LETTERS TO THE EDITOR.

THE FISCAL CONTROVERSY.

[To MR EDITOR OF TER " SPECFATOR.1

SIR,—In a letter which appeared in the Spectator of October 3rd I pointed out that Mr. Balfour's picture of this country as one surrounded by tariff walls which were increasingly excluding all chances for our imports appeared to be somewhat defective. For it was plain that our pro- tecting competitors were protecting against each other' at least as much as against us, and further that, while doing this, they were at the same time doing all they could to increase their own export trades. This, I went on to remind your readers, of necessity involved an increase of their respective imports. That such an increase was steadily in progress was, I went on to show, proved not merely theoretically, but by the tables given in the last Blue-book at p. 476.

Sir Edward Sassoon and Sir Conan Doyle have replied in till Spectator of October 10th to that letter. Apparently they do not controvert the position that defects in British methods, both in processes of manufacture and in trading, are the causes of many lost markets. But they do controvert the general proposition, on the ground that the increase in the import markets of foreign pro- tected countries, in which markets we can compete with the advantages of our Free-trade system, is confined to raw materials, and does not extend to manufactured goods.

I will not occupy your space by repeating the reasons, which have been recently repeatedly explained by you, for the state- ment that all that our foreign import trade does is to divert our capital and labour from producing particular classes of goods for home consumption to producing other classes of goods which can be sent abroad in exchange for them, and which will purchase a greater quantity of them than we could, by the same effort, have produced directly for ourselves. In these days when everybody has studied everything it is of no avail to quote the economists from Adam Smith to Professor Marshall. Not even the remark- able references to the former by Mr. Chamberlain at Glasgow can bring him up from the grave where he reposes in the Canongate Kirkyard to say what he thinks of his latest commentator. Nor will I linger, however much I am tempted, to suggest that if bullion has really somehow been flowing from this country, the inevitable result must have disclosed itself in a fall of prices, which would have made foreigners rush to our markets, even for their manufactured goods. Nor shall I do more than repeat once again the somewhat trite observation that if one thing be plainer from the figures than another, it is that tariffs have only a partial influence on the course of trade, and that capital, like water, flows into the channels where it can moat profitably employ itself.

But I think I may usefully call attention to certain results which have been reached by an examination of the figures. The sources of the following tables, which are the work of Mr. Percy Ashley, are the official statistics of the British and German Governments. To avoid such mishaps as befel Mr. Chamberlain at Glasgow, averages have been taken for the most part in place of particular years

TAILS L

Imports of manufactured articles into protected countries, and into Holland, for the last two five-year periods for which the statistics are available :—

Annual Average, Country. 1892.1896.

Germany . ...... 8914 million marks France 3858 „ francs

Switzerland ...... 273.6 „

Italy 25.5'0 „ lire Austria-Hungary 3981 . „ kronen Russia 1057 „ roubles' ...

Holland 287-8 „ gulden .... ..

The above figures are taken from the "Statistical Abstract for Foreign Countries," No. 29 (1903), pp. 85 seq. There is, however, no uniform classifica- tion,—in some cases manufactured articles, like chemicals, are classed sip raw materials ; yarn appears sometimes ae " raw material," sometimes as a

manufactured article. But it may be taken as pretty certain that the table, if detective, errs on the right side.

• 1891.1895. t 1896-1900.

••• ......

.• •

...

Annual Average, 1897.1901.

1,07843 million marks 7141 „ francs 3471 „

3121 „lice 456'0 „ kronen 1864 „ roubles,. 382.4 „ gulden

TABLE II.

The following table gives the British exports of home produce, and the cor- responding German exports, to protected countries (in three-year periods) :— ...

...

...

...

...

The German figures are taken from the " Statistisches Jahrbuch far das Deutsche Reich," 1903, pp. 170-71.

The English figures are taken from the " Statistical Abstract," 1903, pp. 106.107.

As we have no clear returns of our trade with Holland and Belgium, owing to much of their trade being transit trade, those countries are excluded.

