THE SUGAR-BOUNTIES CONFERENCE.
LORD SALISBURY has scored another triumph in diple- macy. He has succeeded in doing what all English statesmen would have been heartily glad to do for the last six years,—he has induced the Governments of our neighbours to agree to give up those mischievous sugar-bounties which have injured English trade for so many years. While thus con- gratulating Lord Salisbury on a success, it is true that we must remember that the States signing the Protocol have only agreed in principle in condemning the sugar-bounty system. It
is still necessary for the high contracting Powers to submit the mutual agreement arrived at to their respective Parliaments for ratification. There is not, however, any great likelihood that this ratification will be refused, since, almost without exception, the Powers are themselves extremely anxious to be rid of the fiscal perplexities that attend the bounty system. We may take it, then, as almost certain that when the Conference meets again on April 5th, the various representatives of the Powers will be able to announce that their Parliaments have sanctioned the abolition of the bounty system as applied to sugar. The only thing that could postpone such a solution is the attitude of Belgium. Belgium objects to the plan approved by all the other Powers as a substitute for the bounty system, the plan of manufacturing the sugar in bond. Now, the essential feature of any plan for dealing with the bounties on sugar is common action. Speaking broadly, the Powers are bidding against each other for the English market. They find this competition growing ruinous, and each is willing to atop, provided all the others will do the same. Now, unless Belgium agrees to treat the bounties exactly as do her neighbours, no Power will feel certain that Belgium is not really competing unfairly by concealed bounties. We can hardly suppose, however, that when Belgium realises that, unless she agrees to adopt the common system, the Convention will fail, there will be any further difficulty, for she, equally with the other Powers, is anxious for the abolition of the bounties, and only adheres to her own system on grounds of convenience.
As matters, then, stand at present, all the Powers have con- demned bounties in principle, and have agreed to propose their abolition to their respective Parliaments. The result of these proposals is to be notified to the English Government before "March 1st, and in case the result is favourable, a statement will be made of the mode in which it is proposed to carry out the abolition. If we consider the extraordinary fiscal complica- tions which have been produced abroad by the bounty system, the only marvel is that some agreement of this sort was not come to earlier. In Austria, the policy of fostering the sugar industry by bounties has reached such a pass that more is actually paid away in bounties on the export of sugar than is raised by the tax on sugar itself. That is, the consumer of sugar in Austria is taxed, and the whole proceeds of the tax are applied not to the administration of the country or to its defence, but to the cheapening of sugar for the English con- sumer. When an economic fallacy has stripped itself naked in such a fashion as this, even the foreign taxpayer begins to suspect that he is not benefiting by this form at least of in- direct taxation, and wonders if his money is not being divided between the manufacturer and the foreigner. When it is seen that a large tax could be remitted without embarrassing the Exchequer, men begin to long for its repeal. It does not follow, however, even when hard facts such as these have made the Austrian taxpayer anxious to be rid of bounties on sugar, that he can escape at once. Nations who create industries out of nothing by means of bounties, are like those sorcerers of romance who made living creatures by their art. Frankenstein once called into existence, became a terror to the very man who had breathed life into him. So when a vast industry like that of the Austrian sugar-refiners and beetroot-growers has once been started, it becomes a danger and a terror to its creators. For Austria to withdraw her bounties while other countries kept theirs, and so to hurl sugar-refining and all its de- pendent industries to the ground, would spread ruin far and wide through the trade of the Empire. Until, then, Austria can get the other Powers to lay down their arms at the same time as she lays down hers, she is powerless to control her Frankenstein. The case of France is almost as bad. Her Exchequer is nearly £3,000,000 out of pocket each year -owing to her system of bounties. The German Empire, again, suffers no less severely from the insane camped- -lion in bounties on which she has entered like her great
neighbours of Russia, Austria, France, and Italy. This madness, however, is not a monopoly of the Great Powers. Belgium, Denmark, Spain, Holland, and Sweden were once equally anxious to stimulate their sugar industries by bounties, and are now equally desirous for a common agree- ment which may deliver them from the burden. The system under which bounties were in many cases originally constituted, may serve as an excellent warning for those politicians who are too apt to imagine that Government interference in fiscal matters may be so adroitly managed as to assist, rather than to impede, the production of wealth. To such notions, we fear Lord Salisbury himself is too much inclined to lean. Though far too keen-sighted and clear-headed to be taken in by the grosser fallacies of Fair-trade, he is too apt to imagine that Governments can by their action exert a favourable influence on trade. To put our proposition negatively, he does not clearly realise that all attempts at State regulation of national and international exchange are pure evil, and that the statesman's aim should be, except under the dire necessity of raising revenue, to let trade alone. The manner in which a nation