PROTECTION AND TAXATION.

Hawke's Bay Weekly Times, Volume 2, Issue 69, 27 April 1868, Page 101

PROTECTION AND TAXATION.

(From the Sydney Morning Herald, 31st March.) The manufacturers of America are compmining loudly. They enjoy the protection of a tariff all but prohibitory, and wages have lately been reduced from ten to twenty-five per cent. Yet, id spite of this, every manufacturing industry is said to be in a state of collapse, and conventions are being summoned to discuss the causes and the cure of the evil.

Massachusets, the leader in industrial enterprise, complains perhaps the most loudly. Not only are the sbip : building yards deserted, and the cotton mills said to be unable to compete any longer with English products, but the prestige of the great port of the State has received a blow by the withdrawal of the mail steamers. Mr Cunard says that there is no freight to be got at Boston, not though it is taken at the cost of ballast, and therefore it will not pay to touch there any longer. The trade has centralised itself at New York.

The stagnation of trade in America is partly due to the reaction of the war expenditure. The greater portion of the money spent on the war was spent in the country. The demand was stimulated enormously. Prices rose, and profits were high. This de maud has' now ceased, and a revived commerce has not yet proved a substitute for it. The South is still impoverished and unsettled. The home market for the manufacturers, there fore, is less than it was, and it can only recover itself slowly. The export trade in the markets of the world is exposed to competition. Protection is of no use here. And in tryiug to force this trade, the American now finds himself weighted with the pressure of the war taxes. Prior to the war, America was doing a good foreign trade. Its chief competitor was Great Britain, whose manufactures were weighted with the taxes necessary to pay the interest on a debt of eight hundred millions sterling. America, free from such incubus, and lurning to account its immense supply of waterpower, was beginning to push the British manufacturer hard. Now the case is altered. For the four years of the war, America practically vacated the foreign trade, and now that it again essays it, it finds that it cannot, produce as cheaply as before. It has the same weight to carry that its rival

has, and it cannot run the race to win under those conditions.

| Accordingly, we’find the manufacjturers protesting very strongly against the severity of : the internal taxes. They are as much in love with the Customs duties as ever, and would like to see them increased if it jwere not that there is a natural limit jto their productiveness. If the tariff was made too high the Customs revenue would fall off, and a 3 the Government must have money it would be ! obliged to compensate for the dimunition of Customs revenue by an increase of the internal taxes. But it is the desire of the manufacturers to lighten the internal taxes as much as possible, and therefore it is to their interest that the Custom-house should be as productive as possible, and this can only be by a large importation. The protectionist craving, therefore, which would otherwise be satisfied with nothing short of prohibition, is checked by the equally strong desire, to lighten the internal taxes.

In order to make this latter process j possible, it is suggested that no present effort should be made to pay off the principal of the debt. It is said to be as much as the country can comfortably do to discharge the interest until trade revives, and that it will be time enough in a few years to commence the gradual reduction of this national burden. And this policy will very likely find favor. The Government was anxious, in the first instance, to make a great display of reducing the debt with rapidity, but the importance of lightening the annual pressure on the industry of the country will probably lead to a considerable postponement of the original project. The present position of American manufacturing industry shows that protection is not a cure for commercial crises. There is a great want of employment among the artisan class, and wages, when calcukted with reference to the cost of living, are not high. Protection affords no guarantee for employment. 5: ?

Nor is it cheapening articles of consumption. There is scarcely a commodity in the United States that is selling at free trade prices. The cost of living is enormously enhanced by the taxes on everything that is used in daily life, and this cost tells directly on the cost of protective industry, and prevents the manufacturer from competing with advantage in the markets of the world. We may also learn from our American cousins that one of the best ways to promote domestic manufactures is to keep down the taxation, and one of the surest ways to hamper local industry is to increase the taxation. This is a lesson which ought to be powerfully impressed on the minds of our present Ministers. They 1 are supposed —at least some of them—to be favorable to the policy of protection in this colony, and yet they are recklessly running the country into further debt, and preparing the way for fresh taxes. The last set of taxes imposed have had an appreciable effect in discouraging local industry by reducing its profits, and fresh taxes will operate still further in the same way. IT the Government really wishes to assist the local producer, it cannot do better for him than to leave him alone; and by an economical administration keep him free from all additional taxes which, however imposed, are sure to meet him at- some turn or other. Any other kind of protection is a broken reed. It may give a partial help for a time at the expense of other people, but it will break down in the end, and will aggravate the difficulties of any commercial crisis. The more free and natural the trade of any country is, the better it is fitted to weather the storms which occasionally pass over the financial worldwhile a country depending on an artificial and protected trade is. more likely to be prostrated' by any serious disturbance. Free 'trade has great elasticity as well as great resources, and adapts; itself with the least waste to the changing state of affairs.