1 BOUGHT WITH THE INCOME FROM THE SAGE ENDOWMENT FUND THE GIFT OF 3Hcnrg W. Sage 1S91 ■*?*H*7 idirliJ 97»4 arVl3094 COrne " Universit y Library S ,?, l .S!iK..a.r!!.c!es ii O i n reciprocity olin.an? 1924 031 234 598 Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924031234598 DEBATERS' HANDBOOK SERIES RECIPROCITY DEBATERS' HANDBOOK SERIES Enlargement of the United States Navy (3d ed. rev. and enl.) Direct Primaries (3d ed. rev. and enl.) Capital Punishment Commission Plan of Municipal Govern- ment (3d ed. rev. and enl.) Election of United States Senators (2d ed. rev.) Income Tax (2d ed. rev. and enl. ) Initiative and Referendum (2d ed. rev. and enl.) Central Bank of the United States Woman Suffrage (2d ed. rev.) Municipal Ownership Child Lahor Open versus Closed Shop (2d ed.) Employment of Women Federal Control of Interstate Corporations Parcels Post Compulsory Arbitration of Industrial Dis- putes Compulsory Insurance Conservation of Natural Resources Free Trade vs. Protection Government Ownership of Railroads Reciprocity Trade Unions Other titles in preparation Each volume, one dollar net Debaters' Handbook Series SELECTED ARTICLES ON RECIPROCITY COMPILED BY EDWIN CLYDE ROBBINS MINNEAPOLIS THE H. W. WILSON COMPANY 1913 S EXPLANATORY NOTE In American industrial and governmental affairs the tariff has been a source of unending controversy. An important feature of the discussion has concerned reciprocal treaties. The proximity of Canada, for example, has always made the question of reciprocity with that nation an issue of peculiar interest to the United States. Even before the well known treaties of 1854, the question received much consideration; since that date it has been a source of prolific discussion. Experience with other nations, though meagre in some re- spects, has been of such a nature as to make the subject of reciprocity a topic of nation-wide interest. The present volume of reprints is submitted, in conformity with the general plan of the series of which it is a part, in hope that it will be of practical value to speakers, debaters, and those wishing to secure general knowledge of the ques- tion with a minimum expenditure of labor. To that end the bibliographies and reprints have been selected. CONTENTS Brief Introduction . ix Affirmative ix Negative xii Bibliography General Bibliographies xv General References xv Affirmative References xviii Negative References xix Special Bibliographies on Important Topics xxi General Discussion Laughlin & Willis. Reciprocity I Hornbeck, Stanley Kuhl. Most Favored Nation Clause in Commercial Treaties. Chapter III Bulletin, University of Wis- consin. (Economics and Political Science Series.) 26 Hornbeck, Stanley Kuhl. Most Favored Nation Clause in Commercial Treaties. Chapter IV Bulletin, University of Wis- consin. (Economics and Political Science Series.) 32 Reciprocity and the Philippine Islands ' Manila Merchants' Association 41 Haynes, F. E. Reciprocity Treaty with Canada of 1854. American Economic Association Publications 56 Bliss, William D. P. ed. Reciprocity Treaties and Agree- ments Since 1850. .. .Encyclopedia of Social Reform 95 Affirmative Discussion United States and Canada Current Literature 97 Charlton, J. American and Canadian Trade Relations. Forum 100 viii CONTENTS Charlton, J. Reciprocity With Canada Forum 112 Willis, H. P. International Aspects of Reciprocity Journal of Political Economy 127 America, Canada and Great Britain Living Age 141 Mond, Sir Alfred, Bart., M. P. Canadian-American Reciprocity Agreement Living Age 145 Canada's Free Hand Nation 161 Reciprocity and the Farmers Nation 163 Hay, Eugene G. Future of Canada and Reciprocity with the United States Review of Reviews 166 Negative Discussion , Silly Season at Washington American Economist 179 "Reciprocity" with Cuba American Economist 181 Experiences in "Reciprocity.'' American. Economist 182 Chasing the Reciprocity Rainbow American Economist 188 Canadian Agreement American Economist 100 Plain Truth About the Proposed Reciprocity Agreement. . American Economist 203 Reciprocity Not Favored by the Country Generally American Economist 206 Dodge, Arthur J. Reciprocity is Losing Ground. American Economist 207 "Reciprocity" is More in Doubt. .American Economist 212 "Both Sectional and Partisan. Mulhall (Okla.) Enter- prise American Economist 214 White, G. C. Proposed Agreement as Viewed by the Farmer Journal of Political Economy 215 BRIEF Resolved, That the United States should adopt the policy of entering into reciprocal trade treaties with foreign nations. Introduction I. Of late years there has x been an increasing discussion of the advisability of entering into reciprocal treaties with foreign nations. This discussion has doubtless had its origin in the facts that there is a well defined movement on foot in favor of conserving our natural resources, and that during the' past few years the cost of living in the United States has increased at an unusual rate. II. President Hadley of Yale says: "Reciprocity is a rela- tion between two independent powers such that the citizens of each are guaranteed certain commercial privileges at the hands of the other.'' III. The first reciprocal treaty of importance which the United States entered into was with Canada in 1854. This treaty covered all natural products, i. e. products of forest, field, mine — not manufactured produce. The treaty lasted for twelve years. The United States has had other reciprocal treaties of importance. Affirmative I. The policy of reciprocal trade treaties is in harmony with our system of protection, for, A. It is granted for the purpose 'of off-setting the dif- ference in the' cost of production at home and abroad. 1. Professor Taussig of Harvard, before the Ways and Means Committee of the House, said, x BRIEF "The basic reason for the protective policy was to shield the workingmen from competi- tion with underpaid labor of over-crowded countries." 2. President Taft in a special message to Congress relative to Canadian reciprocity said: "This is not a violation of the protective principle as that has been announced by those who uphold it." B. It meets conditions as they exist in various coun- tries with which we have important trade rela- lations. For example, take Canada: 1. The general industrial and social conditions of the United States and Canada are almost uni- form, i. e., in ancestry, in language, in institu- tions, in labor conditions and in wages. 2. Canada is under populated. She has two peo- ple to the square mile as compared with our thirty-two to the square mile. 3. Wage conditions are practically the same. C. It supplements the protective policy, for, 1. In making concessions the labor and industrial conditions of each country are considered in detail. II. The reciprocal policy would promote great friendly re- lations with countries now competitors, for, A. It will prevent commercial warfare between the nations, for, 1. There will be no object in retaliating. B. It gives expression to the attractive forces between the countries, such as, the geographical advan- tages, the close relationship, common sympa- thies, identical moral and social ideas. C. It will permit a closer inter-dependence between the two nations, by giving freer play to commer- cial forces. III. The reciprocal policy would tend to conserve our na- tural resources, for, BRIEF xi A. A feasible plan of conservation is to gain access to more supplies. Canada, Mexico, and South American nations all have these supplies. For example, i. Canada has: a. 840,000 square miles of lumber. b. Extensive areas of wood-pulp. c. Great coal fields. B. By lowering the tariff wall we shall gain access to such resources, for, I. By the natural flow of trade and of reciprocal relations these raw materials would come to us. IV. The reciprocal policy would benefit us from the point of view of incoming trade, for, A. The incoming trade would boom American trans- portation companies, for, 1. It would cause transportation to flow north and south, as well as east and west, B. The incoming trade would increase American man- ufacturing companies, for, 1. It would give them large supplies of raw ma- terials to work into the finished product. C. The incoming trade would be of advantage to American bankers, for, 1. It would increase the business of American commission men. 2. It would cause large quantities of grain to be marketed in the United States. D. The incoming trade would be of benefit to Ameri- can farmers, for, 1. It would give them an increased supply of "feeders." 2. It would give them an opportunity to raise and feed more cattle on American corn. E. The incoming trade would be a blessing to the American consumer, for, 1. It would lower the price of lumber. xii BRIEF 2. It would reduce the cost of paper. 3. It would steady our markets. Negative I. When put to the actual test reciprocity has proved a failure, for, A. The reciprocal treaty with Canada in 1854 was not a success, for, 1. It did not increase our export trade. 2. It brought no real navigation advantages, for, a. The number of vessels that took advantage of the provisions of the treaty was small. b. There was no increase in our navigation trade due to this treaty. 3. It did not encourage friendly feeling between the two countries, for, 4. The treaty was extremely one-sided. All the advantages in the treaty went to Canada. B. Reciprocity treaties negotiated under the McKin- ley Acts have been failures, for, 1. They have not increased our export trade. 2. They have absolutely failed to produce any desirable results whatever. C. Reciprocity treaties negotiated under the Dingley Acts have not been successful, for, 1. They have failed to increase our export trade. 2. They have failed to check the high cost of liv- ing. II. The reciprocal policy will not benefit the ultimate con- sumer, for, A. Practically all the products that would be involved are now controlled by trusts. The trust will be benefitted, not the consumer, for, 1. The trust can regulate the price which the consumer has to pay. B. On those products not controlled by trusts, the reductions, if any be made, would go to the manu- facturers and the middlemen, for, BRIEF xiii 1. Such reductions would be on raw materials that must be further 'handled by manufacturers and middle men; not on articles directly us- able by the consumer. III. Reciprocity would not increase our markets, for, A. The reductions on manufactured goods would be slight, for, i. Proposed treaties have provided only for slight reductions. 2. General reductions would affect our "most fav- vored nation" clause in treaties with other countries, and compel us to grant similar re- ductions to all nations. TV. The reciprocal policy would deprive us of markets abroad. For example, the adoption of the policy with nations in the western hemisphere would arouse hostility in the eastern hemisphere. A. It would hasten the adoption of a protective policy in England, for, i. English statesmen, such as Balfour and Cham- berlain, have stated that such action on the part of America would result in an English protective system being adopted. B. It would hasten protection in Germany, for, i. German legislation is already tending in the direction of protection against American goods. V. The reciprocal policy would injure our home markets, for, A. The reduction of import duties into the United States would enable other nations to com- pete in our home markets in products in which they could not otherwise compete, i. This would be true of lumber, wheat, barley, etc. VI. The reciprocal policy would result disastrously from an industrial standpoint, for, A. It will mean a considerable loss of revenue, for, xiv BRIEF i. The United States will be compelled to remit large sums now secured as duties. B. It will destroy our fishing industry, for, i. Foreign fisherman work for less wages. Their vessel's are operated at less expense. 2. It would throw American fishermen into com- petition with cheaper lands, lower rates, lower wages, and lower cost of living. VII. Reciprocity is the wrong method of adjusting our tariff, for, A. It is unscientific, for, I. It invites no general investigation of our com- plex tariff system. B. It tends toward free trade, for, I. Its basic idea is to break down the tariff. C. It is but a temporary arrangement, for, I. Reciprocal treaties cover short periods of time and may easily be revoked. D. It sacrifices one industry at the expense of another. E. It is a discrimination against afi~other nations" for the benefit of the one with which the treaty is made. F. It tends to postpone a scientific adjustment of our tariff schedules. BIBLIOGRAPHY An asterisk (*) preceding a reference indicates that the en- tire article or a part of it has been reprinted in this volume. General Bibliographies Library of Congress. Select List of Books with References to Periodicals on Reciprocity with Canada. Supt. of Docu- ments, Washington. 1907. Library of Congress. List of References on Reciprocity. Supt. of Documents, Washington. 1910. Library of Congress. Additional References Relating to Reci- procity with Canada. Supt. of Documents, Washington. 1911. Laughlin, J. Lawrence, and Willis, H. Parker. List of Ref- erences on Reciprocity and Allied Subjects. (In Their Reciprocity, pp. 439-71). The Baker and Taylor Co., New York. 1903. Supplementary to Library of Congress bibliography on the sub- ject. General References Books, Pamphlets and Documents Allin, C. D. and Jones, G. M. Annexation, Preferential Trade and Reciprocity. Mission Book Company. Toronto, Can- ada. American Protective Tariff League, 339 Broadway, New York City, N. Y. Ashley, Percy Walter Llewellyn. Modern Tariff History, pp. 252-62. J. Murray. London. 1904. Bastable, Charles Francis. Theory of International Trade, with Some of Its Applications to Economics. 4th ed. rev. Macmillan. 1903. *Bliss, William D. P. ed. New Encyclopedia of Social Re- xvi BIBLIOGRAPHY form. Reciprocity Treaties and Agreements, pp. 1050-1. Funk and Wagnalls Company. New York. 1908. Clarke, Albert. Tariff Made Plain; Seven Short Conversa- tions That Bring Out Both Sides, Proofs Cited and Aca- demic and Popular Errors Corrected, pp. 25-32, 75-9. The Home Market Club, Boston. 1906. Collins, Paul V. Canadian Reciprocity vs. American Manu- facturers as Well as Farmers. P. V. Collins Publishing Co., Minneapolis. 1910. Fish, George Mygatt. International Commercial Policies, with Special Reference to the United States; a Text Book. Macmillan. 1907. Foss, Eugene Noble. Reciprocity as An Economic Policy in Its Relation to Foreign Trade. [In National Association of Manufacturers of the United States of America. Pro- ceedings of the Tenth Annual Convention. Atlanta. 1905. pp. 152-71.] New York. 1905. Hadley, Arthur T. Reciprocity. In Lalor, J. J. ed. Cyclopedia of Political Science, vol. Ill, pp. 537-9. Charles E. Mer- rill & Co., New York. 1893. Herod, Joseph Rogers. Favored Nation Treatment; etc. The Banks Law Publishing Co., New York. 1901. *Hornbeck, Stanley Kuhl. Most-Favored-Nation Clause in Commercial Treaties. Bulletin. University of Wisconsin'. [Economics and Political Science Series, Vol. VI, No. 2, Chapters III and IV.] Madison, Wisconsin. *Laughlin, J. Lawrence, and Willis. H. Parker. Reciprocity. The Baker and Taylor Co., New York. 1903. An extensive discussion of the whole field. National Reciprocity League. Chicago, 111. Issues magazine devoted to reciprocity movement, and fur- nishes information on subject. Porritt, Edward. Sixty Years of Protection in Canada, 1846- 1907, etc. Macmillan. 1908. *Reciprocity and the Philippine Islands. Pamphlet. Manila Merchants' Association, Manila, P. I. 1911. Shaw, L. M. Current Issues, pp. X53-88. D. Appleton. 1908. Tariff Commission, London. Proposed Reciprocal Trade Ar- BIBLIOGRAPHY xvii rangement Between Canada and the United States of America. 2d ed. P. S. King & Son, London. 1911. Taussig, Frank W. Tariff History of the United States. G. P. Putnam's Sons, New York. 1901. U. S. Government Material. In addition to the more important bibliographies and reports listed herein, the congressional records abound with speeches bear- ing upon reciprocity. U. S. Statistics, Bureau of (Dept. of Commerce and Labor). Reciprocity Treaties and Agreements Between the United States and Foreign Countries since 1850. Washington. 1904. U. S. Ways and Means Committee. Report Concerning Reci- procity and Commercial Treaties. [1st Sess. 54th Cong. House Report 2263.] Washington, D. C. 1896. An especially desirable volume for debaters. Woolsey, T. S. America's Foreign Policy. Essays and Ad- dress. The Century Co., New York. 1898. Magazines Annals of the American Academy. 29: 441-50. My. '07. De- velopment of the Foreign Trade of the United States. Elihu Root. Annals of the American Academy. 29: 456-61. My. '07. Brief History of the Reciprocity Policy. William Eleroy Curtis. Annals of the American Academy. 32: 330-42. S. '08. Commer- cial Relations of the United States with Canada. John Ball Osborne. Annals of the American Academy. 32: 383-93. S. '08. Ameri- can Interpretation of the Most-Favored-Nation Clause. C. L. Jones. *American Economic Association. Publications. VII: 417. 1892. Reciprocity Treaty with Canada of 1854. F. E. Haynes. Current Literature. 50: 231-44. Mr. '11. Canadian Reciprocity. Current Literature. 50: 462-5. My. 'n. Canadian Reciprocity and the Farmers. Independent. 70: 415-7. F. 23, '11. Champ Clark Waves the Flag. xviii BIBLIOGRAPHY Journal of Political Economy. 19: 527-41. Jl. '11. International Aspects of Reciprocity. H. Parker Willis. Monetary Times. 46: 616-8. F. 11, '11. Reciprocity Debate. Outlook. 98: 752-3. Ag. 5, '11. Reciprocity and Its Probable Effect. Review of Reviews. 43: 42-5. Ja. '11. Will There Be Reci- procity Between the United States and Canada? P. T. Mc- Grath. Review of Reviews. 43: 278-83. Mr. '11. Reciprocity Program and Opinion at Home and Abroad. Affirmative References Annals of the American Academy. 23: 55-83. Ja. '04. Reci- procity in the American Tariff System. John Ball Os- borne. Annals of the American Academy. 29: 450-5. My. '07. Reci- procity with Continental Europe, Alvin H. Sanders. *Current Literature. 34: 386-7. Ap. '03. United States and Canada. *Forum. 29: 471-80. Je. '00. American and Canadian Trade Relations. J. Charlton. *Forum. 32: 582-93. Ja. '02. Reciprocity with Canada. J. Charlton. Independent. 53: 2874-7. D. 5, '01. Reciprocity with United States. J. W. Foster. Independent. 54: 667-71. Mr. 20, '02. Reciprocity with United States. J. Charlton. Independent. 54: I7H-5- Jl- 17. '02. Trade Relations. J. Charl- ton. Independent. 57: 1278-80. D. 1, '04. Reciprocity with the Unit- ed States. J. Charlton. Independent. 70: 265-7. F. 2, '11. Trade Agreement with Canada. Independent. 70: 365-7. F. 16, '11. Agreement with Canada. ♦Journal of Political Economy. 19: 527-41. Jl. 'n. Interna- tional Aspects of Reciprocity. H. P. Willis. *Living Age. 268: 491-2. F. 25, '11. America, Canada and Great Britain. BIBLIOGRAPHY xix ♦Living Age. 26,9: 67-76. Ap. 8, '11. Canadian American Reci- procity Agreement. Sir Alfred Mond. Nation. 78: 345-6. My. 5, '04. Trading with Canada. ♦Nation. 92: 158-9. F. 16, '11. Canada's Free Hand. ♦Nation. 92: 184-5. F. 23, '11. Reciprocity and the Farmers. North American. 176: 400-9. Mr. '03. Reciprocity with the United States. J. W. Longley. North American. 178: 205-15. F. '04. Reciprocity with the United States. J. Charlton. Outlook. 72: 209-12. S. 27, '02. Reciprocity with the United States. Outlook. 73: 483-8. F. 28, '03. Growth of Reciprocity Senti- ment. J. Charlton. Outlook. 78: 1065-6. D. 31, '04. Canadian Reciprocity. Outlook. 96: 994-5. D. 31, '10. Farmers and the Dominion Government. Outlook. 97: 244-5. F. 4, '11. Canadian Reciprocity and Its Effect. Outlook. 97: 306-8. F. 11, '11. Writing on the Wall. Outlook. 97: 372-4. F. 25, '11. Canadian Reciprocity Would Help Our Farmers. *Review of Reviews. 28: 462-6. O. '03. Reciprocity with the United States. E. G. Hay. Negative References ♦American Economist. 44: 90. Ag. 20, '09. Silly Season at Washington. ♦American Economist. 44: 192. O. 15, '09. "Reciprocity' - with Cuba. ♦American Economist. 45: 206. My. 6, '10. Experiences in "Reciprocity." ♦American Economist. 47: 20. Ja. 13, '11. Still Chasing the Reciprocity Rainbow. ♦American Economist. 47: 62-6. F. 3, '11. Canadian Agree- ment. American Economist. 47: 85. F. 10, '11. Extremely Good for Canada. xx BIBLIOGRAPHY American Economist. 47: 89. F. 17, '11. Divided on the Free Trade Port. ♦American Economist. 47: 102. F. 24, '11. Plain Truth About the Proposed Reciprocity Agreement. American Economist. 47: 118. Mr. 3. '11. Reciprocity That is Unfair. American Economist. 47: 300. My. 19, '11. Reciprocity is a Step Backward. ♦American Economist. 47: 316. My. 26, '11. Reciprocity not Favored by the Country Generally. American Economist. 47: 322. My. 26, '11. How It Works. ♦American Economist. 47: 323. Je. 2, '11. Reciprocity is Los- ing Ground. ♦American Economist. 47: 325. Je. 2, '11. Reciprocity is More in Doubt. ♦American Economist. 47: 368. Je. 23, '11. Reciprocity: Both Sectional and Partisan. Canadian Journal of Commerce. 72: 79. Ja. 20, '11. Reciprocity Negotiation. Canadian Journal of Commerce. 72: 150-1. F. 3, '11. Reci- procal Tariff Proposals. Canadian Journal of Commerce. 72: 259-60. F. 24. '11. U. S. Trade Proposals. Forum. 44: 655-62. D. '10. Reciprocity with Canada. P. Mc- Arthur. Independent. 70: 176-9. Ja. 26, '11. Reciprocity in Protection. L. Young. Independent. 70: 696-701. Ap. 6, '11. Danger in the Misnamed Reciprocity Scheme. W. Fordney. Independent. 71: 17-20. Je. 6, '11. Dangerous Political Hybrid. P. J. McCumber. Industrial Canada. 11: 441-5. X. '10. Opposes Reciprocity Treaty. ♦Journal of Political Economy. 19: 567-73. Jl. 'it. Proposed Agreement Viewed by the Farmer. G. C. White. Literary Digest. 42: 450-2. Mr. 11, '11. Canada on her Dignity. Monetary Times. 46: 717-8. F. 25, '11. Trade Ties and Annex- ation. BIBLIOGRAPHY xxi Rural New Yorker. 70: 204, 240, 280, 324, 364. F. 18, 25; Mr. 4, '11; Mr. 18, '11. Canadian Reciprocity. Special Bibliographies on Important Topics I. Reciprocity Treaty with Canada, 1854. A. Laughlin and Willis. Reciprocity. Chapter 2. B. American Economic Association. 7 : 417. 1892. Rec- iprocity. Treaty with Canada of 1854. F. E. Haynes. C. Annals of the American Academy. 23: 55-83. Ja. '04. Reciprocity in the American Tariff System. John Ball Osborne. D. Stanwood. Tariff Controversies. V. II. pp. 135-8. E. (U. S.) Monthly Summary of Commerce and Fi- nance. -No. 5. Series 1901-2, p. 1907. II. Reciprocity with Hawaii. A. Laughlin and Willis. Reciprocity, Chapter 3. B. Taussig. Tariff History, p. 279. C. Annals of the American Academy. 23: 55-83. Ja. '04. Reciprocity in the American Tariff System. John Ball Osborne. D. Stanwood. Tariff Controversies, V. II. pp. 192-4. E. Treaties and Conventions Between United States and Other Powers (1776-1887). pp. 540, 1187. F. Journal of Political Economy. 1 : 280. Our Commer- cial Relations with the Hawaiian Islands. F. R. Clow. G. (L T . S.) Monthly Summary of Commerce and Fi- nance. No. 5, Series 1901-2. p. 1907. III. Reciprocity and the Sugar Question. A. Laughlin and Willis. Reciprocity, Chapter 5. J3. Atlantic 101: 334. Mr. '08. Lesson in Reciprocity. Frank W. Taussig. v C. Quarterly Journal of Economics. 17: 44. Sugar Question in United States. Frank R. Rutler. D. North American. 190: 347-58. S. '09. Brussels Su- gar Convention. Benjamin Taylor. xxii BIBLIOGRAPHY IV. Reciprocity Under the McKinley Act. A. Laughlin and Willis. Chapters 6-8. B. Stanwood. Tariff Controversies. V. II. pp. 264, 305. C. Taussig. Tariff History, p. 278. D. Annals of the American Academy. 23: 55-83. Ja. '04. Reciprocity in the American Tariff System. John Ball Osborne; 29: 456-61. My. '07. Brief His- tory of the Reciprocity Policy. William Eleroy Curtis. E. Quarterly Journal of Politics. 7 : 26-39. O. '92. Reciprocity. Frank W. Taussig. V. The Kasson Treaties. A. Laughlin and Willis. Reciprocity, Chapter 10. B. Annals of the American Academy. 23: 55-83. Ja. '04. Reciprocity in the American Tariff System. John Ball Osborne; 29: 456-61. My. '07 Brief History of the Reciprocity Policy. William Eleroy Cur- tis. C. (U. S.) Monthly Summary of Commerce and Fi- nance. No. 5, Series 1901-02, p. 1907. D. Taussig. Tariff History, p. 352. E. Atlantic. 88: 721-31. D. '01. Expansion Through Reciprocity. John Ball Osborne. SELECTED ARTICLES ON RECIPROCITY GENERAL DISCUSSION Reciprocity. Chapter I. Laughlin & Willis. The term ''reciprocity" as now currently used is employed in most cases with only a vague or very general notion re- garding its meaning. In current speaking and writing it usually implies no more than the bare notion of tariff re- ductions made by some specified nation or country in com- pensation for some reductions made in favor of such a na- tion by a second. The actual definitions of the word now given vary widely, both in definiteness and in wha,t they connote regarding the nature and desirableness of the policy to which they relate. In the most general sense, the, definition furnished by President Hadley may be accepted. According to him: "Reciprocity is a relation between two independent powers, such that the citizens of each are guaranteed certain com- mercial privileges at the hands of the others." It thus ap- pears that he makes no effort to confine the term to tariff matters, but regards it as representative of a broad aspect of commercial policy. In this view of things a mutual grant of "privileges" is the essence of the reciprocity idea. A further attempt is made to define reciprocity when it is 2 SELECTED ARTICLES specified that the "privileges'' to be granted must be equiva- lent. Thus one recent writer, basing his definition upon a study of the public papers of the presidents of the United States, remarks: "Reciprocity is the granting by one nation of certain commer- cial privileges to another, whereby the citizens of both are placed upon an equal 'basis in certain branches of commerce." Most of those who attempt to define the term are not content with specifying that the word reciprocity means a mutual grant of commercial privileges and that such grants must be 'equivalent." but attempt to confine the word to tariff concessions purely. Thus, according to one authority, reciprocity is: "A term for an arrangement between two countries having a protective tariff against other countries, to admit each into the other's territories certain specified taxable articles of commerce duty-free, or at exceptionally light duties. The classes of articles are arranged to balance one another on one side and the other. Such mutual arrangements are sometimes called Fair Trade, as opposed to free trade and thoroughgoing protection." This definition may be taken as aptly descriptive of the general notions on the subject of reciprocity. It implies nothing with regard to modifications of the relations between either of the contracting parties and any third, and offers merely a description of the act involved in the adoption of a reciprocity treaty by the two parties to it. A review of commercial history will show clearly what the term reciprocity meant when first used and will furnish t lie means for a better comprehension of its modern signi- ficance. It was first properly employed in connection with the "navigation system.'' During the eighteenth century an elaborate scheme of shipping restrictions had grown up. These restrictions sought to compel trade to travel in bot- toms belonging to the nation which enacted the navigation laws. So general were the restrictions imposed by these laws that it finally became apparent that the system was proving hurtful instead of beneficial to shipping interests. The efforts made by various countries to hamper each other's trade resulted in almost as much injury to the at- tacking country as to its antagonist. The first breakdown came shortly after the American RECIPROCITY 3 Revolution when England, by the order in council of July 2, 1783, decided to put American ships upon the same footing as British so far as concerned direct trade with the mother country. This step was not taken from any humanitarian motives, but was solely due to the fear that a failure to con-, cede the point would result in a loss of the large trade with the former colonies. By the same order in council, how- ever, which relaxed the particular provisions of the naviga- tion laws already referred to with regard to the United States, trade with the West Indies was confined to British ships, the design being to deprive the United States of the benefits of this traffic and to divert it to British North Amer- ica. This policy led to sharp protests from the West Indies themselves and from various British interests which felt themselves to be imperiled. Nothing of any importance, however, was done until after the war of 1812. In 1815, a treaty was concluded between Great Britain- and the United States by one clause of which it was agreed that the ships of neither nation should be liable to greater charges in the ports of the other than were exacted by such nations in its own ports. The credit of making the first considerable breach in the ■ old policy is due to Huskisson. He vigorously attacked the navigation policy. In 1822 acts were passed which permitted the colonies of Great Britain to export their produce under much more favorable terms, and gave to foreign countries greater liberty in the carrying trade. A more important vic- tory came in 1823 when by an act of that year it was declared that any country might export goods to British colonies in its own as well as in English bottoms. The act, however, stipulated that the privileges therein granted should be met by corresponding treatment on the part of the countries en- joying its advantages. Thus was developed the policy which first became known as reciprocity.' It will be observed that it consisted essentially in a relaxation of the excessive pro- tection accorded by the navigation laws to shipping. Then, as now, any reduction of protection was met by loud out- cries on the part of certain protected interests. The real 4 SELECTED ARTICLES circumstance which had compelled the relaxation of the pro- tection to shipping was the fact that this excessive protection bade fair to impede the progress of all other branches of commerce, and even, through this means, to destroy the shipping industry itself. The competition in the carrying trade to which English vessel-owners were just then, for the first time, exposed was the real cause of the depression in shipping — a depression which would have become worse had it not been for the introduction of the reciprocity pol- icy. Huskisson himself showed in his great speech in the House of Commons, May 12, 1826, that the change in the navigation laws and the reciprocity policy were the direct result of petitions from a certain section of the shipping in- terests and after an examination of persons engaged in the shipping trade. The antagonism of the vessel-owners to reciprocity as applied to shipping was unable, however, to check the then rising tide of opinion in favor of free trade and free com- merce. Navigation in British ships actually increased be- tween 1821-1822 and 1830-1831 thirty-six per cent. The amount of goods passing from country to country in British ships employed in the foreign trade increased forty-eight per cent., British tonnage engaged in the colonial trade increased twenty-seven per cent, and foreign tonnage employed in trade with Great Britain increased sixty-nine per cent. With the growth of British manufacturing came the need of closer reliance on foreign countries for raw materials. Foreigners were, for a long time, large buyers of English manufactured goods. Everything conspired to make for free trade in shipping, and freedom of navigation tended to promote the idea of greater freedom in regard to customs duties. It was to be expected that the success thus experienced in con- sequence of the removal of trade restrictions would have been influential in removing the prejudice in favor of a high- tariff policy. All over the world, the tendency toward free trade was growing stronger. The organization of the German Zollverein extended the notion of reciprocal concessions in regard to ships to the RECIPROCITY 5 movement of goods between states whose interests would be helped by mutual freedom of exchange. This tariff un- ion, which was established in 1824, had the effect of greatly increasing the trade between the German States. It led directly to inquiry on the part of foreign countries as to whether it might not be possible to inaugurate customs un- ions of the same sort which would have an equally favorable influence in developing foreign trade. The movement thus begun gradually developed into the free trade era which con- tinued to 1870. Great Britain repealed the corn laws during the years succeeding 1846, and in i860 negotiated a treaty with France which contained liberal commercial concessions on exports and imports and removed all the prohibitions theretofore resting upon the commerce of the two countries. Following this treaty, some twenty-seven other arrangements were negotiated between the European states, granting com- mercial concessions. By reason of the fact that they incor- porated the so-called "most favored nation clause", of which more will presently be said, the concessions embodied in the treaties became generally accepted among the European states and created a strong movement toward an almost absolute freedom of exchange. It needs hardly to be said that, under these conditions, the prosperity of European trade increased enormously. The commerce of Austria, Belgium, France, Holland, Italy, and Great Britain grew be- tween i860 and 1873, more than 100 per cent., while the trade of the same countries with nations not having reciprocity treaties with them increased, according to Mr. David A. Wells, only about sixty-six per cent. In the United States, the movement toward free trade continued to move along somewhat the same lines as those pursued by the European countries. Clay's American sys- tem, which was enacted into the tariff of 1824 and modified by the act of 1828, had hardly become thoroughly established when it began to crumble. The movement toward more lib- eral customs legislation practically culminated in the less highly protective tariff of 1846, which was later completed in detail by that of 1857. With the Civil War a new era began. 