A Letter From England: The Issue of Protection

I MAY be pardoned, I hope, for opening the present letter by recalling the fact — however immaterial — that last January, when summarizing 1902, I hazarded a reference to Protection as one of two questions “ rapidly stealing upon us to the exclusion of all others, the decision of which may be destined to bring about more far-reaching changes in our civic and commercial life than the inventions or reforms of the century.” The dramatic fulfillment of this modest prophecy, enacted by Mr. Chamberlain, I cannot certainly pretend to have foreseen ; but, in writing to-day, there can be no difference of opinion as to the predominance of the issue. In wisdom or folly, for good or ill, we are inevitably committed to a very searching and exhaustive inquiry into the situation.

Meanwhile, the particular manner in which this crisis has been precipitated involves us in one incidental element of danger, and in another of no less significant security. In the first place we may wander, at least temporarily, from the vital issue toward a too curious study, or a too enthusiastic partisanship, of the attitudes adopted and the characters displayed by individual statesmen. The ex-Colonial Secretary, who shares with the German Emperor a genius without parallel for absorbing public attention, has thrown himself in the face of English tradition with an impetuosity which lends to his proposals a certain glamour of knight-errantry. He declaims our difficulties so fearlessly that he may hurry us into the adoption of his panacea. The middle position of Mr. Balfour is too intellectual and too apparently temporizing for the average mind to trust its sincerity ; while the most zealous and most thoughtful Free Traders can with difficulty escape the suspicion of having set their faith on shibboleths and of out-Cobdening Cobden. Leader-writers in support of the new commercialism are forever crying out: “Free Trade may be an ideal, but it is unattainable. Trade has never been free, it is not free, it cannot be free. Drop the moral attitude and face facts.” Thus they ignore, and in time they may tempt us to forget, that Free Trade — as taught by all economists— is no more an absolute theory or dogma than Protection. Both are practical policies or systems, “in one of which the protective element is slight and accidental, while in the other it is considerable and avowed.” We should do well to avoid either catchword and speak of “ Tariff Reform,” through the investigation of which any given proposal may be fairly stated and discussed on its own merits.

But a compensating consequence of the sensational dénouement of the last few months may be found in the precise contrary of what it seems on the surface to have produced. Though Mr. Chamberlain might be accused, with some show of justice, of having split up the Tory camp by his latest sortie as effectually as he broke the ranks of Liberalism by opposing Home Rule, it is by no means improbable that his present campaign may have the ultimate effect of restoring to almost stable equilibrium the balance of parties, on which our system of government is generally believed to depend. The Home Rule rupture dislocated old landmarks, and they were finally demolished under the war fever. Unionism has never been a healthy growth. But we are confronted to-day — on Mr. Chamberlain’s initiative undoubtedly — by a broad and definite parting of the ways. We are face to face with a problem in which the genuine and traditional spirit of the Liberal is unflinchingly opposed to the stout Tory. An honest fight in the open field should clear the air. Maybe even the Whigs will find their feet again, and, once the temporary confusions of nomenclature are eradicated, we shall every one of us know where we stand. The issue is modern, inasmuch as it is essentially at once imperial and commercial ; but the most cherished of our national ideals are equally involved, and a fair poll on Protection would nail the electorate to its colors.

On the eve of the struggle, perhaps, amidst the clamor of tongues and the hailstorm of political pamphlets, it may not be immediately easy to discern why the English peoples should have been summoned, thus suddenly and imperiously, to the settlement of a controversy which in reality consists, as one of our younger economists has written,1 of two cries and four problems.

“ The cries are, on the one hand, that our national prosperity is threatened by foreign competition, and, on the other, that the fabric of imperial unity is crumbling away. The problems have reference to the desirability, or otherwise, of the following suggestions: first, a return to some form of general Protection, especially in the case of manufactured articles ; secondly, a special and limited application of Protection against the aggressive action of Trusts and Kartels; thirdly, a modification of tariff policy, designed to increase our power of bargaining with other nations; and, lastly, a system of reciprocal preferential arrangements within the British Empire.”

Impartial judgment will probably in a short time decide that the plea of urgency based on these cries, by which some of our protectionist friends have tried to shout down opposition, is not justified by facts. In the first place, though trade statistics are formed from very complicated detail of which the significance may be variously interpreted, the consensus of responsible opinion does not sanction either the vague alarms of “ depression ” or the assumption of alien underselling as its cause. The common deduction is taken entirely from import and export returns, whereas “ the richer a country becomes, the greater in all probability will be the disparity between advances in its real wealth and prosperity and the upward movement of its foreign trade.” It is obvious that, “in the limiting case of a nation already rich enough to buy all the foreign goods of which it has any need, these latter figures will go no higher, however great the leaps and bounds by which wealth continues to increase.”

The second, that is the imperial, cry of “ Rocks ahead ” may be silenced by statements at once simple and convincing. Amid much of certain evil, of doubtful promise, recent events in South Africa have at least proved beyond cavil that the ties of sentiment between Great Britain and her distant daughter-lands are more than verbal. And through the present crisis the leaders of Colonial thought have been unanimous in declarations that contain “ no hint or suspicion of any anxiety to force a preferential market upon us as the price of their continued loyalty.”

If, then, we can rest assured that reform is not, in fact, immediately imperative, it becomes possible to dispassionately investigate “certain rival schemes of fiscal policy,” which may still, of course, for other reasons be desirable toward our ultimate prosperity. And we may further admit in passing, on the one hand, that foreign protected competition, like all trusts and dumping, is one of the elements producing crises in commerce ; and, on the other, that all advantages claimed for Protection have a far greater appearance of cogency for young and undeveloped countries (as trusts have for new industries) than for those of established status like our own.

