Ottawa : The Other Side
BY SIR ANDREW MCFADYEAN.
[An article by Mr. L. S. Amery, M.P., on " What We Have Gained From Ottawa" appeared in last week's SPECTATOR.] Iconsidering the Ottawa Agreements we may all, i bigoted Free Traders as well as hidebound Protec- tionists, agree for the sake of the argument to accept the position as it existed when they were being negotiated, to abstain, on the ground of its irrelevance, from any discussion as to the wisdom or unwisdom of the fiscal system which we have adopted, and to address ourselves to the question how far, given that fiscal system, we used it at Ottawa to the best advantage.
If this method of approach is accepted, there are certain factors in the question which should, in my opinion, be present to our minds, though I could not so confidently expect them to be admitted by both schools of fiscal thought. The first is that the economic effects of Protection in this country are at present masked by chaotic world conditions, by trade restrictions of various kinds, and by monetary anarchy : nothing, at any rate, has yet emerged to suggest that in the long run—and the rather shortish long run at that—the maintenance of tariffs is compatible with the duties and privileges attaching to the position of a creditor power. A second is that the electorate did not pronounce at the last Election in favour of Protection or Imperial Preference : it was plain that it was prepared to acquiesce in both of them " if the doctors ordered it," and I shall not pause to probe the question whether the doctors made so thorough an examination of their patient as- to inspire confidence in either their diagnosis or their prescription. And a third factor is that even a National Government returned to power with a doctor's mandate could not have secured acquiescence in its fiscal policy without the support of millions of voters who had hitherto been Free Traders but had reconciled themselves temporarily to a protective tariff, not as a tool, but as a weapon to fight the cause of freer trade, who took the view that what the world wanted was less restriction and more international trade.
What has, in fact, happened ? In the case of Canada, for instance—the figures, though often quoted, have not lost their force—the tariff contains 800 items, only 215 of which are affected by the Ottawa agreement ; in 1:12 cases the British preference is increased by lowering the rate charged on imports from this country ; in 83 cases. tic rate on British imports is unchanged and the prefer-. ence is increased by putting a heavier duty on imports from other sources. Since it is notorious that in the former category the reduction has not in all cases been consider- able enough appreciably to affect the volume of trade, it is obvious that to a large extent the effect of the Canadian agreement will be not to increase world trade, which is the only means by which prices can recover and prosperity return, but to divert a certain amount of Canadian foreign trade from foreign to British exporters. Part of this diversion is effected at the expense of the United States, which is in no need of export markets, but which was bound to—and does in fact—resent this weakening of its position. Part is effected at the expense of Germany, which will find it proportionately more difficult to earn the foreign currencies required to pay what it owes this country and the United States.
What have we given the Dominions in exchange except another diversion of trade ? We have given the Cana- dian wheat grower a preference over the American farmer. Admitted, again, that the United States has no particular claim to foreign markets while it tries—as we seem bent on trying—to combine an export surplus with a creditor position ; none the less, is it politic to aggra- vate the economic situation of the Middle West when we are preaching the doctrine that the cancellation of loans due by us will enure as much to its benefit as to ours ? When we contract his markets arc we inducing in the American farmer a frame of mind in which he will support a policy the first effect of which is to raise his taxes ?
We have diverted trade from Denmark, which has given British manufacturing products a much freer entry than the Dominions favoured at its expense. At a time when " it is essential to raise the wholesale prices of frozen meat in the United Kingdom market " we deliberately encourage the growth of fresh supplies. We have en- couraged and largely financed an eflicient source of supply in South America which is now to be penalized ; countries such as the Argentine, which have been content to be colonial lands and done nothing to add to the world's confusion by attempts at industrialization, are sacrificed to Australia, one of the most highly protected countries in the world. When all efforts should be devoted to raising world prices, which requires increased world con- sumption or reduced world production, all we can do is to encourage new production in the eolonies and dis- courage consumption at home.
Two years ago there were many Protectionists, of the variety who urged the adoption of Protection in order to enforce tariff reductions elsewhere, who could be heard to express the opinion—perhaps not very publicly —that with a tariff we should be able to demand sub- stantially free trade within the Empire, and if it were not granted to offer equivalent advantages for reciprocal treatment to foreign countries. To those who realized that the British Empire was not self-sufficient it seemed a reasonable policy ; it was the only one which on a purely economic view could have justified an alliance between ourselVes and countries which are not nearly in the same degree such natural trade complements as certain foreign countries. If non-economic grounds are invoked—well, we have already started to bully Ceylon and we arc not likely to' be much older before we have bickerings about body-line bowling from one or other of the Dominions when we begin in earnest to negotiate trade agreements with other 'countries. Incidentally, Mr. Walter Elliot, busily knocking nails into the coffin of laissez-faire, is already asking the Dominions to abandon some of the privileges which the Ottawa agree- ments secured them.
Before the World Economic Conference begins we have restricted our freedom of movement and diminished our bargaining power. We have used a position, in which leadership towards a revival of world trade was open to us, to encourage the formation of antagonistic trade " blocks " or groups, without having' SuCceeded in forming an imperial block which can satisfy our require. ments within a generation. We have refused to associate ourselves with the one progressive 'fiscal measure that has been taken for many years—the agreement between Belgium, Holland and Luxembourg for the reduction of tariffs inter se and an invitation to other Powers to join the group. Worse than that, we are apparently prepared to oppose this progressive movement on the ground that it is not compatible with the maintenance of the most- favoured-nation . clause. Because minor colonial pre. ferences have long. by prescription been admitted as exceptions to the Operation of the unconditional most- favoured-nation clause, we calmly assume that other countries will consider the clause. not to be infringed by the intricate reciprocal System erected at Ottawa ; and the Ottawa Conference, with what seems to me to be consummate impudence, recorded its vieWthat " foreign countries which had existing treaty obligatiOns to grant most-favoured-nation_ treatment to the products of par- ticular 'parts of the Conimonwealth could not be allowed to override such obligations by regional agreements " for the Mutual accord of preferences.. And yet we wonder that we are sometimes considered to be hypo- Crites ! The mostifavoured-nation clause; hi *Uncondi- tional forM, has almost certainly outlined' its utility, and perhaps the one unquestionable advantage of Ottawa was that it shattered it, but we are too modest to claim the credit—or too uncertain to have formed any con- sistent policy.
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