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producing more cheaply than less favoured nations. Then by free international exchange of these goods the consumer will benefit from cheap supplies, while the producers will be able to realize greater wealth from their efforts than if they pursued occupations for which their land was unfitted. For instance, Lancashire has plenty of coal, and a suitable climate for cotton spinning. Therefore let her specialize on the production of cotton goods. By so doing she creates more wealth than if she tried to grow corn or rear cattle. Similarly, the West Riding of Yorkshire has abundant coal and water, and a population trained for centuries to the manufacture of woollen cloths. Other lands are not so well supplied with coal, their climate is not so naturally adapted for cotton manufacture, and their population is devoid of textile skill. But they are well equipped for the growth of cotton, the rearing of cattle and sheep, or the production of foodstuffs. By producing these things they create far more wealth in proportion to the outlay of capital and labour then if they endeavoured to spin cotton or make serges. Therefore let Yorkshire, Lancashire, and similar areas stick to their textile factories. Let the natural agricultural areas produce the greatest possible amount of foodstuffs and raw materials. Then by exchanging these products, free of any tariff impositions, consumer and producer will both benefit far more than if each area endeavoured to be jack of all trades.
(2) Free trade enables each country to enjoy the consumption of goods which it is unable to produce by reason of its soil, climate, or size either of land or population. Cold countries are able to obtain cheaply the products of tropical and sub-tropical lands, and vice-versa; the produce of the world becomes available to the poor of the world; small but thickly-populated countries can find adequate supplies of food, and a land with a small population and primitive industries can enjoy all the comforts produced by countries with vast, highly-developed industrial populations. At the same time, countries can produce more than they require for themselves of products for which their land is well suited, exporting the surplus. In this way, Australia finds a profitable use for her semi-dry lands and her metal deposits, Chile can make use of her nitrates, America her cotion belt. A tariff reduces these advantages by enhancing the price of such goods to the importing country, and makes less easy the use of the resources of over-supplied lands.
(3) Since nations trade really by barter, and pay for their imports by exporting goods, any reduction of imports by means of a tariff entails a corresponding decrease of exports, thereby causirg unemployment to those engaged in production for export. This may be to some extent remedied hy setting the unemployed to work making such goods as are kept out by the tariff, but this sneans a transfer of labour and capital from one industry to another, and the new industry may be less profitable than the old one.
(4) Free trade prevents or makes difficult the formation of trusts, and renders their operations less likely to be oppressive. Protection makes possible wire-pulling by the big industrial interests, who seek to influence the government to give extra protection to their goods. Hence the flood-gates of corruption are opened wide. Further, under the shelter of the tariff, inefficient methods and obsolete machinery may be retained, with consequent costly production. Free trade compels producers to keep their wits awake, and the stress of foreign competition prevents them from falling into grooves and becoming conservative in their methods.
(5) Protection may benefit some industries, but at the expense of others. The finished article of one industry is the raw material of another. A tariff on leather may benefit tanners, but raise the price of leather to boot-makers. A tariff on steel benefits steel-makers, but hits machine-makers, to whom steel is raw material. A tariff on machinery hits industries using machinery, and makes it less possible for them to afford new machines as such are invented abroad.
(6) Protection is a fruitful cause of international friction; it is based on the idea of international strife, and breeds a spirit of hatred and rivalry among nations.
An increased tariff by Italy on French goods is promptly, met by an increased French tariff on Italian goods, and a tariff war ensues, which may bring the two countries to the verge of war. The only good port for importing goods into Austria is Trieste; but if Italy owns Trieste, and puts a heavy duty on goods destined for, or coining from, Austria, then Austria must fight to secure or retain that port. Finally, if one nation endeavours to seize an area of rich “backward” country, so as to retain for itself a monopoly of the raw materials of that area, other countries which need supplies of those materials chafe at their exclusion, and seek by war to gain access to the spoils. In short, the whole policy of protection breeds ill-feeling, and in some cases actually causes war. Free trade removes this possible friction, and when all people have equal access to raw materials and exchange goods to mutual advantage peace is fostered.