6 SELECTED ARTICLES Throughout the whole of this antebellum period, the no- tion of reciprocity, as a policy, received considerable atten- tion. It was vigorously advocated in certain quarters and as vigorously opposed in others. Webster was one of the prin- cipal opponents of the system, and he even antagonized the idea of reciprocity as applied to shipping. Owing to the prevalence and growth of the free trade spirit, however, the reciprocity advocates had decidedly the upper hand. It was urged that reciprocity with the German Zollverein should somehow be introduced. Should such an arrangement be. put into operation, said these advocates, it would be possible to sell American raw materials to much better advantage, as well as in larger quantities. On the other hand, reciprocity with Germany would open an oppor- tunity for the purchase of manufactured articles cheaper than they could be had in Great Britain or France, while the nature of the German tariff was said to be such that the treaty would afford stronger guarantees of permanency than similar ar- rangements with either of the other countries referred to. Moreover, it was believed that a reciprocal treaty with the Zollverein should doubtless have the effect of forcing Great Britain to come to similar terms. As a result of this agita- tion, a treaty was actually negotiated in 1844 between the Zollverein and the United States, but like a later treaty with Mexico, was rejected by the Senate. This rejection was made on the ground that the President had exceeded his executive authority and that he had no right of his own motion to enter into such arrangements with foreign coun- tries, the legislature being the department of government by which revenue laws should be passed. Thus precisely the same criticism was offered upon the action of the execu- tive in negotiating the Zollverein treaty which has been so frequently urged within the last year or two by members of the House of Representatives. They doubt the right of the treaty-making power to enter into agreements with foreign powers that may conceivably result in infringing upon the authority of the lower house to pass revenue measures. For the sake of our foreign trade it was greatly to be re- RECIPROCITY 7 gretted that the Zollverein treaty was not put into opera- tion. By the terms of that treaty, articles imported to the United States were divided into three classes, one of which was to be taxed at a rate not exceeding twenty per cent, ad valorem, while a second was dutiable at fifteen per cent., and a third at ten per cent. Duties on wines imported from Germany were not to be raised above the level existing in 1844. In return for this concession, the Zollverein agreed to reduce the duties on American tobacco and lard and to main- tain the tariff on rice at a point no higher than it then had reached. Unmanufactured cotton was to be free. A remin- iscence of the earlier restrictions on shipping was found in the provision that the tariff reductions were to apply' only to goods laden on vessels of one of the contracting parties, or on vessels which had by treaty been placed upon the same footing as national vessels, and in any event the goods must come directly from the ports of one party to those of the other. Just how far the rejection of this treaty was actually due to the constitutional reason assigned in the Senate de- bates it would perhaps be difficult to say. The probability, judging from all contemporary evidence, is, however, that the reciprocity treaty with the Zollverein came too early in our free-trade movement and met the usual fate of pioneers in such fields. Its defeat was doubtless due in large measure to precisely the same causes which, during the past three years, have prevented the acceptance of any of the reciproc- ity treaties negotiated by Mr. Kasson, the Special Commis- sioner appointed by our government not long ago to negoti- ate for commercial advantages. Then, as now, the constitu- tional argument was a plausible and soothing apology for a refusal largely dictated by the wishes of interests which feared to find their profits reduced by foreign competition. Reciprocity agitation very shortly assumed a new form. The idea came into existence that there might be developed on this side of the ocean a commercial union which should include the whole North American continent. In order suc- cessfully to work out such a union, it was necessary to make suitable reciprocity arrangements with Canada on the North 8 SELECTED ARTICLES and with Mexico on the South. Thus there would be de- veloped a commercial system somewhat analogous to that which had been produced in Germany by the establishment of the Zollverein. Instead of continuing the effort to get into commercial relations with the European customs union, we should have a customs union of our own. The first ne- gotiations looking to this end were naturally directed toward Canada. From 1846 on, the idea was actively discussed on both sides of the border and finally culminated in the Cana- dian reciprocity treaty of 1854. This agreement managed to prolong an existence of about twelve years, when it was finally overwhelmed by the rising tide of protectionism and the commercial jealousies and political hostilities of the time. Its history will be reviewed in a subsequent chapter. Having established satisfactory relations with Canada, it remained only to unite ourselves with Mexico on the same principles, in order to realize the idea of a customs union comprising the North American continent. Our experience with the Zollverein treaty was repeated in connection with negotiations with Mexico late in 1859. It will be convenient to anticipate the historical course of events and refer briefly to the Mexican experience at this point. The Mexican treaty was negotiated by Mr. McLane, then Minister to Mexico. It was designed to promote friendly relations with that country, and in a measure soothe the bad feeling which still existed as a consequence of war with the United States, by opening up a profitable field of trade. The treaty in the form in which it was submitted to Con- gress contained a list of articles from which that body was to be allowed "to select those which being the natural in- dustry or manufactured product of either of the two repub- lics may be admitted for sale or consumption in either of the two countries under conditions of perfect reciprocity whether they be considered free of duty or at a rate of duty to be fixed by the Congress of the United States, it being the in- tention of the Mexican Republic to admit the articles in question at the lowest rate of duty, and even free, if the Congress of the United States consents thereto.'' Doubtless RECIPROCITY 9 under ordinary conditions this treaty, notwithstanding its extremely liberal character, would have been ratified, for the free trade spirit exemplified in the tariff act of 1857 had then gained so much headway in the United States that it would probably have been able to carry the day. The threatening political situation and the fact that the Demo- crats naturally supported the idea of freer trade with Mexico tended, however, to divide the Senate on partisan lines and the proposal was defeated by a strict Republican vote. In order to understand the subsequent development of our tariff policy, it will now be necessary to deal briefly with one aspect of the reciprocity system viewed from the stand- point of international law. We have seen that, as the Euro- pean countries gradually developed the reciprocity idea, they did so in accordance with the diplomatic principle known as the "most favored nation" theory. This principle was worked out along two radically different lines in Europe and in the United States respectively. That divergence led to an atti- tude on the part of European countries toward our later reci- procity agreements, different from the one which was adopt- ed by the United States, and has given rise to some friction. This has worked in certain minds against further extension of reciprocity agreements.. Inasmuch as the two different con- ceptions of the most favored nation clause became thorough- ly established during the first half century of our national life — the period during which, as we have seen, the reciproc- ity and free trade ideas originally developed — it seems con- venient to deal with the divergent interpretations of the most favored nation clause at this particular point. Early commercial treaties were negotiated by European nations in strict accordance with the idea that every conces- sion granted by one country to any other should be given only in exchange for similar concessions in return. In other words, the negotiation of commercial treaties was a sort of bargaining process in which either nation might be over- reached by its antagonist. The object to be kept in mind by either party was the negotiation of an agreement as favorable to it as circumstances, and the relative acuteness of the io SELECTED ARTICLES other, would allow. It is evident that, supposing two na- tions, A and B,. to have negotiated a commercial treaty granting certain privileges by mutual agreement, B might be at a considerable advantage with respect to a third nation, C, in competing for the trade of A. If subsequently, therefore, an agreement should be entered into between A and C, whereby more elaborate concessions were allowed C than those which had been gained by B, it might turn out that B would not merely be outstripped by C in the competition, but might even be worse off than would have been the case had no treaty been originally negotiated with A. It was this situation which led to the development of the most favored nation clause. Under it, states sought to obtain guarantees that, in case future commercial concessions should be offered to their competitors, they themselves would, ipso facto, come in for the enjoyment of the same concessions. Thus, if the two nations, A and B, had entered into a commercial ar- rangement, into which the most favored nation stipulation had been incorporated, any subsequent treaty entered into by A and C, in which larger concessions were granted, C would, by the nature of the case, extend those concessions also to B. Now, it is clear that the interpretation to be placed upon the clause might be such as to extend those concessions to B, only in case B should pay for them by the same return concessions granted by C, or should simply be permitted to enjoy them without any further payment than that already arranged for in the original A and B treaty. Writers on international law distinguish several different forms of the "most favored nation clause." They enumerate more particularly the so-called "simply reciprocal form" and the so-called "imperative and unconditional form." In the first, "where reciprocity is the foundation of every clause in the treaty dealing with a subject of commerce and navigation, the inference points to reciprocity as the foundation for the general covering clause which is to supply omissions and prevent future unfavorable discrimination." Under the oth- er interpretation, the commercial favors are granted to all RECIPROCITY ii countries under the most favored nation clause "immediately and without condition;'' in other words, without compensat- ing privileges offered in return. It is easy to see how nations like Great Britain, which have adopted free trade as their policy and which have, as a matter of fact, nothing to offer in return for a reduction of duties, would be likely to insist strenuously upon this second interpretation. The "simply reciprocal form" of the most favored na- tion clause is, of course, the one to which the United States has consistently held. It has, from the beginning, adhered rigidly to the view that trade concessions offered by it to some other country need not become common to a third coun- try with which we had treaty relations involving the most favored nation clause, unless that third nation should meet us on our own ground by granting the same favors that we secured at the hands of the other nations with which we had entered into treaty relations. In the treaty negotiated be- tween the United States and France, February 6, 1778, the following words occur: "The most Christian King and the United States engage mu- tually not to grant any particular favor to other nations in re- spect ot commerce and navigation which shall not immediately become common to the other party, who shall enjoy the same favor freely, if the concession was freely made or on allowing the same compensation if the concession was conditional." In Art. IX. of the treaty with Prussia, in 1828, and in Art. IX. of the treaty with Austria, in 1829, occur the words: "If either party shall hereafter grant to any other nation any particular favor in navigation or commerce, it shall immediately become common to the other party, freely, where it is freely granted to such other nations, or on yielding the same compen- sation, when the grant is conditional." On the other hand, European diplomacy has developed the interpretation of the most favored clause along a differ- ent line, following out the second of the two interpretations already referred to. As things now stand, most European countries admit that nations which have granted to other nations the benefits of the most favored nation clause have guaranteed to them that their commercial relations shall not be less favorable with it than shall those of any other coun- try. In other words, new and more extensive trade conces- sions granted by country A to C, a third nation, are, ipso 12 SELECTED ARTICLES facto, extended to B, a second nation, with which it has originally entered into commercial relations, while B obtains these advantages without compensation even though they may have been paid for very heavily by C. This, of course, is a marked reversal of the original interpretation given to the "most favored nation clause", during the eighteenth and the first half of the nineteenth century. It is a most impor- tant point to bear in mind, in studying the development of reciprocity as a policy, for it will readily be seen that the adoption of the European interpretation of the most favored nation clause implies either the giving up of all commercial treaties, or else the conscious recognition of tariff reduction as a system to be regularly applied whenever granted in an individual case. Reciprocity, when limited to isolated in- stances, becomes nothing more than a matter of internation- al bargaining, which may or may not be undertaken accord- ing as the circumstances of the particular case seem to indi- cate. It is apparent that the United States in maintaining its own interpretation of this clause, reserving the right to grant tariff concessions only in return for certain other con- cessions, and the right to decide whether concessions offered by other countries are equivalent to those obtained from any particular country, occupies a vantage ground as compared with a group of nations adhering to a different interpretation and granting to us the advantages of the clause which we, however, deny to them. All of this has led to exceedingly unfavorable comment on the part of European countries which regard our attitude on the subject of the most favored nation clause as characteristically selfish. With the repeal of the English corn laws about 1846 came a period of considerably greater relaxation in trade regulations. The more liberal spirit which thus was begin- ning to find its way into European legislation continued to grow until about i860, when it broadened into a general Euro- pean movement toward a much freer, tariff policy. In that year, a treaty negotiated between Great Britain and France contained liberal concessions on goods exported by the con- RECIPROCITY u trading countries, and removed all of the prohibitions pre- viously laid on certain kinds of traffic passing between them. On the basis of the principles accepted in this treaty, there grew up an elaborate system of agreements between the several European states. These agreements granted commer- cial concessions which, by reason of the fact that they were subject to the "most favored nation clause,'' became general- ly applicable to European commerce and led to a condition bordering upon freedom of trade. Commercial development under these treaties was unex- pectedly favorable. The trade of Austria, Belgium, France, Holland, Italy, and Great Britain increased more than one hundred per cent, from i860 to 1873, while the trade of the same countries with nations which had not entered into reci- procity treaties with them increased only sixty per cent. In this way, a policy which was at least analogous to reciprocity gained ground and seemed to meet with unexpected success. It undoubtedly gave general satisfaction within the countries which were affected by it. Yet it was not long before a dis- tinctly new tendency became apparent. In the years immedi- ately following the crisis of 1873, there began a definite and very general reaction from free trade. This reaction came on insidiously. In part, the higher tariff policy, which was then initiated, was due to the Franco-Prussian war, which pro- duced increased expenditures and heavier indebtedness in consequence of the necessity of maintaining heavy arma- ments. Thus, increased taxation was required. Moreover, it is maintained by some that the new modes of production which were then gaining the ascendency led to maladjust- ment, and brought about a struggle to dispose of certain kinds of goods which were being freely manufactured by all countries, and which, it was supposed, were in danger of overproduction. In consequence of this movement, came a demand for protection, in order that -the producing interests of the several countries might be safeguarded in the control of their own markets. Thus there gradually grew up a sys- tematic attempt to encourage domestic manufactures by the levy of protective duties. At the same time, side by side i 4 SELECTED ARTICLES with the protective movement thus sketched, there was noted a tendency to develop certain kinds of industry by the payment of bounties on articles of domestic production or by subsidizing vessels built for foreign commerce. These ten- dencies were not exclusively confined to Germany and France, although, of course, the effects of the Franco-Prussian war were felt with the greatest intensity in those two countries. The reaction from free trade spread throughout the whole of Europe, and by 1880 was in full swing. Some of the smaller states merely imitated the example of the more powerful. Others attempted a system of retaliatory legislation, think- ing to break down the duties of their antagonists, while others fell into the belief that their producing interests would be best served by protection irrespective of the policy of other countries. In 1879, Germany adopted an elaborate new tariff, mod- eled upon the idea that she had certain paramount economic interests which must be cultivated. These interests were supposed to center about the production of grain, on the one hand, and about sundry extensive manufacturing industries on the other. The tariff adopted under these circumstances was not a system of high duties universally applied to all imported goods without exception. It aimed only to fur- ther the particular interests in question by the imposition of duties upon products likely to compete with them. At the same time, a strong effort was made to prevent other coun- tries from retaliating by the imposition of discriminating duties upon German exports. The various political disturb- ances which occurred subsequent to 1880 furnished oppor- tunity for Germany, by throwing her political influence into the scales, to overbalance the economic interests of sundry smaller countries, and to get low rates of duty without prom- ising to admit the products of those countries on similar terms. So, also, in Austria, the tariff revision act of 1879 was a step in the direction of protection, although the legislation was still moderate. The tariff acts of 1882 and 1887 carried Austria still further in the direction of higher duties. Italy had much the same experience. Starting with fairly liberal RECIPROCITY IS legislation in 1878, the schedule of duties adopted in 1883 and subsequently modified in 1887, swung to the farther extreme of protection, in many instances going almost so far as to prohibit trade. In Spain a protectionist party succeed- ed in adopting high duties as early as 1877, and various other European countries of the second class followed suit. By 1890 mosfr of them had come within the pro- tective boundary. In France a similar reaction was in progress. Duties were materially raised' at various times during the later seventies. In 1881 came a vigorous effort to secure the adoption of a maximum and minimum tariff system. Russia, while introducing fewer changes into her protective system than had been made by the other countries, enforced a fairly high schedule against the rest of Europe down to 1893, with few, if any, discriminations. . Eng- land alone, among the important European countries, main- tained her determined free trade attitude, and was imitated only by Norway and Holland among the states of secondary importance. The system thus inaugurated in the seventies, and carried out during the eighties, very early produced distinct results. Assisted by the bounties and subsidies granted to favored interests, the high tariffs already considered lead to serious complications, and tended to promote the existence of over- grown industries, which were supported only by heavy taxa- tion of the consumer, and which resulted practically in sup- plying goods to the foreigner at absurdly low rates. Of this kind of development the sugar industry furnishes a classical example, but it was not the only industry which suffered from the unhealthy stimulus given to it by the duties and boun- ties which were supposed to favor it. The several states be- gan to feel keenly the need of some policy which would en- able them to buy off other countries from the enforcement of retaliatory duties against them. Hence, arose a system of commercial treaties, by which it was undertaken to make bargains designed to relieve the strain of retaliatory duties imposed in return for the heavy taxation with which the products of the different nations had been burdened. By the 16 SELECTED ARTICLES opening of the last decade of the century, the industrial sys- tem of Europe had become a tangle of overlapping and inter- woven commercial agreements. It was necessary to find some way of relieving the con- fusion into which commercial conditions were rapidly falling. The decade 1890-1900 is characterized predominantly by ef- forts of this kind. It was necessary .for each country to reckon with: (1.) The interests of the overgrown industries which had been stimulated by the protection previously granted. (2.) The interest of the general producing classes of each country, which were likely to find themselves cut off from foreign markets, should foreigners be stung into retaliatory measures. (3.) The most favored nation clause, which had become a fundamental maxim in European diplomacy, developing along the lines already traced in the earlier portion of this chapter. These conditions were met in various ways. Yet analysis shows that the tariff systems adopted after 1890 may be classified for the most part under two heads, the so-called "general or conventional" tariffs, and the ''maximum and minimum" systems. The characteristics of a maximum and minimum tariff system are found in the fact that instead of having two rates for a few articles, it has two rates on most articles on which duties are imposed at all. For this reason, it is fre- quently called the double tariff system. "In the application of these rates, the maximum schedule corresponds to the general schedule, and the minimum schedule to the conven- tional schedule of the * * * (conventional tariff system), since the minimum rates are given only to those countries which receive the most favored nation treatment. The char- acteristic difference between the two systems, however, aris- es from the difference in their origin. The minimum schedule is not drawn up by negotiations between the executives of two countries, but is framed by the legislative body at the same time that the maximum schedule is made. That is, the RECIPROCITY XT legislative power fixes two rates of duty on each article in the tariff. The higher rate is the one which fixes the maxi- mum extent to which those articles may be taxed on enter- ing the country; the lower or minimum rate is the one which fixes the minimum extent to which the duty may be lowered. If it is desired to make commercial treaties at any time, these two rates show the exact limits between which the treaty rates are to be fixed. At the present time, the maximum and minimum system has been most generally adopted in Europe. It is employed by France, Russia, Spain, and Norway, as well as by Greece. In South America it has been adopted by Brazil. France adopted the plan in 1892, and Spain gave in its adherence at about the same time. Russia followed the French example in 1893 an c figures show the effect of the treaty very clearly. The total trade for the last year before the treaty was $34.- 899,544. while for the first year of the treaty it was $57,041,- 594, an increase of $22,142,050 for the first year under the treaty compared with an increase of $9,184,896 during three years (1850-53) before the treaty. Under the favorable con- ditions furnished by the reciprocity treaty, the trade in- creased more than twice as much in one year as it had in three years without the treaty. This increased trade continued with the usual fluctuations during the continuance of the treaty: 1858 $37,995,673 Total Trade I860 49,444,195 under Treatv of 1851 1862 48,888,897 1865 60,533,561 1844 $ 8,181,618 Total Trade 1S46 9,344,150 before the Treatv 1848 12,029,122 1850 16,788,141 1867 $50,283,464 Total Trade 186S 48,905,613 after the Treatv 1870 58,134,775 1872 70,088,925 1875 $76,508,092 Total Trade 1877 75,732,919 under the Treaty of 1S71 1879 69,677,055 1882 103,976,742 An examination of the preceding figures shows that the abrogation of the treaty did not seriously disturb the amount of trade. At least the effect was not permanent; for the trade had begun to recover before the negotiation of the treaty of 1871. Of course a considerable portion of this increase may have been due, and undoubtedly was due, to the natural increase of business, the result of the increase of wealth and of improvements in production and transporta- tion, but is it likely that the permanent effects of the treaty had something to do with this increase? May not the in- fluence of the treaty have developed a trade which continued after its expiration? It seems probable to me, and if true, gives to the reciprocity treaty' of 1854 an importance which has never been recognized. RECIPROCITY 75 Besides the effect of the treaty, as shown by the increase of trade, the amount of the imports into the United States for 1866 (the last year of the' operation of the treaty), $48,- 528,628, gives ground for the conjecture that this unusually large quantity was due to the desire' of business men to profit as much as possible by the treaty. There are two reasons for this conjecture: (1) because the fiscal year ending June 30, 1866, was not coincident with the existence of the treaty, which terminated March 17, 1866. Consequent- ly this excessive importation was the work of less than nine months. (2) This amount of importation was not again reached until 1882, when $50,775,581 of goods were imported from the Dominion of Canada. Mr. Larned, in his "Report on Trade with the British North American Provinces," says that — "To a remarkable extent our present trade with the provinces is what might be characterized as a pure commerce of con- venience, incident merely to the economical distribution of prod- ucts which are common to both countries. We exchange with them almost equal quantities of the cereals, and almost equal quantities, on an average of flour. Except so far as concerns the barley that we buy and the Indian corn that we sell to them this trade originates on neither side in any necessity, but is chiefly a matter of simple convenience, of economy in carriage, or of diversification ,in the qualities of grain. Similarly and for the like reasons we exchange with them about equal quantities of coal. We sell them a certain quantity of hides and skins, and buy half that quantity of the same articles back from them. On the other hand, they sell us provisions and wool and buy our provisions and wool to half the amount in return. Not less than one-third, probably, of the trade now carried on between the United States and the neighboring provinces is of that char- acter, and the fact that it is kept up with so little diminution, notwithstanding the imposition of duties on both sides of the frontier, is significant of the value of the advantages that are found in it." This "commerce of convenience'' is natural enough when we consider the geographical relations of the two countries. The British provinces are by nature divided into groups bearing a closer relation to adjacent portions of the United States than to the other parts of the British possessions. The maritime provinces are more intimately connected with the neighboring New England states than with the Cana- das, Ontario and Quebec, while the Canadas in their turn find their easiest communication with the middle states of 76 SELECTED ARTICLES the Union. This grouping of the various provinces has re- ceived still greater emphasis by the rapid development of the western provinces of the dominion, a development hard- ly begun at the time of the reciprocity treaty. The same reason for a "commerce of convenience" ap- pears when we examine the economic relations of the two countries. On this point Goldwin Smith says: "Let any one scan the economical map of the North American continent, with its adjacent waters, mark its northern zone abounding in minerals, in bituminous coal, in lumber, in fish, as well as in special farm products, brought in the north to hardier perfection, of all of which the southern people have need: then let him look to its southern regions, the natural products of which, as well as the manufactures produced in its wealthy centres of industry, are needed by the people of the northern zone; he will see that the continent is an economic whole, and that to run 'a customs line athwart it and try to sever its mem- bers from each other, is to wage a desperate war against na- ture." Furthermore a ''commerce of convenience" is not the only necessary commerce between the United States and the provinces. The maritime provinces have lumber, bituminous coal and fish which they desire to sell, and New England is anxious to buy. The Canadas, Ontario and Quebec, pro- duce barley, eggs, and other farm products; horses, cattle and lumber, for the sale of which they look to New York and other neighboring states. All the provinces want to get American manufactures as well as the products of a more southerly climate in return. The argument of the opponents of reciprocity, that there cannot be profitable commerce between Canada and the United States, because their products are the same, is not true. The United States includes regions and produc- tions almost tropical. Canada has bituminous coal, which is needed in parts of the United States, and an abundance of nickel, of which there is but little in the United State?. Canada has a vast supply of lumber, and the United States needs all that it can get. Both countries produce barley, but the Canadian barley is the best for making beer. "High as the tariff wall between Canada and the United States is, trade has climbed over it." In 1889 the trade be- tween Canada and the United States was greater than that RECIPROCITY 77 between Canada and any other country, and nearly as great as that between Canada and all the countries in the world put together. The treaty was intended to provide for the exchange of natural products between the two countries, and with very few exceptions these products were in the crudest possible condition, just as they were taken from the field or forest, or dug from the soil, or obtained from the sea. They were raw materials in the fullest sense of the word, and may be grouped under five heads: products of the mine, of the forest, of the sea, animal products and agricultural produce. Products of the Mine. — Coal, ores of metals of all kinds; stone or marble, un- vvrought; grindstones, wrought and unwrought; slate; gyp- sum, ground and unground. Products of the Forest. — Timber and lumber, round, hewed, sawed; firewood; pitch, tar and turpentine. Products of the Sea. — Fish and fish products. Animal Products. — Animals of all kinds; meats, fresh, smoked, salted; hides, furs, skins, undressed; poultry, eggs, butter, cheese, tallow, lard, horse manures, pelts, wool. Agricultural Products. — Grain, flour and breadstuff's; cotton-wool, seeds and vegetables; dried and undried fruits; plants, shrubs and trees; rice, broom-corn and bark; flax, hemp and tow; tobacco, unmanufactured. In this list a few are included which may, perhaps, not be fairly classed as raw products. For instance, flour, smoked and salted meats, dried fruits; timber and lumber, round, hewn, and sawed. But these form a small number compared with the total number provided for by the treaty. The trade for the ten years, 1853-1863, may be sum- marized as follows: 78 SELECTED ARTICLES Products of the Mine (imported into United States). — 1853 $58,400 1856 84,228 i860 3i8,S37 1863 1,114.831 Products of the Forest. — 1853 $2,589,898 1856 3,345,284 i860 4,019,278 1863 3,679,559 Products of the Sea. — 1853 $73,422 1856 140,948 i860 185,873 1863 957.166 Animal Products. — 1853 $1,107,870 1856 2.375.388 i860 3,557,912 1863 3J33.463 Agricultural Products. — 1853 $4,949,576 1856 . . 