, we cannot expect to see capital and wages increase, or pauperism and the hours of labour diminish. IN^or can we believe that the aggressive protection of a foreign export bounty, entailing the ultimate dependence of the consumer on an artificial and uncertain, because bounty-fed supply — an effect already apparent in the case of sugar — can result in ''the lessening of the cost of the article " to which it is applied. From every point of view, therefore, whether of the consumer or the producer, it is evident that acquiescence in such a protective system as that of a foreign export bounty cannot be consistent with the maintenance of the benefits of free trade. 4. The proof given by Mr. Giffen that the benefits of free trade are destroyed by foreign export bounties leads to the inevit- able conclusion that the removal of the bounty, however attained, will restore those benefits of free trade which cannot exist so long as the bounties continue. It is the bounty, and the acquiescence of this country in its injurious effects, that constitute the exception to the beneficent policy you have described, and not, as you would sug- gest, the proposal to countervail the bounty, — a proposal which the Spectator describes as '' not only consistent with free trade, but posi- tively conceived in the interests of free trade." For these reasons, which have been stated with sufficient frequency and distinctness. LETTEE FEOM THE BOARD OP TRADE. 5. " The Board of Trade cannot discover in the evidence which has hitherto been produced any such justification, either in the character or extent of the alleged injury to the interests which you especially represent, while they are convinced that there are no arguments for a countervailing duty which do not involve the advocacy of a system of protection to trade, and the proposed remedy would bring with it evils greater than any which it is intended to remove. 6. " With regard to the alleged injury to trade, there are at the present time two causes of complaint which are perfectly distinct and inconsistent with one another. 7. *' It is asserted in the first place that the bounties given by Austria and Germany on the production of raw beet sugar are REPLY OF !1«HE WOEKMEN's COMMITTEE. 7 which have been accepted as sound by the best authorities, and have stood the test of the closest examination by a Select Committee of the House of Commons, we most emphatically deny that any further justification is necessary for a proposal which, far from being any departure from the policy of free trade, is simply a means of restoring, by the removal of the bounty, that free trade which its existence has destroyed, and should, therefore, at once be accepted by Her Majesty's Government as in accordance with sound commercial policy. 5. In direct contradiction to this accepted view of the subject, the Board of Trade ''are convinced that there are no arguments for a countervailing duty which do not involve the advocacy of a system of protection to trade." Bounties destroy free trade ; their removal restores free trade ; and yet, in the opinion of the Board of Trade, there is no argument for the removal of bounties which does not involve the advocacy of protection. The removal of foreign bounties by treaty was advocated by Mr. Gladstone, in 1866, as establishing a freedom of trade beneficial not only to the producer but to the consumer. The Board of Trade should show in what way the removal of a bounty by a countervailing duty differs from its removal by treaty, before they assume that such a mode of removing it would involve protection. The evils which would accompany such a mode of removing a bounty are not defined by the Board of Trade, and no evidence of any such evils was given before the Select Committee. 6. Great efforts were made before the Select Committee, by Mr. Giffen and those members of the Committee who opposed the demand for the removal of foreign export bounties, to make it appear that the complaints of British refiners and colonial planters were inconsistent. A reference to the evidence would at once show how unfounded was this assumption, and how promptly and repeatedly it was disproved. The Board of Trade, nevertheless, do not hesitate to repeat the suggestion, to assume its correctness, and entirely to ignore the evidence taken by the Committee and its report in reference to this point. 7 and 8. The answers are very simple. In the first place, raw sugar cheapened by bounties makes all other raw sugar equally O LETTEE FROM THE BOAED OF TEADE. calculated to reduce the price of raw sugar below its natural level, and thereby check the production and injure the interests of those who are engaged in the growth of cane sugar in our colonies ; and in the second place, it is stated that the bounty given by France, Holland, and other countries on the export of refined sugar also reduces the price of refined sugar below its natural level, and so, has injured, and may in the end destroy, the English business of sugar-refining. 8. '^But the Board of Trade desire to point out that it is obviously the interest of the British sugar refiner to obtain his raw sugar at the cheapest possible rate, and therefore that, to remedy the complaint of the "West Indian sugar grower by imposing a duty on raw beet sugar from Austria and Germany would create a new disadvantage for the English refiner, whose export trade would be destroyed, and whose home trade could only be retained by the aid of protective duties levied to the prejudice of the English consumer. REPLY OF THE WORKMEN'S COMMITTEE. 9 cheap, and this universally cheap raw sugar is equally cheap to all, whether the buyers of it be refiners receiving a bounty or refiners receiving no bounty. Under such circumstances it is clear that no benefit accrues to the one refiner which is not equally enjoyed by the other, so far as the price of the raw sugar is concerned. Secondly, it is to the interest of the British refiner, contending against bounty -fed refined sugar, that all bounties, whether on raw or refined, should be abolished, because the main objection urged by Prance, at the International Conferences of 1876 and 1877, against the acceptance of a Conven- tion for the abolition of bounties, was the fact that bounties were given in other countries which refused to become parties to the Convention. Thirdly, the British refiners suffer from the export bounty in Austria just as our colonial producers do, the bounty being on refined no less than on raw sugar, the exports of refined sugar from Austria having, therefore, increased even more rapidly than those of raw sugar. These two points have been frequently brought to the attention of Her Majesty's Government, and were repeated in a letter to the Board of Trade only a few weeks ago. The British refiners have a further and very strong community of interest with our West India colonies in the fact that it is much to their disadvantage that the supply of colonial or other tropical sugar to this country should be reduced, and that British consumers should become more and more dependent on the Continental bounty- fed supplies. The increasing dependence of the consumer on the bounty-fed sources of supply also causes violent market fluctuations, which are always harassing to legitimate industry. The best proof, however, that it is to the interest of British refiners that bounties on all sugars, raw and refined, should cease, is that they have for a long time unanimously and most strenuously endeavoured to obtain that result. The British loaf-sugar refiners, who have hitherto been affected by foreign bounties on refined sugar, have for many years possessed no export trade, the foreign export bounties having necessarily deprived them of it. As to their home trade being maintained by protective duties, they would resist such a proposal as one most detrimental to their interests. 