I leave your readers to make their own comments on what these tables disclose. Were I to take particular years, I could do so, not unfairly, by comparing German and British exports of home produce to the United States for 1898 (the year after the Dingley Tariff came into operation) and 1902. The figures would show this result:—

1893. 1902.

Germany 334-6 million marks ... 4491 million marks + 34% Britain 141 million £ ... 23.7 million £ + 60% Such figures illustrate -what I have already referred to, the com- paratively defective capacity of any tariff we have yet seen to shut out imports. Thus Bradford sent to the United States in 1902 431,873,983 worth of goods, as compared with £1,381,802 in 1898, the first year of the Dingley Tariff, and illustrations could be multiplied. The broad fact remains plain and patent that despite the temporary disturbances which new foreign tariffs cause, especially to old-established and sluggishly managed British businesses, these markets are steadily becominc, greater. If any one wishes to turn to the dark side of the picture, he will find it, not in the effects of Protection, but in such facts as our leading authorities on applied science bring out. The recent address of Professor Meldola on " The Relations between Scientific Research and Chemical Industry" at Oxford (now reprinted from Nature of August 27th) tells us how the money invested by the German nation in chemical instruction and research is now pro- ducing a trade worth 450,000,000 annually to Germany. The whole of his address is most instructive, and I venture to com- laend it to those who think that people who, like myself, hold that one of the first duties of our statesmen is to turn their energies to the remedy of a grave national shortcoming, are exaggerating the importance of the effects which a large development of educational facilities of this kind would have on British trade. In these days of increasing knowledge and capacity on the part of our rivals, nothing but strenuous effort can enable us to hold our own. I trust that my country will not be turned away from the only treatment that can help its case by specious offers from the itinerant vendors of quack remedies.

German Annual Annual Exports Average, Average,

' to 109799. 1900-1902. mill. marks, mill. marks.

Husain ... 416-6

359.0

France ... 2101 ...

260-2

Spain 32-9 53-4 Portugal. 161 20-3

Italy 100-2 ...

1281

Awaria- 451.6 ...

Hungary

511.8 U. States 369-9 ...

424'8 ...

Total 1,5913'0 ... 1,7571

Plus or British Annual Annual Plus or minus per cent. Exports to Average, Average,

le87-99. 1900-1902.

mill. g. mill. s. minus per cent.

-131% Russia

9.5 ... 91 ...

0 X +231% Prance 141 ... 17'3 ... +22 X +621% Spain .

3.6 .... 5-1 ...

+41'6% +251% Portugal ... 1.7 ... 1-9 ... +111% +28 Italy .... .....

6-1 ... 7.9 ...

+29'5%

+13.3%

Austria- * Hungary

P7 ... 2.2 ...

+29'4% +141% II. States ...

17-9 ... 206 ...

+15 X +10 %

Total...... 54-7 641

+18 %

—I am, Sir, &c., R. B. HALDANE.

Cloanden, Auchterarder, N.B.

P.S.—The topic lies outside the scope of this letter, but I think I must offer a few lines of comfort to my friend Sir Edward Sassoon. In reference to my doubt as to whether this country would not have been worse off to-day in point of riches had Cobden's sanguine anticipations of universal Free- trade been fulfilled, he says of the effect of the adoption of

the system by Great Britain alone :— " The sudden reversal of the fiscal conditions of the United Kingdom relative to foreign countries caused a stream of emigrants to leave our shores. The agricultural capabilities of our lands were restricted, indifferent lands lay fallow or were put to pastures, and this dislocation of industrial spheres of activity— which a universal resort to free exchanges would have averted— caused some of our best men to go out to swell the numbers and enrich the peoples of America."

I venture humbly to ask the writer of this sentence to recon- sider it. How could universal Free-trade have tended to keep British land in cultivation ? In the absence of American import-duties our capital must have tended more and more in the direction of the manufacture of commodities to be ex- changed in even greater quantities than to-day for American wheat. The conditions of the soil and climate of America must have invited the extinction of the relatively unprofitable industry of agriculture in Great Britain. You cannot believe in both universal Free-trade and Protection. They are causes

of mutually exclusive effects.