Reverting to the four practical suggestions named above, it will be easily recognized that, while the first " has been advocated only by irresponsible persons upon grounds implying an imperfect understanding of economic analysis, ” the second and third are now admitted into the official programme of Mr. Balfour and his present Cabinet, while the fourth presents the distinguishing item of Mr. Chamberlain’s personal campaign, the chosen corner stone of the New Imperialism.

The Prime Minister claims to “ approach the subject from the free trade point of view,” ¹ and, theoretically, the proposal to increase our bargaining powers — by retaliation or concession — does not involve the introduction of the protection principle. Our present tariff policy, aged twenty-five years, would " confine that part of our revenue which is derived from customs ” (with one special exception from which the protective element is eliminated by excise) " to duties on commodities not produced at all in the United Kingdom.” It would, therefore, seem feasible to open tariff negotiations in some quarters by raising or lowering the duties on such commodities, without in any way disturbing home industry. But to " compensate ourselves for the harm done us by a given rise in our own tariff, we should need to secure a fall about equal to that rise in the tariffs of all the world ; ” a triumph of diplomacy surely Utopian; while retaliation would be even more dangerous. On the contrary, we must remember that our free trade policy has not tempted other nations to any hostile discrimination. " It has everywhere, and in all important particulars, secured for our goods ' most favored nation ’ treatment, — an advantage of which there is no reason to suppose that they are the least likely to be deprived.” And in practice it is almost certain that 44 the conversion of the nation to tariff bargaining would mean the erection of a customs system under which more than one British interest benefited at the public expense.”

Arguments for the principle of Protection, whether generally applied or limited to the attack on Trusts and Kartels, are too intricate for full discussion within the limits of this letter. Every one is familiar with the outlines of the crusade against the threatened encroachments of foreign monopolists. It remains for the English electorate to consider how far the injury undoubtedly inflicted upon us by the high customs duties of other nations is really different in kind, or even in degree, from any other form of “ check upon exchange ; ” and whether it would not, in fact, be increased by any " burden we might ourselves put upon the inward branch of our foreign trade,” similar to that now put by others upon the outward. The protectionist can easily show that small temporary benefits would accrue from the erection of tariff walls to particular industries, or, more accurately, to the capitalists controlling them ; but he must prove that such a nursing of vested interests will be permanently advantageous to the community. He must maintain, in fact, what would seem contrary to the laws of economy, that any deliberately imposed artificial restraint of capital and labor from those occupations, to which it is being impelled by the broad economic forces of the time, would not produce a loss of total efficiency. Finally, he must face the grave disadvantages (if an advocate of limited Protection)

“ which are bound to arise when ordinary human beings endeavor in practice to select the proper cases for intervention, the right time for beginning it, and, above all, the moment at which the temporary duty ought to be removed ; ” since, once the protective element has been introduced, powerful interests are perennially opposed to any reductions. " There are also to be apprehended those evils other than material which Protection brings in its train,—the loss of purity in politics, the unfair advantage given to those who wield the powers of jobbery and corruption, unjust distribution of wealth, and the growth of sinister interests.” ²

It is not difficult to see that Mr. Chamberlain’s preferential scheme involves unlimited Protection, and, indeed, presents the most natural and consistent completion of the new policy. We cannot give a preference to some without taxing all; we cannot effect anything substantial for the Colonies by confining our action to goods not produced at home. We shall be pledged to full retaliation, because the Colonies have plainly declared that any return concessions from them to us will not take the form of lower rates to the Motherland, but of higher to the foreigner. Should an Imperial Fiscal Unity be established, we may lose the “ most favored nation ” treatment as a retaliation to Colonial action. Preferences, therefore, can only be recommended by evidence of very strong internal advantages, which mostly vanish with a denial of the urgency plea. They are commonly also defended as the surest means of encouraging the development of agricultural resources, which, however, are bound in nature to make rapid strides whatever our attitude toward them ; and for certain political considerations, which will not bear close inspection. It is said that a protected supply of food within the Empire would be invaluable in case of war; but the emergency presupposes the hostility of all other markets ; which is most improbable, for example, in the case of the United States. It is said that we must make any sacrifices to secure the fighting service of our sons “ over the water ; ” but, in fact, the difficulties of adjustment between the Colonies would be infinitely provocative of friction, as they were in the first half of the nineteenth century, and a cash nexus may easily snap the thread of disinterested affection. Here, more emphatically than in any other form of Protection, we dare not go back in case of failure. “ The old preferences of sixty years ago were not done away without rousing very bitter feeling among the Colonists. To grant them a second time, and again to withdraw them, would be scarcely possible without the risk of grave disaster. There is at present no evidence of a tendency on the part of the Empire to ‘ fall to pieces and separate atoms ; ’ but it is doubtful if the same could be said, should it ever come to be subjected to so severe a strain as this.”

Any one of the present schemes for fiscal reform, or any compromise between all, more likely to override the free trade tradition, is accompanied by certain danger; and it remains for the protectionist to prove that evils exist demanding the change or amenable to the remedy. Popular opinion sees that Protection must make food dearer. It is not yet convinced that our commercial difficulties are due to Free Trade, or that a change of policy would secure us an increase of wealth to meet the greater cost of living.

R. Brimley Johnson.