10 LETTER FROM THE BOARD OP TRADE. 9. '' The question at once arises whether, under any circum- stances, it would be right to ask the consumers of the mother country to forego cheap sugar, and to change their commercial policy, in order to encourage an industiy with which their con- nexion is so indirect. To do so would be to make the possession of the colonies a burden and not a gain to this country, which would then have to bear taxes which would not be imposed if we had no colonies. REPLY OF THE WORKMEN S COMMITTEE. 11 9. The exact meaning of the next paragraph in your letter is not quite apparent ; but we presume it to mean that, having assumed that British refiners have no interest in the abolition of boimties, — a curious assumption in the face of facts and blue books, — '' the question at once arises whether, under any circumstances, it would be right to ask the consumers of the mother country to forego cheap sugar, and to change their commercial policy, in order to encourage an industry with which their connection is so indirect." This is a most important statement, requiring careful examination. The question is easily answered. For eighteen years the commercial policy of this country has not only been to ask consumers to forego artificially cheapened sugar but to compel them to do so whether they desire it or not, by endeavouring to procure the abolition of the bounties by treaty. And this has been done on the sound and indisputable ground that freedom of trade is as much to the interest of the consumer as to that of the producer. In demanding a removal of these bounties, therefore, no change in the commercial policy of this country is asked for. On the contrary, we insist that the policy hitherto pursued with regard to export bounties shall be maintained, and we have no less an authority than that of our present Prime Minister for the soundness of that policy, — an authority to which the experience of the last eighteen years has given the strongest confirmation. So much for this portion of the paragraph, which is, however, only a minor part of this remarkable statement. For it appears from what immediately follows that the Board of Trade, in speaking of ''an industry svith which our connection is so indirect," refer to our colonial possessions. This is indeed a new doctrine, and one which would not, we venture to believe, readily receive the assent of Parliament or the country. We have always been taught that our colonies were one of the greatest glories of this country, and that justice to them was as essential as justice to ourselves. More especially is this the case with our "West India possessions, which are practically governed by our Colonial Office, and we trust that that office will not be found to concur with the opinion of the Board of Trade, that artificially cheapened sugar at home must override every consideration of justice or fair 12 LETTER FROM THE BOARD OF TRADE. 10. ''Eut, independently of these general considerations, I have further to point out, for your information, that the production of cane sugar in the colonies has not diminished under the influence of competition with beetroot sugar, but has, on the contrary, increased during the period in which the bounty system has prevailed. The average of the production of the principle "West India colonies was for the five years ending 1869 about 166,000 tons ; for the next five years about 181,000 tons ; and for the four years ending 1878 about 200,000 tons. It should also be remem- bered that many of the colonies themselves, at the present time, place an export duty upon their own sugar, and in the face of this impediment, created by themselves, it seems unreasonable that they should ask the consumers of the mother country to give up REPLY OF THE WOEKMEN's COMMITTEE. 13 ealing to the colonies. Does the Board of Trade forget that whatever cheapness may result from foreign bounties, the same cheapness is necessarily exacted by the British consumer on every pound of sugar from our colonies ? This is nothing more nor less than a tax levied on our colonial producers, in order that British consumers may enjoy for a time the very questionable benefit of artificially cheapened sugar. The Board of Trade consider that to deprive British consumers of this benefit, — which the Govern- ment have been trying to do for eighteen years, — ''would be to make the possession of the colonies a burden and not a gain to this country, which would then have to bear taxes which would not be imposed if we had no colonies." From this it appears that the Board of Trade seriously believe that a duty to countervail a bounty is a tax on this country, instead of being, as is so self- eiddent and has been so frequently explained, a tax levied on and paid by the foreign bounties, — a securing of the bounty for the benefit of the revenue, and therefore to the positive relief of the taxpayer. Moreover, it is not on the ground of benefit to the colonies that the policy and principle of countervailing i, bounty is advocated and defended, but on the much broader ground of the interest of the consumer, to whom freedom of competition is abso- lutely essential, if he is to secure a permanent supply of every article at that price at which alone he can expect permanently to obtain it, namely, its natural free-trade value. 10. There are two distinct branches to the subject of export bounties. First, the question of principle ; secondly, that of the injury inflicted. The most important is the question of principle. If it be shown that foreign export bounties are an injury, not a benefit, to this country, and that to countervail them would be " not only consistent with free trade, but positively conceived in the interests of free trade," then the second question becomes of minor importance ; although, of course, it would be quite legiti- mate to urge that, though the policy of countervailing a bounty be right in principle, it might not be expedient in some particular instance. The Board of Trade, however, confuse the two questions. Leaving the question of principle unanswered, they pass abruptly to that of the magnitude of the interests involved and the extent 14 LETTER FROM THE BOARD OF TRADE. the cheap beetroot sugar they now get and to accept in place of it the cane-grown sugar burdened by duties imposed solely for the advantage of the colonies. KEPLY OF THE WORKMEN'S COMMITTEE. 