11,864.836 i860 10,013.799 1863 . . .' 7,005,826 The largest imports before the treaty were of agricul- tural produce, and in 1863 they remained still the largest, having also made the largest gain — about three millions — dur- ing the decade. The second place, both in 1853 and in 1863, belonged to the products of the forest, the gain, however, being inferior to that made by animal products. Animal products occupied the third place at the beginning and the ending of the period, while the gain was superior to that made by the products of the forest. The fourth and fifth places were held by fish products and the products of the mine, the latter displacing the former between 1853 and 1863. RECIPROCITY 79 Turning now to the imports from the United States into Canada, we have the following figures: Products of the Mine (imported into Canada).— l8 53 $126,586 l8 S6 488,984 1860 406,688 l86 3 1 647,965 Products of the Forest. — l8 53 $66,620 l8 56 302,904 1860 137,392 l8< 53 134.281 Products of the Sea. — l8 53 ' $383,436 i 8 56 4H,7i6 i860 227 112 1863 281,023 Animal Products. — l8 53 $570,587 1856 2,896.838 i860 -. 1,679,912 1863 3,050,294 Agricultural Products. — 1853 ■•• $668,113 1856 3,809,112 i860 4,603,114 1863 8,137,447 As is the case of the United States imports, the largest item in the Canadian in 1853 was that of agricultural produce, and this proportion remained the same in 1863, the increase being remarkable — about seven and a-half millions. The second place was held by animal products, both at the be- ginning and at the end of the period, the gain also being next in amount to that of agricultural produce. Products of the sea occupied the third place at the beginning, but had fallen to fourth place at the end, with the additional dis- 80 SELECTED ARTICLES grace of having had a decrease instead of a gain during the ten years. Products of the mine rose from fourth place to third from 1853-1863, making a gain in amount next to that of animal products. Finally products of the forest held and retained the fifth place. The following figures show the amount of the trade in a few leading articles: Animals (imported into United States.) — Increase. 1862 $1,532,957 1865 5,503.318 $3,970,36i Barley. — 1862 1,095,443 1865 4,093,202 2,997,759 Timber. — 1862 2,526,658 1865 4.515,626 1,988,968 Oats.— 1862 634,176 1865 2,216,722 1,582,546 Wool — 1862 569,839 1865 1,527.275 957,436 Meats. — 1862 128,935 1865 850,328 721,393 Coal. — 1862 614,556 1865 1,210.004 595,448 Grain, all kinds (imported into Canada). — 1858 2,078,464 1863 5,062.610 3,984,146 Meats. — 1858 544,366 1863 1,238,923 694,557 RECIPROCITY 81 Coal. — ^58 242,700 1863 548,846 306,146 Animals. — 1858 240,186 1863 520,835 280,649 Hides. — 1858 125,000 l86 3 384,951 259,951 Cheese. — 1858 90,045 1863 294,327 204,282 Wool.— 1858 11,101 1863 208,858 197,757 Flour. — 1858 750,580 1863 898,029 I47..449 These figures show that the articles of first importance on the side of the United States were those of animal prod- ucts, and barley, timber, oats, wool, meats and coal; on the side of Canada grain occupied the first place, followed by meats, coal, animals, hides, cheese, wool, and flour. If bar- ley and oats were combined in the United States imports as they are in the Canadian under the single head of grain, they would take the first place, and grain would then be the largest import into both countries. Of course these figures are not for the same years and some slight allowance must be made for the varying conditions of the two periods. The period 1858-1863 covers only a part of the war period, while the years 1862-1865 are wholly included in that period. As was said at the beginning of the discussion, the course of trade under the treaty was disturbed by two great economic ■events, so that no certain inference may be drawn from the actual course of trade. Moreover, the whole period of the 82 SELECTED ARTICLES treaty was almost too short to allow sound conclusions to be drawn from the figures representing its progress. The trade between the United States and the other Brit- ish provinces from 1849-1863 can be summarized as follows: the figures are taken from a table of leading exports to British provinces other than Canada from 1849-1863. Wheat.— 1849 332,/65 1853 208,956 1856 268,959 i860 90,049 1863 1 10,333 Wheat Flour. — 1849 1,518,922 1853 784,498 1856 3.120,787 i860 3.044,243 1863 4.420,748 Indian Corn. — 1849 .• 126,791 1853 105,404 1856 136,774 i860 85,915 1863 131,552 Meal. Com and Rye. — 1849 625,691 1853 135,040 1856 631,959 i860 206,881 1863 286.238 The most noticeable features in these figures are the de- cline in the amount of exports in wheat, corn and rye meal, and the large increase in wheat flour. The population of the maritime provinces was small and their resources were, undeveloped. New England had not yet come to need the raw materials of which the provinces possessed an abun- RECIPROCITY 83 dance, and therefore the resources were not developed dur- ing the continuance of the treaty. These reasons probably explain to a considerable extent the failure of the treaty to produce a greater effect upon the trade. The remarkable increase in the export of wheat-flour from a million and a- half to nearly four millions and a-half — may be explained by the fact that the United States imported wheat and re- exported it in the form of wheat-flour. The following figures show the relative amount of trade between the United States and Canada, and between the United States and the other British provinces: United States Exports. Other Canada. Provinces. 1850 4,285,470 1.358,992 1853 5,278,116 2,272,602 1856 17,488,197 3,822,224 i860 18,861,673 4.989.-708 1862 .'....'.15,253,152 4,046,843 United States Exports. Other Canada. Provinces. 1850 v 5,930,821 3,618.214 1853 7,829,099 5-311,543 1856 20,883,241 8,146,108 i860 14,083.114 8.623,214 1862 12,842,504 8,236,61 1 The proportion 6i trade with these two groups, the Cana- das and the maritime provinces, Nova Scotia, New Bruns- wick, Prince Edward Island and Newfoundland, seems to have been little affected by the treaty. The imports from Canada were three times as large as those from the mari- time provinces in 1850 and in 1862. The exports, too, bore about the same proportion to each other in both years, those 84 SELECTED ARTICLES to Canada being somewhat less than twice as large as those to the maritime provinces. The effect of the treaty ap- pears much more striking in the Canada trade than in that to the maritime provinces. From 1853-1856 the imports from Canada were more than trebled, while those from the maritime provinces do not double. The exports to Canada during the same period nearly treble, while those to the other provinces again do not double. The total trade be- tween the United States and Canada was in — 1853 13,107,215 1856 38,371,438 The total trade between the United States and the mari- time provinces was in — 1853 7>584,i45 1856 1 1,968,332 During the discussion over the abrogation of the treaty the common assertion was that the United States allowed the principal Canadian exports to enter free of duty, while Canada, on the other hand, imposed a duty upon exports of manufactured goods of the United States. The following figures show the amounts of free and dutiable goods im- ported into the United States and Canada in several dif- ferent years from 1850-1862: United States Imports Free Dutiable 1850 $ 787,599 $ 4,856,863 1853 1,418,250 6,132,468 1856 20,488,697 821,724 i860 23,180,971 690,411 1862 18,770,737 529,258 RECIPROCITY 85 Canadian Imports Free Dutiable 1850 $ 791,128 $5,803,732 1853 1,125,565 10,656,582 1856 9,933,586 12,770,923 i860 8,746,799 8,526,230 1862 19,044,374 6,128,783 Of the United States imports the amount of free im- portation increased from $787,599 in 1850 to $23,180,971 in i860, while that of dutiable goods decreased from $6,132,468 in 1853 to $529,258 in 1862. Of Canadian imports the free importations increased from $791,128 in 1850 to $19,044,374 in 1862, while the dutiable goods remained about the same amounting to $5,803,732 in 1850 and to $6,128,783 in 1862. An actual increase in the amount of dutiable goods oc- curred from 1853 to 1856. The figures for these years were as follows: 1853 $10,656,582 i8S4 • 13,449,341 1855 11,449,472 1856 12,770,923 The amounts gradually declined, until in 1862 it reached the lowest amount of the twelve years, 1851-1862 inclu- sive. The large amount of dutiable goods may have been the result of the better trade relations established between the two countries by the treaty, although the largest amount of dutiable imports during the period 1850-62 was in 1854, the year before the treaty went into operation. The amount of dutiable goods imported into Canada, on the other hand, increased absolutely, although the amount bore a smaller proportion to the total trade. The increase in free goods was about the same in both countries, except for the years, 1856 and i860, when the increase of United States imports was much greater than that of Canadian imports. The treaty of 1854 applied almost exclusively to nat- 86 SELECTED ARTICLES ural products, leaving manufactures upon the same founda- tions upon which they had rested before the treaty. Curi- ously enough, however, the question of manufactures played an important part in the abrogation of the treaty. The one really serious complaint made by the opponents of the treaty against it, and admitted even by its friends, was the violation of the spirit of the treaty by the province of Canada by the increase of the provincial tariff on articles not included in the treaty. The importance of this action of Canada will be under- stood when it is remembered that the population of Can- ada formed the largest portion of the population of the provinces, being 2,500,000 out of a total of 3,253,000. The Canadian trade, therefore, formed by far the largest part of the trade of the British provinces, that of the re- mainder, containing only about 700,000 inhabitants, being relatively unimportant. With these other provinces there was no dissatisfaction during the existence of the treaty. Trade with them was a local matter of interest only to the people of Xew England. Their slow development had not in i860 made clear the importance of their natural resour- ces. Hence the arguments for a closer union with the mari- time provinces, so prevalent to-day, had not yet made their appearance. The increase of the Canadian tariff was a part of the same policy which had dictated the negotiation of the reci- procity treaty, a policy having for its object the develop- ment of the resources of the provinces. To carry out this policy the Canadian government embarked on a system of internal improvement destined to develop their resources. Canals were built and improved, the navigation of the St. Lawrence was improved, and railroads were constructed. The idea of the government seems to have been to direct the carrying trade of the new western states of the L'nion from the railroads and canals of Xew York to Canadian canals and railroads. The negotiation of the reciprocity treaty gave a favorable opportunity for such a scheme. These improvements in transportation were undertaken RECIPROCITY 87 by the government and were mainly dependent upon sub- sidies and municipal bonds. No doubt the object of these works was as much political as commercial, the desire of the Canadian statesmen having been to consolidate the sep- arate provinces and by an increase in the material wealth of the people to remove all discontent, which from the situation of the country, so easily developed into a desire for annexation to the United States. Whatever the objects of the Canadian government, such works required large revenues for their completion. Some increase of taxation became necessary. The easier method seemed to be to raise the tariff. This could not be done in the case of those articles included in the treaty, but could be done in the case of maunfactured goods. This was done, and then arose the grievance of which the Ameri- cans so bitterly complained. From year to year, as a greater revenue was required, a higher tariff was imposed to the increasing disgust of the American manufacturer. The yearly changes from 1855-1859 in certain articles were as follows : 1855. 1856. 1857. 1858. 1859. Molasses 16% 11 11 18 30 Sugar (refined) . 32 28 25 26^ 40 Sugar (other.).. 2754 20 17^2 21 30 Boots and Shoes 1254 T-AYz 20 21 25 Harness I2J4 17 20 21 25 Cotton Goods... \2.y 2 izVi 15 15 20 Iron Goods 1254 18^ 15 16 20 Silk Goods I2J4 13^2 15 17 20 Wool Goods \2.y 2 14 15 18 20 The complaint of the Americans might have had a doubtful justification before, the outbreak of the civil war, while the tariff of 1857 was in force. It could have none at all after the war tariffs came into existence. Even un- der the tariff of 1857, the tariff rate of the United States upon cotton and woollen goods was 24 per cent., 4 per cent, higher than the Canadian duty under the tariff of 1859. 88 SELECTED ARTICLES But the justification of the complaint does not rest with the comparative rate of duties. No formal complaint of a vio- lation of the treaty was made by either party. The United States claimed that the treaty was made with the under- standing that the tariff of Canada would remain the same as it had been at the conclusion of the treaty. But no clause to such an effect had been added to the treaty, and the United States could expect only a strict adhesion to the terms of the treaty. The following figures show the effect of the higher Canadian tariff upon the exports of manufactures from the United States: Cotton Manufactures. — 1858-59 $363,016 1862-63 64.495 Iron Manufactures. — (except Pig Iron). 1858-59 761,619 1862-63 , 395,907 Boots and Shoes. — 1858-59 211,147 1862-63 22,860 Tobacco (Manufactured). — 1858-59 1,205,684 1862-63 76,026 House Furniture. — ■ 1858-59 136,765 1862-63 66,718 Books.— 1858-59 , 154,034 1862-63 ; 25,164 Hats — 1858-59 116,150 1862-63 14,078 Musical Instruments. — 1858-59 104,534 1862-63 67,445 RECIPROCITY 89 Uncnumcratcd. — 1858-59 $624,534 1862-63 401,227 These figures show a marked decrease in the exports of American manufactures to Canada from 1858 to 1863. Un- doubtedly the increase in the rate of the Canadian duties upon manufactured articles, was one of the causes of this falling off. Yet it must be remembered that the Civil war broke, out during the period, and that the effect which it produced upon the export of manufactures must have been considerable, especially in the case of the cotton manufac- tures. The needs of the United States increased, while its power of production diminished. This, of course, applied to all branches of production. The following figures show the total amounts of the ex- ports of American manufactures to Canada for the several years from 1858-1859 to 1862-1863. 1858-59 4,185,516 1859-60 3,548,114 1860-61 3,501,642 1861-62 2,596,930 1862-63 1,510,802 The privilege of free navigation of the river St. Law- rence, conferred by the fourth article of the treaty, had long been a subject of negotiation between the United States and Great Britain. The United States claimed a right of free navigation as "a riparian state of the upper waters of the river and of the lakes which feed it." This privilege, grant- ed temporarily in 1854, was given permanently by article XXVI of the treaty of 1871. Besides the privilege of navigating the St. Lawrence, that of navigating those canals of Canada which formed the means of communication between the lakes and the Sea, was granted by the fourth article of the treaty. This privilege proved a bone of contention between the two countries. The interest of the United States in the navigation of the go SELECTED ARTICLES Canadian canals by its citizens upon the same terms with Canadians related to the increasing needs of means of trans- portation from the grain producing states of the northwest to the sea-coast. The railroad system in the United States was still in the early stages of its development, the great through lines between the interior and the sea-coast not being completed' until nearly ten years after the period of the reciprocity treaty. Great dependence was still made upon the canal system of the country, and many attempts were made for the improvement of the existing system. Doubtless, too, the blockade of the Mississippi during the Civil war, thus cutting off one means of transportation to the sea, made the desire for any other possible avenue of com- munication with the sea stronger than it would otherwise have been. The inadequacy of the existing means of transportation led, too, to a natural suspicion on the part of the producers of western grain that the owners of railroads and canals would use them for the furtherance of their own interests to the injury of the helpless producers. Thus early ap- peared the western hostility to railroads, which later in- fluenced the legislation of many states. Besides the western producers, anxious for a new av- enue for the transportation of their products to market, a certain commercial element favored the continuance of free navigation, hoping thereby to profit by means of the larger trade which would be brought to their doors. This element seems to have been most active in the northern parts of >Jew York, especially in Rochester, Oswego and Ogdensburg. Their expectation seems to have been to obtain a large share of the business of transportation from the west to the sea-coast. The course would naturally be, they thought, from the lakes through the Welland canal and Lake On- tario to their own wharves. Then they would profit greatly by such a trade. But the interest of Canada in granting the privilege of navigating her canals to foreigners seems to have been clearly connected with the policy of internal development to RECIPROCITY 91 which I have already referred. The canals were built for the benefit of Canada, and the grant of special privileges to Americans was expected to work towards that end. The diversion of a large part of the carrying trade from Ameri- can canals and railroads would be a great gain to Canada and would surely cause such an increase of prosperity that all desire for annexation would die out of the minds of the people. Unfortunately the laws of nature were unfavorable to this scheme. For a good portion of each year the canals and rivers of Canada are frozen over, and consequently this new outlet for the surplus products of the west could have only a limited value. The attempt to thwart the laws 01 nature did not turn out as the projectors expected. In the report of Hon. W. P. Howland, finance minister for Canada for the year 1862, the results of this policy are, examined. He says that "the movement of property on the provincial canals shows a steady increase." On the Welland canal the movement was: Tons Property. Tonnage of Vessels. 1859 709,611 856,918 i860 944,084 1,238,509 1861 1,020,483 1,327,672 1862 1,243,774 1,476,842 On the St. Lawrence canals the movement was: Tons Property. Tonnage of Vessels. 1859 631,769 765,636 i860 733,596 824,465 1861 886,908 1,009,469 1862 964,394 1,049,230 In i860 the tolls on the St. Lawrence canals were abol- ished and those on the Welland canal reduced. The report of the finance minister says upon this point, that though there has been an increase in the movement of property by the St. Lawrence route since the change, this increase must not be considered as due entirely to the re- 92 SELECTED ARTICLES mission of tolls. "The greatly increased production of cereals in the western states and the figures presently intro- duced will show that in proportion to that increase, and to the whole volume of agricultural produce moved from Lakes Erie and Michigan to tide-water, we have not obtained so large a traffic since the removal of the tolls as we obtained prior to the adoption of that policy." While the Canadian canals failed to reap the benefits ex- pected from the reduction of tolls, the Erie canal material- ly increased its tolls. This increase amounted to an advance of seventy cents per ton on wheat and flour from Buffalo to tide-water, and of forty cents per ton from Oswego to tide- water. The finance minister concludes from the results of the free canal system that the policy has been productive of benefit, neither to the producer nor to the consumer of western breadstuffs. He says that "it can be shown from trustworthy data that, in so far as the actual cost of trans- portation is concerned, western produce can be carried to tide-water much cheaper by the St. Lawrence than by any competing route." The cause of the failure of ' Canadian canals to obtain a large proportion of the western trade is due, in the opinion of the minister, to "the absence of suf- ficient competition among forwarders engaged in the St. Lawrence trade, to the financial relations between shippers engaged in the western trade and the capitalists of New York, and finally and chiefly, to the lower rates of freights from New York to Europe, occasioned by the greater com- petition at that port than is to be found at Quebec or Mon- treal. There is but one course open for securing that quota of the western trade which the advantages of the St. Law- rence route give us reason to anticipate. If we can give to the owners of the largest vessels now profitably engaged in the trade of Lake Michigan the option of trading to Kingston and the St. Lawrence, or to Buffalo, as may be found most profitable, we shall have thrown down the barrier which now forces the main current of trade into the Erie canal. We shall have more than balanced the greater insurance and RECIPROCITY 93 freights charged from our seaports to Europe over the cor- responding charges from New York, and we may there- after expect Quebec and Montreal to take rank among the greatst grain marts of this continent." The value of the navigation of the Canadian canals can, I think, be safely inferred from this report of the Canadian minister of finance. Notwithstanding the importance at- tached to it by the inhabitants of the northwest, the results of its practical use for a series of years were unsatisfactory if not insignificant. In spite of every effort to direct the carrying trade from the Erie canal the Canadian canals ob- tained only a small fraction of the total trade, and this small fraction seemed to bear a smaller and smaller propor- tion to the total traffic between the west and the sea-coast. An examination of the history and effect of the reciproc- ity treaty of 1854 leads to the conclusion that the measure was favorable to the development of trade between the United States and the British provinces. The statistics of trade indicate a greater increase of commerce during the continuance of the treaty than at any other time during the period from 1820-1880. This increase appears most clearly during the early years of the treaty, for the later years were disturbed by extraordinary economic events. But depen- dence must not be had exclusively upon statistics, for there were features of the trade which cannot be illustrated by means of statistics. The "commerce of convenience" and the gain to both countries, and especially to the United States, of obtaining raw materials free of duty are subjects incapable of statistical illustration. Imperfections there may have been, and certainly were, as was most natural in a first attempt at a settlement of trade relations on a new basis. These imperfections, however, were not the cause of its abrogation. The cause was political rather than economical or commercial. There is very little doubt, as has been said already, that the attitude of the English towards" the North during the Civil war, was the direct cause of the ab- rogation of the treaty. The evident hostility of the Eng- lish aroused still more fully all the dormant resentment of 94 SELECTED ARTICLES the North, stirred as it was already by the southern rebel- lion. In such a state of feeling the result of any discussion of the treaty must prove fatal. And so it did. The contro- versy in regard to renewal began just as the hostility to England was strongest. The arguments of the friends of reciprocity were of no avail. The opponents of the measure appealed to the patriotism of the people, and to their self- interest as well. They showed the great loss of revenue caused by> the existence of the treaty; they made it clear that the British colonists were profiting from the needs of the Americans; and they clinched the argument by reminding the people of the hostility of those very people who were growing rich from their necessities. The majority are moved more by their feelings than by their judgment. The business sentiment of the country favored a continuance of the policy of reciprocity, but it was overruled by the burst of patriotic feeling aroused throughout the nation. The unfortunate fate of the reciprocity treaty has given it a false position in the economic history of the country. As the first measure of its kind in the trade relations of the United States and Canada and with no successor as yet, it seems an isolated thing, unrelated to the preceding or suc- ceeding periods. But this was not really the case. The years from 1846-1870 witnessed the development of a policy on the part of the principal nations of the world in favor of the removal of many of the existing restrictions upon inter- national trade. This policy was shown by the repeal of the corn laws in England, by the development of the zollverein in Germany, by the negotiation of numerous commercial treaties and by the reduction of import duties in various countries. In the United States the tendency found expres- sion in the negotiation of the reciprocity treaty and in the reduced tariffs of 1846 and 1857. But this movement, un- fortunately, was interrupted by the outbreak of the Civil war In the United States and by the Franco-Prussian war in Europe. The consequence of these two events was the overthrow of the liberal movement in Europe and America. The United States needed greater revenues for the conduct of the war and for the payment of the debt thus incurred. RECIPROCITY 95 Europe since 1870 has been an armed camp, and enormous revenues are needed to keep in constant readiness the mil- lions of soldiers, the large navies and the costly defences required in such a state of affairs. With the downfall of the liberal movement disappeared the best hopes of better trade relations between the United States and the British pro- Encyclopedia of Social Reform, p. 1051. William D. P. Bliss, ed. Reciprocity Treaties and Agreements Since 1850. (Prepared by the Bureau of Statistics of the Department of Commerce and Labor.) Countries with which Reciprocity Treaties Signed Took effect Terminated and Agreements have been made British North American possessions (treaty) June 5, 1854Mch. 16. 1855Mch. 17, 1866 Hawaiian Islands (treaty) . . Jan. 30, 1875 Sept. 9, 1876 Apr. 30,1900 Brazil (agreement) Jan. 31, 1891 Apr. 1,1891 Santo Domingo (agreement) June 4, 1891 Sept. 1,1891 Great Britain: Barbados (agreement) Feb. 1, 1892 Feb. 1, 1892 Jamaica (agreement) Feb. 1, 1892 Feb. 1,1892 Leeward Islands (agree- ment) Feb. 1, 1892 Feb. 1,1892 Trinidad (including To- bago) (agreement) Feb. 1, 1892 Feb. 1, 1892 Windward Islands, ex- cepting Grenada „„ ..„. (agreement) Feb. 1, 1892 Feb. 1, 1892Aug 27,1894 British Guiana (agreement) Feb. 1,1892 Feb. 1,1892 Salvador (agreement) Dec. 30, 1891Feb. 1, 1892 (provisional) Nicaragua (agreement) Mch. 11, 1892Mch. 12,1892 Honduras (agreement) Apr. 29, 1892May 25,1892 (provisional) Austria Hungary (agree- ment) May 25, 1892May 26,1892 France (agreement) May 28, 1898 June 1, 1898 Still in force Germany (agreement) Jan. 30, 1892 Feb. 1, 1892Aug. 24,1894 July 10, 1900 July 13, 1900 Still in force Portugal and Azores and • Madeira Islands (agree- ment) May 22, 1900 June 12, 1900 Still in force Italy (agreement) Feb. 8, 1900 July 18, 1900 Still in force Switzerland (treaty of , 1850) June 1, 1898Mch. 23, 1900 Switzerland Jan. 1, 1906 Still in force Cuba (agreement) Dec. 17, 1903Dec. 27, 1903 Still in force 96 SELECTED ARTICLES Reciprocity treaties or agreements were also negotiated and signed under authority of section 4 of the Act of 1897, with the following governments: United Kingdom, for Ja- maica, Turks and Caicos Islands, Barbados, Bermuda, and British Guiana; Dominican Republic; Nicaragua; Ecuador; Argentina; France — but the U. S. Senate has not acted upon them. The treaty with Cuba, which went into operation Dec. 2 7, 1903, gives a reduction of 20 per cent duty on all dutiable articles from Cuba entering the U. S., and a reduction rang- ing from 20 to 40 per cent on articles from the U. S. entering Cuba. Feb. 28, 1906, the president, by proclamation, extended to Germany the benefits of reductions of duty allowed under section 3 of the Dingley Tariff Act. On Sept. 1, 1906, a re- ciprocal arrangement embracing the same articles went into effect between the U. S. and Spain. AFFIRMATIVE REFERENCES Current Literature. 34: 386-7. April, 1903. United States and Canada. When the Joint High Commission dissolved its sessions two years ago, it was in a deadlock over the Alaskan Boun- dary question. The provision' now made for settling that question opens the way for a new session of the Commission, of which Sir Wilfrid Laurier is the Canadian head and Sena- tor Fairbanks the American. About the middle of Febru- ary, Senator Fairbanks communicated with Mr. Laurier touching a reassembling of the Commission with a view to settling all outstanding differences between the United States and Canada other than the Alaskan Boundary question. As a result of the correspondence, the Commission will meet again next fall, after the adjournment of the Canadian Parlia- ment. The questions to be considered are thus enumerated: Reciprocity is trade. Transit of merchandise in bond through the territories of the two countries. Transit of merchandise of one country to be delivered at points in the other beyond the boundary. Atlantic, Pacific and Great Lake fisheries. Seal fisheries in Bering Sea and North Pacific. More complete definition of the boundary line between the United States and Canada. The armaments which the United States and Canada shall be allowed to maintain on the Great Lakes. Alien labor laws. Enjoyment of mining rights by the nationals of one in the territory of the other. Reciprocity in wreckage and salvage rights. Transportation of criminals. 