PROTECTION IN PRACTICE. T HE working of the Safeguarding of Industries
Act is proving as difficult and unsatisfactory as we feared. Let us say in general that we are entirely at one with the theory, as such, that= when an industry is essential to the safety of the nation it ought to be safeguarded. Such cases, however, should be exceptions. Taking the trade of the country as a whole we have always been convinced —and recent experience has made us more convinced than ever—that Protection is a very bad thing indeed. It impedes the exchange of commodities ; it takes the edge off the alertness and inventiveness, the ingenuity and the quickness to meet new forms of competition, which have been the very life blood of British industry. Nevertheless, we agree that it would be foolish to allow any particular trade to become extinct if that trade were proved to be necessary as the nucleus for manufac- turing those things which are necessary for defending the country. Consider as an example the dyestuffs industry. The war proved that all the chemical processes used by Germany for producing dyes were the basis of menu- ' icturing explosives. • Failing toloresee this, Britain allowed the making of dyes to become almost the monopoly, and to a large extent the secret, of Germany. Germany had in -the dye industry the framework of an enormous plant foe the production of explosives. We had nothing of the sort, and we had to improvise from the beginning. Virtually the same thing was true of optical lenses. We needed an enormous number of lenses not only for telescopes and field glasses and photographic instruments, but for periscopes, &c., but unfortunately we had allowed the manufacture of lenses to become almost a German monopoly. Much the same thing, again, was true of magnetos. Although trade as a whole lost nothing by this, and may even have gained—it merely meant that we had been manufacturing what we could produce more easily and more cheaply in exchange for the German dyes and lenses and magnetos—when the Government announced after the war that the gaps• in our industrial armour must be carefully filled in we could not but agree with them. We assented, that is to say, not for industrial reasons at all, but because we were willing to pay a price for safety. Recognizing that Protection of any kind always increases the cost of those articles to which it is applied and reduces the total volume of trade, we still regarded security as essential.
Unfortunately in trying to obtain security the Government went the wrong way to work in detail. Nor is that all. Since we discussed these matters immediately after the war the danger of national bankruptcy has assumed proportions which were not then dreamed of. We have now to recog- nize that the circumstances have vastly changed and that the greatest national need of all, even from the point of view of security, is the recovery of the wealth of the country. Nobody will deny, we suppose, that in the last resort Great Britain was enabled to win in .the war because of her vast financial resources which had been built up upon Free Trade and because by means of these resources she was enabled to finance her Allies who might otherwise have collapsed. Our belief is that in the circumstances, changed as they have been by the depression, the first step towards security is to revive our trade before it is too late ; and that cannot be done to the fullest extent so long as we go on putting a host of embarrassments in the way of manufacturers and traders. We fancy that if most manufacturers who used to be Protectionists would tell us their secret thoughts they would acknowledge that in the Safeguarding of Industries Act they have already seen enough of Protection and want no more of it. But though that is our belief about the main general need of the nation, we want to point .out on this occasion why we think the Government have gone the wrong way to work in applying Protection, on the assumption that Protection of some sort there had to be. In the case of the dye industries large sums of State money have been sunk, and if there is to be any adequate return, or if there is any promise of an adequate return, we are not aware of it. No doubt our chemical researchers made many important discoveries during the war, and no doubt some of these have been put at the disposal of the dye industry. But it is the experience of manufacturers that a new invention does net necessarily pay for itself for some time though it may be extremely valuable potentially. What is needed is the practical experience of men who have spent many years of their lives in the workshops and the laboratories. The obvious way of making a success of the State-helped dye industry from the outset would have been to bring over from Germany industrial chemists to show us the ropes. Such men, so far as we understand, would have been delighted to come for the salaries which it would have been worth our while to offer them. No such plan was possible, however, because under the Aliens Act no unnaturalized German is allowed to live in this country except temporarily as a visitor. Now let us turn to Part IL of the Act, which provides against dumping. In cases where an industry is to be safeguarded an Order will be issued by the Board of Trade, but no Order will come into force unless it receives the approval by resolution of the House of Commons. The Economist of February 11th says that among the requests which have been made by minor trades to be protected, several have been rejected, others have been referred to the Committees of Inquiry, and others are still in suspense. Those which have been referred to the Committees relate to aluminium and enamelled hollow-ware, to gold and aluminium (bronze) powders, to fabric gloves and glove materials, to domestic, illuminating, and