The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo. WEDNESDAY, MAY 29, 1907. PREFERENCE V. FREETRADE.

Auckland Star, Volume XXXVIII, Issue 127, 29 May 1907, Page 4

The Auckland Star: WITH WHICH ARE INCORPORATED The Evening News, Morning News and The Echo.

WEDNESDAY, MAY 29, 1907. PREFERENCE V. FREETRADE.

Tor the cause that tacks assistance, for the wrong that needs resistance. For the future in the distance. And the good that we eau do.

The interesting letter from Professor H. W. Segar, which appears in our correspondence columns to-day, makes no at tempt to deal with'Ahe whole case for Preferential Trade; but as it traverses some of the arguments we have employed we can hardly pass it without comment. We are aware that List supported Protection only as a temporary expedient under certain carefully defined conditions. But our reference to him was merely incidental and we would be sorry to allow the case for Protection to stand or fall by an appeal to List. It 'must be remembered in the j first place that List's great work on the ''National System of Political Economy," appeared 6G years ago, and the conditions under which the problem of international trade must be studied have changed almost infinitely since 1841. Secondly, while List was admittedly the founder of German Protection — antl though he held that " on the development of the German protective system depends the existence, tho independence, and the future of the German nationality " —his theories are no longer accepted as conclusive even by the leading German advo : cates of Protection. Professor SchmOller, of Berlin, the head of the German Historical School, and the most influential of contemporary Continental thinkers on economic subjects, declared in 1901 that the German protective policy does not rest, primarily or solely, on List's views (the " productive powers " or " infant ■industries" argument), but derives its chief strength from the knowledge that " tariffs are international weapons which may benefit a country if skilfully used." Professor Schmoller admits justly enough the evils of excessive protective tariffs; but he points out that Protection, once instituted by a powerful commercial State, " drives all other States to a certain amount of tariff regulation if only not to be quite defenceless."

But when we come to consider the? authoritative justification for protective tariffs, we need not : go so far abroad. When Adam Smith upheld the strongly protective Navigation Acts, he based his' case on the maxim that "defence is of much more importance than opulence" ; and this truth, in his eyes, fully justified vigorous interference with the ideal rule of "haying ia the cheapest market and s«lling in the dearest.'* The notion that Free Trade is an invariably sound policy is certainly not

supported by Adam Smith, and .when Mill made his famous concessions to the Protectionists in favour-of "infant industries," he went a long Way toward invalidating the theoretical case for Free Trade. But it is astonishing how far the most orthodox. English economists—from Smith and Mill- down to Marshall and —are prepared to go in admitting that, as Professor Ashley puts it, "a protective policy may be in some cases economically justifiable." The difficulty j s t 0 induce them to admit that the theorefical conditions which they assume are ever paralleled in actual life. Remembering how the industrial and commercial position of England has altered during the last century, we may Well wonder what Adam Smith, or even Mill', would have said about the "exceptional*;' conditions under which England is now contending for supremacy with her many- powerful and wealthy rivals. And it is surely in the highest degree significant that the leading exponents of economic thought in Germany and America hold that the theoretical soundness of their Protectionist policy has been amply justified by its practical results; though these results, we need hardly- say,,have hopelessly contradicted the most emphatic predictions of the founders of British Free Trade.

A second point on which we must join issue with Professor Segar concerns the effect produced by the Corn Laws Upon the condition of England, and the effect of their repeal. In the first place, no student of the social and political history of the early ninete nth century can doubt that the Free Traders put the worst possible face upon the condition of the country in 'order to carry their point. No doubt there was a good deal of destitution . and misery among the industrial and - agricultural classes; but it was not the business of Cobden and his friends to point out that this was most largely due to such general causes as . war taxation, currency troubles, chronic over-production, and —perhaps more than anything else—the transition from an age of manual labour -to an era of labour-saving machinery. But in spite of all this, the state of England was such that in 1524 the leading statesmen of America, in discussing their own fiscal policy, constantly referred to the "unrivalhd prosperity" of England as a powerful argument in favour of Protection. Surely even the Free Traders should allow some merit to the system which had built up the spLndid array of industries and manufactures which by 1846 had piaced England, beyond fear of competition, at. the head of the world's commerce and finance. And as to the condition of the poople, as a counterblast to" the sensational rhetoric of the extreme Cobdenites, ,w:e. may cfatjto ~.'y. t jtu~-i?mi&/ni\''¥*&#*• trader, tci the effect that in 1845 "the country was flourishing, trade was .prosperous, the working classes were fully and remuneratively employed, and bread was cheaper than it * been for many years." With such ewJence from such a source, even Freetraders may be content, to acknowledge that ."the hungry forties" were probably nothing like as deplorable as they are represented in the speeches of Cobden and his immediate followers.

As to the figures dealing with the pries? of corn, Professor Segar apparently contends that the corn duty kept up the price of bread, and, that after 1546 the repeal of the Corn Laws produced cheap food. We need not repeat the statistics we have quoted already, but we may add that for the twenty-five years, 1822-46, the average ' price of wheat was ' 58/ per quarter, and for the twenty-five years, 1849-72, after the corn duties were removed, the average was 53/ per quarter.; This drop was what might have been expected from the improved facilities for transport, and when Mr. Gladstone -said in his 1879 Midlothian Campaign speeches that the repeal of the Corn Laws did not reduce the price of corn, he was stating an obvious and incontrovertible fact. As, to the general theory of the incidence of such a tax, the usual Free Trade assumption is that the tariff necessarily means a rise in price to the consumer. Professor Segar will hardly need to be reminded that this view is not supported by the weight of economic authority. Professor of Oxford, Professor Baatable, of Dublin, Professor Nicholson, of Edinburgh, 3nd Professor Seligman, of. America—perhaps the four most eminent financial theorists in the English-speak-ing world to-day—all freely admit that such an import duty as the corn tax may be paid at least in part by the foreign producer. To assert that the foreigner always pays all the duty is, of course, to exaggerate on the other side. But the experience of Germany, France, and America proves conclusively that import duties may. be imposed without producing any effect on the price paid by the consumer for the taxed article. Professor Edge Worth has shown that when the American MeKinley tariff imposed a duly of two dollars per ton on hay the price remained unchanged in the States, and fell two dollars in Canada. Mr. Inglis. Palgrave, editor of the " Dictionary* of Political Economy," has shown that when the duty on Dutch cheese was removed in 1860 the price remained unchanged in England, while when the duty on French gloves was taken off and the duty on sherry was lowered, the prices in England actually rose. In France, the duty on mutton and beef was raised about 150 per cent in 1892, and the retail price of mutton and-beef'has-either remained unchanged or has actually fallen since. Without multiplying evidence, the Prefcrcntialists may fairly claim that the experience of the past in England ahd in ■other countries is on their side: And, remembering, that the price" of breaa has remained practically unchanged for_•■*ears at a time, io spit* of extreme fluctuations in the wheat, we may assert «ny rjh»ticalry~that the risk to; the T»age-

earners of England from a small import duty on corn would be infinitesimal, and that the " dear loaf " scare so persistently encouraged by Free Traders at Home is practically as well as theoretically baseless and visionary.