98 SELECTED ARTICLES There may be no special significance in the resolution in- troduced into the National House of Representatives on February 25, by Mr. De Armand of Missouri, providing for inquiry whether Great Britain, upon any terms "honorable to both nations and satisfactory to the inhabitants of the territory primarily affected, would consent to cede to the United States all or any part of the territory lying north of and adjoining the United States, to be formed in due time into one or more states and admitted into the Union upon an equality with the other States," but the resolution shows that the question of a union of the United States and Canada is, in one respect, like Shakespeare's famous ghost. Last fall, speaking at a dinner of the Minnesota Society of New York, Archbishop Ireland prophesied such a union. "There will be no conquest, no war," he declared, but "the hearts across the border are already beating: with love for us, and commerce and agriculture are calling for espousals." Somewhat later, how- ever, in an address in the city of Toronto, at the unveiling of a monument to the memery of British and Canadian soldiers who fell in 1812-1815, Hon. G. W. Ross, Premier of Ontario, made a declaration against any proposition to transfer the British pos- sessions in North America to the United States. The opposition in the States to commercial reciprocity with Canada does much to set Canadians against the realiza- tion of Archbishop Ireland's dream of the Stars and Stripes floating "from the Gulf to the Bay." There are, however, currents and counter-currents. The Canadian Preference League is being organized through- out the Dominion in the interests of Canadian products and in- stitutions against those of the United States. At the same time the Fortnightly Review of London countenances the declaration that England is driving Canada into the arms of the United States by her growing neglect to supply the people with money for Can- ada's growing industries. The writer who toured Canada last au- tumn, says that the Province of Quebec is becoming more French than France and more Roman Catholic than any other part of the world, and declares that suggestions that the French Canadians are most loyal subjects to the throne is a mere fairy tale, pe says that there is no English-speaking Canadian but laughs at stories to this effect published in the old country. He also quotes sta- tistics, specially furnished by the Ottawa departments, to prove the inevitable Americanization of the Canadian "West, while Canada's dependence on New York channels for British news is working in the same direction. An article in the London Monthly Review intimates that Canada is being "Americanized" to an extent that makes her loyalty to Great Britain a matter of doubt. London Public Opin- ion says: "The risks latent in the Americanization of Canada may easily be overstated at the moment, but they must not be ignored, and no means of lessening them should be missed." RECIPROCITY 99 A writer in the World's Work shows circumstantially the pre- ponderating part now played by Americans in the industrial de- velopment of Canada. "What the social and political result will be it is too early to prophesy. In some quarters of Canada anxi- ety is expressed, but, it would seem, needlessly. That the fusion of the two peoples caused by counter migration of Americans and Canadians across a purely arbitrary boundary is inevitable is the conclusion of some observers; but at any rate, it guar- antees the final occupation of the land by men of the same sturdy stock, speaking the same language and with customs, laws, and religion essentially alike. All the way across the continent American pioneering energy is pushing its conquests northward across the line and the industrial frontier is spreading farther, and farther." In Detroit, last December, a convention of United States business men met to advocate reciprocity with Canada. One speaker declared that the feeling is growing in Canada that the people of the dominion can do without the trade of the United States. A few days later, Sir F. W. Borden, Canadian Conservative leader, expressed the same thing at a banquet in New York, as follows: We hear a great deal to-day about reciprocity, and we are ali waiting for something to arise in this direction. After all our efforts to try to sell our potatoes, barley, and other products to the United States, we were finally compelled to seek a Euro- pean market, and we found the open market of Britain waiting for us. Now we want to thank the United States for turning us away and teaching us a lesson in self-reliance. Such utterances led the Toronto Monetary Times to say: Still it must seem, to any outside observer of the geograph- ical and commercial situation of the two countries, a curious thing to find two great and growing nations, close neighbors, engaged for a series of y years in maintaining barriers against each other's trade, instead of cultivating friendly relations. The thing is an economic absurdity. But it exists, and the United States is to blame for it, since she did away with the 1854 treaty in an unjustifiable pet, and Canada has time and again offered to reciprocate, but the Washington authorities will not. The reply to this, by those who justify the course of the United States, is thus put by the New York Tribune: The two points which it is desirable to' dwell upon are these — that Canada has no real grievance against the United States and that she now is and long has been discriminating against the United States as between this country and Great Britain. As we have hitherto pointed out, the United States makes no discrimination against Canada. Its rates of import duties are the same for all countries. It taxes Canadian goods no more than those of other lands. Thus there is absolutely no ground for the notion, which some injudiciously put forth, that the United States is treating Canada with special injustice and oppression. This country is doing no such thing. It is treating Canada just as it treats all others, and the Canadian demand is, therefore. ioo SELECTED ARTICLES not for the abatement of a special grievance, but for the grant- ing: to her of special favors. On the other point named it is to be remarked that Canada has for years had a tariff law under which she has, to our disadvantage, shown special favors, to our chief rival in her market. She lets in goods from Great Britain at a much lower rate of duty than similar goods from the United States, and it is notorious that she adopted that system not only for the sake of benefiting Great Britain, but also for the sake of injuring the United States. But this country has not got angry or excited over it. It has placidly acquiesced in Canada's undoubted right to make whatever tariff arrangement she pleases with the mother country, especially since in this case the arrangement is a step toward the adoption of our own principle of free trade among the members of the Union and pro- tection against all the outside world. Only the fact remains that because of that very arrangement it is Canada that is discrimi- nating against us and not we against her. The Detroit National Reciprocity Convention, above re- ferred to, asked Congress to move for recovering the Joint High Commission to treat with Canada on the basis of reci- procity in natural products. In January, the National Board of Trade, convened in Washington, made a similar request of Congress and indorsed the Bond-Hay treaty with New- foundland, which, however, Congress has thus far neglected to ratify. Concurrence in the position of the Detroit Con- vention and the National Board of Trade characterizes branch reciprocity leagues and commercial organizations in various parts of the United States. On the whole, the Hon. John Charlton, M. P., the noted Canadian advocate of reciprocity, is led to say in opening an article in the Out- look for February 29, that circumstances seem to warrant the belief that public sentiment in the States is assuming a mope liberal attitude toward the question of reciprocity with Canada. Forum. 29: 471-80. June, 1900. American and Canadian Trade Relations. J. Charlton. The relative geographical positions of the United States and Canada, with their counterminous boundary line extend- ing from the Atlantic to the Pacific, with similarity of ethno- logical conditions, of laws, and of political institutions, should naturally lead to intimate commercial and social re- lations. Affinities so pronounced as those existing between RECIPROCITY 101 these two sections of the North American continent can only- fail to produce such results through the interposing of poli- cies calculated to impair the influence of natural conditions. The two countries, while geographically a unit, are possessed of dissimilarity of climate and diversity of production to a degree so marked as to be calculated to stimulate inter- communication and commerce. Canada requires the raw cotton, the tobacco leaf, the iron, steel, and coal of the United States for her manufacturing operations; she requires also the tropical fruits of the South and a great variety of Ameri- can manufactures; and in exchange it is natural that she should send to the United States her forest, farm, and mine products. The natural barriers which separate portions of the two countries — the great inland seas, and the mighty river which is their outlet — are of a character to invite and facilitate inter-communication rather than .to offer obstacles to its fullest development. The geographical position of the east- ern portion of the United States is such as to afford to the province of Ontario, to a portion of the province of Quebec, *nd to the vast Canadian Northwest, with its enormous future possibilities, the shortest and most feasible routes to the sea. Portland, Boston, New York, Philadelphia, and Baltimore are the natural winter ports of extensive sections of the Canadian territory; and the Erie Canal and the railway routes from Buffalo to the sea-board have afforded hitherto the nearest and most inviting outlets to tide- water for a, considerable portion of the exportable products of the sections of Ontario bordering upon Lakes Erie, Hur- on, and Superior, and for the grain of Manitoba and the Canadian Northwest which finds its outlet by lake ship- ment from Fort William. Movements have already been made for the establish- ment of ferry services across Lake Erie from the coal-mines and iron-works of Pennsylvania and Ohio to the rich dis- trict of Western Ontario. A harbor is approaching comple- tion at Port Burwell, on the north shore of Lake Erie, which will afford deep water as well as excellent facilities for win- 102 SELECTED ARTICLES ter entrance at a point which geographically is most advan- tageous. A short line from this port connects with all the trunk lines of Ontario, and will not only furnish inward business, but will afford an outlet, summer and winter, by car ferriage, for the various Canadian products seeking ex- portation. In winter, these can be sent much more cheaply and expeditiously to Baltimore and Philadelphia than to Canadian points. This is one of many schemes for in- creased facilities of transportation, and is mentioned to illus- trate the fact that the possibilities for development of inter- communication and for increase of business between the two countries are indefinite and well-nigh unlimited. Intimate knowledge of the extent and resources of Canada is not as a rule possessed by the American people. Little is known of the country, of its future possibilities, of its area, and of its value as a customer at the very door of the United States. Even under the conditions that at the pres- ent moment govern trade, conditions which, as far as the fiscal policy of the United States is concerned, are repres- sive, Canada, with its 5,500,000 inhabitants, is a better custo- mer to the United States than all of Spanish America, with a population of 55,000,000, and comprising Mexico, the Cen- tral American States, all of South America, and all of the West Indies, including Cuba and Porto Rico. For the year 1898, the total exports of the United States to this enormous region reached the sum of $86,786,000, while the total ex- ports of the United States to Canada for the same year were $86,537,000. For the year 1899, the exports to Canada from the United States have largely increased, exceeding in amount the exports to Spanish America and the West Indies. This fact is indicative of the possibilites of trade between the United States and the northern half of the North American continent. The total trade of Canada last year, exports and imports, was -$312,948,000, divided as follows: Total trade with Great Britain $136,151,000 Total trade with the United States 138,140,000 Total trade with all other countries 38,657,000 RECIPROCITY 103 Of this total trade the amount with Great Britain con- sisted chiefly of exports, while the amount with the United States consisted chiefly of imports. The total exports to Great Britain were $99,860,000 The total imports from Great Britain were 37,600,000 The total exports to the United States, ex coin, bullion, and estimated short returns, which latter were more than counterbalanced by smuggling into Canada, were 36,562,000 Of this amount the exports to the United States, the produce of Canada, ex coin, bullion, and estimated short returns, were $34,766,000. The total imports from the United States were. .$101,642,000 The total exports of Canada to all foreign coun- tries except the United States and Great Britain were 14,677,000 The total imports from all other countries were. 24,175,000 Balances of Trade The balance of trade against Canada on total' ex- ports and imports was $3,868,000 The balance of trade in favor of the United States on total exports and imports was 56,509,000 The balance of trade against Canada on total ex- ports and. imports with all foreign countries except the United States and Great Britain was 9,499,000 The balance of trade against Great Britain upon total exports and imports was 62,141,000 In other words, Canada sold to Great Britain more than she purchased from that country, and used the chief part of this balance in her favor to pay for her importations from the United States. The superior liberality of the Canadian trade policy as compared with that of the United States is clearly demon- strated by a statement of the relative rates of duties levied 104 SELECTED ARTICLES by the two countries. For the year 1899 the Canadian rates of duties were as follows: Rate of duty upon total imports 15.81 Rate of duty upon imports for consumption 16.07 Rate of duty upon dutiable imports 26.16 Rate of duty upon dutiable imports for consumption. 28.77 In the United States the rates of duty for the previous year were: On total imports 2 4-78 On dutiable imports 49-20 The exact rate for 1899 is not at hand, but it could have varied only slightly from that of 1898. Notwithstanding the preferential rate of 25 per cent in favor of Great Britain — which has been increased during the present session of Parliament to 33J-3 per cent, and which it is probable, in the estimation of the Canadian Gov- ernment has been called for by the superior liberality of Great Britain toward Canada in trade matters as compared with the United States — .and notwithstanding the fact that England furnishes a market for Canadian products greatly in excess of that furnished by the United States, the volume of imports from each country still leaves a decided advan- tage in favor of the United States. From the latter coun- try we purchase a class of manufactures quite distinct in the main from the kinds purchased of Great Britain; and the differential duties do not seem to have had the practical influence upon the relative volumes of trade of the two countries that might have been anticipated. The rates of duty from Great Britain, from the United States, and from the rest of the world, including the British possessions, for the year 1899, were as follows: From Great Britain Rate of duty upon total imports 19.80 Rate of duty upon imports for consumption 19.83 Rate of duty upon dutiable imports 26.69 Rate of duty upon dutiable imports for consumption. 26.27 RECIPROCITY ios From the United States Rate of duty upon total imports 11.52 Rate of duty upon imports for consumption 12.59 Rate of duty upon total dutiable imports 24.22 Rate of duty upon dutiable imports for consumption. 24.13 From All Other Countries, Including the British Possessions Rate of duty upon total imports 27.68 Rate of duty upon imports for consumption 27.94 Rate of duty upon dutiable imports 37-98 Rate of duty upon dutiable imports for consumption. 38.37 The imports of Canada per capita for 1899 were, as fol- lows : Total imports, per capita $29.59 Imports from Great Britain, per capita 6.71 Imports from the United States, per capita 18.48 Imports from the rest of the world, per capita 4.40 Contrasted with this is the fact that the total imports per capita of the United States from Canada were $0.60. Words cannot strengthen the presentation of the case made by the cold figures. The liberality of the Canadian trade policy toward the United States as contrasted with the repressive trade policy of the latter country toward Canada is further illustrated by the statement that the total importation of free goods for consumption into Canada for the year 1899 amounted to $64,618,000, of which amount different countries furnished as follows: United States $48,535,000 Great Britain 9,538,000 All other countries 6,544,000 The advantage enjoyed by the United States in the matter of free entry for goods into Canada, as compared with other countries, will be shown by a statement of the 106 SELECTED ARTICLES amounts, based on percentages. Upon this basis the re- sult is as follows: Percentage of free goods from the United States 75- TI Percentage of free goods from Great Britain 14-91 Percentage of free goods from all other countries.... 9.98 To offset this enormous free list in favor of the United States it is doubtful whether $5,000,000 worth of Canadian products are given free admission into the American market. The percentages of imports into, and exports from, Canada are as follows: Imports Total imports $162,764,000 Total imports from Great Britain 36,945,000 Percentage of total imports 22.69 Total imports from the United States $101,642,000 Percentage of the total imports 62.44 Total imports from all other countries $24,175,000 Percentage of total imports 14.87 Exports Total exports of Canada $158,896,000 Total exports of Canada to Great Britain 99,086,000 Percentage of the total amount 62.35 Total exports to the United States, . including coin and bullion $4,011,151, and estimated short returns $4,559,530 $45,133,000 Percentage of the total amount 28.40 Total exports to all other countries $14,677,000 Percentage of the total amount '. 9.25 A striking illustration of the unsatisfactory condition of trade relations between the two countries, viewed from a Canadian standpoint, is furnished by the statistics of 1899 relating to the export and import trade in farm products. As is seen by the above statements, Canada is a large im- RECIPROCITY 107 porter of American products, and this is especially the case in regard to American manufactures. The general im- pression is that Canada's exports of farm products to the United States are greatly in excess of the amount of her imports in the same line from that country. Being a pur- chaser to an enormous extent of the products of American skilled labor, it is but natural to suppose that Canada should find a market in the United States to an equal, or a nearly equal, extent for her raw material, in exchange for such finished commodities as she purchases. On a fair basis of trade arrangement this ought to be the case. As facts actually exist, however, the market in the United States for Canadian farm products is of comparatively small mo- ment; Canadian sales to the United States of farm products being very much less than Canadian purchases of farm products from that country. The export of farm products, the produce of Canada, to the United States, for 1899 was as follows: Export of agricultural products $1,149,686 Export of animals and their products 4>628,S33 Total $5,778,219 Imports of farm products for consumption by Canada from the United States, for 1899, were as follows: Imports of agricultural products from the United States for consumption, dutiable and free, for 1899 $18,686,000 Imports of animals and their products from the United States for consumption, dutiable and free, for 1899 5.762,000 Total $24,448,009 Of these amounts, $16,202,612 of agricultural products and $3,514,938 of animals and their products were free. The surprising result, therefore, is, that in 1899 Canada bought farm products from the United States for consump- tion to the extent of more than four times the value of the farm products she sold to that country. If from the list of her purchases of farm products from the United States we 108 SELECTED ARTICLES should eliminate raw cotton and tobacco leaf, amounting to $4,989,000, the account would stand: Purchases, $19,459,000; sales, $5,778,000 — purchases over three and one-third times as great as the sales. The same year the sales of Canada to Great Britain, of agricultural products, the produce of Canada, were Si 8.447,- 000, and of animals and their products, the produce of Canada, $41,604,000, total $60,051,000; making the exports of farm products, the produce of Canada, to Great Britain more than ten times as great as her exports of the same products 1 to the United States. This, and the fact that the total imports of Canada from the L T nited States were nearly three times greater than her total imports from Great Britain, will serve to illustrate why her Government has seen fit to give Great Britain preferential treatment. It may seem surprising that so great a disparity should exist between the imports of farm products from the United States into Canada and the exports in the same line from Canada to the United States. The reason is twofold: (1) The American duties on the agricultural schedule are evi- dently designed to be as nearly as possible prohibitive; and (2) Canada has a vast and ever-increasing market for food products in her new mining regions and in other sections of the Dominion, and has a large population of food con- sumers not engaged in the production of food. This popu- lation is chiefly engaged in lumbering, mining, and the fisheries. As another illustration of the great liberality of Canadian fiscal regulations as compared with those of the United States, the permission to import corn from the United States free of duty may be mentioned. Corn was placed upon the free list in 1897. The importation of that grain last year from the LTnited States amounted to 23,342,000 bushels, valued at $8,966,000. For this concession no cor- responding concession, either in reduction of duty or in placing any kind of grain upon the free list, has been made by the United States. The importation of manufactures from the United States into Canada in 1898 amounted to $40,662,000, and in 1S99 to RECIPROCITY 109 $48,645,000. This amount exceeded the importation of manu- factures from Great Britain for that year by the sum of $11,500,000. Of this importation, $13,292,000 was on the free list. The farmers of Canada probably took not less than $25,000,000 of the entire amount, and, in return, they were permitted to sell to the United States the comparative- ly insignificant amount of $5,778,219 of farm products, while they saw the farmers of the United States taking possession of their own markets in the same line to the extent of three and a third times that amount. The above statistics will make clear the fact that the American, market is practically sealed to Canada for the products of the farm. Naturally, therefore, Canada has turned her attention to seeking new outlets; and having done so with great success, the importance of the American market to her is becoming of smaller moment year by year. A feeling is also gradually taking hold of the public mind, which, if not one of hostility, is one of intense dissatisfac- tion with the commercial policy of the United States toward Canada; and the day is probably not distant when practical action will be demanded, either in the shape of securing increased exports to the United States or of adopting a policy which will very sharply curtail importation from that country. The lumber trade of Canada with the United States has of late been "one of diminishing quantity; and the American policy of imposing heavy duties upon forest products amounts, in effect, to a liberal premium on forest destruc- tion in the United States. The rapidly diminishing supply of white pine, it appears from the best authorities, will be practically exhausted in five years more, and the American duty of $2 per thousand is hastening the day when the last pine-tree will be cut. The duty upon Canadian lumber is rapidly changing the course of Canadian trade in that article. Until within the last three years the exports of forest productions to the United States exceeded the ex- ports in the same line to Great Britain. Last year, how- ever, the exports to the British' possessions amounted to $16,361,000, while the quantity exported to the United States no SELECTED ARTICLES had shrunk to $9,921,000, a considerable portion of which passed through the United States in bond for export. While this trade is burdened with the duty of $2 per thousand, Canada imported from the United States last year forest products free of duty to the amount of $2,996,000. The Government has refused the demand of Canadian lumber- men to impose duties upon this importation corresponding to the American duties upon importations of the same class into that country; wisely deeming it improper to burden new settlers in the Northwest by duties upon lumber which in many sections can be obtained more cheaply from Min- nesota than from Canadian sources. The feeling of resentment caused by the meagre charac- ter of the American free list as compared with that of Canada, and the striking of lumber from the free list when the Wilson Bill was superseded by the Dingley Bill, finds expression in the province of Ontario in the prohibition of the export of saw-logs and pulp-wood, and in the province of Quebec in a differential Crown due on the export of pulp- wood of $1.50 per cord, the Crown due for local consump- tion being forty cents per cord, and for export $1.90. Upon the broad ground of political economy this system unques- tionably is bad policy, and it is highly unfavorable to the interests of those holding timber; but it is almost univer- sally popular, because it is felt that it affords a method of striking back and giving a quid pro quo for an ungenerous policy toward us. Its chief weakness lies in the fact that its application to old sales of timber berths and to licenses issued before the passage of the law is denounced by the sufferers as a breach of faith. No one, perhaps, would feel disposed to cavil at its application in all cases when it has been, or can be made, a condition of sale ; but the cx-po'st- facto feature of the legislation is no doubt of very question- able character. The statements of trade relations between America and Canada contained in this article make it evident that the American fiscal policy toward Canada is illiberal as com- pared with the Canadian fiscal policy toward the United States. That it is in the interest of the United States it is RECIPROCITY in hardly possible to believe. The export trade between Can- ada and the United States in articles the produce of Canada has practically stood still since the abrogation of the Reci- procity Treaty in 1866, and in 1899 was actually a fraction less than in the former year. The admission to the Ameri- can market of Canadian farm products would have little, if any, influence upon prices received by American agricultur- ists, as Canadian importations would be so small, compared with the great volume of American production, as to produce little influence upon market prices. The fear of Canadian competition, on the part of the American farmer, is ill- founded; for both meet in the common market of England for the sale of farm products, and the interchange of such products between the two countries would not produce the slightest effect. Had free trade in natural products been permitted since 1866, or even for a period of ten or fifteen years past, the volume of trade between the two countries would have been beyond all reasonable doubt two or three times greater than it is at present. The two people would have been brought into more intimate relations, both socially ana commercially; the tone of public sentiment in the two countries would have been more healthy; and each country would have known more" about the other, which is all that is necessary to assure mutual respect. Unquestionably, by fostering such intimate trade relations, the interests of each country, and of the entire English-speaking race, would have been promoted, with the natural concomitant of more friendly feeling. The present condition of affairs, if permitted to continue, Will develop into more serious estrangement, and will probably lead in due time to imitation, by the Government of Canada, of the fiscal policy of the United States, as con- cerns the relations between these two countries. It might perhaps be worth the while of American economists to con- sider the probable effect of raising the Canadian standard of 26 per cent on dutiable imports to the American standard of 49 per cent, with perhaps an increase of the differential in favor of Great Britain. This course would greatly stimu- H2 SELECTED ARTICLES late the development of our manufacturing system; and it would also enable our farmers to furnish food for the op- eratives whose products they consume, a privilege now al- most absolutely denied to them in the case of the American operatives, whose productions were taken last year by Ca- nadian consumers to the extent of more than eight times the value of Canadian farm products permitted entrance into the markets of the United States. Forum. 