The Issues at Ottawa
By H. V.
HODSON.
AS the Ottawa Conference approaches, a clear line—not identical, mark, with that which divides protec- tionists from free traders—begins to show between those who believe that the Conference is bound to be a sorry failure and those who expect of it such a success as will set us on the path of economic recovery and outweigh a possible breakdown at Lausanne. But neither of these factions seems to be very certain as to what it means by success or failure. In general terms which all may accept, the goal at which the Conference aims, whether it prove attainable or not, is the revival and enlargement of trade within the Empire, unaccompanied (presumably) by any reduction of our trade with the rest of the world. For " trade," in the minds of some of our public men, one must read " exports," but it is plainly foolish to begin any dis- cussion of the problems of Ottawa by assuming that exports are good in themselves and should if possible be secured without countervailing imports. In the light of our experience since the War, we naturally seek first the extension of markets for our export trades, but few would not be prepared to have this country buy more if only we had an assurance that we could sell more. It follows that what we want from Ottawa is a reduction of tariff barriers within the Empire sufficient to outbalance any raising of foreign tariffs which might be provoked by our granting, in return, wider imperial preference to the Dominions and Colonies. To look for a revival of trade in the mere raising of tariffs, by ourselves and by the Dominions, against foreign competitors is, on the face of it, ridiculous.
Mr. J. H. Thomas and other spokesmen for the Govern- ment have been emphasizing, very properly, that we must not enter the Conference in any bargaining spirit. We must not hawk fiscal " sacrifices " but must offer what benefits we can to the common pool. Yet however care- fully we avoid the language and atmosphere of the market, there is almost certain to come a moment when we must say : " What we have proposed involves certain dis- advantages—to our budgetary plan, to our need for cheap foodstuffs and raw materials, to our commercial relations with other countries ; and what you have put in the pot does not seem to justify our incurring such risks." If we are not prepared to say that, then the Conference is certain to be a failure in the sense indicated above, for the Dominions naturally start prejudiced in favour of their present high tariffs, which in spite of a valuable measure of British preference are the most formidable existing obstacle to the development and rationalization of trade between the members of the British Commonwealth.
No official disclosure has been made of the proposals that the British Government intends to make at Ottawa. But some of the possibilities may be gathered from the actual situation. Apart from the earlier duties, such as those on tea and sugar and the McKenna duties, all or which carry an Empire preference, the Import Duties Act and orders made under it have applied a general tariff, with additions, to a wide range of imports (a range which, The Economist reckons, totalled £409 millions in 1930). No part of this tariff touches imports from the colonies or, until November 15th, imports from the Dominions, India, Southern Rhodesia and the mandated territories. This implies that the Government at any rate contemplates the possibility of altering that exemption after the Ottawa Conference. Of course, we do not want to use the possibility as a threat, but assuming the general tariff Lo be a good thing, any detraction from- it might legiti- mately be claimed to diminish at once the protection afforded to the British manufacturer or farmer, the revenue from the duties and the certainty Of securin, a proper balance of external trade, and therefore to require some special inducement for its maintenance. In general terms, then, we have three concessions t0 offer—the retention of Empire exemption on all or any of the products now under the general tariff ; the raising of the tariff on imports from foreign countries of certain goods in which the Dominions are particularly interested ; and the removal of articles from the present free list in order to establish an Empire preference. Of the products now subject to the tariff, those with which the overseas Empire is particularly concerned are dairy produce and eggs, fruit, sisal, ground-nuts and palm-oil, coffee, fish, timber ; and of those now on the free list : beef, mutton and lamb, bacon and ham, wheat, wool, maize.
For all the bitter controversy that has raged aroinhi the question of an Empire preference or quota for wheat, that commodity must be ruled out at once as unsuit- able, since the Empire is a net exporter and so- in the absence of a price ring—must accept the world price for its crops, whatever privileges Great Britain might grant. The same is true of wool and jute. It seems likely that as concerns preference in Great Britain the " key " commodities at Ottawa will prove to he butter and cheese, beef and mutton, bacon and ham, and fruit, fresh, bottled and dried. There is no space here to analyse the various considerations that our representatives will have to bear in mind in formulating their policy in respect of these products, but among them are obviously the position of the home producer and our trade relations with the principal foreign com- petitors, notably Denmark and the Argentine. One of the avowed purposes of our new tariff is to bring duami tariffs elsewhere, and that cannot be achieved if at. Ottawa we debar ourselves from offering concessions on their principal exports to those foreign countries which are most likely to accord us a preferential position in return.
It is impossible to state both precisely and succinctly what we ask from the Dominions in exchange. Briefly, it is the extension of markets for our manufactures, but we cannot expect from the Dominions any sub- stantial modification of the general principle of protection for their secondary industries. What we will ask, if Wc are wise, is a more economic division of industrial effort —" Empire rationalization," as it has been called, or " complementary production." Let them concentrate on the things which they are best suited, or at any rate are inflexibly determined, to make, giving us as free a market as possible for the rest, including all those specialised articles for which their home demand is inadequate to support production on an economic scale. It may very well be that certain of the Dominions will be much more inclined than others to accede to our requests, and in that case our delegates will have to weigh the advisability of entering into separate under- standings with the different parts of the Empire.
Imperial preference is, of course, by no means the only issue that will be raised at Ottawa, or the only means of furthering trade within the Empire. questions of uniformity of statistics and of manufacturing standards, of emigration policy, of permanent economic organ- izations, will have to be considered. Above all, the Canadian Government .has placed on the agenda, and New Zealand at least will insist on ;treating very seriously, the problem of currency and credit. It goes without
saying that a general rise of prices would bring much greater economic benefit to the Empire than any system of preferences which the Conference is capable of creating. But although all the Empire except South Africa is effectively off gold, and presents a vast area for the exercise of monetary reform, it is well not to be too hopeful. A new currency for Empire trade, for instance, is out of the question, since it implies a supreme central banking authority, inevitably in London, which would at once arouse the intense suspicion of the Dominions ; nor would it necessarily have any effect on prices. The use of silver as a currency standard has also been suggested in some quarters ; but whatever monetary system is ultimately fixed upon by Great Britain or any other member of the " sterling group "—gold or silver or some free or fancy standard—the raising of prices depends on an expansion of the use of credit in trade and business, and that in turn depends not merely on the liberality of central banking policy but much more on the revival of confidence among both investors and borrowers. Lausanne may bring about that revival of confidence ; if not, then Ottawa cannot hope to undo its failure.
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