GERMANY AND FREE TRADE IT is a curious and paradoxical
fact that the one great country in Europe which is most aghast at the growing multiplicity and complexity of tariffs is the one where the tariff system was first of all reduced to an exact science—Germany. It is no secret that Dr. Luther and Herr Stresemann during their last visit to London expressed their concern that England, by imposing the safeguarding duties, was turning on her traditional policy of Free Trade and embarking on the broad road that leads to Protection. It would be easy to show that the fears of the German statesmen were in this respect much exaggerated, but the point worth noting is the alarm of Germany that she might lose England's support in any steps she may take for launching an anti-tariff movement in Europe. Herr Schlacht, the President of the Reichs- bank, has also been pleading for European economic co- operation, while Herr Trendelenberg, the German Minister of Economics, in a speech which he delivered in Hamburg last December, insisted on a simpler, less harassing economic system for Europe, and protested against the restrictions, the import and export prohibitions, the passport regula- tions, and so on, of the post-War period. The Times Berlin correspondent thus summed up the feeling in Germany which Herr Trendelenberg expressed.
" In part the present temper which characterizes all discussions of trade policy is due to the multiplication of frontiers and trade barriers throughout Europe, tending to exasperation, and hardly conducive to the more considerate methods of the pre-War period. Doubtless this is more and more directing the attention of serious business men to international arrangements in the form of hori- zontal trusts, and the ultimate arrival of some form of international, if not European, customs union.
Germany, with her serious unemployment, her obliga- tions under the Dawes Scheme, her need for credits, is as anxious as England herself is for markets, but where is she to find them ? The Locarno spirit, powerful as it is, has not yet succeeded in quieting the suspicion and jealousy which still hinder trade between the Fatherland and Poland. The Wilhelmstrasse has concluded a commer- cial treaty with Russia, it is true, but that treaty had a political rather than an economic bearing. It was intended to be a sop to Russia's suspicions of Germany's political obligations under the Locarno Treaty, and all the advantages are with the Bolshevists, who by their State monopoly of trade in Russia, and by their inability, or refusal, to give foreign business men the protection of impartial courts of justice, have always a superiority over any other country with whom they conclude commer- cial treaties. Alsace and Lorraine are still an economic barrier to an effective settlement with France, while the recent commercial treaty with England is, in German eyes, jeopardized by the policy of the safeguarding treaties. In the countries of the Danube basin Germany also finds tariffs, where there was once a mighty Zoilverein, and in place of the easy-going Austro-Hungarian Empire, a number of new, ambitious, self-centred States which are much keener on starting their own factories than on buying the products of Germany. It surely must be conceded that the present network of tariffs in Europe is inimical to the prosperity not only of Germany, but of all its other States, great and small, including our own. For the tariff has been metamorphosed in recent years, and has become not so much an aid to home industries, as a symbol of national pride, a sort of economic flag, an evidence of sovereign independence, a warning to all and sundry that within these holy boundaries there is a sufficiency of everything. The idea of exchange--the basis of trade, and the first article of the true economist's creed—has been forgotten amidst the racial animosities and raw ambitions of the new Europe. When a tariff becomes a means not so much of benefiting oneself as of hurting one's neighbour in the sacred 'cause of a newly-formed national exclusiveness, the most rigid Protectionist must surely admit that things arc going a trifle too far. Yet who can deny that in great parts of 'Europe, and more particularly in the Danube basin, the tariff has become not an expedient, but a passion ? If the Peace Conference had left the old Hapsburg Monarchy an economic entity, instead of giving the Succession States the right to impose duties, what troubles and 'disappointments might Europe not have been spared ? For the economic isolation of Russia might have by this time disappeared, and the old traffic between east and west might once again have been in full vigour. The admirable work of the League of Nations and of such far-seeing Englishmen as Mr. Montagu Norman, the Governor of the Bank of England, in helping the reconstruction of Austria and of Hungary has been greatly impeded by the tariff walls which surround them. And until they arc considerably reduced, the economic recovery of Austria in particular, remarkable as it has been, will not be complete. At the present moment the trade of Austria with distant countries is developing at a greater rate than the trade with her neighbours, whom geography, common sense, and tradition have designed as her best customers. Vienna is the natural centre of all the mighty trade between cast and west, between France and England' on the one hand, and the Balkans and the Near East on the other. Artificial attempts to deprive her of the advantage which geography has conferred on her will in the long run provetruitless. A policy of closer co-operaticn between Austria and her neighbours is the burden of the speeches of all the economists who have visited Central Europe in recent years. It is the dominat- ing refrain in that admirable report on the Economic Conditions of Austria Which Mr. Layton and M. Rist drew up last year at the request of the League of Nations. And, as they point out, the problem is not only an Austrian but a European question, for " the ill effects of excessive tariffs have been renognized on several occasions by the League of Nations itself and at gatherings of European statesmen." Exclusiveness carried too far in social life inflicts in the end more harm on those who practise it than on thoie against whom it is practised, and the same also applies to the world of exchange and barter. Tariff architects cannot remove mountains and alter river valleys ; they cannot even modify to any great extent railway tracks and steamship courses. In the end Nature is too strong for them. And Germany, pondering on the loss of markets, and the tariff walls which now divide the former Dual Monarchy, is apparently taking to heart those venerable truths.
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