32: 582-93. January, 1902. Reciprocity with Canada. J. Charlton. Geographical and ethnic conditions have always sug- gested to the Canadian that broad and liberal trade rela- tions with the United States would be natural and mutually advantageous. He has invariably acted upon this view, and the repeated rejection of his overtures has not seriously shaken his faith in the doctrine that the present trade situa- tion could be easily changed for the better. In 1854 the efforts he made for more liberal terms were crowned with success through the negotiation and ratification of a reci- procity treaty which was to continue in force for twelve years, and then to be terminable at' one year's notice. This treaty provided reciprocal entry for the natural products of each country into the markets of the other. Lender its pro- visions there followed a great expansion of trade between the two countries, an increase of social intercourse, and an advance in the direction of community of interest. Notice of the abrogation of the reciprocity treaty of 1854 was given by the United States Government in 1865. The primary cause of this action was supposed to be a feeling of resentment provoked by the fact that news of the Federal defeat at Chancellorsville had been received with cheers by the majority of the Tory members of the Canadian Parlia- ment, then in session at Quebec. At this time public feeling in Canada regarding the War of the Rebellion ran high. The Liberals of the country almost to a man sympathized RECIPROCITY 113 with the South. The action of the United States in giving notice of the abrogation of the treaty was ill-judged, if it was prompted by this incident. There were copper-heads in the North, in no insignificant numbers, as ready to cheer over Federal reverses as was the Tory contingent in the Ca- nadian Parliament. No less than 40,000 Canadians had aided in fighting the battles of the Union. The majority of the people of Canada were intensely sympathetic with that cause, and the abrogation of the treaty was a wet blanket upon their zeal; tending to strengthen and spread the feel- ing for which it was supposed to be designed as a punish- ment. It was contended that the operation of the treaty gave the greater advantages to Canada. To a limited extent, and in the narrow sphere of present results, this may possibly have been true; but a statesmanlike view of the operation of causes that would tell upon the future was not taken by those who held this opinion. A sordid reckoning as to which of the parties to the agreement sold the most was allowed to hide from view the march of destiny and the fraternal blending of the unmeasured forces of the future. If the treaty in its practical workings was unsatisfactory to the United States, Canada was ready to modify its provi- sions; it was, in fact, anxious to do so. Before the fated day of abrogation arrived, Canadian envoys had visited Washington to plead for the continuance of fraternal trade relations, under a treaty to be modified in any way that was reasonable and just. Their reception was a rebuff — ■ cold, positive, and absolute. They returned from their fruitless errand; and Canada at once set about the confed- eration of the British North American Provinces, a task which was accomplished in 1867. In twelve years the treaty had more than quadrupled the amount of trade between Canada and the United States, and had led to a very large increase in the importation of Amer- ican manufactures into Canada. The War of the Rebellion had created a demand for Canadian farm products greater than would have existed under normal conditions; and the ii4 SELECTED ARTICLES exportation of natural products to the United States in 1866, the last year in which the treaty remained in force, was greatly stimulated by the approaching abrogation, the date of which was known in advance. In that year the total ex- port of the British North American Provinces to the United States, including estimated short returns from inland ports of $4,185,692, was $44,143,908. This amount was composed in large part of farm products, namely, animals and their products $11,319,243, and agricultural products $13,722,721, these two items together amounting to $25,041,964. In the same year the British American imports from the United States amounted to $28,572,000, a considerable proportion of which consisted of manufactures. It will be borne in mind that the imports into Canada for the year 1866 were made in the natural course of trade, while the exports, for the rea- son above stated, were abnormal in amount. It is reason- able to conclude that the tendency under natural conditions would have been to secure the equalization of exports and imports. In 1866 the British-American exports to Great Britain amounted to $16,826,000, and the imports from Great Britain to $40,062,000. The most considerable items on the list' of exports consisted of forest products and ships built at Que- bec. The exports of farm products from the provinces of Nova Scotia, New Brunswick, and Prince Edward Island were inconsiderable. From the United Provinces of Canada they were as follows: animals and their produce $1,326,000, and agricultural products $2,217,000, making a total of $3,- 543,000. The imports from Great Britain consisted largely of manufactures. It will thus be seen that in the last year of the operation of the reciprocity treaty of 1854 the chief market for Canada's farm products was the United States, while the chief source of supply for its manufactures was Great Britain. Following the abrogation of the reciprocity treaty came the imposition by the United States of duties upon farm products. These duties were of an almost prohibitory char- acter. It is not unlikely that the belief was entertained RECIPROCITY 115 that Canada required access to the American market for her surplus farm products, and that duties reaching to the limit of exclusion would force political union. If this opin- ion was entertained, events proved it to be utterly mistaken. The policy of repression at once begat bitterness and deep- seated resentment, and the two peoples commenced to drift asunder. The Canadian was put upon his mettle, and pro- ceeded to cast about for new markets. The American was no longer asked to act as his factor in the exportation of such farm products as had previously figured as a part of American imports. The Canadian quest for new markets was successful. In due time the export of farm products to the United States dwindled to an insignificant fraction of the total Canadian export in that line, and Canada became a purchaser of American farm products for her own con- sumption, nearly up to the limit of her total export of such products to the United States in 1866. In the meantime Canada maintained a wise and moder- ate tariff policy toward the United States. The percentage of duty upon the total value of goods entered for consump- tion amounted to 12.25 in 1868, to 15.98 in 1900, and to 16.06 in 1901. It never rose above 21.57, which was the rate in 1888. During all the period from 1868 to 1901 the duty upon American goods entered for consumption was less than the average duties upon the amount of goods entered for con- sumption from all other countries; the duties upon the total American imports in 1901 having amounted to no more than 12.05, while those upon dutiable imports were 24.83. This moderate revenue tariff offered no obstacle to the liberal importation of American goods; and while repressive Amer- ican duties kept Canadian exports to the United States at a standstill, the Canadian imports from the United States increased until in 1901 they were four times what they were in 1866. Canada is now the third largest customer the United States has in the world; Great Britain and Germany taking the precedence. In 1900 the total importation of Canada from the United States amounted to $116,972,000, or $21.65 n6 SELECTED ARTICLES per head. In the same year the total imports from the United States by Mexico, Central America, South America, and all the West Indies, except Cuba and Porto Rico, amounted to no more than $96,140,000, or $1.70 per head. The opinion seems to be held in the United States that the trade conditions prevailing in 1866 continue to-day, and that Canada is still dependent upon the United States for a market for her agricultural products. The sooner the American learns that this impression is utterly without foundation, the sooner will a true appreciation of existing conditions be reached. The following statement of trade returns between the United States and Canada, and between Canada and other countries, during the fiscal year ending June 30, 1901, will afford the premises from which to draw correct conclusions. These tables are compiled from advance statements by the Customs Department at Ottawa, and may be slightly varied upon careful revision for official publication: Canadian Trade with the United States Total imports from the United States $119,306,000 Imports from the United States for consumption 110,485,000 Dutiable imports from the United States for con- sumption 53,600,000 Free imports from the United States for con- sumption 56,884,000 Total exports to the United States 70,306,000 Exports to the United States ex foreign mdse... 67,983,000 Portion of same coin, bullion, gold dust, etc 28,486,000 Actual export domestic produce 39,497,000 Deducting domestic produce exports from goods entered for consumption, actual balance of trade with the United States against Canada. 70,988,000 Canadian Trade zvith Great Britain Total imports from Great Britain $43,164,000 RECIPROCITY 117 Imports for consumption 43,018,000 Total exports to Great Britain, produce of Can- „ ada 92,857,000 Total exports 105,328,000 Canadian Trade with All Other Countries Total imports from all other countries $27,945,000 Imports for consumption 27,734,000 Exports to all other countries, the produce of Canada 16,591,000 Total exports 20,753,000 The totals of free imports for this year were: from the United States, $56,884,000, or 73 per cent; from Great Bri- tain, $11,316,000, or 17.3 per cent; and from all other coun- tries $7,469,000, or 9.7 per cent. The rates of duty were as follows: From all countries, entered for consumption 16.06, dutiable 27.46; from the United States, entered for con- sumption 12.05, dutiable 24.83; and from Great Britain, en- tered for consumption 18.23, dutiable 24.71. Out of the total of Canadian imports 63 per cent came from the United States, 22J/2 per cent from Great Britain, and 14^/2 per cent from all other countries. Of exports not including precious metals, the United States took 21 per cent, and Great Britain 53^2 per cent. It is too early to attempt an analysis of the Canadian im- port returns for 1901, for the purpose of ascertaining the importation of manufactures for that year by Canada from the United States and from Great Britain; but the returns of 1900 will serve the purpose. For that year the Canadian imports of manufactures from the United States and from Great Britain were as follows: From Great Britain, value of free manufactures $7,610,477, dutiable manufactures $30,- 377,084; making a total of $37,987,561. From the United States, free manufactures $18,021,365, dutiable manufactures $44,837,580; making a total of $62,858,945. In 1898 the importation of manufactures, free and duti- u8 SELECTED ARTICLES able, from Great Britain was $26,732,584, and from the United States $43,834,769. The importation of manufactures for 1901 as compared with 1900 has probably increased in the case of the United States, and fallen off in the case of Great Britain, as the imports for consumption had risen from $109,844,000 to $110,- 485,000 in the case of the United States, and had fallen from $44,789,000 to $43,018,000 in the case of Great Britain. The Dominion possesses the great stretches of produc- tive soil upon this continent that still remain unoccupied. The trend of the isothermal line to the northwest of Lake Superior brings within the wheat belt a region extending eight degrees northward from the boundary line, and em- bracing the Peace River valley. In 1901 as many as 45,000,- 000 bushels of wheat were produced in Manitoba and the Canadian Northwest from 2,000,000 acres of land. There are from 250,000,000 to 450,000,000 acres more of wheat land in that country waiting to respond with bountiful harvests to the invitation of the plough; and as many as 50,000,000 inhabitants may find homes and subsistence in this part of the Dominion. In 1901 Canada's trade in farm products with Great Britain and the United States was as follows: Exports to the United States Agricultural products, the produce of Canada.... $2,907,924 Agricultural products, foreign produce 338,842 Total $3,246,766 Animals and their products, produce of Canada... $5,331,657 Animals and their products, foreign produce 286,947 Total $5,618,606 Total export of farm products $8,865,372 Total export of farm products, the produce of Canada 8,239,581 RECIPROCITY 119 Exports to Great Britain Agricultural products, produce of Canada $17,337,675 Agricultural products, foreign 11,502,620 Total _. $28,840,295 Animals and their products, produce of Canada . .$49,186,025 Animals and their products foreign 500,744 Total $49,686,767 Total export of farm products $78,527,062 Total export, produce of Canada 66,523,700 Imports for Consumption from the United States Agricultural products free $14,923,080 Agricultural products dutiable 2,997,202 Total $17,920,282 Animals and their products free $4,587,785 Animals and their products dutiable 2,961,973 Total $7,549,758 Total imports farm products $25,470,040 Portion of the same free 19,510,865 Imports from all other Countries, including Great Britain Agricultural products free $687,626 Agricultural products dutiable 531,904 Total $1,219,520 Animals and their products free $3,429,356 Animals and products dutiable 100,950 Total animals and products $3,530,3°6 Total farm products $4,749,826 120 SELECTED ARTICLES Of the $63,000,000 of manufactures purchased by Canada from the United States in 1900, Canadian farmers purchased quite $30,000,000. They were permitted in return to project a dole of $8,239,000 of farm products over the tariff wall of the United States, and to see brought into Canada from the United States, free of duty, hides and skins to the value of $2,432,000, wool $398,000, horses $90,000, broom corn $209,- 000, hemp $291,000, Indian corn $6,484,000, flaxseed $662,260, tobacco leaf $1,720,000, raw cotton $4,731,000, and some other articles of less value; making a total of free farm products imported from the United States amounting to $19,500,000. Naturally, the farmer thinks some kind of re- adjustment would be proper; and he will take very kindly to the suggestion that it would be better to have the goods manufactured in places where he could furnish the operatives with the food they consume, and with some of the raw materials required in the production. Of the farm products upon the export and import list, Canada bought of the Unit- ed States to the extent of $24,058,000 in excess of her sales to that country, while the United States bought of Canada, in excess of her sales to that country, the following farm products, for consumption: Corn, oats, rye, wheat, corn- meal, oatmeal, rye and wheat flour, malt, seeds, apples, small fruits, potatoes, vegetables, tobacco leaf, broom corn, hemp, flaxseed, horses, hogs, poultry, eggs, butter, lard, bacon and hams, beef salted in barrels, pork in barrels, other meats, grease, hides and skins, wool, and many minor articles. Some of the facts above set forth may be briefly sum- marized as follows: (1) The -Canadian tariff rates are less than one-half those of the United States. (2) The Canadian exports of farm products to the United States are only one- third as much as in 1866. (3) Canadian imports from the United States are now over four times what they were in 1866. (4) Canadian imports from Great Britain have in- creased less than ten per cent since 1866. (5) Canadian ex- ports of farm products to Great Britain have increased twenty-fold since 1866. (6) Canada buys three times as much from the United States as she sells to that country, RECIPROCITY 121 leaving out of account the precious metals. (7) Without in- cluding raw cotton, Canada buys from the United States two and a half times the amount of farm products that she sells to that country. (8) Canada buys at least $10,000,000 more manufactures from the United States than from all the rest of the world. (9) Canada finds her chief market for farm products in Great Britain. (10) Of the total imports of Canada sixty-three per cent comes from the United States. (11) Canada gives the United States a free list of $56,884,000, or seventy-three per cent of her entire free list. Included in the free list from the United States are $39,000,- 000 of free farm products, free forest products, and free manufactures. (12) Canada receives practically no free list from the United States, except the precious metals. Canada cannot afford to continue the present state of trade relations with the United States. They do not serve to promote her prosperity. Her purchases from the United States must be paid for, in a large part, from the proceeds of sales of her products to other countries. If she is to be a hewer of wood and drawer of water, she wants at least the privilege of selling the wood. The United States can easily give to her a kind of reciprocity that will put matters upon the proper basis, by enabling her to sell her products in the markets of the United States to an amount somewhat approaching the extent of her purchases from that country. ' Failing to secure this arrangement, Canada can give to the United States a kind of reciprocity that will make the vol- ume of imports from that country nearly as lean and hungry as is the present scale of exportation to it. The simple formula for securing this result is to adopt the American tariff; and Canada is rapidly settling down to the conviction that there should be no unnecessary delay in taking this course, if proper concessions cannot be obtained. The supply of raw material for paper-making has become a matter of much importance to the paper mills of the Unit- ed States. Canada possesses a great reserve of spruce tim- ber suited to that use. Her public men fully appreciate the importance of such a possession. No obstacle has yet been 122 SELECTED ARTICLES placed in the way of the exportation of pulp wood; but it would be natural, in a possible movement for reciprocity of tariffs, to require the manufacture of Canadian pulp wood into paper in Canada. This course would very likely be taken, as has already been the case with saw-logs and lum- ber manufacture. The change in the fiscal relations of the two countries that would form a reasonable and proper basis of adjust- ment would be to make the natural products of the farm, the forest, the mine, and the sea reciprocally free, and to provide that Canada should not discriminate in her tariff rates in favor of other countries. At first sight this may seem rather a sweeping proposition. The lumberman who wants to hasten the extinction of the American forests, and the farmer who has the faith, born of ignorance of the facts, that the small Canadian surplus of farm products that might find a market for consumption in the United States would swamp the vast production of that country, will loudly pro- test. This proposal, however, for reciprocally free natural products will be found, upon examination, a reasonable one. It must be borne in mind at the outset as before, stated, that Canada consumes farm products from America amounting to two and a half times the total of her own export of farm products to that country. Free trade would greatly stimulate this consumption; for, with the exception of In- dian corn, all the cereals, flour, meal, fruits, animals, butter, cheese, lard, eggs, meats of various kinds, seeds, potatoes, vegetables, etc., pay, when imported into Canada, duties nearly or quite equal to those levied upon similar articles by the United States. Under free trade British Columbia and the Klondike region would buy their food supplies from Washington and Oregon. The Maritime Provinces — Nova Scotia, New Brunswick, and Prince Edward Island — with a population of 925,000, would buy their food supplies from cities upon the American seaboard. Ontario and Quebec would buy largely of Indian corn, as at present, together with increased quantities of coarse grains, flour, pork, and meats for the use of men engaged in lumbering and mining operations. RECIPROCITY 123 It is not improbable that Canadian purchases of farm products would still exceed Canadian sales for consumption in the same lines to the United States, and it ,is certain that the balance against the United States would not be large in this interchange- of farm products. It is not probable that the Canadian export of such products would be more than six times as great as at present, or more than double the export under the stimulus of war demand and impending reciprocity abrogation in 1866, or in round numbers, say, $50,000,000. It is also likely that, under the stimulus of free admission, the Canadian imports of farm products, amount- ing in 1901, without raw cotton, to $20,737,000, would be doubled, which would leave a balance of about $8,000,000 be- tween export and import of farm products. The exports of forest products, amounting in 1901 to $12,205,000, and of mine products, amounting to $38,501,000, wh'ich included $26,824,000 of gold dust, nuggets, gold-bearing quartz, and silver concentrates, would be increased; but the total in- crease in the export of all lines of natural products would hardly amount to a sum equal to three-fifths of the actual American balance of trade against Canada last year. In the meantime the general stimulus to trade, resulting from making' natural products free, would largely increase the Canadian importation of American manufactures and other commodities; and it is certain that under the proposed new arrangement the United States would continue to score large annual balances of trade against Canada. In the case of all articles of farm produce, of which the United States and Canada have a considerable surplus for sale in Great Britain and other foreign markets, free trade between the two countries would have little effect upon prices. This would apply to wheat, flour, bacon, hams, pork in barrels, cheese, etc. The Canadian producer might benefit, to a limited extent, through competition between American. and Canadian buyers in his own market, because rings and combinations of buyers would be more difficult to establish and maintain than if the American buyer were ex- cluded. In the case of articles exported to the United States i2 4 SELECTED ARTICLES for consumption, free trade would have no appreciable effect upon prices, because of the insignificant amount of importa- tion compared with the great volume of production in the United States. In the case of sawn lumber the importation into the United States from Canada, for consumption, amounted last year to about 500,000,000 feet, board measure, which was less than one and a half per cent of the quantity of lumber manufactured in the United States. To assert that one and half per cent will depress ninety-eight and a" half per cent to the extent of the duty, or will even affect prices in any material degree, is absurd. This view of the case was placed before the American members of the Trade Committee, when the Joint High Commission met in 1898; and the Hon. Nelson Dingley free- ly admitted that American lumber prices could not be ap- preciably affected by the importation of Canadian lumber free of duty, with the amount then imported, or likely to be imported. The same conditions would hold good with re- gard to eggs, barley, vegetables, potatoes, cheese, butter, and other articles of farm produce likely to be exported from Canada to the United States for consumption. The disparity between the volume of importation and that of domestic production would be even greater in the case of these articles than in the case of lumber, and free trade could not to any material extent affect prices. The Canadian lum- berman and farmer desire free access to the American mar- ket, but not for the purpose of depressing prices in that" country to the present level of prices in Canada, where dif- ference of price exists, because that would do them no good. Their desire for free trade arises from the expectation that the Canadian price will be increased to the extent of the duty when the latter is removed. In the case of failure of a crop, or great scarcity of any article, free trade might in exceptional cases relieve the strain and affect prices, to the benefit of all classes, in either country. Absolute free trade has existed between all the states ot the American Union since the Constitution was adopted. Its operation has been entirely satisfactory. It has fur- RECIPROCITY 125 nished the most absolute vindication of the wisdom of dis- pensing with tariff restrictions. Between different states and different groups of states, great diversity of soil, cli- mate, production and general conditions have always ex- isted. These differences are as great as those dividing the Canadian Provinces and Territories from the American Union. The logical application of the principle of protec- tion would have called for duties upon the agricultural prod- ucts of the fertile West, in behalf of the farming interests of the less-favored New England and Middle States; and also for duties upon the goods produced in the well-estab- lished manufacturing plants of the Eastern States, in favor of the new and struggling industries of the Mississippi val- ley and the Pacific slope. The assertion that such a policy would have promoted the' welfare and prosperity of the Union would be absurd. The humblest citizen knows that, with every extension of the area over which the system of free interstate commerce pre- vails, the more apparent become the advantages conferred by 'that system. The nearer the approach to this system in the trade policy of the United States and Canada, the better for both countries; for similar results to those that have followed the application of the system of free trade in the United States would follow its application to the great Canadian domain. A Zollverein would perhaps be the truly scientific and effectual method; but years of trade repression and business estrangement and the development of a vast export trade with the Motherland make this an unattainable arrangement at the present time. Free trade in natural prod- ucts and moderate revenue duties upon a reasonable sched- ule of finished products, as at present in Canada, with ap- plication of the most-favored-nation treatment by each country to the other, will prove infinitely more satisfactory than present conditions, and will naturally lead up to such further developments as will accord with the wishes and the interests of both countries. The opening of the nineteenth century found North America inhabited by 5,500,000 English-speaking people. At 126 SELECTED ARTICLES the close of the century the number had increased to 80,000,- ooo; and an area of 7,000,000 square miles, rich in all resourc- es that the most advanced form of civilization requires, is now the heritage of the American Anglo-Saxon. The his- tory of the last hundred years is a glorious record of prog- ress and expansion for these peoples. The United States has suddenly stepped to the front as a great world power, and will be content with nothing short of the foremost manufacturing, commercial, and naval position. The world is respectfully taking the measure of the new Colossus, and forgets to indulge in the old-time criticisms about swagger, rawness, and self-assertion. The portals of the twentieth century have opened, and down the vista of its one hun- dred eventful years to come there looms the shadowy, half- defined, half-concealed revelation of mighty achievements and illimitable accretions of force. While this great power commands the attention of the world, a younger member of the galaxy of Anglo-Saxon commonwealths is rounding into national life, and has laid wisely the foundations of its political structure, adhering closely to the structure and spirit of the f,orm of government that has been shaped in the furnace of conflicts, and evolved from contact with dif- ficulties and by the application of the lessons learned during a thousand years. Experience shows that the British model will well serve the purpose of Canada. The young nation is taking stock of its immense resources, and looking forward to the 'day when its people will number a hundred millions. The future of these two great commonwealths upon the American continent is a matter of great importance to the world, and of greater importance to themselves. It will be a great disaster if the policy of the last thirty-five years is continued by the United States, with the probable result of being imitated by Canada. Let us hope rather that the American policy of free trade within the Union will be imitated as far as may be permitted by circumstances, and may be consistent with the preservation of separate na- tional autonomy, and that provision will speedily be made for the development of a vast and mutually advantageous RECIPROCITY 127 commerce, for. the growth of friendly relations, and for the securing of a permanent peace. Journal of Political Economy. 19: 527-41. July, 1911. International Aspects of Reciprocity. H. P. Willis. President Taft in his message to Congress January 26, 1911, states with the utmost cogency the general reasons which call for a closer commercial union between the Unit- ed States and Canada. His exposition of the broad and statesmanlike considerations which should control the ac- tion of the two countries in this matter leaves little to be added. The technical effects of given changes in duty have been fully treated by competent authorities. It seems to me that the advantages to both countries certain to flow from the operation of the agreement are of so evident and considerable a nature as to make the desirability of its adoption unmistakable. I think it should be passed by the Senate without further delay, and that when it has been so adopted it will constitute one of the most creditable acts of the present administration. I believe in the agreement not because it is perfect or even satisfactory in its scope, but because it is a step toward the establishment of those equitable trade relations with Canada which can be reached only by a very marked reduction, if not actual abolition, of - tariff restrictions upon the mutual interchange of commodi- ties. There is another aspect of the Canadian agreement, however, in which it constitutes a striking innovation upon past and present commercial policy, and which suggests the acceptance of a new attitude toward foreign countries more in harmony with existing conditions than the exclusive inter- national position heretofore accepted by the United States. This, to my mind, transcends all other considerations in favor of reciprocity. The reciprocity agreement, if adopted, will without doubt be an important step toward the revision of our system of tariff treaties. 128 , SELECTED ARTICLES The international tariff position of the United States is today dependent upon two important factors: (i) the most- favored-nation clause in our commercial treaties; (2) the present maximum and minimum tariff provision of the Payne-Aldrich Act. If we add to the problem a new fac- t° r i (3) the reciprocity provision now proposed with Canada, how-will it affect the operation of the other two elements? The position of the United States as respects the most- favored-nation clause is the product of a long period of development and is now absolutely anomalous. Early com- mercial treaties were arranged by European nations in strict accordance with the idea that every concession granted by one country to any other should be given only in exchange for similar concessions in return. In other words, the ne- gotiation of commercial treaties was a sort of bargaining process in which a foreign nation might be overreached by its antagonist. The object to be kept in mind by either party was the arrangement of an agreement as favorable to it as circumstances, and the relative acuteness of the other, would allow. It is evident that, supposing two na- tions, A and B, to have signed a comm-ercial treaty granting certain privileges by mutual agreement, B might be at a con- siderable advantage with respect to a third nation, C, in competing for the trade of A. If, subsequently, an agree- ment should be entered into between A and C, whereby more elaborate concessions were allowed C than those which had been gained by B, it might turn out that B would ■ not merely be outstripped by C in the competition, but would even be worse off than would have been the case had no treaty been originally negotiated with A. It was this situation which led to the development of the most- favored-nation clause. Under it, states sought to obtain guarantees that in case future commercial concessions should be offered to their competitors, they themselves would, ipso facto, enjoy the same concessions. Thus, if the two nations. A and B, had entered into a commercial agreement in which the most-favored-nation stipulation has been incorporated, and if there should be any subsequent treaty between A and RECIPROCITY 129 C, in which larger concessions were granted, C would, by the nature of the case, extend those concessions also to B. Xow, it is clear that the interpretation to be placed upon the clause might be such as to extend those concessions to B only in case B should pay for them by the same return con- cessions granted by C, or should simply be permitted to enjoy them without any further payment than that already arranged for in the original A and B treaty. Writers on international law distinguish several different forms of the "most-favored-nation clause." They enumerate more particularly the so-called "simply reciprocal form'' and the so-called "imperative and unconditional form." In the first, "where reciprocity is the foundation of every clause in the treaty dealing with the subject of commerce and navi- gation, the inference points to reciprocity as the foundation for the general covering clause which is to supply omissions and prevent future unfavorable discrimination." Under the other interpretation, the commercial favors are granted to all countries under the most-favored-nation clause "imme- diately and without condition"; in other words, without com- pensating privileges offered in return. It is easy to see why nations like Great Britain, which have adopted free trade as their policy and which have, as a matter of fact, nothing to offer in return for a reduction of duties, are disposed to insist strenuously upon this second interpretation. The "simply reciprocal form" of the most-favored-na- tion clause is, of course, the one to which the United States has consistently held. It has, from the beginning, adhered rigidly to the view that trade concessions offered by it to some other country need not become common to a third country with which we have no treaty relations involving the most-favored-nation clause, unless that third nation should meet us on our own ground by granting the same favors that we secured at the hands of the other nations with which we had entered into treaty relations. In the treaty negotiated between the United States and France, February 6, 1778, the following words occur: The most Christian King and the United States engage mu- tually to grant any particular favor to other nations in respect i 3 o SELECTED ARTICLES to commerce and navigation which shall not immediately be- come common to the other party, who shall enjoy the same favor freely, if the concession was freely made or on allowing the same compensation if the concession was conditional. In Art. IX of the treaty with Prussia, in 1828, and in Art. IX of the treaty with Austria, in 1829, occur the words: If either party shall hereafter grant to any other nation any particular favor in navigation or commerce, it shall immediately become common to the other party, freely, where it is freely granted to such other nation, or on yielding the same compensa- tion, when the grant is conditional. On the other hand, European diplomacy has developed the most-favored-nation clause along a different line, fol- lowing the second of the two interpretations already referred to. As things now stand, most European countries admit that nations which have granted to other nations the bene- fits of the most-favored-nation clause have guaranteed to the latter that their commercial relation shall not be less favorable with the guarantors than shall those of an} - other country. In other words, new and more extensive trade concessions granted by country A to C, a third nation, are, ipso facto, extended to B, a second nation, with which it has originally entered into commercial relations, while B obtains these advantages without compensation even though they may have been paid for very heavily by C. This, of course, is a marked reversal of the original interpretation given to the ''most-favored-nation clause" during the eigh- teenth and first half of the nineteenth century. It is a most important point to bear in mind, in studying the develop- ment of reciprocity as a policy, for it will readily be seen that the adoption of the European interpretation of the most-favored-nation clause implies either the giving up of all commercial treaties, or else the conscious recognition of tariff reduction as a system to be regularly applied when- ever granted in an individual case. Reciprocity, when lim- ited to isolated bargaining, which may or may not be under- taken, as circumstances of the particular case seem to indi- cate. It is apparent that the United States in maintaining its own interpretation of this clause, reserving the right to grant tariff concessions only in return for certain other con- cessions and the right to decide whether concessions offered RECIPROCITY 131 by other' countries are equivalent to those obtained from any particular country, occupies a peculiar and anomalous position as compared with a group of nations adhering to a different interpretation and granting to us the advantages of the clause, which we, however, deny to them. All of this has led to exceedingly unfavorable comment on the part of European countries, which regard our attitude on the subject -of the most-favored-nation clause as characteris- tically selfish. We can better understand the application of this inter- pretation of the most-favored-nation clause by considering the precise details of the instructions given to our diplo- matic representatives on some critical occasions. These are fully set forth in Foreign Relations, but Secretary Knox has lately sent to the Senate a useful compilation of prece- dents from which a few may be chosen. The treaty of April 30. 