15 of the injury already sustained. It is sufficient to refer to the report of the minority of the Select Committee to show that the injury already inflicted on cane sugar production is more extensive than the Board of Trade would make it appear. That report points out that the production of cane sugar has actually decreased during the period 1873 to 1878, which is really the period affected, to the extent of 142,000 tons, notwithstanding an immense increase in consumption. The production of beetroot sugar during the same period, as is well known, increased enormously. The figures quoted by the Board of Trade, as to the West India crops, are incorrect and quite erroneous. The fact is that the average crop for the three years ending 1873, the period when the bounties affecting raw sugar became important, was 246,580 tons, while during the three years ending 1879, the average crop was 242,186 tons. The beetroot crop for the same periods was 966,000 tons in the first and 1,361,000 tons in the second, — and the crop for the current season is estimated at 1,670,000 tons. Thus it appears that while the production of bounty-fed sugar increased by 395,000 tons, that of West India decreased about 4,000 tons. This sufficiently bears out the report of the Select Committee, which says that " the development of the sugar-growing industry of our colonies has been checked and their future prosperity endangered," and thus gives a very different complexion to the case to that which the Board of Trade desire to put upon it. They quite ignore, however, the real gist of our colonial producers' complaint, which is that if bounties continue and prices are thereby necessarily forced down periodically, as in 1876 and 1879, to a level considerably below the cost of production, it will be im- possible to maintain their competition. The Board of Trade next refer to the export duty levied on sugar in some British colonies. "We are informed that this is in no way a duty in the ordinary sense of the word, but simply a mode of raising contributions from planters to defray the cost of the immigration of the labour employed on their estates, and is, therefore, merely a part of the cost of labour. This is a far-fetched argument of the Board of Trade, and one which has no connection with the subject in discussion. We have the comfort of 16 LETTER FROM THE BOARD OF TRADE. 11. ''As regards the case of tlie English refiners, this has, until very recently, been confined to the complaint that the manufacture of loaf sugar has been practically destroyed by the bounties of France and Holland. 12. *' The whole business of sugar refining has not diminished, but increased, in the last 16 years, during which complaint is made of the bounties ; the quantity of raw sugar used in refining in the IJnited Kingdom having risen from about 400,000 tons in 1864 to about 700,000 tons in 1879. EEPLY OF THE WORKMEN'S COMMITTEE. 17 knowing that a sound case would not have recourse to such reasoning. It appears, however, to give another opportunity for a reference to the cheap beetroot sugar now enjoyed by the British consumer, to which we will again reply that the enjoyment of artificially cheapened beetroot sugar at the expense of the conti- nental taxpayers involves, so long as our colonies endeavour to compete, the enjoyment of artificially cheapened cane sugar at the expense of our colonial producers. All we ask is that the bounty should be taken away, and that we may then see who can produce the cheapest sugar. 11. The case of the British refiners has, as you say, ''been confined to the complaint that the manufacture of loaf sugar was practically destroyed by the bounties of France and Holland." Is this, as the word " confined" would seem to imply, a small complaint ? Until recent years the sugar refining industry of this country consisted entirely in the production of loaf sugar. It was an important industry, and gave employment to a larger number of men than the present manufacture of moist sugar^ Is it a small matter that this, or any other British industry, should be *' practically destroyed" at the caprice of foreign States ? Again, we venture to say that the country would not endorse such a doctrine. 12. That a new and totally distinct industry has, from entirely other causes, and in order to supply a want formerly met by raw sugar, sprung up during recent years, appears to us to have no bearing on the removal of the loaf sugar industry from British to foreign ports by means of export bounties. That the imports of raw sugar into the United Kingdom have largely increased no one disputes. The great increase in the consumption of sugar caused by the abolition of the sugar duties, and its increased use in breweries and for cattle feeding are, of course, the main causes of this, and it is one of the strongest points in our complaint that at the very time when such an impetus was given to the sugar trade in this country, the great British industry of loaf sugar refining was being gradually undermined, and has almost entirely disappeared, owing to the insidious attack of foreign export bounties, an attack which 18 LETTER FEOM THE BOARD OF TEADE. 13. '^TheEoard of Trade do not admit that the chief or sole cause of the decline of loaf sugar refining in this country has been foreign bounties ; but the grievance, whatever it may be, has in any case been largely met by the recent reduction of the French sugar duties, which has done away almost, if not entirely, with the bounty upon this description of sugar. 14. '^ It is now alleged, however, that a bounty will remain on the refining of moist sugar, but the extent of the supposed bounty is still a matter of controversy. Assuming, however, for the sake of argument, that it exists, and that its tendency is to injure the English sugar-refining trade, it is important to bear in mind that the interest threatened is only small in comparison with the vast extent of English industrial undertakings. The whole of the fixed capital engaged in all kinds of sugar refining in the United Kingdom is only about £2,000,000, while the workmen employed in it number from 4,000 to 5,000 only, of whom by far the largest proportion are unskilled labourers, and may therefore, without difficulty, find employment in other business if their present occupation should be taken away from them. REPLY OF THE WOEKMEN S COMMITTEE. 19 must inevitably have the same result if directed against other industries. 13. The Board of Trade, nevertheless, ''do not admit that the chief or sole cause of the decline of loaf sugar refining in this country has been foreign bounties." They do not state what other causes have led to that result, nor was any other cause elicited in evidence before the Select Committee. This attempt to shift the manifest and necessary effect of bounties to some other imagin- ary cause is a curious way of meeting a demand based on the un- disputed fact of the existence of bounties and on sound deductions from that fact, and is one which would not, we venture to think, recommend itself on further consideration to the judgment of Her Majesty's Government. It is true that the French bounty on loaf sugar has been somewhat reduced with the reduction of duty in France, but the British loaf sugar refiners have still to contend against considerable bounties in France, Belgium, and Austria, and against a heavy bounty in Holland, the latest details in connection with which have recently been communicated to the Board of Trade but are now completely ignored by them. From these* it appears that the Dutch bounty has gradually increased and is now very heavy, and that the Dutch refiners are therefore enabled to sell loaf sugar in British Markets veiy much below cost price. 