The Mercantile System. The above arguments, and many others, were first put forward strongly during the first half of last century, and formed part of the individualist reaction against the Mercantile System that still survived. The aim of that system, as it had gradually evolved during two centuries, was national strength and independence on the economic side, so as to fit the state for the successful waging of any war into which it might be plunged. No nation could hope to hold its own in the quarrelsome family of nations unless it had plenty of sturdy men for the army and navy, plenty of industries, and a flourishing agriculture capable of supplying all needs and defying any blockade, plenty of ships available for conversion into men-of-war, and a foreign trade so directed as to bring into the country a plentiful supply of ready morey. This aim-economic strength as a bulwark of political and military strength-was during the 16th-18th centuries the guiding principle of statecraft throughout Europe. Its chief features were as follows:
(1) The encouragement of industries. This was done by an elaborate system of prohibitions or heavy duties. The importation of some manufactured goods was forbidden altogether, while others were admitted only on payment of heavy duties. On the other hand, the exportation of raw riaterials or machinery, and the emigration of artisans, were prohibited, lest any rival nation should therewith build up a competing industry. Finally, the export of manufactured articles was encouraged. In order to do this, the state endeavoured to maintain a high standard of quality, frowned on deceitful practices, and sent an army of inspectors and searchers into the industrial areas to see that cloth and other products were made good and true. The state also insisted on the serving of a long apprenticeship, and on two occasions tried to increase the home demand for woollen cloth by decreeing that 10 person should be buried in any wrappings except such as were made of pure wool!
(2) The encouragement of agriculture, especially of corn-growing. This was done by discouraging or actually prohibiting the importation of corn and by encouraging its exportation. After 1773, however, England required all her own corn for home consumption, and had to import in increasing quantities. Then with the outbreak of the war with France in 1793, sea trade was interrupted, and for 22 years England had to rely almost entirely upon her own production. Prices fluctuated violently from 60/- to 155/- a. quarter, but as a rule were high. Hence the farmers benefited somewhat, enclosures were universal, and the landlords were able to demand very high rents. When peace drew near in 1815, and the renewal of foreign supplies tas imminent, parliament intervened to save farmers and landlords from a break in prices and rents by forbidding the importation of any foreign corn until the price of British corn had reached 80/- a quarter. (The figure was reduced from 80/- to 70/- in 1822.) This was the famous Corn Law (amended in later years) against which the free traâers made their strongest attack.
(3) The encouragement of shipping. This was attempted in the Navigation Laws of the 17th century, which forbade the importation of goods from Asia, Africa, or America through European ports, or in any ships except either English ones, manned predominantly by English seamen, or those of the country from which the goods came. The coasting trade was kept in British hands. Goods imported into or exported from any British colony could be carried only in British or colonial vessels.
(4) T'he development of the colonies for the benefit of the mother country. The general principle underlying colonial policy was that colonies were children of the mother land, were protected and financed by her. in return any benefits which the children might be able to bestow should be for the almost sole benefit of the parent. In all things their actions were to be subject to parental control; colonial commodities must be sold to Britain alone, and preference given to British goods. Manufacturers must not be allowed to grow up in rivalry with those of the mother country, and, as Chatham said in the 18th century, “the British colonists of North America have no right to manufacture even a nail for a horse-shoe.” Modifications of this policy were sometimes allowed, but on the whole the fundamental justification of colonization was that the colonies were simply to benefit the commerce of, and serve as pawns in the commercial game played by, the parent land.
(5) The accumulation of a large store of precious metals. Money was very necessary in time of war, and, until governments discovered the wonderful possibilities of the printing press, that money must be gold or silver. But how was the stock to be increased? Drake's method of galleon raiding had its iimitations, and so the only satisfactory way was to regulate trade in such a way that a country exported more goods than it imported. Under such circumstances the net surplus of exports would have to be paid for in metal. To get a favourable "balance of trade” was perhaps the most important part of mercantilist policy; it influenced the regulation of exports and imports, and determined the countries with which trade was to be fostered. England, for instance, discouraged trade with France because the balance there would be unfavourable, but encouraged traffic with Portugal since Portugal was likely to buy more from England than she could pay for in goods.
The Free Trade Movement. The policy outlined above may have been helpful to nations at a certain stage of their growth, but by the 18th century it was certainly a hindrance to British expansion. The colonial system and the Navigation Laws, pushed to extremes, proved fatal in the case of the American colonies, and led to the American Revolution; smuggling flourished in spite of all laws and customs officers; prohibited goods were sold openly; artisans had little difficulty in getting to other lands if they wished; and the Navigation Laws were probably doing as much harm as good by 1770. Even in the 17th century there were many critics of this elaborate state control, and at various points a greater measure of freedom was won. By 1776 Adam Smith in Britain and the Physiocrats in France were ruthlessly pointing out flaws, real and imaginary. Pitt, who had become a disciple of Smith, set out in the eighties to reform the whole financial system and pull down trade barriers. In 1786 he made a commercial treaty with France, by which each country reduced duties on certain specified goods imported from the other. Free trade seemed to be coming rapidly, but the Revolutionary and Napoleonic Wars crashed in to stop it. The need for revenue compelled the government to raise the duties on imported goods, to put more items on the tariff list, and to impose excise duties on almost every article produced inside the country. Ir 1792 the British National Debt was £237,000,000; in 1815 it was £860,000,000, and called for very heavy taxation to provide the £45,000,000 needed each year for interest and sinking fund. In 1815 there were 1,500 articles on the tariff list, and everything was taxed. As Sydney Smith declared, there were "taxes upon every article which enters the mouth, or covers the back, or is placed under the foot; taxes upon everything which it is pleasant to see, hear, feel, smell, or taste; taxes upon warmth, light, and locomotion; taxes on everything on earth, and the waters under the earth; on everything which comes from abroad or is grown at home; taxes on the raw material, taxes on every fresh value that is added to it by the industry of man; taxes on the sauce which pampers man's appetite, and the drug which restores him to health; on the ermine which decorates the judge and the rope which hangs the criminal; on the poor man's salt and the rich man's spice; on the brass nails of the coffin and the ribands of the bride." At bed or board, from the cradle to the grave, man must pay, and when he dies “his virtues are handed down to posterity on taxed marble, and he is gathered to his fathers—to be taxed no more.