1803, for the cession of Louisiana provided, in Art. VIII, that "the ships of France shall be treated upon the footing of the most-favored-nations" in the ports of the ceded territory. By act of Congress of March 3, 1815, the vessels of foreign countries were exempted from discriminating tonnage duties in the ports of the Unit- ed States, provided that such countries granted reciprocal treatment to American ships in their ports. Great Britain took advantage of this offer of reciprocity and removed her discriminating duties against American shipping. France, however, took no action, with the result that French ves- sels continued to pay discriminating duties when entering United States ports, while British vessels were exempt. The French minister, in a note to the Department of State, under date of December 15, 1817, claimed that the exemption granted to British shipping should likewise be extended to French shipping by virtue of Art. VIII of the treaty of 1803. Secretary of State John Quincy Adams, in his reply of December 23, 1817 {American State Papers, For. Rel., V, T S 2 -53). defined the position of the United States as follows: The undersigned is instructed to say that the vessels of France are treated, in the ports of Louisiana, upon the footing of the most-favored nation, and that neither the English nor any other 132 SELECTED ARTICLES foreign nation enjoys any gratuitous advantage there which is not equally enjoyed by France. But English vessels, by virtue of a conditional compact, are admitted into the ports of the United States, including those of Louisiana, upon payment of the same duties as the vessels of the United States. The condition upon which they enjoy this advantage is, that the vessels of the United States shall be admitted into the ports of Great Britain upon payment of the same duties as are there paid by British vessels. The eighth article of the treaty of cession stipulates that the ships of France shall be treated upon the footing of the most-favored nations in the ports of the ceded territory; but it does not say, and cannot be understood to mean, that France should enjoy as a free gift that which is conceded to other na- tions as a full equivalent. It is obvious that if French vessels should be admitted into ports of Louisiana upon the payment of the same duties as the vessels of the United States, they would be treated, not upon the footing of the most-favored nation, according to the. article in question, but upon a footing more favored than any other nation; since other nations, with the exception of England, pay higher tonnage duties, and the exemption of English vessels is not a free gift, but a purchase at a fair and equal price. It is true that the terms of the eighth article are positive and unconditional; but it will readily be perceived that the con- dition, though not expressed in the article, is inherent in the advantage claimed under it. If British vessels enjoyed, in the ports of Louisiana, any gratuitous favor, undoubtedly French vessels would, by the terms of the article, be entitled to the same. During the negotiations between the governments of the United States and Great Britain which resulted in our reciprocity treaty of 1854 with Canada, Mr. Crapton, the British charge d'affaires at Washington, under instructions from his government, wrote to Secretary of State Clayton, as follows : It has been objected that, if certain agricultural articles (more particularly wheat), the production of Canada, were to be ad- mitted free of duty into the United States, under a convention with the British government for a reciprocal free trade between that province and the United States in such productions, the like productions of other nations having "reciprocity treaties*' of commerce with the United States must be admitted on the same terms. To this it may be replied that no nation could claim for itself an advantage under a convention between Great Britain and the United States, which Great Britain herself had not obtained un- der that convention. Had any other nation a colony similarly situated, she might then be borne out in claiming that such colony should be equally favored; otherwise not. The reciprocity convention concluded between the United States and the Hawaiian Islands on January 30, 1875 (effec- tive September 9, 1876), provided, in Art IV, that the Ha- waiian Islands should not. so long as the treaty remained in force, "make any treaty by which any other nation shall obtain the same privileges, relative to the admission of any RECIPROCITY 133 article free of duty, hereby secured to the United States.'' Invoking the most-favored-nation clause in Art. IV of her treaty with the Hawaiian Islands, Great Britain demand- ed that the latter should extend, gratuitously, to the United Kingdom the tariff concessions granted in reciprocity to the United States. The position of the United States government in this matter was set forth in a note from Jlr. Comly, American minister at Honolulu, dated July 1, 1878, to the Hawaiian foreign office, reading in part as follows {For. Rel., 1878, 404) : No treaty in existence at the time this compact was entered into secured to any other nation the privileges as to the admis- sion of. certain articles free of duty, which have been guaranteed to the' United States by this treaty. These privileges were secured, not through any general treaty rights or stipulations, but by giving certain valuable considerations in a special treaty of reciprocal covenants. The concession of these privileges to the United States cannot, therefore, form any just basis for a claim to like privileges by any other nation, under the parity clause of any ordinary form of treaty. The uttermost that might be conceded under such parity clause would be the claim to pur- chase the same immunities through' special treaty, upon like terms with those agreed upon between the United States and the Hawaiian Islands. Sec. 608 of the United States tariff act of 1894 placed salt upon the free list, but provided that if salt should be import- ed ' from any country that imposed a duty upon salt im- ported from the United States there should be levied on the salt of such country the rate of duty existing prior to the passage of the tariff act. Notwithstanding that American salt was dutiable on importation into Germany, the Ger- man government demanded free entry of German salt into the United States by virtue of the most-favored-nation clause (Arts. V and IX) of the treaty of 1828 between the United States and Prussia. The question having been submitted to Attorney-General Olney, he gave an exhaustive opinion, under date of November 13, 1894, in which he said: The most-favored-nation clauses of our treaties with foreign powers have from the foundation of the government been in- variably construed both as not forbidding any internal regula- tions necessary for the protection of our home industries and as permitted commercial concessions to a country which are not gratuitous, but are in return for equivalent concessions, and to which no other country is entitled except upon rendering the same equivalents. Thus, Mr. Jefferson, when Secretary of State in 1792, said of treaties exchanging the rights of the most-favor- ed-nation that "they leave each party free to make what in- 134 SELECTED ARTICLES ternal regulations they please, and to give what preference they And expedient to native merchants, vessels, and productions. In 1817, Mr. John Quincy Adams, acting in the same official ca- pacity, took the ground that the "most-favored-nation clause only covered gratuitous favors and did not touch concessions for equivalents expressed or implied." Mr. Clay, Mr. Livingston, Mr. Evarts, and Mr. Bayard, when at the head of the Department of State, have each given official expression to the same view. It has also received the sanction of the Supreme Court in more than one well-considered decision. In 1898, during the reciprocity negotiations between the United States and the Argentine Republic, under the pro- visions of section 4 of the United States tariff act of July 31, 1897, Mr. Buchanan, the American minister at Buenos Ayres, reported to Secretary of State Sherman that the Argentine government was apparently deterred from 'enter- ing into a treaty of reciprocity with the United States be- cause it assumed that it would be compelled to extend any tariff concessions which it might make in such a treaty with the United States to European countries with which the Argentine Republic had commercial treaties provided for most-favored-nation treatment. In reply to this dispatch Secretary of State Sherman in- structed Minister Buchanan, under date of January 11, 1898 (Ms. Inst. Arg. Rep., XVII, 306, as follows in regard to the United States' construction of the most-favored-nation clause: It is clearly evident that the object sought in all the varying forms of expression is equality of international treatment, pro- tection against the wilful preference of the commercial interests of one nation over another, but the allowance of the same privi- leges and same sacrifice of revenue duties to a nation which makes no compensation that has been conceded to another na- tion for an adequate compensation, instead of maintaining, de- stroys that equality of market privileges which the most-favored- nation clause was intended to secure. It conceded for nothing to one friendly nation what the other gets only for a price. It would thus become the source of international inequality and provoke international hostility. The neighborhood of nations, their border interests, their differences of climate, soil, and pro- duction, their respective capacity for manufacture, their widely different demands for consumption, the magnitude of the recipro- cal markets, are as many conditions which require special treat- ment. No general tariff can satisfy such demands. It would require a certainty of language which excludes the possibility of doubt to justify the opinion that the government of any com- mercial nation had annulled its natural right to meet these special conditions by compensatory concessions, or held the right only on condition of extending the same to a nation which had no compensation to offer. The fact that such concessions if made would inevitably inure to the equal benefit of a third com- petitor would often destroy the motive for, as well as the value of, such reciprocal concessions. RECIPROCITY 135 But instead of such certainty of expression, one of the arti- cles in each of the treaties referred to contains a distinct recog- nition that special and compensatory commercial arrangements may be made, notwithstanding the most-favored- nation clause; and provided that in such cases the favors granted shall be enjoyed by the party claiming favored-nation treatment, gratui- tously if so granted, .or for equivalent compensation if granted for a price. What will be an equivalent compensation is to be honorably determined by the governments concerned. So many considera- tions have necessarily entered into such special concessionary agreements that no universal rule can be applied. The price has often been special privileges in the market of the other for certain manufactures dr products of the contracting country; but it may also be a port, a bay, or an island, or a protectorate, as well as an expanded market, or a privileged export trade. It may be anything within the range of the treaty-making power. It is not to be supposed that a right of such importance in many national emergencies has been abandoned by the Argen- tine Republic, or that it is only held on condition of the repeated and gratuitous payment to other countries of the same con- sideration stipulated in reciprocity. The right of the other na- tions to enjoy the same special concessions depends on their ability to offer an equivalent compensation. When they do this, the favored-nation clause is rightfully invoked. Hitherto the United States has stoutly maintained its claim that we cannot properly be called upon to make common even to those nations with which we have a most- favored-nation clause the advantages accorded to any one unless others which desire the same advantages are will- ing to extend equivalent concessions. We have, however, consistently taken the view that where other nations were thus willing to grant equivalent concessions they might re- ceive the same reductions we had accorded to any one of their competitors. This was a position which, though out of harmony with the European interpretation of the most- favored-nation clause, has until recently been at least ten- able. Whatever may be thought of this position regarding the most-favored-nation clause in commercial treaties there was at least a basis for considering it a self-respecting and self-consistent position on the tariff question. But the Payne-Aldrich act- introduced a new element of difficulty by including the so-called maximum and minimum provi- sion. This was found in sec. 2 and was as follows: That from and after the thirty-first day of March, nineteen hundred and ten, except as otherwise specially provided for in this section, there shall be levied, collected, and paid on all articles when imported from any foreign country into the United 136 SELECTED ARTICLES States or into any of its possessions (except the Philippine Is- lands and the Islands of Guam and Tutuila), the rates of duty prescribed by the schedule and paragraphs of the dutiable list of section one or this Act, and in addition thereto twenty-five per centum ad valorem; which rates shall constitute the maximum tariff of the United States. Proridctl. That whenever, after the thirty-first day of March, nineteen hundred and ten, and so long thereafter as the Presi- dent shall be satisfied, in view of the character of the con- cessions granted by the minimum tariff of the United States, that the government of any foreign country imposes no terms or restrictions, either in the way of tariff rates or provisions, trade, or other regulations, charges, exactions, or in any other manner, directly or indirectly, upon the importation into or sale in such foreign country of any agricultural, manufactured, or other prod- uct of the United States, which unduly discriminates against the United States or the products thereof, and that such foreign country pays no export bounty or imposes no export duty or prohibition which unduly discriminates against the United States or the products thereof, and that such foreign country accords to the agricultural, manufactured, or other products of the United States treatment which is reciprocal and equivalent, thereupon and thereafter,, upon proclamation to this effect by the President of the United States, all articles when imported into the United States, or any of its possessions (except the Philippine Islands and the islands of, Guam and Tutuila), from such foreign coun- try shall, except as' otherwise herein provided, be admitted under the terms of the minimum tariff of the United States as pre- scribed by section one of this Act. By virtue of this provision we promptly represented to all foreign countries that unless they could consent to give us their lowest tariff rates we should be obliged to impose upon them the maximum duties threatened in the law. With most countries little or no difficulty was experienced. But in the case of Germany, France, and Canada the situa- tion was quite different. Although for some time an of- ficial statement of the results of these negotiations was withheld, it is now published as H. R., sec. 956, 61st Cong. 2d sess. The German government withheld from numerous class- es of imports from the United States the benefit of its con- ventional or minimum tariff rates. These conventional rates represented reductions of duty made by Germany as concessions to various governments of Europe in return for equivalent concessions made by them in reciprocity treaties, the mutual benefits of which were given wide ap- plication through the operation of the most-favored-nation clause as construed by European governments. The De- partment of State had found it impossible, previous to the RECIPROCITY 137 passage of the Act of August 5, 1909, to obtain for Ameri- can commerce complete equality of tariff treatment in Ger- many. The negotiations resulted in action by Germany granting to the United States her full .conventional tariff rates in return for the minimum tariff of the United States, this being an exchange of minimum for minimum. The United States was thus placed on exactly the same terms as all other countries to which Germany had granted her conventional tariff in pursuance of treaty stipulations. The tariff conditions affecting American commerce in France, particularly as regards finished products of manu- facture, had Keen unfavorable. Under the commercial agreements of 1898 and 1908 providing for limited reci- procity, the benefit of the minimum rates on 25 numbers of the French tariff had been granted to the United States. All leading commercial nations competing with the United States in the markets of France had the benefit of the com- plete French minimum tariff. During the interval between November I, 1909, and March 31, 1910, the French govern- ment applied its complete maximum tariff rates to all duti- able importations from the United States. By the settlement with France, under which the mini- mum tariff of the United States was granted to that coun- try, France granted the minimum tariff; rates to the United States on about 80 numbers of the tariff where two rates existed. These cover manufactured articles, including ag- ricultural and various other forms of implements, tools, and machinery. In addition, assurances were given as to the maintenance of many general tariff rates in the French schedule, the understanding being that if certain rates are lowered the United States shall be accorded such reduc- tion. The question requiring adjustment with Canada grew out of the Franco-Canadian treaty which was put in force between the two countries February 1, 1910. The Cana- dian tariff consists of three schedules — general, intermediate, and British preferential. The British preferential rates are extended only to the United Kingdom and to various Bri- i 3 8 SELECTED ARTICLES tish colonies. The intermediate rates are the minimum rates to all other countries. Under the terms of the Franco- Canadian treaty France was given a series of intermediate rates and in addition a small list of special rates applying to peculiarly French products. By the operation of the favored-nation treatment, the treaty rates were extended automatically to several countries besides France, some of whose products competed with the products of the United States in the Canadian market. This question was adjusted after a bitter struggle by the extension on the part of Can- ada of rates below the intermediate rates of the Canadian tariff to a very few exports of the United States. A final word may be desirable by way of stating the present position of the United States under the most- favored-nation clause and the Payne-Aldrich Act. We have in force today treaties including the most-favored-nation clause with the following nations: 1. With the equivalence clause. — Argentine Republic, Austria-Hungary, Belgium, Bolivia, Colombia (New Gran- ada), Costa Rica, Denmark, Hanseatic Republic, Haiti, Hon- duras, Italy, Japan, Liberia, Mecklenburg-Schwerin, Olden- burg, Paraguay, Prussia, Russia, Sweden and Norway, Ton- ga, Tripoli. 2. Without the equivalence clause. — China, Ethiopia (Abys- sinia), Great Britain, Greece, Ottoman Empire, Persia, Servia. 3. Unilateral clause. — Egypt, Morocco, Siam. With foreign countries we thus have arrangements guar- anteeing us the lowest rates granted any other country at present except as already indicated: (1) with France; (2) with Canada; (3) with Germany. To these should be added the familiar tariff concession of 20 per cent made to Cuba and the arrangement for limited free trade with the Philip- pines, as well as an agreement with Brazil, whereby we receive a few special concessions. If now a reciprocity arrangement with Canada shall be excepted, how will it affect this existing status? It is evident that/ such an agreement will be tantamount to the establishment of a new see of minimum duties if the RECIPROCITY 139 theory at bottom of our maximum and minimum provisions shall be held to continue in force. Under these circum- stances what will be the necessary attitude of foreign coun- tries? 1. They may demand that they be granted the benefits of the lower Canadian rates without any concessions in re- turn. In so doing they would be demanding nothing more than we ourselves called for in our negotiations under the maximum and minimum provision. But in granting such a demand we should be violating the recognized and tradi- tional reciprocity policy of the United States and the pe- culiar interpretation of the most-favored-nation clause by which it has been accompanied. 2. Or they may assent to the interpretation of reci- procity and the most-favored-nation clause which is implied in the instructions of Secretary Sherman to Minister Bu- chanan in 1898 where he said, with reference to the claims of other governments to certain rights which we contemplat- ed extending to the Argentine Republic, that: The right of the other nations to enjoy the same special concessions depends on their ability to offer an equivalent com- pensation. When they do this, the favored-nation clause is rightfully invoked. And again: What will be an equivalent compensation is to be honorably determined by the governments concerned. But, should they adopt this point of view, they would indubitably retain the right to insist upon obtaining privi- leges equivalent to those granted Canada conditional upon offering similar privileges in exchange. For as Mr. Sher- man says: When they do this (offer an equivalent compensation) the favored-nation clause is rightfully invoked. And as Secretary Hay said to Ambassador White in 1899 with reference to a claim of Germany to be treated in the same way as Switzerland by virtue of the most-favored- nation clause: Nothing has been conceded to Switzerland which under like conditions would not have been given to Germany. That the United States could, without a struggle, sur- render its traditional interpretation of the most-favored- i 4 o SELECTED ARTICLES nation clause is hardly to be expected. The question would, therefore, remain whether the United States could refuse to open negotiations for the extension of reciprocity arrange- ments to other countries which might demand such ar- rangements. Should it so refuse, it must expect to see the present minimum-rate basis granted by foreign countries withdrawn. In fact, it may be expected that almost im- mediately upon the completion of the Canadian agreement Germany will withdraw from us certain of the minimum rates now enjoyed by the United States. Germany, it is well understood has already made inquiries regarding the probable answer of the United States to a request for the extension of the lower rates of the Canadian agreement to her and is apparently prepared to carry her point to the logical extreme. The question of England's position has already been raised in Parliament and will also be pushed as opportunity favors. Such demands could not be refused, nor could we expect to secure much attention for the former threat that we shall apply our maximum tariff rates to countries which grant a special preference to others. It is thus apparent* that one of the most important aspects of the Canadian agreement is found in the fact that it is an important step toward free trade. The old reci- procity treaty with Canada did not operate in that direc- tion for several reasons: it was terminated too early, before our commercial policy or that of European nations under 'the high tariff system had been well developed; it fell at a troubled time in national and world history when but little attention could be given to matters of trade and commerce; it affected a country which was then distinctly a dependency of England in the narrowest sense of the term; it antedated by many years the keen struggle for markets which is now in progress. But today the situation is quite different. We may expect that every step in our commercial policy will be closely watched by our rivals and colleagues in international trade. If it is true, as I have suggested, that reciprocity with Canada must be considered in the historical light and that what we shall do must be guided by our course in the RECIPROCITY 141 past, we cannot escape the belief that this treaty will con- stitute a first and most important step away from the un- satisfactory conditions created under the Payne-Aldrich Act. It will necessitate our entering into similar agree- ments with all countries with which we expect to enjoy friendly trade relations. Refusal to grant concessions in exchange for similar concessions, as we had done with Can- ada, could only result in friction and international irritation of the pronounced kind and must necessarily subject this country to severe retaliation. The most important aspect of the present agreement, therefore, is its general international aspect. It opens the way to an improvement of the present unsatisfactory con- ditions in trade, suggests a development toward less exclu- siveness in the future, and affords a possibility of hopeful solution of many trying questions. The Senate, having acted on this matter, must needs be constrained by the trade policy of other countries to act in others in the future. If the Canadian treaty be adopted, it may prove the first step in a broad tariff policy. It is the first step that costs most, and corresponding credit is due the man who has the courage to take it in the right direc- tion. Living Age. 268: 4gi-2. February 25, 1911. America, Canada and Great Britain. The announcement of a reciprocal agreement between Canada and the United States for the reduction of tariff duties is an event of considerable moment in the history of the relations of the three great English-speaking nations of the world. The importance, indeed, lies both in the im- mediate substance of the proposals and the new policy which they initiate. Even sanguine advocates of reciprocity hardly hoped that the agreement would cover so many forms of food and raw materials, including such important articles as grain, lumber, and dairy and farm products, and that the loud-voiced discontent of Canadian farmers would be as- 142 SELECTED ARTICLES suaged by a substantial reduction in the tariff upon agricul- tural implements. The actual proposal fulfills these expecta- tions. Not only farm products and machinery, but many manufactures are included. There are extensive free lists. The British preferential rates are to be equalized with the new duties. This measure goes a long way to satisfy the growing economic needs of the two peoples. For the absurdity, the waste, the inhumanity of these hardset barriers, forbidding neighbors of the same blood and language from supplying to one another the food and fuel which one possesses in abundance and of which the other is in need, have been be- coming more apparent during recent years. At many points along the northern frontier of the Republic have arisen great manufacturing centres, thickly populated and requiring huge circuits of country to furnish their daily food, their lumber, iron, and other raw materials, together with the jiower to run their factories and workshops. Beyond the same frontier vast tracts of agricultural and stock-raising land have been occupied by incoming streams of settlers, able and willing to work the fields, forests, and mines, which are needed to supply these American demands, while at the same time they are eager to take payment in terms of those very manufactures which their labors cheapen and facilitate. Nowhere are the advantages of free exchange greater and more obvious. No wonder the western farm- ers of Canada are almost to a man enthusiastic free traders, and that, starting first from the developed manufactures of New England, the demand for reciprocity with Canada has spread all through the frontier states of the Middle and Far West, breaking up the solidarity of the great Republican party, with its high protective policy. The retention of this obvious barrier to free exchange is a striking instance of the power which political sentiment can exercise to damage the true interests of two nations. During the whole generation succeeding the Civil war, the substantial relations of the two countries continued to ren- der amicable arrangements well-nigh impossible. The in- RECIPROCITY 143 equality in wealth, population, and status was too great and obvious, and made itself felt in every approach. The Unit- ed States flaunted her superior strength and size. Canada did not possess the well-founded self-confidence needed to meet contempt with equanimity. Now that Canada in ad- vancing swiftly in population and in wealth, and has won the dignity and self-reliance of her status as a great new- world power, she is able to take a calmer consideration of her true interests. Meanwhile, the actual pressure of eco- nomic needs in the United States, with her ninety millions of people, compels her government to favor some loosening of barriers. If the proposed legislation goes through Con- gress, it must be estimated, not only on its immediate value, which is large, but as a precedent for further steps of in- dustrial co-operation between the two nations, which may take place at an accelerated pace when this utility is attested by experience. There are, we know, Imperialists disposed to view with alarm this tariff arrangement with America as inimical to the solidarity of the Empire. That Canadians themselves do not so regard it is evidenced by the fact that the great farmer's demonstration, held recently at Ottawa, urged on the government, as a simultaneous policy, reciprocity with the United States and free trade with the Mother Country. Full free trade in our English sense can hardly be said to lie within the range of practical politics for Canada. But it is significant that, in both great nations of North America, a vigorous movement towards "tariff for revenue only" is afoot, and may, within the next few years, dominate both governments. Such an approach to sound principles of for- eign commerce on the part of both America and Canada is far more advantageous to this country, both commercially and politically, than any possible extension of the policy of Imperial Preference. We entertain no dislike of colonial preferences. Why should we? They are admirable, alike as a natural expression of good-will toward the Mother Country, and as a relaxation of a protective tariff. But there is no permanency in them, especially in the case of a i 44 SELECTED ARTICLES nation with manufacturing ambitions like Canada. This was clearly proved by the partial withdrawal of the prefer- ence on woolen goods as soon as the products of Yorkshire mills began to make their merits too evident in Canadian markets. Our satisfaction at the approaching commercial arrange- ment between Canada and this United States is, however, by no means confined to our conviction that the interests both of Canada and of the country are served by every ap- proach towards economic co-operation of this order. The political implications of this co-operation are even more satisfactory, when taken in conjunction with the liberal sug- gestions for permanent and general arbitration between Great Britain and the United States recently put forward in the most friendly spirit by Mr. Taft and supported by many men of influence in. both countries. A general arbitration treaty of this sort, to which this country, the United States, and Canada should be parties, would, in our judgment, form the soundest possible foundation for that alliance of the English-speaking nations which should perform in the fu- ture a service of incomparable value in the preservation of the peace of the civilized world. Many thoughtful students of politics, watching the menacing clouds which show on the horizon, are turning to some such effective co-operation of powerful Anglo-Saxon peoples as the best safeguard of civilization. But to those in this country who