14. A very complete statement as to the natui'e of the new bounty on moist sugar, established by the recent change of legisla- tion in France, has lately been furnished to the Board of Trade. This statement has not been called in question, nor can it be, as it rests on simple facts and calculations which cannot be disputed. It is not correct, therefore, to say that " the extent of the supposed bounty is still a matter of controversy." But here again the Board of Trade shelter themselves as a last resource under the plea that, after all, it is a matter of veiy little moment whether the people of this country are supplied with the 900,000 tons of sugar which they annually consume by British or foreign producers. Again we declare our belief that the country would not support such a view, but would emphatically refuse to acquiesce in a fiscal artifice by which so enormous an industry as that of the supply of sugar to this country should, by unfair means, be monopolised by 20 LETTER PEOM THE BOAKD OF TEADE. 15. ^' On the other hand, according to the statements of the sugar refiners themselves, the immediate gain which the consumers of the country obtain by means of the bounties is not less than a faithing per pound. This is equal to from two to two and a half millions per annum, or more in each year than the total fixed capital engaged in the whole trade. 16. ^*If such a boon is really given to the sugar consumers of this country by the legislation of other countries, it is one not lightly to be rejected ; and it is clear that if the Government were. REPLY OF THE WORKMEN'S COMMITTEE. 21 foreigners. Also, we again point out that the magnitude of the interests involved does not affect the question of principle. We desire, however, most emplatically to protest against the statement that the workmen employed in the sugar refining industry number from 4000 to 5000 only. We maintain that more than this number are directly employed even in one of the ports. But the number engaged in the refineries is no guide to the number of workmen dependent on the refining industry. There are few industries which have so many allied branches, such as engineers, copper- smiths, boiler makers, charcoal manufacturers, the various industries connected with the raising and distribution of coal, dock warehouse- men and dock porters, coopers and hoop benders, every branch of carriers and lightermen, paper makers, filter-bag manufacturers, every industry connected with the supply of gas and water, rope and twine makers, carpenters, plumbers, bricklayers, — a list, in fact, which might be extended almost ad libitum^ — so that the total number dependent on this industry must be really enormous, and would be very largely increased if the home and export trade taken from us by foreign export bounties were restored. * 15. Whatever may now be, or may have been the gain to the consumer by means of the bounties, we must again call attention to the very important fact that only one-third of it is obtained in the form of bounty, the other two-thirds being extracted by means of the bounty-fed competition out of the profits and wages of those producers who receive no bounty. This cannot continue. The propor|;ion of bounty-fed sugar, which is now one third of the total imports, must constantly increase, but in proportion as it does so will the consumer become more and more dependent on the bounty-fed sources of production. This result is already becoming distinctly evident by the ^-iolent fluctuations in the sugar market. Not only is the British consumer entirely at the mercy of frequent continental speculations in sugar, but he has twice during the last four years had to pay a sudden advance of 50 per cent, owing to a deficient beetroot crop. 16. It is, therefore, evidently incorrect to speak of ''a boon given to the sugar consumers of this country by the legislation of other countries." Tor even if, as the Board of Trade assert, the 22 LETTER FEOM THE BOARD OF TRADE. in this and other similar cases, to regard the immediate interest of a special and limited class of producers, rather than that of the people in general, they would in effect be reverting to that principle of protection which has been abandoned with such signal and prosperous results for the country. 17. ^' It appears, therefore, that, whether as regards the sugar- growing interest of the West Indies or the sugar refining interests of this country, there is no such great evil arising from the present system of foreign bounties as to call for exceptional remedies. REPLY OF THE WORKMEN'S COMMITTEE. 23 gain to tlie consumer were two millions per annum, only £650,000 of this would be ''the boon received from the bounty-giving countries," while the remaining £1,350,000 would be a boon ex- tracted from the profits and wages of those producers who receive no bounty. This is a kind of boon which should be spoken of as one not to be tolerated for a moment by any free trade Government, certainly not as a boon ''not lightly to be rejected." That the boon of the foreign bounty has been rejected in every way which diplomacy could devise cannot be denied even by the Board of Trade. We now propose that it should be accepted, but in such a way as will not entail this heavy tax on unsubsidised competitors, and will never leave the consumer dependent on an artificial supply. We do not ask the Government " to regard the immediate interest of a special and limited class of producers rather than that of the people in general." We dare say that the consumers of this country, when they paid an advance of 50 per eent. on account of a deficient beetroot crop, in 1876-77 and during part of 1879, were not aware that they were paying the penalty for becoming de- pendent on foreign export bounties for their sugar. When they become alive to the fact, they will insist that Government should regard their immediate interest and remove a bounty which, while it does a gross injustice to a special and large class of producers, also deprives people in general of the benefits of free competition . The removal of an injustice, and the restoration of free competition, will not be regarded by them as " reverting to that principle of protection which has been abandoned with signal and prosperous results for the country." 17. Working men will never accept the statement that the ruin of our West India colonies and the " practical destruction" of the loaf sugar industry are "no such great evil." Nor do we believe that they would acquiesce in the destruction of free competition even if the evil it involved were shown to be small. Exceptional evils require exceptional remedies ; but we merely ask for a means of making the accepted remedy efiicacious. The Government have striven for years to obtain the abolition of bounties by treaty. They have been told by France that no treaty will be accepted till the principle of a countervailing duty is 24 LETTER FROM THE BOARD OF TRADE. 18. '' It is sometimes asserted, however, that the attack made upon the sugar interests by means of bounties is only the beginning and prelude to attacks upon more important industries, and that, one by one, the trades of the country will be attacked and ruined. Such a fear, however, is entirely chimerical ; any Grovernment which should pursue such a course would soon find itself bankrupt, and the frequent changes which have been made, both in Austria and France, in order to diminish or do away with the bounties show that already foreign Governments regard this policy with some uneasiness, and are well aware that it is not capable of indefinite extension. 