mounting glass- ware, to gold leaf and to toys. The Committees which sit in public are composed of able men though they have no special knowledge of the trades whose affairs they examine. They were appointed on the principle that an umpire should be disinterested and that an outsider sees most of the game. The real objection is not to the per- sonnel of the Committee, but to the terms of reference under which they work. The Economist, which has been watching their pro- ceedings, says that their terms of reference were so nar- rowed by the Act itself, and their procedure was so restricted by the Board of Trade, that as courts of judicial inquiry they have been almost derisory. They have not been allowed to go into the real case for or against the application of the 331 per cent. duty on competing imports from Germany of toys, aluminium saucepans, fabric gloves, and so forth. They have been limited to inquiring into the following points :— " (1) "Whether the goods in question are being offered for sale in the United Kingdom at prices which, by reason of depreciation in the value in relation to sterling of the currency of the country in which the goods are manufactured are below the prices at which similar goods can be profitably manufactured in the United Kingdom, and whether by reason thereof employment in any industry in the United Kingdom is being, or is likely to be, seriously affected ; (2) What would be the effect which the imposition of a duty under Part II. of the Act on goods of the class or description covered by the complaint would exert on employment in any other industry, being an industry using goods of that type or description as material • and (3) whether production in the industry manufacturing similar goods in the United Kingdom is being carried on with reasonable efficiency and economy."
The Economist says that most of the evidence laid before the Committees is on paper and is not made known. The minds of the Committee may be filled with ex-parte statements already made to them, but these are not disclosed to the opponents of any demand for pro- tection. Nor for the matter of that is the case of the opponents disclosed to the applicants. Counsel are allowed to appear, but are not allowed to cross-examine. No one who is not a member of the Committee has the oppor- tunity of sifting the evidence. It is not surprising that. Sir William Acworth, one of the chairmen, has complained that the prohibition of cross-examination by Counsel is a great impediment to proper inquiry. There is no system in the world so valuable for arriving at the truth as the procedure in a Court of Law. This procedure ought to have been imitated so far as possible instead of being avoided.
The Economist gives a particular instance of the bad working of such inquiries and we must say that it is illuminating. Certain applicants for Protection have shown that German gloves are being sold in this country at prices with which the immature British industry cannot compete, and have also shown that many workers have in consequence become unemployed. Now, as no opposi- tion to any application for a tariff is allowed unless that opposition comes from industries which use as " raw material " the goods which are under discussion, there was no opposition to the demand for Protection against dumped German fabric gloves. There is, of course, no industry in this country which uses fabric gloves as a raw ,material. This is not one of those simple cases in which one industry can say that the manufactured or partly manufactured commodity of another industry is the raw material of its own industry. Therefore, it would he reasonable enough for Sir Henry Rew's Committee to recommend, merely on the strength of the evidence before it, the application of the 331 per cent. duty to German fabric gloves. But this would entirely leave out of the reckoning the all-important fact that German fabric , gloves are made out of yarn spun in Lancaihire mills. This yarn is an important part of the export trade in fine cotton spinning from Lancashire. In other words, if the - demand for protection against German fabric gloves were satisfied a tiny -industry which employs at present only about two thousand persons would be supported at the expense of one of the staple industries of the country. The irony of the whole thing is that here we are in danger of having a real injury done as an extension of the original idea about making the nation safe. Nobody pretends that the home manufacturer of fabric gloves is going to make us safe against anybody. Unless Germany is allowed to sell her fabric gloves here she will not go on buying the fine yarn of Bolton.
If this Order comes before the House of Commons for sanction the strength of Lancashire will once more make itself felt as it has often done in the past. Most of the other possible Orders are similarly open to objection. The best thing that could happen is that the utter absurdities of some one Order should be thrashed out in a debate in the House of Commons, and that the whole principle of the safeguarding of industries should be torpedoed. As we have said, what we want is trade, more trade, and still more trade, and these dangerous tonics which stimulate one man but lay a dozen others low are just now intolerable. If within the general axiom that the recovery of wealth by unfettered trade is our immediate need there is room for any safeguarding—and we admit the possibility that there is—let it be done by means of a direct subsidy. There are no trickeries, no hidden ramifications, about a subsidy. Under a system of subsidy we know exactly what we are paying, and if after a trial it is found that the subsidy does not produce the expected results it can be withdrawn nearly as easily as it was applied.
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