entertain this view, one word of warning is essential. No hearty or last- ing co-operation with the United States or Canada will be practicable while we refuse Ireland Home Rule and while our present association with Japan continues. We may be loth to break away from an experiment which, however dark and hazardous, appeared to carry in it certain elements of present utility. But it is best to face the facts. There is, of course, nothing in our Japanese alliance to interfere with the most liberal arrangements for arbitration with America. But such an Anglo-American-Canadian alliance as might not unreasonably emerge from the closer political and commercial relations between these countries is an im- possibility so long as our Japanese engagement holds. RECIPROCITY 145 Living Age. 269: 67-76. April 8, 1911. Canadian-American Reciprocity Agreement. Sir Alfred Mond, Bart., M. P. The surprise with which the tariff reformers now seem to be overwhelmed at the news of the Reciprocity Agree- ment, is one more result of their persistent misunderstanding of Canadian fiscal history, Canadian development, and the spirit that inspires the Canadian people. They have from the first been led astray by their besetting delusion that it would be possible for them in one way or another to "nob- ble'' Canadian products and trade for Great Britain to the exclusion of other countries. Mr. Joseph Chamberlain, the originator of the idea, furnished himself one of the first and most striking examples of the 'ludicrous misapprehension of Canadian views in the celebrated schedule of prohibited in- dustries proposed in his speech at Glasgow on October 6, 1903. As the version of that speech subsequently published in book form gives a revised and inaccurate report of what Mr. Chamberlain said, it may be well to quote the exact words used by him on that occasion: After all, there are many things which you do not now make, many things for which we have a great capacity of production. Leave them to us as you have left them hitherto. Do not in- crease your tariff walls against us, pull them down where they are unnecessary to the success of this policy to which you are committed. Let us in exchange with you have your produc- tions in all these numherless industries which have not yet been erected. This proposal by Mr. Chamberlain, who was always dis- posed to regard the arrangement with the Colonies as a bargain, was evidently in his mind at a still earlier date. Speaking in London on June 9, 1896, he referred to the sug- gestion that while the Colonies "should be left absolutely free to impose what protective duties they please both upon Foreign countries and upon British commerce, they should be required to make a small discrimination in favor of British trade, in return for which we are expected to change our whole system and impose duties on food and raw ma- terial." On this suggestion he made the following out- spoken comment: 146 SELECTED ARTICLES Well, I express again my own opinion when I say that there is not the slightest chance that in any reasonable time this country, or the Parliament of this country, would adopt so one- sided an agreement. The foreign trade of this country is so large, and the foreign trade of -the Colonies is comparatively so small, that a small preference given to us upon that foreign trade by the Colonies would make so trifling a difference — would be so small a benefit to the total volume of our trade — that I do not believe the working classes of this country would con- sent to make a revolutionary change for what they would think to be an infinitesimal gain. While on the subject of Mr. Chamberlain's love for a bargain, it may be well to point out that that statesman threw away, without any return, one of the best objects of barter in an arrangement with the Colonies which any British statesman could desire. He bestowed upon the Dominion, without any equivalent to this country, the enormous advantage granted to it by the amendment of the Trustees act, putting Canadian government and municipal securities on the same basis as our own, and thereby ena- bling the smallest Canadian municipality to raise money on better terms than certain great powers, such as Germany, Russia and Japan, by giving them access to the cheapest money market in the world. That, in reality, was a prefer- ence given gratis to Canada at the cost of diminishing the value of British "gilt-edged" securities, and it was of far greater importance to the Canadians than the proposed two- shilling duty on wheat could ever possibly be. If at any time we had had a statesman of really wide vision and fore- sight, that great advantage accorded to Canada might have been utilized for securing a far more favorable tariff for our goods from the Canadians than they have ever had under the existing preference arrangement, while it would further- more have been an important step towards eventual free trade between Great Britain and her most important colony. One of the peculiar difficulties of following the Xeo- protectionist arguments on preference, as on their other proposals, is the changes which those arguments have under- gone from the commencement of the tariff reform propagan- da. It has suited the tariff reform propagandists in this country constantly to represent the Canadians as clamoring RECIPROCITY 147 for the adoption of their preference scheme, while they fur- ther tried to secure its acceptance in this country by vague threats of impending disaster to Great Britain and the Empire, alternately of a political and a commercial char- acter. As a matter of fact, that clamor has existed only in their own imaginations. A reference to some of the statements of Colonial Min- isters on this subject will dispose of the idea that any pres- sure of the kind referred to has been brought upon the Mother Country. The attitude of Canada was very clearly expressed by Sir Wilfrid Laurier in 1897 and by Mr. Field- ing, the Canadian Minister of Finance, at the second Colo- nial Conference in 1902. Sir Wilfrid Laurier said: If England were giving to me a preference over other na- tions, taking our goods on exceptionally favorable terms, I would not object. . . It would be a great boon. But for how long would it last? Would it be an advantage in the long run? That is what men who think beyond the passing moment have to ask themselves. Suppose England did such a thing and aban- doned her free trade record, she would inevitably curtail the purchasing power of her people. And do you not think we should suffer from that — we who alone have natural resources enough to feed your millions from our fertile lands? I have too great a belief in English common sense to believe they will do any such thing. What we have done in the way of tariff preference to England we have done out of gratitude to Eng- land, and not because we want her to enter upon the path of protection. The Canadian attitude is still more clearly expressed in the statement by Mr. Fielding in 1902: We do not profess that we want to introduce British goods to displace goods made by the manufacturers of Canada. That is a point upon which we must speak with great frankness. Whether or not it was a wise policy for Canada to foster her manufactures by high duties is a point hardly worth discuss- ing now; we must deal with things as we find them. We had very high duties under the former tariff. The present govern- ment have reduced those duties very materially, especially in the case of British goods. Many things of British manufacture paid 40 per cent., 50 per cent., or 60 per cent., but we have re- duced these now down to 23 per cent, from Great Britain, and we think that in those cases we have gone about as far as we can without sacrificing our own manufacturers. The in- terests are very large: the interests of the capital invested, the labor and the banking interest, and the many other interests which cluster round a great industry. Therefore, if we are asked to reduce our duties and bring in British goods and dis- place Canadian manufactures, we must frankly say that it Is not possible for us to do so. But we say that it is quite pos- sible to give an advantage to British goods in some cases by raising the tariff. The most rudimentary acquaintance with the history of 148 SELECTED ARTICLES this discussion in Canada, shows clearly that the Canadian manufacturers who have welcomed the advocacy of protec- tion in England as a means of strengthening in the Domin- ion that protection from which they themselves profit, never have had any intention, so far as it lay in their power, to allow British manufacturers to compete on anything like equal terms with their own products. The nature of the gift offered to Great Britain by these manufacturers, the so- called Imperialists of the Dominion is clearly shown by their attitude towards preference to England during the in- quiry carried on by the Tariff Commission in different Ca- nadian provinces in L906. This attitude is aptly symbolized by the action of a pro- tectionist firm of cotton manufacturers at Valleyfield, the in- dustrial Venice of Canada, who, after running up the Union Jack over their mill, immediately proceeded to submit to the Commission a demand for increased duties in the cotton sched- ules with the object of reducing the imports from Lancashire. In the evidence given by manufacturers before the Commission, the British Preference was frequently attacked, the witnesses speaking of London and Liverpool as "foreign"' and of English- men who came to Canada in search of orders as "foreigners." Yet many of those "Canadians'' who thus proclaimed their newly acquired nationality hailed from the very districts whose imports they wished to exclude from Canada. Mr. Porritt, in his Sixty Years of Protection in Canada, points out that the Canadian quarrymen who were endeavoring to exclude Aberdeen gran- ite, were themselves chiefly Scots from Aberdeen. One of them confessed to Mr. Porritt that he expected the people at home would think they were "darned mean." Mr. Porritt says, "It is difficult to recall a single session of the Commission in industrial Canada in which the pref- erence (to Great Britain) was not attacked by the manu- facturers." On the other hand, the farmers constantly and enthusiastically defended preference — they, together with the importers of textiles in Montreal and Toronto, being urgent in their pleas for the repeal of the Tariff Act amend- ment of 1904 which curtailed it. "The farmers commended RECIPROCITY 149 the preference because it afforded some relief from the tariff and because it served as a tie to the Mother Country. They realized that as a result of the good feeling towards Canada, Great Britain gave a sentimental preference to Canadian products, and that they had already a market in England for all their produce." Of course, in the resolutions passed by Canadian manu- facturers at public meetings and intended for British read- ers, their real intention to "protect" themselves effectively from British competition is not so plainly expressed, al- though it is sufficiently obvious. Thus, for instance, in a resolution of the Canadian Manufacturers' Association, the "substantial preference to the Mother Country" is made subject to the condition that "the minimum tariff must af- ford adequate protection to all Canadian producers.'' The Ottawa Board of Trade in November, 1903, also insisted upon such a form of protection as would "reasonably safe- guard such industries and business interests as have been developed under the existing tariff conditions." A great deal of the difficulty of British trade with Can- ada, as with the Protectionist Colonies generally, consists in the tariffs secured by the Colonial manufacturers against English goods, which in Canada in particular heavily bur- den the woollen and cotton industries. On the other hand, the only real hope of relief from this burden lies in the gen- eral lowering of the tariff walls in response to the protests of the consuming masses. Those flag-waving colonial pa- triots seem to think that they have done something very generous when they give this country a preference over her foreign competitors, while the duty to which her goods are still subject is sufficient, practically to exclude or greatly hamper them in favor of the protected colonial article. Speaking in Parliament at Ottawa on February 9, 191 1, Mr. Fielding, the Canadian Minister of Finance, thus char- acterized this type of Colonial Imperialist: "Unable to deal with the question (of reciprocity) on its merits, many op- ponents are beating the big drum of Imperialism and there- by insulting the intelligence of the Canadian people." 150 SELECTED ARTICLES As to the alleged damage done to Imperial interests by the manner in which the Liberals are said to have held the Colonies at arm's length, and rejected offers by the latter of which nobody had ever heard, the best answer is to be found in the statements of responsible Canadian Ministers, including Sir Wilfrid Laurier, and in the resolutions of the farmers of Canada, who have been the most consistent and effective supporters of preference to England, and the only class directly interested in the tariff reformers' proposal. The Hon. W. S. Fielding, the Canadian Minister of Finance, telegraphing on February 7, 191 1, to the High Commission- er for Canada, not only disposed of the fears that the Reci- procity Agreement might seriously affect imports from Great Britain and that discrimination would be made in favor of the United States and against this country, but ex- pressly stated that Canada's right to deal with the British preference as she pleases remains untouched by the agreement. The adoption of the agreement will probably lead to some further revision of the Canadian tariff, in which the Canadian Parliament will be entirely free to fix the British preferential tariff at any rates that may be deemed proper. The determination of the Canadian farmers as expressed in the resolutions laid by them before Sir Wilfrid Laurier on December 16, 1910, is equally clear. They state that they also favor the principle of the British preferential tariff, and urge an immediate lowering of the duties on all British goods to one half the rates charged under the general tariff schedule, whatever that may be; and that any trade advantages given the United States in reciprocal trade relations be extended to Great Britain. They likewise advocate such further gradual reduction of the remaining preferen- tial tariff as will ensue the establishment of complete free trade between Canada and the Motherland within ten years; and add that the farmers of this country are willing to face direct tax- ation in such form as may be advisable to make up the rev- enue required under new tariff conditions. That the Canadian government is inspired by precisely the same desire is evident from the statement made by Mr. Fielding, the Finance Minister, in the Canadian House of Commons on January 26, 191 1, in the course of which he said: RECIPROCITY 151 Of course, as a general principle, whether Great Britain is to be interested or not, any duty that may be lowered to any foreign country, according to our well-established policy, would be at the same time lowered to Great Britain, and a clause will be inserted in the resolutions which I shall have the honor to propose providing that where in any case the duties are lower- ed the benefit shall be extended to Great Britain. As a matter of fact, they are only lower on a few items of food-stuffs than the preferential rate, and they are articles which Great Britain does not send us at all. Notwithstanding, I think that if this arrangement be confirmed, it would probably lead to some re- adjustment of our tariff here and there, in order that we may maintain, as we fully intend to do, the principle of the British preference, and that the concessions under the tariff now exist- ing may be maintained under the condition of affairs when the arrangement is made. . . . The preference is a great and important question. We have dealt with it in the past, we shall deal with it again. I do not want to import into this discussion anything of' party color, but I ask my hon. friend if he does not think that the British preference may safely be trusted in the hands of the men who created it? If any further proof were needed that the "one-sided bar- gain'' proposed by Mr. Chamberlain is not necessary for the maintenance of Canadian loyalty, it would be found in the indignant protests of representative Canadians against the tariff reform thesis that their loyalty could only be secured by the payment of a price. As a matter of fact, it is evident to all those who have followed the development of the tariff reform propaganda in this country that their proposals have always been too vague for any business man to base practical calculations upon them. That vagueness and inaccuracy still continue, as may be seen by the statement of the Leader of the Op- position in the House of Commons on February 6, which in its reference to thirty years during which Canada vainly offered preference to Great Britain, and his suggestion that reciprocity with the United States is a new departure, fur- nishes an interesting illustration of the "persistent sloppi- ness" rightly attributed by Mr. Asquith to the whole propa- ganda. In Canada the movement in favor of reciprocity with the United States goes back to the beginning of the nine- teenth century. It assumed an exceptionally .vigorous character in 1846 on the adoption of free trade by this country and the concurrent grant of greater fiscal freedom to the British North American provinces, complaints be- 152 SELECTED ARTICLES ing made that Peel had not on that occasion secured from the United States the free admission of Canadian products. The reciprocity which was then demanded was eventually secured by the Elgin-Marcy Treaty, which remained in force from 1854 to 1866, when it was brought to- a close by the United States. The renunciation of that Treaty, which had greatly stimulated the trade of both countries, was deeply resented in Canada, yet so great was the desire of the Ca- nadian people to restore a similar agreement with the States that both Conservative and Liberal Administrations sent Commissioners to Washington to promote it in 1892 and 1898-99, numerous other attempts being made with the same object both before and after those dates, while for many years the offer of reciprocity retained its place upon the Canadian Statute Book. Indeed, absolute free trade both in manufactures and natural products was advocated in the Liberal campaign carried on in 1888 by Sir Richard Cart- wright, and it was the reciprocity plank, formally adopted in 1893, which won the election for the Liberals in 1896. It was only the persistent refusal of Washington to consider the suggestion and the decision in 1896 to raise a tariff wall against the Dominion that forced the Canadians into the independent development of their own resources and the search for trans-oceanic markets east and west. It should hardly be necessary to recall that preference was introduced by the Laurier Ministry in 1897 in redemp- tion of the free trade pledges made by them in the preced- ing campaign in which they defeated the Conservatives. Those Canadian Conservatives who now, in opposition, are such strong advocates of preferential arrangements with the Mother Country gave no preference whatever to Great Bri- tain from 1887 to 1896, during which period they were in power, any more than the British Conservative Tariff Re- form party took any practical steps during their long term of office to grant to Canada the preference which they ad- vocate. Speaking at Lethbridge on August 31 last, Sir Wil- frid Laurier taunted his Conservative opponents with their opposition to reciprocity on the ground that it might en- RECIPROCITY 153 danger the British preference. He recalled that it was the Conservatives who had always opposed that preference, and that on its introduction in April, 1897, Sir Charles Tupper, the leader of their party, declared it was going to destroy Canadian manufactures. They repeated that for one or two years, and then they had to abandon the cry because the manufacturers were not destroy- ed. The tall chimneys did not topple over, but became stronger, and there were more of them. They had another cry, which was that it was not patriotic to give the preference to the trade of the Mother Country unless the Mother Country was prepared to give us the preference in her own markets also. - . . Why did we give it? First of all, because it suited us to do so. Here it may be recalled that at an earlier date, between 1879 and 1887, strong protests were made from time to time in this country against the protective policy of Canada against England — among the most noteworthy being that by John Bright at Birmingham in 1885 and those in both Houses of Parliament in 1887. The subject of a probable reciprocity arrangement was, of course, keenly discussed in ^ihe Dominion as well as in the United States last autumn. It was both advocated and opposed on many different grounds. In Canada, some of the- most weighty opinions I heard expressed, while approving of it in principle, merely expressed doubt as to the possibil- ity of ever arriving at anything like a fair bargain with the American negotiators. In fact, it was more a question of terms than of principle that gave rise to doubts on the part of some Canadians as to the wisdom of entering into any negotiations at all. This is not surprising in view of the repeated rebuffs which proposals for reciprocity on the part of the Canadians had formerly met with at Washington. As usual in protectionist countries, all those sections in both countries who benefit by the tariffs at the expense of the rest of the community are very local. The depressing experience of the Canadians in the past thus led to a kind of blindly fatalistic conviction that it would be impossible ever to find a body of public opinion strong enough to overcome the resistance of the interested advocates of the status quo. Even the Canadian friends of reciprocity were very doubtful whether the negotiations would lead to any 154 SELECTED ARTICLES practical results. But this time the hands of Sir Wilfrid Laurier were undoubtedly much strengthened by the revela- tion of the force of free trade feeling in the growing West of Canada, a force which he had himself had an opportunity of gauging during his tour through those provinces last year, and which found a visible and impressive symbol in the large and important deputation of farmers that came to Ottawa on December 16 to lay their views before the government. On the other hand, the swing of the pendulum in a democratic direction at last year's election in the United States — a swing due in the main to a passionate revolt of the American people against the Payne-Aldrich tariff, a revolt so universal that it took by surprise even the clever- est electioneers and had to be witnessed on the spot to be thoroughly realized — forced the hands of the Republican Executive. It made obvious to the Republican leaders that they must swim with the tide or be prepared to see their party submerged at the Presidential Election in 1912. The significant fact that not only President Taft but Colonel Roosevelt supports the ratification of the Reciprocity Agree- ment, and that some of the oldest ''standpat" hightariffers among the Republican chiefs have taken the same course, is the best indication of what popular feeling in the United States is believed to be by those who have made it the busi- ness of their lives to keep their finger on the public pulse. This combination makes it practically certain that the Reciprocity Agreement will be ratified in both countries and that little heed will be paid to those representatives of sectional interests who were formerly all-powerful at Ot- tawa and Washington. It is not to be expected that when once this breach has been made in the tariff wall it will ever be rebuilt, or even that the barrier will be allowed to remain intact in other directions. Already the farmers' or- ganizations in America are beginning to demand reductions in the tariff on manufactured articles as compensation for the fact that they are themselves to be exposed to the free competition of their Canadian rivals in their own business. RECIPROCITY 155 Let us consider for a moment the character of the Reci- procity Agreement which the United States has now been driven to accept by the combined effect of the popular re- volt against high prices and the growing needs of her own manufacturers for fresh supplies of cheap raw material. The new arrangement, which does not take the formal shape of a treaty, but is to come into effect by concurrent legislation at Ottawa and Washington, comprises a compara- tively large schedule concerned chiefly with food products of all kinds that are made reciprocally free in both countries. This free list comprises: Live animals and poultry, corn and fodder, fresh vege- tables and fruits, dairy produce, oils, seeds, fish, salt, mineral waters, half-finished timber in various forms, plaster rock, mica, .feldspar, asbestos, etc., glycerine, talc, sulphate of soda, carbon electrodes, rolled iron or steel sheets, and plates, steel wire, galvanized iron, etc., type-casting and type-setting machines, barbed fencing wire, etc., coke, wood- pulp and paper. The second schedule establishes identical rates of duty for a considerable number of semi-manufactured food prod- ucts; fresh meats, bacon and ham, wheat and other flours, oatmeal, barley malt, pearl barley, etc.; macaroni, biscuits, candied peel, fruits and confectionery of all kinds, pickles and syrups, mineral waters in bottles, essential oils, etc.; a long list of agricultural implements, stone, roofing-slate, as- bestos, printing ink, cutlery, clocks and watches, etc.; print- er's cases, canoes and small boats, feathers, surgical dress- ings, plate-glass, motor vehicles, machines for the manufac- ture of wood-pulp, musical-instrument cases, etc. Special rates of duty are granted for other articles speci- fied in two further schedules, C and D, including aluminum, laths, sawed boards, iron ore, coal, cement, trees, condensed milk, biscuits, canned fruit, etc. A little consideration of the foregoing categories will shows that the concessions granted by Canada to the United States will interfere very little with British imports. Dur- ing the debate on the Address Mr. Sydney Buxton pointed 156 SELECTED ARTICLES out that out of the total British trade with Canada of £20,- 000,000 only about £800,000 is effected by the Reciprocity Agreement, so far as preference is concerned. Of that amount £477,000 worth of British goods still retain a preference of 10 to 12 per cent., thus leaving a balance of no more than £316,000, or l l / 2 per cent., of British imports to Canada, the duties on which will in future be identical with those on American goods. At the same time the reciproc- ity agreement will afford great relief to the Canadian no less than the American masses, and considerably increase their capacity for the purchase of manufactured articles, which cannot fail to benefit British trade with Canada. Many of the arguments that have been used in the Press and in the recent discussion in the House of Com- mons as to the effects of the proposed reciprocity arrange- ment, if ratified, more especially those dealing with the ques- tion of transportation and political results, simply ignore existing conditions. A great deal has been made of the statement, for instance, that the traffic flowing now from west to east will hereafter flow from north to south, and that this must seriously damage the great transportation lines of Canada as well as our own commercial interests. The best practical answer to this allegation is the fact that great railway men in Canada and the powerful interests which they represent do not share this apprehension. The way in which the enormous traffic now passing from Can- ada to the United States and vice versa has been ignored, as well as the large transit trade of Canadian corn through American ports in the winter months, reveals a woeful lack of study of the subject. It seems to be entirely forgotten that even under existing conditions the total trade between the United States and Canada considerably exceeds that be- tween Canada and the Mother Country. While in the year ending March 31, 1909, the total trade of Canada with the United States was $285,265,717, or say, £59,000,000, that with Great Britain was only $204,302,113, or £42,000,000. A further noteworthy circumstance is that while the total im- ports of Canada from the United States were $192,661,360, RECIPROCITY 157 or more than dotible the amount of Canadian exports taken by the United States, which amounted to $92,604,356, the British imports to Canada were but little over half the amount of the exports from Canada to Great Britain, that is to say, $70,556,738 worth of imports as against $133,745,- 375 worth of exports. In 1908, 19,768,000 bushels of Cana- dian wheat were shipped in transit through the following American ports: Baltimore, Boston, New York, Philadelphia, and Portland, while 506,105 barrels of Canadian flour were forwarded through the same ports in the same year. As a matter of fact, both in Canada and the United States there is naturally a flow from west to east of agricul- tural products, while water transportation is open from the heads of the lakes down to the seaports on the east coast. The wheat areas of both countries have to a large extent the same outlet at the head of Lake Superior. , On the other hand, there is a large traffic north and south, not merely in manufactured goods but in such heavy articles as coal, coke, lumber, etc. No one who has visited the two countries and realized what a purely artificial and arbitrary line of divi- sion the customs tariffs have raised between two peoples who have so much in common in life and thought, will be surprised to find that at a favorable political juncture like the present, old jealousies are being put aside, sectional, selfish interests are "being overridden, and common sense is having its way after a lapse of many years. That the industrial population of Maine and Massachusetts should be precluded from the use of the agricultural produce of Que- bec, so suitable for the cultivation of fruit and vegetables; that the wheat-growers of Alberta and Saskatchewan should be cut off from the American central market, with its grow- ing industrial population; that two countries whose coal deposits are placed by Nature in the case of Canada at the extremities, and in that of the United States mainly in the center of a line of frontier extending for about three thou- sand miles, — is a condition of things .which could not in reason be expected to continue, and which no amount of artificial straight-waistcoating on the part of our tariff re- formers could have maintained in the long run. 158 SELECTED ARTICLES If the idea that an extension of trade between Canada and the United States must draw the Dominion into the political orbit of its great neighbor were well founded, this process would already be manifest, as no force in this world could permanently prevent the growth of trade between these two populations. Indeed, there has never been, nor is there now, any political foundation for this hypothesis. The Canadian people are a very distinct political entity, and the sense of Canada's nationhood is what most impresses any visitor to that country. Whatever may have been the fears or hopes of those who years ago looked forward to Canada ultimately entering the Federation of the United States, I do not think that any statesman in either country would to-day, in spite of Mr. Champ Clark's misunderstood joke, seriously consider that eventuality as one worth dis- cussing. A number of prominent Canadians, some of them sup- porters of the tariff reform standpoint in this controversy, have effectively helped to dispose of the idea that Great Brit- ain is likely to suffer seriously either from an economic standpoint in consequence of the Reciprocity Agreement. According to the Daily Mail correspondent at Ottawa, in a telegram dated February 7, 191 1, several conservative news- papers in Canada considered that the Agreement was not only a good thing for the Dominion, but would do no harm to the Empire. Sir Donald Mann, Vice-President of the Canadian Northern Railway, goes as far as to say that the arrangement will benefit English trade, while Sir \Y. Mac- kenzie, president of that railway, repudiates*the idea that the Agreement will throw Canada politically-Nnto the arms of the United States. He does not think th^T it will have any political effect whatever, and asserts that there will be no tendency under it to weaken the ties between the Domin- ion and the Mother Country. Sir \Y. Mackenzie does not believe that a large proportion of the Canadian wheat crop v/ill be diverted to the south. The Americans, he says, now produce all the wheat they require, and if they import wheat from Canada, they will themselves have all the more to ex- port. RECIPROCITY 159 It is not necessary to conclude, as many here do, that the increase of American trade means a diminution of Brit- ish trade with Canada. In fact, the figures for the five years 1905-1909 show that the trade of this country and the United States with Canada has increased concurrently with- in that period. In a great number of products England cannot possibly compete with the United States in the Ca- nadian market, as is evident when it is remembered that to a large extent Canada's imports from the United States consists of commodities such as agricultural produce, in- cluding bread-stuffs, sugar, and raw tobacco; animal, fishery, and forest products; and minerals comprising coal, oils, and ores. ; In the matter of manufactures, the fact that the habits and conditions of life of the Canadians are so similar to those of the States give a great advantage to American manufacturers. The latter are already making articles for their own immense market which are equally suitable for Canadian requirements. The English manufacturer, on the other hand, is in a very different position,, as, in order fully to meet the Canadian demand, he would have to establish special departments, new designs, models and patterns adapted to the local conditions of what is for him, up to the present, a relatively small market. When in Canada I heard many complaints of a certain want of adaptability on the part of British manufacturers to the requirements of their Canadian customers, and of an unwillingness either to study or to comply with local requirements, with the re- sult that many merchants who preferred English goods ow- ing to their superior workmanship were unable to sell them. Another advantage enjoyed by the American manufacturer is proximity to his customer, which enables both to enter more easily into direct personal relations. To compensate for these natural disadvantages, English manufacturers will have to devote more money and thought to the establishment in Canada of stocks, warehouses, and other facilities with the object of enabling their customers readily to obtain supplies of spare parts and all those little details that mean so much in the conduct of industrial en- 160 SELECTED ARTICLES terprises, and in the smooth working of their daily routine. Our firms would also need to organize a more energetic prop- aganda for British goods in the Dominion, and to take into account the necessity of relieving themselves as far as cir- cumstances permit of the handicap imposed by the difference in currency and weights in Canada. They should accom- modate themselves to Canadian requirements in those re- spects, and base their calculations on the dollar currency and on the short ton of 2000 lb., which is universally adopted on the North-American continent. There can be no doubt that a certain revision of the methods of British manufac- turers in these respects would do much to increase the sale of English goods, the solidity and high quality of which are fully appreciated by the Canadians, who would be glad to do business with our firms in preference to any other if a great- er attention to their requirements made it possible for them. There is a huge business awaiting our manufacturers in the Dominion, a vast country with unlimited resources, and a rapidly growing . market, in which closer attention and greater energy will do far more to foster their trade than tariff crutches, wifh their paralyzing influence on enterprise. Although it may be a long time before a state of abso- lute free trade comes into existence between the two great kindred states of North America, it is now quite clear that there the apostles of high protection have had their day. How far this swing of the pendulum may lead in the im- mediate future to a further demolition of tariff walls it is difficult to forecast. The moral effect, however, of the practical proof in both countries that the free exchange of products leads to greater prosperity and not to mutual de- struction, cannot, if properly emphasized, be lost upon the intelligent democracies of the two most progressive States of the American Continent. All those who hold that an in- crease in the world's trade, the reduction of artificial bar- riers, and the most economic use of the varied potentialities of the earth are a gain for humanity must rejoice to think that a great step in the direction of universal free trade has been taken in the conclusion of the Reciprocity Agreement between Canada and the United States. RECIPROCITY 161 Nation. 