BOOKS.

THE TRADE POLICY OF IMPERIAL FEDERATION.*

IT is difficult to read the book before us—the work of a Colonial man of letters—and not to conclude that its pages

have been penned by a sort of economic Jekyll and Hyde. Half of it is an exceedingly fresh and vigorous attempt to vindicate the principle of Free-trade, and to prove not only that, economically, Protection must always be wrong, but that even on the ground of expediency its claims are more than doubtful. The other half is an elaborate endeavour to show that the one thing needful for the Empire is a modified sort of free-exchange within the Empire, and prohibitive tariffs against the foreigner. For example, while Jekyll fills his share of the work with such unquestionable good sense as, " Nothing in the whole range of Trade Economy is so indis- putably proved as that the freer the trade, the greater the

trade,' " and "Free-trade is a radically sound policy Pro- tection radically unsound," Hyde is making insidious sugges- tions that we should benefit in the long-run by putting a duty on corn not grown in the Empire. "It is quite true," says Hyde, "that the principles of Free-trade teach us to buy in the cheapest market. Yes; but Free-trade, or at least intelligent Free-trade, does not teach us to bolster up foreign Protectionist industries, and then try to persuade ourselves that we have done the best we could." Hyde is, in fact, as strongly Protectionist as Jekyll is Free-trade. Unfortunately, as in Mr. Stevenson's fable, Hyde triumphs in the end, and the last pages of Mr. Herbey's book are a direct incitement to the setting up of one of the most monstrous Protective systems ever planned by the ingenuity of man for the purpose of bringing about his own impoverishment.

The first problem that presents itself in reading Mr. Herbey's book is, therefore, to discover the magic powder which changes Jekyll into Hyde. The exact argumentative in- gredients it is difficult to discover, but, as far as we can see, what weighs with Mr. Herbey is the plea that Protection is necessary to infant countries. This admitted, and admitted also that it is necessary for the Empire to be federated in some shape or other, and it is an easy descent to the slough of Protection. The Empire cannot be federated unless there is Commercial Union ; therefore there must be a Commercial Union. Now, a Commercial Union might, of course, be brought about by the Colonies following the example of England, and adopting Free-trade. But, argues Mr. Herbey, this is impossible, for the Colonies are obliged, on grounds of expediency (i.e., on the infant-industry-coddling principle) to maintain Protection. It follows, then, that Commercial Union must be carried out, if at all, by England adopting Pro- tection. Now, a plain man might suppose that this would mean at any rate the abolition of Customs dues within the Empire, —that England, that is, would let in all Colonial products free, while putting duties on foreign corn, wool, meat, &c. ; and that the Colonies, in exchange, would let in our goods free. In other words, there would be Free-trade between all British possessions, but tariffs against the rest of the world. Not a bit of it. If we understand Mr. Herbey right—he naturally is a little confused in making such a proposal—we are to put duties on foreign corn and to let in Colonial corn free; but the Colonies are, in most cases, to continue to keep out British goods in order that their infant industries may not be destroyed. That is, it is proposed that we should offer a close market to Colonial products, but that they should give us no equivalent whatever. It would, in fact, be a reversal of the old Colonial system, under which the Colony was obliged to buy only from the Mother-country. The Mother-country would be bound to take her supplies from the Colonies alone, but they would not be bound to buy from her. It is, how- ever, only fair to Mr. Herbey to say that he looks forward to a time when the necessity for Protection within the Empire

• The Trade Policy of Imperial Federation, from an Economic Point of View. By Maurice H. Herbey, Principal of Illawarra College, New South Wales. London: Swan Bonnenschein and Co. New York : Charles Scribner's Sena. 1892.

would no longer exist, and when the infants could walk alone. Here is the passage :—

" After a few years of the Protective encouragement afforded by the Commercial Union to British communities against foreigners, such Colonial industries as were built upon a sound productive basis could gradually dispense with Protection within the Union. This may seem to be at variance with our well-established previous contention that Protection tends to intensify and not to diminish. But it is not. The uncompromising, headstrong, all-producing Protection begotten of national expediency does tend to intensify ; it is as insatiable as the daughters of the horse-leech. It is, how- ever, radically different from the discriminating, economically sound Protection, adopted in order to enable young and backward States of a self-contained Empire to give their productive powers a fair test. Let us take an example. In the Illawarra district of New South Wales, at Wollongong and Bulli, there are inex- haustible seams of the finest steam-coal in the world,—coal that never cakes,' coal that stokers say, it is a treat to handle.' Within fifty miles of this coal there are large deposits of iron ore. Naturally, attempts have been made to start iron industries. But such industries require large capital for their inception, and money is dear in the Colony. They require skilled labour, which is scarce and dear also. Still might all these difficulties be surmounted but for foreign competition. It is simply hopeless for the Colonial ironmaster to attempt to undersell Germany and the United States, to say nothing of England and Scotland. He appeals for Pro- tection, but, as the policy of New South Wales is Free-trade, he appeals in vain. The iron rests undisturbed in the Blue Moun- tains : which are celebrated for their scenery. There are upwards of thirty rich, nnworked coal-seams at Wollongong, which town, however, enjoys its chief reputation for its butter. Now, is there any valid economic reason why an industry, so favoured by natural conditions, should not be fostered during its struggling infancy ? None whatever. Adam Smith himself would so have fostered it. Or is there any reason why it should require con- tinued Protection after it once took firm root ? None. Then, why was not an exception made in its favour ? Free-trade permits no such exceptions, as Free-trade is, at present, understood. Yet, in this particular, glaring instance, the New South Wales Govern- ment has ventured a little way, by accepting a few local contracts for iron manufactures at an increase upon import rates. Examples might be multiplied ; but one suffices to illustrate the distinction between the economically sound Protection of encouragement and the economically rotten Protection of exclusion."