19. ''But, even if the Board of Trade were able to accept all the statements which have been made as to the effect of the bounties and the probability of their continuance, it would still be impos- sible for them to admit as a satisfactory remedy the imposition of a countervailing duty. The objections to this course as a permanent arrangement are obvious. Such a duty would be an attempt to protect trade, and like all other protective measures, would neces- sarily fail of its end, while producing new evils. KEPLY OF TKE WOEKMEN's COMMITTEE. 25 admitted. We have ourselves been told by M. Leon Say, formerly French Minister of Finance, and now President of the French Senate, that we must not expect the abolition of the French bounty until freedom of competition is restored on British markets for unsubsidised producers. We therefore ask the Government to admit a principle which has been shown by the best authorities to be sound, and which was never shaken dimng the searching investigation of the Select Committee. 18. Though it has never been asserted that the attack on the sugar interests is only the prelude to attacks upon more important industries, there can be no doubt that other industries are equally liable to similar attacks. That the prospect of such attacks is not '* chimerical" is shown by the serious proposition of the French Grovernment to grant heavy bounties on the construction and running of ships. And those who are opposed to any action being taken to remove bounties on sugar have been asked how they would deal with the question if other and still larger industries were attacked, because whatever course would be a right one to adopt in the more serious case would be equally right in principle whatever the magnitude of the interest concerned. 19. The Board of Trade now revert to the question of principle, on which we are glad to have the opportunity of joining issue with them. They say that a duty to countervail a bounty *' would be an attempt to protect trade." This we most emphatically deny. The Board of Trade, in making this assertion, entirely ignore everything that has been said or written on this question, and disregard both the report of the Select Committee and the evidence on which it is founded. A duty to countervail a bounty would restore freedom of competition by removing the bounty fi'om the market and placing competitors in the exact position they would be in if there were no bounty. Protection to trade has an exactly contrary meaning to this, and an exactly contrary result. It destroys freedom of competition by giving one competitor an artificial advantage over another. This is the result of a protective duty. It is also the result of an export bounty. The removal of a protective duty and the imposition of 26 LETTER FROM THE BOARD OF TRADE. 20. "It has been clearly shown, for instance, that it would be impossible to settle a countervailing duty which should exactly compensate for the bounty. The amount of the bounty is differ- ently stated by different authorities, and is extremely difficult of accurate computation. It varies on different qualities, and in different countries, and it varies in different years. Consequently, any fixed duty, if sufficient to countervail the highest bounty given, must be excessive, and, to that extent, pure protection as regards all the others. In any case, such a duty would establish an advantage in favour of one country as against another, while, on the other hand, the objections to a duty regulated so as exactly to countervail every case of a foreign bounty are admitted, even by the advocates of countervailing duties, to be insuperable. 21. "Moreover, the acceptance of the principle contended for, of countervailing bounties by duties, would carry us one step further to the theory of reciprocity, and lead us to the imposition of retaliatory protective duties. But this is not all. The bounties on sugar, so far as they exist at all, are direct and obvious bribes by a foreign Government to a particular trade ; but there are many other cases in which the bounty, though less obvious, is equally certain and effective, and in which retaliation, if adopted in the case of sugar, might be demanded with'equal justice. For instance, Prance, for the benefit of her paper-makers, imposed an export duty on rags, but we did not the less on that account admit French paper free. Many countries have given, and apparently will give, subsidies to particular lines of their own steamers, and we have not on that account subjected them to additional taxation. The United States and Canada have improved their communica- tions at the public expense, have freed navigation from tolls, have encouraged emigration and settlement, and have made and are making free grants of land ; and have given other advantages for the making of railways into their agricultural territories. These proceedings are as certain in their effect as, if less direct than. REPLY OF THE WOEKMEN's COMMITTEE. 27 a countervailing duty are, therefore, identical in their results, namely, the restoration of free trade. 20. In support of the assertion that a duty to countervail a hounty is protection, the Board of Trade point out that it would be difficult to settle a countervailing duty which should exactly com- pensate the hounty. "We fail to see the connection between the two subjects, but we may refer the Board to the evidence before the Select Committee, in which they will find that it was the unani- mous opinion of the witnesses that a duty low enough not to exceed any bounty would be sufficient to bring about the abolition of bounties. The Board of Trade, in asserting that a countervailing duty not in exact accord with the bounty ''would establish an advantage in favour of one country as against another," ignores the fact that it is the bounty not the countervailing duty which establishes this inequality, and that any inequality which might then exist would be trifling as compared with that created by bounties when, as now, they are unrestricted. 21. The Board of Trade believe that ''the acceptance of the principle of countervailing bounties by duties would caisy us one step further to the theory of reciprocity, and lead us to the impo- sition of retaliatory protective duties." They give no reasons for this extraordinary and paradoxical opinion, but merely state it as a dogma to be received. Though there were, both on the Com- mittee and among the witnesses, opponents of our views quite as pronounced as the Board of Trade, no such statement was ever attempted to be put forward. No such view is even hinted at in the minority report. Hitherto such wild ideas have only been found in irresponsible articles of certain hostile newspapers, where thej are naturally excusable. We need not describe what Lord Derby truly calls " the futility and folly of attempting a system of retaliation." We can only wonder how any reasonable persons can see a connection between the restoration of free competition brought about by countervailing a bounty, as already explained, and the rushing blindly into a desperate, wholesale, and perfectly useless destruction of free competition. In the one case the con- sumer benefits by the restoration of the freedom of competition, and a gross injustice to producers is removed ; in the other, whole- 28 LETTER FROM THE BOARD OP TRADE. bounties on the exportation of com would be ; yet no one has yet been heard to propose that we should on this account impose a countervailing duty on Canadian or American com. 22. ''There are other difficulties connected with this proposal to which your attention has already been called, and notably the 'most favoured nation' clause in treaties with other countries, which has been of the utmost possible advantage to this country, and which it would be disastrous in the last degree in any way to shake or undermine. REPLY OF THE WORKMEN'S COMMITTEE. 