like Austria can slide into the intolerable position of giving away more in bounties than she raises by the Sugar-tax may well be quoted in this context. The steps are simple enough when the first has been taken. A tax, for ordinary fiscal reasons, is imposed on sugar. This tax it is found con- venient to levy on the beetroot before it is refined, instead of on the actual sugar. The raw beetroot is thus taxed at so much per ton. The refiners, however, want to export some of their sugar when refined. Accordingly, a drawback is given on sugar taken out of the country,—that is, the money paid as a tax on the beetroot which was made into the sugar is refunded. Now, in order to say how much they are to refund, the Exchequer must calculate how many tons of beet- root went to a ton of sugar. It is soon suggested that, in order to stimulate the sugar industry and to encourage trade, this calculation may be made on a liberal scale,—that is, that the man who is going to be patriotic enough to export home-made sugar shall be encouraged by getting back quite as much, or a little more, than he paid as the tax on the beetroot. The ratio, then, is fixed in such a liberal spirit that it, in effect, puts a small premium on the export of sugar. It happens, however, that new discoveries are made in sugar-refining which enable the refiner to get double the amount of sugar he used to get out of the same quantity of beetroot. The tax, however, remains the same. When, therefore, he brings a ton of sugar for export and claims the refunding of the tax, he gets a drawback calculated on double the amount of beetroot really used by him and on which he has paid the tax. Of course, such an arrangement makes a rush to manufacture sugar, and the exports of sugar rise more and more rapidly every year, and the sum required for the bounty drawback with them. This, speaking generally, is just what has happened. The bounties in the nature of drawbacks, which were meant at first as nothing more than slight encourage- ments to the sugar industries, have gradually slid into great financial burdens, which every year more and more embarrass the Exchequers ,of the bounty-giving States. We wonder if, in Germany or in Austria, any advocate of the bounty system were to sit down and add up the amount that in either country had been expended in producing the sugar industries, he could honestly say that the money had been well or judiciously spent. Perhaps the sum-total might begin to make him speculate whether, after all, State interference in trade was really beneficial.
The near approach of the abolition of the sugar-bounties has given rise to some curiously mistaken theorising on the effect of the bounties in England. England, it has been argued, benefits by the bounties, and so ought not to attempt to get them abolished ; to do so is not to act in accordance with the principles of Free-trade. As we pointed out last week, no proposition could be more ridiculous. To argue so is to miss one of the most important principles of free ex- change. Everything which injures a country with which we have commercial intercourse injures us. Since wealth is the result of exchange, the more beneficial the exchange the greater the wealth. If a country under a wasteful system of bounties is made to produce things which it produces ill, we who trade or exchange commodities with that country, obtain a less amount of benefit by the process. In truth, the material interests of different countries can no more be separated than can the material interests of the different cities of England, or of the different inhabitants of those cities. Thus, since bounties impoverish the countries that adopt them, England cannot fail to share in the impoverishment while the bounties are maintained, or to share in the increase of wealth that will follow their abandonment. Europe's loss can never be England's gain. This admitted, it does not follow, however, that all means are justified in order to compel foreign nations to understand their true interests. For instance, though we are willing to admit theoretically that, were it possible to arrange duties so as to countervail bounties, such duties would be justified, we cannot but condemn strongly all idea of recourse to them in prac- tice. In the first place, the fact that every country has a different scale of bounties, and that it is impossible to analyse the price of bounty-fed sugar when the bounties are given in the shape of drawbacks, or to say what is bounty cheapness and what is natural cheapness, would make the imposition of accurately countervailing duties an impossibility. In the next place, the political dangers of imposing a duty for purposes other than those of revenue are most serious. We have already pointed out how easy it is to slide from drawbacks into bounties. Would the descent be less easy from countervailing duties to protective duties ? Any duty that is not a revenue duty always is, and always must be, a source of practical danger, however defensible it may be on theoretical grounds. As Sir Louis Mallet has pointed out, with his usual clearness of insight in all economic matters, any attempt by "Government interference to equalise the conditions of production would, if once admitted, seriously compromise the whole Free-trade policy." "Hands off!" is the only safe maxim for trade ; but it applies, in our own interest, to foreign countries as well as to England.
What may be the result of the abolition of bounties on the English sugar-trade, it is difficult to see. We confess that we are far from sure that the price of sugar will be materially in- creased. The production of sugar is so enormous, and the free market so small, that in England at least the competition must always be severe. The fears, then, that the great in- dustries resting on cheap sugar—such as jam and biscuit- making—are in danger, need not, we fancy, alarm us very greatly.
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