II (7)

There are two special inducements which might bring the self-governing colonies, or some of them, to favour a closer political union with Great Britain. The first is a revision of the commercial and financial policy of the mother country, so as to secure for the colonies an increased market for their produce in Great Britain and in other parts of the British Empire. In discussion of this issue it is customary to begin by distinguishing the proposal to establish an Imperial Zollverein, or Customs Union, from the proposal for a preferential tariff. But very little reflection suffices to perceive the futility of the former without the latter as an appeal to the self-interest of the colonies. Will these colonies assimilate their financial policy to that of Great Britain, abolishing their protective tariffs and entering a full Free Trade career? The most sanguine Free Trader suggests no such possibility, nor indeed would such a course afford any real guarantee of increasing the commercial inter-dependence of the Empire. It would simply force the colonies upon processes of direct taxation repugnant to their feelings. Is Free Trade within the Empire, with a maintenance of the status quo as regards foreign countries, really more feasible? It would simply mean that the colonies gave up the income they obtained from taxing the goods of one another and of Great Britain, each getting in return a remission of tariffs from the other colonies with which its trade is small and no remission from Great Britain, which would continue to receive its goods free as before. Though this same policy would ultimately be beneficial to their commerce, it would only encourage the existing tendency to trade less with the Empire and more with foreign nations, while it would involve a revolution of their fiscal method. No; Free Trade within the Empire is only conceivable upon the basis of Great Britain agreeing to abandon Free Trade with countries outside the Empire. Even were Great Britain prepared to adopt such a course, it would remain most unlikely that the colonies would make the sacrifice of customs income involved by admitting goods from all the Empire free; for this course would entail a sacrifice much greater than at first sight appears, inasmuch as such discrimination would virtually enable the goods admitted free to displace the taxed goods, reducing to quite insignificant dimensions the income still derived from customs.

Engaged as we are now in finding special inducements to draw the colonies into closer political union with Great Britain, we need not discuss the probability of an extension of the policy which Canada initiated by her preferential tariff, according to Great Britain a preferential tariff by a surrender of duties upon British imports amounting to 33 per cent. It is needless to discuss the motives which may have animated this advance. If we look to its result we find that it has been quite inoperative, regarded as a stimulus to British trade. "In spite of the preferential tariff, the percentage of American goods entering Canada has continued to increase and the percentage of British goods to decline." This is attributed to the "sham" character of the concession, as illustrated by the fact that "before giving a preference to British goods the Laurier ministry was careful to raise the duties on cotton goods largely coming from Great Britain, while lowering or abolishing the duties on raw materials coming from the United States."

Thus the much-boasted British preference is to a large extent a delusion. In spite of the preference, British goods still pay a higher average tax on entering Canada than American goods. Here are the figures:—

Even if it is claimed that the act was a pure offering of goodwill, it is not contended that the colonies will generally follow the example, making concessions and receiving no preference in return. The only Zollverein proposal which claims serious discussion is one based upon the general adoption of preferential treatment within the Empire, involving on the part of Great Britain herself an abandonment of Free Trade with foreign countries. Here, at least, the colonies would have some quid pro quo, a guaranteed monopoly of the imperial market for their exports, in compensation for their loss of customs revenue from admitting imperial imports free, or at a lower rate of duties. Assuming that the colonies would enter such an arrangement, Great Britain would have to pay a heavy price for the political and military support which such a commercial policy was designed to purchase. Apart from the immediate dislocation of her industries, which would follow this partial abandonment of Free Trade on her part, and which would be more serious than a carefully imposed tariff applied equally to all imports, it would tax all classes of consumers and producers in this country by raising the prices of ordinary necessaries and conveniences of life, and of materials imported from abroad to be employed in home industry. Grain and flour, cattle and meat, wool, timber, and iron would form the chief commodities which, in the supposed interests of our colonies, would be taxed first. Unless it did raise these prices it could have no effect in enabling colonial producers to displace foreign producers: the tariff, to be operative at all, must remove all profit from some portion of foreign goods previously imported, and, by preventing such goods from entering our markets in the future, reduce the total supply: this reduction of supply acts of necessity in raising the price for the whole market. This well-recognised automatic operation of the law of supply and demand makes it certain that English consumers would pay in enhanced prices a new tax, part of which would be handed over to colonists in payment for their new "loyalty," part would go to the British exchequer, and part to defray expenses of collection.

Nor is this all, or perhaps the worst. By this very method of binding our colonies closer to us we take the surest way of increasing the resentment of those very nations whose political and military rivalry impels us to abandon Free Trade. The vast and increasing trade we have with France, Germany, Russia, and the United States is the most potent guarantee of peace which we possess. Reduce the volume and the value of our commerce with these nations, by means of the re-establishment of a tariff avowedly erected for the purpose, and we should convert the substantial goodwill of the powerful financial, mercantile, and manufacturing interests in these countries into active and dangerous hostility. It would be far worse for us that we had never been a Free Trade country than that we relapsed into a protective system motived by the desire to weaken our commercial bonds with the political and commercial Powers whose rivalry we have most to fear. By the statistics of an earlier chapter it has been shown that not merely is our trade with these foreign nations far greater than the trade with the self-governing colonies, but that it is growing at a faster rate. To offend and antagonise our better customers in order to conciliate our worse is bad economy and much worse politics.

The shrewder politicians in our colonies might surely be expected to look such a gift-horse in the mouth. For the very bribe which is designed to win them for federation is one which enhances for them enormously and quite incalculably the perils of a new connection by which they throw in their lot irrevocably with that of Great Britain. A monopoly of the imperial market for their exports may be bought too dear, if it removes the strongest pledge for peace which England possesses, at a time when that pledge is needed most. Nor would these colonies share only the new peril of England; their own discriminative tariffs would breed direct ill-feeling against them on the part of foreigners, and would drag them into the vortex of European politics. Finally, by distorting the more natural process of commercial selection, which, under tariffs equally imposed, has in the past been increasing the proportion of the trade done by these colonies with foreign countries, and reducing the proportion done with Great Britain, we shall be forcing them to substitute a worse for a better trade, a course by which they will be heavy losers in the long run.

It cannot be too clearly understood that not merely is the natural tendency of development in our self-governing colonies towards a decreasing commercial dependence upon Great Britain, but the same commercial separatist tendency operates among the colonies in their relations to one another. The colonies do not find their interests to lie in increasing the proportion of their trading intercourse with one another. Professor Flux in his close investigation of the statistics comes to the following conclusion:—

"As for the trade between the colonies, the Australian inter-colonial trade, which we have stated at £22,500,000 for 1892-96, was only between £7,000,000 and £8,000,000 at the earlier date here considered. Other inter-colonial trade has hardly grown in value. It was recorded at about £20,000,000 on the import side and £25,000,000 on the export side during the years 1867-71. Thus nearly 76 per cent. of colonial imports were derived from the Empire, and about 73 per cent. of the exports went to the Empire, or about 74 per cent. of the total trade was carried on with other parts of the Empire, as compared with the 65 per cent. at the more recent date, as recorded above." Why should we persuade our self-governing colonies to reverse the natural tide of their commerce, which flows towards internationalism, and force it into the narrower channel of Imperialism?