29 sale injustice is done to producers, and the consumer is greatly injured by tlie loss of free competition. Having made this startling statement, the Board of Trade change the subject rapidly, and refer to cases where they presume that causes are in operation somewhat similar to export bounties. As to the instance of the prohibition of the export of rags from France, we fail to see how that gave any artificial advantage to the exporters of French paper, since it had absolutely no effect on the price of rags throughout the rest of the world, and therefore did not enable French paper- makers to gain any advantage over our own, and could in no case have enabled them to sell paper below cost price. The instance of free grants of land is equally easily answered. Land is granted on condition that it is cultivated, or that a railroad is made through it. That is the best price that some Governments can obtain for their land ; it is, therefore, the natural value of the land. The conclusion, therefore, that 'Hhese proceedings are as certain in their effect as, if less direct than, bounties on the exportation of corn would be," has no bearing whatever upon the question. We believe that American corn is produced under perfectly natural conditions. As to the improvement of communi- cations, and the freeing of navigation from tolls, were not our own roads and bridges made for us, centuries ago, at the public expense, and has not our navigation been freed fi-om tolls in the same way ? With regard to the encouragement of immigration, while denying that it is at all analogous to the granting of export bounties, we -> maintain that its operation must be so remote as to remove it from the consideration of practical men. 22. The only advantage which can arise from a ''most favoured nation " clause is that of being placed on an equality with com- peting countries in the country with which the treaty is made. But if one of the competing countries is allowed to destroy the equality, any advantage of the favoured nation clause naturally disappears. A favoured nation clause is intended to secure like treatment for all countries coming under like conditions. What- ever may be the value of that clause it clearly tends to shake and undermine that value to be obliged, as the Spectator puts it, " by granting a favoured nation clause, to treat nations alike under 30 LETTER FKOM THE BOAED OF TRADE. 23. ''It is alleged, indeed, by those who favour such a retalia- tory policy that their object is not that the duty should continue to be permanently levied, but that it should be adopted in order to compel other countries to give up the bounty system. But while many of the above and other objections to such duties are equally valid, whether the duties are permanent or temporary, it may be pointed out that the plea of their being temporary only is precisely the argument which has been used of late years by those who have desired to retaliate by protective duties against hostile tariffs ; and the Board of Trade are unable to see that a duty imposed to countervail a bounty can be more defensible than a duty imposed to retaliate against a duty. Indeed, as regards the consumer, the difference appears to be in favour of the bounty. The foreign protective duty prevents the foreign manufacturer from exporting to England as freely and cheaply as if imports into the foreign country from England were free, but the foreign bounty enables and compels foreign manufacturers to manufacture and export their goods to England more freely and more cheaply than they would do if there were no bounty. A foreign Government, in effect, pays out of the taxes levied on its own subjects generally a part of the price which the English public would otherwise have to pay for the bounty-fed article. 24. ''To sum up, the Board of Trade are of opinion that the foreign bounties on sugar have not, up to the present time at any rate, caused any considerable disarrangement of industry, or transfer of labour or capital ; that the evils resulting from them to our producers have consequently been exaggerated, while they have BEPLY OF THE WOUKM 's COMMITTEE. 31 totally unlike circumstances, for that really means treating them not equally but unequally." Any such construction of the clause ought, in the opinion of the Select Committee, an opinion with which the Spectator heartily agrees, to be provided against in renewing our commercial treaties. Lord Granville has recently officially informed the French Government that bounties are contrary to the spirit and intention of the most favoured nation clause. If that be so, the acquiescence of our Government in an inequality which it is in their power to remove must be equally at variance with the spirit and intention of this treaty engagement. 23. Because those who are foolish enough to desire to retaliate by protective duties against hostile tariffs advance the plea that such duties would be only temporary, and because those who desire to restore free trade by countervailing export bounties maintain that the admission of the principle would be sufficient, therefore, '' the Board of Trade are unable to see that a duty imposed to countervail a bounty can be more defensible than a duty imposed to retaliate against a duty." As we have already shown that the one is exactly the opposite of the other, and have fully stated the grounds for defending the one and condemning the other, we need not repeat our arguments. We have also shown why the gift made by foreign Governments to the British public is, in its present form, injurious to the consumer as well as to the producer. The Board of Trade go on to say, "indeed, as regards the consumer, the difference appears to be in favour of the bounty;" that is, the difference between '' a duty imposed to countervail a bounty " and ''a duty imposed to retaliate against a duty." There is evidently a complete confusion of ideas here which we are unable to um'avel. 24. To sum up, we have shown, and the evidence before and report of the Select Committee completely sustain the assertion, that foreign export bounties on sugar have caused a very ''con- siderable disarrangement of industry," and are creating violent fluctuations in the sugar market, which, while they quite preclude 32 LETTER FEOM THE BOARD OF TRADE. conferred very considerable benefit on tbe consuming public ; and that the attempt to remove them by the imposition of counter- vailing duties would be inexpedient in itself, while it would at the same time invite a return to that system of retaliation and protection which the country has so resolutely and bo successfully abandoned. ^' I am, &c., " Evelyn Ashley. " Office of Committee of Privy Council for Trade, '* December 2, 1880." REPLY OF THE WORKMEN'S COMMITTEE. 