Under this weight of taxation industry and commerce groaned. From 1820 therefore voices began to be raised louder and louder in favour of reform, and this agitation, strengthened by the failure of the fiscal machine to produce an adequate revenue, compelled statesmen to whittle the policy away till nothing remained. The Navigation Laws were modified in operation by making many reciprocity treaties concerning shipping after 1824, and eventually they were repealed (1849 and 1854), thus throwing British ports and sea trade open to the vessels of all nations. Other countries went nearly as far, but some of them, for instance, the United States, retained a monopoly of the coastal trade for local ships. The laws forbidding the exportation of machinery and the emigration of artisans were repealed in 1825, after having been generally evaded for decades. Attempts to maintain a standard of quality in manufactures were also abandoned, and henceforth the purchaser inust see to the quality for himself. The apprenticeship laws had gone in 1813.
Meanwhile the tariff of 1,500 articles was being assailed from 1825 onwards. Prohibitions disappeared, duties on raw materials were substantially reduced, restrictions on exports vanished. In 1840 there were still 1,150 articles on the list; yet the national revenue was inadequate, and for years the Treasury had been faced with a deficit. In 1840 a Parliamentary Committee was asked to investigate the whole tariff question; it reported that the tariff liad “neither congruity nor unity of purpose,” and that out of 721 of the chief dutiable articles the return on at least 600 was not worth collecting. After that discovery it was admitted that the tariff was a bad revenue-producer, and unnecessary as a means of protection, since England was the most advanced industrial country in the world. Therefore, let it be cut away and revenue sought in other directions. During the next 30 years Peel, and then Gladstone, reduced the rates and finally abolished them; by 1860 the number of items was 48; in 1874 it was 17.
This abandonment of the tariff as a source of revenue made it necessary to find some other source of revenue. The alternative was supplied by the income-tax. This tax had been first levied during the Napoleonic wars. It was renewed by Peel in 1842, as a temporary expedient, but was such a successful revenue-producer that it was never abairdoned. Gladstone raised the rate from 7d. to 1/2 during the Crimean War, to help pay for that war, but during subsequent years the rate was reduced, until in 1874 it stood at 2d.
Colonial policy was affected radically by the free trade movement. The attitude of the free trader was that the colonies would grow to a certain stage under the wing of the mother country and then break away into independence. Therefore let them be freed from all parental control :1 their commercial dealings, free to trade as they wished. This, plus selfgovernment, would enable them to reach more quickly years of discretion and independence. International commerce was turther liberated by means of a system of “most favoured nation” treaties. These treaties worked as follows:-In a treaty between Prussia and France, France promised that if she granted concessions to any other country, say England, Prussia should automatically obtain the same concessions. Prussia in return made the same promise to France. France did actually make concessions to England, and therefore Prussia obtained them as well. Hence by a network of treaties duties were reduced all round, and a big approach was made towards European free trade.
The Corn Laws. The most spectacular fight in the free trade campaign centred round the Corn Laws, against which the Anti-Corn Law League, founded in 1839, crusaded, with Cobden and Bright as its champions. For six years the League carried on a vigorous widespread campaign, strove to work up public opinion, and vainly endeavoured to secure the abolition of the "tax on bread.” Agitation failed, but the bad English harvests of 1844-5 and the Irish potato famine of 1845-6 succeededi, for the need of getting cheap food converted Peel and compelled the government to allow corn to be imported on payment of a duty of 1/- a quarter. That 1/- was removed in 1869, and free importation of corn became the rule
Free Trade in Other Lands. The movement towards free trade was not confined to England. France went a long way on the road, and a commercial treaty with England (1860) opened French ports to British produce on much more favourable terms. In Germany, the Zollverein (1833) established free trade between 36 states, and thus facilitated the internal