We must not omit to mention that Mr. Herbey proposes that certain distinctions should be made among the foreign nations outside the Empire. The great nations—Russia, Ger- many, France, and the United States—should, he holds, be rigidly excluded from all share in the trade of the Empire; but there should be a ring of Satellite States among whom our leavings should be scrambled for. They would not get the full advantages enjoyed by the States of the Empire, but still would not be altogether left out in the cold.

We have said enough, we think, to show the nature of Mr. Herbey's scheme. Criticism would be out of place. The people of the United Kingdom, though stupid, are not absolutely in- sane. That is the best answer to Mr. Herbey. This fact does not, however, prevent our being very grateful to Mr. Herbey for his book. We do not write in irony, for he is evidently a very able man, and propounds his scheme with great cleverness. Our gratitude is due to the fact that he has brought all the wild talk of the Empire Leaguers to the test, and has shown what their scheme means when worked out in practice, and what is the sort of Zollverein the Colonies would accept. We believe he is perfectly right in assuming that though the Colonies would like our markets, they do not want us to have

theirs. But this being the case, the sooner it is realised by the British public, the better.

Before leaving Mr. Herbey's book, we may not unusefully

draw attention to a curious instance of the difficulties into which those who argue on economic subjects fall by forgetting that £1 worth of goods is quite as well worth having as 21 :— " Trade means to exchange commodities for other commodities or their equivalent value—if possible. Practically, trade has for its object to buy as cheap, and sell as dear as possible. When England buys America's raw material, say her cotton, she buys cheap,'—i.e., she pays as little as she can help for it. If, now, America bought England's manufactures, say the same cotton worked up into calico, would she be buying cheap or dear ? Look at the thing straight. America sells England £1,00() worth of cotton, and buys back the same cotton converted into calico for £4,000: which has the better of the deal ? Of course theorists here step in with a summary and contemptuous reply. Neither 1 they cry. The £3,000 difference merely represents the cost of transforming cotton into calico. The calico is as cheap at £4,000 as the cotton was at .21,000, because it cost only £1,000 to grow the cotton at a profit, whereas it cost £4,000 to manufacture it, also at a profit. In such an instance we merely have an example Of the mutual benefits of trade.' Very well ; but, after all, America has received only £1,000, or its value, and has paid away £4,000, or its value. What has become of the 43,000 ? Who has got it? Has it not gone towards the support of English workmen, or the profits of the English manufacturer ? Admitting that they all only barely get a living out of it, that the American capitalist grower gets even a higher rate of interest than the English capitalist manufacturer for his invested capital, and that the goods are excellent and cheap, does it not, after all, mean £4,000 devoted to English manufacturing interests as against £1,000 devoted to American Raw Production ? Oh ! ' again cries theory ; such a query simply presupposes utter ignorance of the most elementary economic facts.' [Pardon, my dreamy friends, theories, not facts.] `If England can turn out an excellent article cheap, she is entitled to manu- facturing pre-eminence. So long as she can produce goods at a minimum cost, she must and ought to be the chief source of the world's supply.' Now, whether she ought is a point which Americans have declined even to discuss; whether she must, they have, so far as their section of the globe is concerned, pretty thoroughly disproved. And are they not justified, if they choose, in trying to build up manufacturing interests of their own with this balance ? True, they cannot manufacture so cheaply as England now, perhaps they may not be able to do so for many years, perhaps (rather a probable perhaps ') they never will be able to do so. Is that a sufficient reason for not making the attempt ? Not, at all events, in American eyes."

What has become of the £3,000 ? Was there ever a more extraordinary question, especially when the asker forgets to inquire what has become of the manufactured cotton ? England has the £3,000, and America the manufactured cotton. Now, the goodness or badness of the bargain depends upon the answer to the question, could America have carried oat the manufacturing process for the sum of £3,000 ? If not, she has gained by the bargain. 'But,' say the Protectionists, we shall have the manufactured cotton and £3,000 both, if we manufacture at home.' Yes ; but only by taking away people from some other industry to set them making cotton. To say that the manufacturing of cotton is cheaper in England, is only another way of saying that the people of America can be

more profitably employed doing something else than making cotton. That is, it pays best for them to do that something

else, and to commission people in England to make their cotton for them. If, then, a Protective system intervenes, and forces or bribes people to make the cotton in America, that system is causing a waste of wealth. Mr. Herbey must look a little closer to his definitions. We suspect that if he would remember that wealth is anything that has an exchange value, and that nothing can have value unless there is a demand for it, he would keep clear of a good many paradoxes.

On the abstract question of the maintenance of the Empire, we will only say this,—its continuance is a matter of feeling and sentiment, and not of trade. It is as absurd to say that Colonial Protection, as at present carried on, must sever the existing ties, as to say that Free-trade would necessarily ensure their continuance. Tariffs have very much less to do with the matter than people suppose. We were not more inclined to amalgamate with the French during Cobden's Treaty than we are to-day. The Colonies are acting very foolishly and very wastefully in relying on Protective tariffs ; but they are not ruining the Mother-country, or doing anything which makes it essential that we should " do something." Those who care most, and care most wisely, for the union of the English- speaking peoples, will let Imperial Federation alone, and allow both the Mother-country and the Colonies to work out their economic salvation in their own way. Some day the Colonies will see the folly of Protection; but till that day arrives, we can only wish them a quick return to common-sense.