33 any enterprise on the part of those producers who have to contend against an artificial subsidized competition, entail periodically a heavy loss on consumers ; that the evils resulting to producers have, therefore, not been exaggerated, and that the greater part of any temporary gain to the consuming public is obtained out of the pockets of producers who receive no bounty ; and that the admis- sion of the principle of restoring freedom of competition on British markets, in the interests of consumers no less than of producers, by countervailing the bounty, is " expedient in itself," as being the only means of carrying out the policy pursued by successive Governments for many years, of obtaining the abolition of these bounties, and that it is not a return to *' that system of retaliation aad protection which the country has so resolutely and so success- fully abandoned," but, on the contrary, a means of removing foreign protection on British markets. In conclusion we would observe that while we adhere strictly to the views always maintained by us, that foreign bounties, being a violation of the economic principle of free trade, are detrimental to the interests of the consumers, we regard with astonishment the statements contained in certain paragraphs of the Board of Trade letter, wherein they would appear to justify injustice to the few for the benefit of numbers. We believe that this doctrine which now finds favour with the Board of Trade, and which bears an obvious affinity to the Communism and Socialist doctrines advocated by certain classes abroad, has not yet corrupted the working classes of the country to which we belong. It is, therefore, with much gratification that we turn from the perusal 9f such sentiments to the opposite views expressed by the present Prime Minister, Mr. Gladstone, who, in a communication addressed to us in 1878, observes : — "My desire is that the British consumer should have both sugar and every other commodity at the lowest price at which it can be produced, without arbitrary favour to any of those engaged in the competition ; but I cannot regard with favour any cheapness which is produced by means of the concealed subsidies of a foreign State to a particular industry, and with the effect of crippling and distress- ing capitalists and workmen engaged in a lawful branch of British trade." 34 LETTER FROM THE BOARD OF TRADE. REPLY OF THE WORKMEN S COMMITTEE. 35 We have been greatly encouraged to persevere in the agitation which we have undertaken by this declaration, and by a further communication fi'om Mr. Gladstone, of the 14th April, 1879, in which he says : — " In the present state of the question, I think it my duty to await the views and intentions of Her Majesty's Government, whose duty it is to take the initiative in such a matter, involving greatly the interests both of revenue and of trade." What we claim is free trade in sugar on British markets, so that our labour and the labour in our colonies shall not be inter- fered with ; and you will excuse us if we say that we shall continue our agitation until we obtain it. AYe are, &c., (Signed) J. Monteith, President. Thomas M. Kelly, Assistant General Secretary. Workmen's National Executive Committee for the Abohtion of the Foreign Sugar Bounties, 11, Blackfriars Road, S.E., December 16, 18«0. LETTER FROM THE BOARD OF TRADE TO THE WEST INDIA COMMITTEE. *' Thomas Daniel Hill, Esq., Chairman, ''West India Committee. "Sir, "Having now considered your letters of the 12th of Angust and the 30th of September, addressed to Her Majesty's Secretary of State for Foreign Affairs, and your letters of the 19th and 22nd of October, addressed to the Board of Trade, in all of which you urge that the Government should take steps to invite a Conference of the sugar producing Powers, in accordance with the report of the Select Committee on Sugar Industries, I am directed by the Eoard of Trade to state briefly the policy which the Eoard of Trade have decided to adopt in the matter, and the grounds of their doing so. "At present, in the opinion of the Board of Trade, the effect of the alleged bounties given by foreign Governments has been to cheapen the price of sugar to the consumer in this country, while, up to this time, the general industry of sugar refining in the United Kingdom and of sugar production in the colonies has not been seriously affected, though there has been some transfer of capital and labour from one branch of sugar refining to another. As the policy of this country has been for many years to prefer the large consuming interests of the whole community to the small produc- ing interest of any single class, the Board of Trade are consequently not prepared to recommend any remonstrance to foreign Govern- ments regarding their bounties on the ground of alleged injury to the trading interests of this country. ' ' At the same time, the Board of Trade desire, for all other countries as for this country, the establishment of a policy of complete free trade, believing that, in the long run, absolute non- interference with trade, whether by bounties or protective duties, is the system most conducive to general prosperity. They are accordingly desirous to advocate its adoption by all reasonable means, even in a case like the present, where the immediate effect LETTER PROM BOARD OF TRADE TO WEST INDIA COMMITTEE. 37 of the bounties is to benefit this cotmtry at the expense of the or nations. They have, therefore, proposed to make inquiries of the Governments of sugar-producing countries whether they are will- ing to enter into negotiations or engage in an international Confer- ence for the removal of their bounties on the export of sugar, and have expressed their own willingness to co-operate with foreign Powers in the matter. ** At the same time, I am to inform you that the Board of Trade can in no case assent to the imposition of countervailing duties on the import of sugar from countries which give bounties, and to enclose herewith a copy of a letter which has been addressed to the Workmen's Committee for the Abolition of Sugar Bounties on the subject. — I am, &c.. Evelyn Ashley. " Office of Committee of Privy Council for Trade, " December 2, 1880." EEPLY OF THE WEST INDIA COMMITTEE. '' The Hon. Evelyn Ashley, Board of Trade. ''Sir, " I have the honour to acknowledge the receipt of your letter of the 2nd inst. in reply to several communications addressed to Her Majesty's Government on the sugar bounty question by the "West India Committee. "You state that, 'in the opinion of the Board of Trade, the effect of the alleged bounties given by foreign Governments has been to cheapen the price of sugar to the consumer in this country.' I am to remind you that the bounties, instead of being merely ' alleged,' have been decisively proved to exist before a Committee of the House of Commons, and no foreign Government would deny their existence. As to the second point, the consumer does not get the benefit stated. In some years, no doubt, an undue cheap- ness has been created. But the reliance upon bounty-fed sugar has led to the price being unduly raised whenever the beet crop has fallen short. The trade is thus placed in a condition of uncertainty, which is even worse than the immediate effect of the bounties upon prices, while an entire dependence 38 EEPLY OF THE WEST INDIA COMMITTEE. upon continental sugar and the destruction of all natural free trade competition means the creation of a monopoly and the rising of the price to a level dictated exclusively by foreign Governments for the protection of their own industries. ''Upon the refiner's part of the question, no opinion need be here expressed. But in reply to the statement that sugar produc- tion in the colonies has not been seriously affected, I have to point out that the figures of West Indian production, as stated in the Select Committee's Report, were on the average of three years, 1872-4, 181,469 tons; 1874-6, 195,900 tons; 1876-8, 197,167 tons. Since the time, therefore, that Austria has exported largely raw sugar under bounty, say 1874, there has practically been no advance in the production of West Indian sugar. But, on the other hand, the production of beet sugar has increased from 873,300 tons in 1871 to 1,574,153 tons in 1879. The total imports of sugar for consumption in the United Kingdom have risen from 729,703 tons in 1872 to 944,069 in 1878. And whereas cane sugar supplied, |in 1872, 73 per cent, of the consump- tion of the United Kingdom and beet 27 per cent., in 1878 the former had decreased to 68 per cent, and the latter had risen to 32 per cent. In 1863, when the continental bounties began, the cane sugar (British and foreign) supplied nearly the whole (or 94 per cent.) of the home consumption, and since that year the percent- ages show a gradual displacement of cane by beet. Attention might also be called to the statistics given in the Minority Report of the Select Committee, from which it appears that cane sugar imported from British possessions had fallen from 278,500 tons, or 50 per cent, of the total import, in 1863 to 245,850 tons in 1878, or 27 per cent, of the total import. Foreign cane sugar in 1863 was 244,300 tons, or 44 per cent, of the total import. This had increased to 327,000 tons in 1878 (an illustration of the effect of slave or coerced labour) ; but, although foreign cane shows an increased quantity, its percentage of the total import had fallen to 36 per cent. The import of beet sugar in 1863 was 33,200 tons, or 6 per cent, of the total import ; in 1878 it was 335,500 tons, or 37 per cent, of the total import. The above figures clearly show the position of the British colonies in regard to the European produc- tion, and, together with the evidence given by responsible REPLY OF THE WEST INDIA COMMITTEE. 39 witnesses connected with the colonies, entirely justify the conclu- sion expressed by the Select Committee ' that the development of the sugar-growing industry of our colonies has been checked, and their future prosperity endangered.' '' As to ' the small interest of any single class,' I beg to remind you that the capital involved in the sugar industry of the colonies has been estimated at 30 millions sterling, giving employment to more than 500,000 people, most of them being of a class for the welfare of which the British Government are peculiarly responsible. The West India colonies will regret to see that the Board of Trade consider their connexion with the mother country so ' indirect.' It is not, however, probable that either Parliament or the English people will take the view put forward by the Board of Trade. These colonies are governed directly and absolutely from Downing- street, and they are bound up with the United Kingdom to such an extent as to make them a real part of the British community. Their interest is consistent with and not (as suggested by the Board of Trade) antagonistic to the interest of the mother country. The consumer here is concerned in the natural production of an important article of food, unfettered by any artificial restrictions ; and any supposed gain to the consumer by undue cheapness is balanced by a loss to the British producer, out of whose pocket the alleged advantage to the consumer must partly come. '* It is difficult to understand on what ground Her Majesty's Government could remonstrate with foreign Governments except that of injury to the general interests of this country. You state that the ' Board of Trade desire for all other countries as for this country the establishment of a policy of complete free trade, be- lieving in the long run absolute non-interference with trade, whether by bounties or protective duties, is the system most con- ducive to general prosperity.' This sentence admits that bounties are not free trade, that they constitute an interference with trade, and that they are not conducive to the general prosperity of the country This surely takes all weight from the argument as to the consumers' gain, and the question may be asked, "Why, in view of the above declaration, are these bounties and this interference to be continued to be allowed ? There seems an irreconcilable inconsistency between the policy of continuing to allow bounties 40 EEPLY OF THE WEST INDIA COMMITTEE. on the ground of the consumers' advantage, and at the same time declaring that such interference with trade as is caused by bounties is not conducive to the general prosperity. In short, the Board of Trade apparently propose to accept bounties as an advantage, while at the same time they desire their removal as an interference with trade. ' ' I am to express satisfaction at the proposed preliminaries for an international Conference. The West India Committee have never advocated the immediate adoption of a countervailing duty, nor gone beyond the suggestion that a means of solution might be found in a Conference as proposed by the Select Committee, The "West India Committee have in the letters which you acknowledge laid before the Board of Trade the reasons which induced them to think that foreign Powers would be willing to negotiate, and that the acceptance of the true free-trade principle of a countervailing duty would be effectual in bringing about a successful result of those negotiations. I am to pray that Her Majesty's Government would be pleased to take steps for the meeting of such conference as soon as possible. " There is one point in the letter to the "Workmen's Committee, copy of which you enclose, which requires notice here. It is stated that many of the colonies at the present time place an export duty upon their own sugar. I beg to say that in British Guiana and Barbados, producing at least half the total of West India sugar, there is no export duty. In Trinidad and Jamaica there is a small tax which is not raised for general revenue, but is strictly applied to the payment of the cost of introducing the labour employed on the sugar plantations. The amount is, therefore, merely part of the cost of labour, and is so small as to be practically inappreciable as compared with foreign bounties, while the general incidence of the export tax over the sugar production is a con- venience and practically results in a reduction of price to the consumer. ''I have, &c., " Thos. Daniel Hill, Chairman. '^ West India Committee, 9, Billiter Square, E.C., ''t)ecember 9th, 1880." if'w^ ¥K$- WC0\ '-[:^^-M0o :t- >> 1 ^ ,^ m-' t®