32: 158-9. February 16, 191 1. Canada's Free Hand. Mr. Balfour has condemned the Canadian reciprocity- agreement as "an imperial disaster." To the "tariff-reform" Imperialists, the probability that effect will be given to the agreement is, indeed, galling. But Mr. Balfour is the first ' British statesman to denounce any of the attempts in the past sixty-five years to establish reciprocal trade between Canada and the United States. In Canada and in the other over-sea possessions of Great Britain, this new Imperial- ism must come with a shock — for if it means anything, it •means that the new Imperialism would impair the absolute fiscal freedom which the self-governing colonies have en- joyed since 1846. This accrued to the colonies partly by accident. Sooner or later it must have been conceded to them. It was Peel's reforms of 1846 that gave the larger col- onies their new freedom, simply because, when it was no longer the policy of England to maintain protective tariffs, it ceased to be possible to intertwine the tariffs of the col- onies with the British fiscal system. Within ten or twelve years were enacted tariffs for Quebec and Ontario in which there were duties intended to protect Canadian manufac- turers from British competition. British manufacturers — in particular the iron and steel interests of Sheffield and Glas- gow — vigorously protested to the Colonial Office against these Canadian taxes. The Duke of Newcastle, then colo- nial minister, sympathized with the British manufacturers, and made some remonstrance to Gait, the Canadian minister of finance. But Gait was only extending a policy that has been begun a year earlier by Gayley; and his reply to the Colonial Office was that self-government would be annihilat- ed if the views of the Imperial government on colonial fis- cal questions were preferred to those of the people of Can- ada. "It is, therefore," he continued in his letter to New- castle, "the duty of the present government distinctly to affirm the right of the Canadian Legislature to adjust the 1 62 SELECTED ARTICLES taxation of the people in the way they, deem best — even if it should unfortunately happen to meet with the disapproval of the Imperial Ministry. Her Majesty cannot be advised to disallow such acts, unless her advisers are prepared to as- sume the administration of the affairs of the colony, irre- spective of the views of its inhabitants." The royal assent was not withheld; and since that time a British government has never intervened to prevent the enactment of a protec- tionist tariff in any of the over-sea dominions. Since 1859, there is not one of the self-governing colonies that has not sought to protect domestic industries from the competition of British manufacturers. Even before the Gait and Newcastle controversy of 1859 settled it that fiscal freedom went with responsible govern- ment for the colonies, the British government had been will- ing to assist in bringing about reciprocal trade between the United States and the British North American Provinces. They were not prepared for the sudden change which came in 1846. Montreal and Canada complained that bankruptcy faced Quebec and Ontario with the ending of preferences for their exports. Gladstone, who was then under-secretary for the colonies, was reassuring. But it was said that Great Britain, in establishing free trade with the world, had not guarded the interests of Canada. It was insisted that Eng- land, when throwing open her ports to American grain, should have stipulated with the United States for reciprocity for Canada. The Elgin-Marcy Treaty was the result of the appeal to London from the North American Provinces. Twice since the abrogation of the treaty, Great Britain has used her good offices to effect a return to some such sys- tem of free exchange between the United States and Canada as was in existence from 1854 to 1866. Were Mr. Balfour at this time Prime Minister, and were Canada as now intent on obtaining reciprocity, his government would not dare to withhold any diplomatic aid that might be necessary. Canada is the only Dominion whose trade interests can be much advanced by a reciprocity agreement with a non- British country. Yet all the colonies would have been RECIPROCITY 163 alarmed had the utterances of Mr. Balfour come from the Prime Minister. In Mr. Balfour, they are understandable in view of recent developments in both England and Canada. Three times since 1906 the British electorate has repudiated the scheme for a protective tariff with preference for the colonies. In Canada the Manufacturers' Association has repeatedly served notice on the Ottawa government that there can be no British preferences in the Canadian tariff which leave Canadian industries without protection against all comers; and there were many curtailments of the British preference when the tariff was revised in 1907. The repudia- tion of the Chamberlain plan was the second serious set- back in Canada that the movement for protection begun in England in 1903 has received. A third setback is the pro- posed free trade in all natural products between the United States and Canada. Canada is the keystone of the arch of the Chamberlain-Milner Imperialists; and it is easy to un- derstand why Balfour takes the gloomy view that reciprocity between the United States and Canada is an Imperial dis- aster. Nation. 92: 184-5. February 23, 191 1. Reciprocity and the Farmers. The trade agreement with Canada should set our farmers to doing some thinking about the effects of high tariff duties on their business. They have been ready to believe it when they were told that, because other countries cannot send us their farm products without paying heavy duties, therefore our farmers are "protected." Manufacturers and politicians have presumed on the gullibility of the farmers. That they have done this with so much success is one of the curious facts of our tariff history. Perhaps farmers are a bit slow to look into a complicated system that oppresses them. In France of the eighteenth century, it has been well said that the farmers were the mules of the Old Regime. They car- ried the burdens; the other classes had whatever advan- tages there were. When the French peasants finally woke up 1 64 SELECTED ARTICLES to the situation, they became the mainstay of the Revolu- tion. One may hope that our farmers, too, are on the eve of a great awakening. For, as a class, they gain nothing from the tariff; on the contrary, they suffer a huge eco- nomic loss every year from its operation. If the farmer studies the case, he will discover that, in the first place, our tariff does not and cannot raise the prices of our agricultural staples. These are constantly exported; they have to find their markets abroad, and must accept the prices that result from competition with similar products from Canada, Argentina, Russia, and all other farming countries. The price of wheat in Liverpool is surely not "protected" by our tariff. And since the price of wheat sold at home, for consumption here, cannot even equal the Liver- pool figure, it is as clear as day that our tariff duty on wheat has never added a cent to the price of wheat in the United States. And what is true of wheat is true of all other farm products that enter into our export trade. If our duties exclude some Canadian wheat, barley, meat, etc., the only effect is to increase Canada's export of those ar- ticles to Europe, where our products must meet their com- petition, and submit to the resulting price. And, we repeat, this European price governs the price here. Clearly, there- fore, if our farmers will consider, they cannot fail to see what an empty favor the tariff on farm products offers them. But this is far from being the whole case: it is only one side of it — the side of no gain. Now for the loss. This falls under two distinct heads. First, the obvious loss to our farmers from having to pay high prices for most of the things they buy for their own consumption. The prices of nearly all manufactured articles, whether imported or made at home, are enhanced by the tariff. When the farmer buys any of the thousand and one articles needed for himself and his family, he pays prices made higher by the tariff than they would be without it. That is what the tariff on manufac- tures is for. The tariff on farm products is meant to bam- boozle the farmers. But the tariff on manufactures is a very different matter. The prices of our manufactures are not RECIPROCITY 165 fixed in free competition with all the world. The tariff wall comes between. This immediate and direct loss appears at once when a tariff is set up in a country. The producers of exports lose as buyers of other commodities. But there is another and probably greater loss that comes slowly and indirectly. It is more difficult to explain, because it depends on the work- ing of more obscure though quite irresistible laws of trade. A tariff wall disturbs the natural movement of money be- tween countries. It does not at once diminish exports, but does diminish imports. The customer countries have to re- mit money instead of the goods they formerly sent. This movement of money goes on through a term of years until a new equilibrium of trade is reached in which each coun- try's exports are again roughly equal to its imports. One of the forces at work to reestablish equilibrium is the ris- ing scale of prices in the tariff country. The inflow of mon- ey has this sure result in the course of years. Producers of exports feel this rise of prices in all things that they buy; but in selling their own product they get no rise, for the price of their product depends, even at home, on the price it commands abroad. That is the precise position of Ameri- can farmers to-day. In this indirect price-raising by the tariff, as in the direct and immediate effect, farmers have no share as re- gards their own product. Their costs of producing are in- creased: they pay more money for labor and implements, and their family purchases are at raised figures. But the prices of their exportable crops are in fact lowered, for they are fixed in other countries where the supply of money is relatively small — fixed by the cost of producing similar crops in countries where money goes farther in paying costs. So our farmers are burdened by the indirect operation of the tariff. Does some one think that in saying the tariff causes our country to have a greater supply of money than it would have without the tariff, we give a conclusive argu- ment in favor of the tariff? Why, a common laborer has 1 66 SELECTED ARTICLES been heard explaining to his companion that if you get two dollars where you formerly got only one, but have to pay two dollars for what formerly cost you only one, you have gained nothing. That is good sense and good political economy. Unfortunately for our farmers, their case is dif- ferent. They get no increase of price by the tariff, but have to pay more for what they buy. The excess of money brings them only damage and loss. Can they wonder that they are so often disappointed at the results of their labors? Review of Reviews. 28: 462-6. October, 1903. Future of Canada and Reciprocity with the United States. Eugene G. Hay. There was but little difference in time in the settlement of the Canadian provinces and the colonies that in 1789 be- came the United States of America. They were settled by substantially the same race of men. In 1867, when the Do- minion government was formed, the United States had be- come a great, mighty, prosperous nation, stretching from the Atlantic to the Pacific, while the Canadian provinces had progressed but slowly. Since the formation of the Dominion government, the growth of the Canadian prov- inces has been far more rapid, yet how insignificant when compared with the mighty strides the United States has made during this period. The acceleration which came to Can- ada with the formation of the Dominion government was the result of that unity of action which was thus made pos- sible; that it has not grown and developed as the United States has, is the result of the impossibility of independent action that is inherent in its colonial existence. It is pos- sible that colonial government may be wisely administered, that it may be honestly administered, yet under it a people can never become great. Their resources can never be fully developed, their enterprise and their energy can never have full play, and their inventive genius can never reach its full limit. Their commerce, which is the chief factor in national RECIPROCITY 167 greatness, is necessarily held by the same leading strings that guide their political existence. A people to become truly great must live under a government that can do busi- ness with other governments; a government that can have a foreign policy of its own, and diplomatic and commercial relations with the other governments of the world. Canada Hampered in Trade Relations The industrial, commercial, and political interests of Canada are essentially Canadian, essentially cisatlantic; yet under the anomalous governmental conditions under which the Dominion exists, its interests are necessarily bound up with British interests, scattered as they are over every con- tinent. Canada has now reached that point where its rela- tions with other countries require individual treatment. This, under existing conditions, is difficult if not impossible. In the great political centers of the world, Canada has no diplomatic representative; in the great commercial cities, it has no consuls. An army of trained men are reporting to Washington, each day, the conditions of commerce in the great centers of population; these men are constantly alert to extend American commerce in the cities and countries where they are stationed. Canada 'must secure all informa- tion from London, and every move to extend her commerce must be through a British representative. His duties require him to have first in mind the interests of the mother coun- try, and in looking after Canadian interests he must do it with reference to the interests of Australia, of South Africa, of India, and of the islands of the sea. An Empire of Grain Fields This was all well enough when Canada was composed of a few fishing settlements that fringed the Atlantic coast, and Quebec and Montreal were on the frontier. Now it stretches tbree thousand miles west from Montreal, and northwest to the far-distant head waters of the Yukon. Locked in the mountains of the Canadian possessions is 168 SELECTED ARTICLES mineral wealth second only to that of the United States, while her agricultural possibilities can scarce be exaggerat- ed. Between the Lake of the Woods and the Caribou Moun- tains the forces of civilization are building a mighty empire, destined soon to become the granary of the world. The province of Manitoba and the districts of Assiniboia, Al- berta, and Saskatchewan extend 400 miles north and south and 900 miles east an-d west, embracing an area of 359,000 square miles. Add to this Athabasca, with its 122,000 square miles, in which is situated the beautiful Peace River Valley, said to be as fertile and productive, as the valley of the Red River of the Xorth, and we have an area of almost half a million square miles. In the light of the development of our own great Western prairies, is it too much to say that one-half of this is arable, and will eventually come under the plow. More than one-third of it lies west of the one hundred and fifth meridian. Forty years ago, the man who would have predicted that the time would come when 200,- 000,000 bushels of wheat would be raised in the United States north of the forty-fifth parallel, and between the con- tinental divide and the Rocky Mountains, would have been set down as insane. Yet that is what has happened. Is it not, then, within the bounds of conservative statement to say that within the lives of the present generation 200,000 square miles of this Canadian territory will be under culti- vation? Scarce 2 per cent, of this land was cultivated last year, yet they raised 60,000,000 bushels of wheat and suf- ficient other small grain to bring the total grain production to more than 100,000,000 bushels. Seventy-five thousand set- tlers entered this territory last year, and more than one hundred thousand more will make their homes there this year. When settled as thickly as our own Western prairies are to-day, it will afford a market for everything required in a grain-growing country unequaled on this continent. Un- less her progress shall be arrested by political conditions, the next generation will see the center of Canadian popula- tion and power in the basin of Lake Winnipeg. Canada must then have a population of more than twenty millions of people. RECIPROCITY 169 Canada Must Work Out Her Own Salvation Will such a people, possessed of such boundless wealth, permit it to remain undeveloped, and their progress retarded by outgrown political institutions? If they do, they will prove false to Anglo-Saxon traditions! Could twenty mil- lions of people, possessed of such diversified interests, re- spond to the leading strings of colonial government? This question carries its own answer. What, then, is the ultimate destiny of Canada? Those Americans who talk of the United States annexing Canada, either by force of arms or by a tariff policy that excludes Canadian products from our markets, woefully misunderstand the temper and the spirit of the race to which they belong. Let them remember that a country peopled by Anglo-Saxons has never been annexed. In thinking of forcible annexation they forget the "Spirit of Seventy-six" and the race in which it was aroused. The policy of commercial exclusion has proven a dismal failure. When, in 1866, our government annulled the reciprocity treaty of 1854, it was thought that the United States was Canada's only market, and from time to time, as our tariffs have been raised, misguided statesmen have expected to see Canada forced into suing for annexation. Not so! Our market was their natural market, but when it was denied them, they sorrowed, but not in despair; disappointed they were, but not discouraged, and like the race to which they belong, wherever found upon the round globe, they turned their energies to making the best of the opportunity that was left them. They have found other markets for their products, and prospered. What, then, of the future? That the people of Canada will work out their own destiny there can be no doubt. That they may be helped or hindered by the action of our government is equally certain. Canada must eventually either become an independent nation, or by the free, voluntary act of her people and the consent of the people of this country, become a part of the United States, as Texas did, upon terms of full and complete equality. As to which is the more alluring; as to which presents the best 170 SELECTED ARTICLES opportunity for the development, progress, and prosperity of Canada; as to which will most accelerate the solution of those ethical and moral problems in which the people of each country have a common interest, it is idle for us on this side of the line to discuss, for it is a question that must and will be settled by the Canadian people. The Tariff Wall But whether Canada's future is to become a free and independent nation, or a part of the American Union, the commercial relations between the two countries should be as free and unrestricted as it is possible to make them. Ex- perience has demonstrated that the easiest and least burden- some method of providing for public revenues is by tariff duties. But aside from making provision for fiscal necessi- ties, our justification for a protective tariff is the protection of our high civilization by upholding the American wage standard. As between the United States and Canada the reason for this does not exist, and our tariffs against the products of Canada operate as an unnecessary and harmful restraint of trade. All will agree that no harm could come to the great commercial interests of New York or New Eng- land if Ontario and Quebec should be admitted as states of the American Union. The freedom of trade between the States and the vast territory over which our commerce ex- tends without restriction or hindrance has been the most potent factor in our prosperity; to increase that territory by adding contiguous states, peopled by the same class of peo- ple, maintaining the same civilization, with similar political in- stitutions, would therefore increase that prosperity. Meas- urably the same results may be attained without a political union. To abolish all tariffs between the United States and Canada would greatly enhance the commercial interests of both countries. This condition, however, cannot be brought about at once, owing to the fiscal necessities of the Domin- ion government, as for some time to come Canada must derive a large part of her necessary revenues from customs duties on commodities that could be bought in the United States. RECIPROCITY t7 , The British Zollverein Proposition Secretary Chamberlain's proposition to create a British tariff for the purpose of establishing colonial reciprocity is an attempt to save the empire which the elder Pitt created. But his task is greater even than was that of Lord Chatham. The problem that confronts him in the twentieth century is entirely commercial, while in the eighteenth century, in the establishment of England's colonial empire, her great prime minister had the powerful aid of war and military conquest. That momentous tragedy on the heights of Abraham, which changed the history of this continent, could not be enacted with the same results in the twentieth century. The mighty currents of commerce cannot be permanently diverted from their natural channels, and had Chamberlain the genius, the wisdom, and the undaunted spirit of him who by com- mon voice was the most powerful minister that ever guided the foreign policy of England, his efforts would yet be fore- doomed to failure. His proposition, stripped naked, is to tax the breakfast table of every, man in England, be he rich or poor. For what is he asked to pay this tax? No benefit will inure to him, for the duty is to be placed on articles • which England consumes, but does not produce. Its sole purpose is to. hold the colonies to the mother country, for Secretary Chamberlain doubtless sees, what men less wise than he have discerned, the impending danger of the dis- memberment of the British Empire, not through any desire of the colonies to throw off an oppressive yoke, but that they may expand and grow to the commercial importance their natural advantages give them. It is asking more than patriotism has yet been credited with to expect the people of England to impoverish themselves in order that it may continue to be said that "England's drum-beat follows the sun in its course." Reciprocity with the United States more Desirable But wha(; is Canada's interest in this English preferen- tial? To have her grain given a preference in the English 172 SELECTED ARTICLES market, she is to continue to give English manufacturers an exclusive preference in the Canadian market. Such English manufactures as can be sold in Canada, even with a prefer- ential duty, are such as are sold chiefly in the Maritime prov- inces, Quebec, and Ontario. These provinces produce but little grain to be benefitted by the English food-stuff prefer- ential, and Manitoba and the adjoining grain-growing dis- tricts would derive far greater benefit from reciprocity with the United States than any reciprocity England could give. The admission of wheat, the great staple product of this great western country, into the United States free of duty would be of far more value to them than any preferential tariff England could adopt, and this, too, without injury to the wheat growers of the United States. Liverpool, where the surplus wheat of the world is marketed, will continue to fix the price for Canada and for the United States, whether England adopts a discriminating duty or the United States tariff is taken off of Canadian wheat, or whether both of these events transpire. But the facilities for transporting, handling, and manufacturing the grain, which the Canadian farmer could avail himself of if he had free access to the American market, would be of more benefit to him than the slight tax England could place upon the grain coming from other countries. But of still greater value to the Canadian farmer would be the reduction of the duty on farm machin- ery, which is almost certain to be provided for in an}- reci- procity treaty that might be negotiated. He now, to a large extent, buys American machinery be- cause it is of high quality and best adapted to his needs, paying for it the American price plus from 20 to 35 per cent, duty. The rapid growth and development of the vast new country in western Canada makes this a matter of transcend- dent importance both to the Canadian farmer and the Ameri- can manufacturer. Here, then, is an instance of genuine reci- procity. In exchange for the free admission of Canadian wheat to the American market, by which those interested on both sides of the line are to be benefitted, the Canadian duty on farm machinery will be reduced, to the advantage RECIPROCITY 173 also of those interested in both countries. If we travel along the border, observing the products that could be interchanged, we cannot help but be impressed with many instances similar to that just cited. Remove the tariff on lumber and our Western lumbermen will, by reason of ad- vantageous transportation, contiguous territory, and other natural causes, supply the lumber to build the homes for the settlers in the new Canadian northwest, while further east the forests of Ontario will supply the demand for this commodity in our older States, from which the timber has long since been cut. Coal is another item. New England is badly in need of Nova Scotian coal and the coal miners of Nova Scotia badly want the New England market. Mov- ing further west, the coal of Pennsylvania is wanted in cen- .tral Canada, and can be placed in the yards and bins of the consumer far cheaper than coal from any other place. Geography and climate conspire to demand the largest possible freedom of trade between the countries. The lines of commerce run with those of longitude as surely as those of immigration run with those of latitude, and as years go by, and the countries become more densely populated, it will be more and more apparent that the products of our warmer climate can be profitably exchanged for those of "Our Lady of the Snows." Glance at the map of North America and see what geography is certain to do in making these two countries commercially one. In commerce, the transportation of commodities to market is the most im- portant factor, and whatever conditions the machinations of men may temporarily bring about, eventually the lines of transportation will be determined by distance and resistance. Nature selects the route of least resistance; following this natural law, the commerce of the world will eventually trav- el over the shortest route and that which affords the least obstacles to transportation. Aside from the Maritime prov- inces, the shortest route from every city and all produc- tive parts of Canada to the Atlantic seaboard is through the United States. More than half of the population of Canada lies south of an east and west line that would run 174 SELECTED ARTICLES through Grand Forks, North Dakota, and such a line drawn through Ottawa, the capital of the Dominion, would strike to Portland, Oregon, at its western terminus and bisect the slate of Maine as it approached the Atlantic. Without pur- suing the subject further, it is safe to say that, with un- natural barriers removed, the sum saved in transporting the products of Canada to their best markets would go a long way toward paying the fiscal expense of the Dominion gov- ernment. The Elgin Treaty of 1854 Largely through the energy, the tact, and the skill of Lord Elgin, then Governor-General of Canada, there was negotiated and ratified, in 1854, a commercial treaty between the United States and the Canadian provinces. This treaty, by its terms, was to continue for a period of ten years, and continually thereafter until twelve months after either gov- ernment had given notice to the other of its wish to termin- ate the same. The President of the United States, upon the direction of Congress, gave such notice in 1865, and the treaty was terminated in 1866. No provision was made in this treaty fixing the duty on dutiable articles, but it pro- vided for the free admission from either country to the other of a long list of natural products, being the growth and products of Canada and of the United States, embracing most of the products of the farm, the forest, the quarry, and the waters of each country. In the light of present conditions, it is difficult to under- stand why the United States Congress terminated this treaty. The principal reason given was that, with the enor- mous debt left by the Civil War, the United States was in need of all possible revenues, and must have the revenue that would come from the duty on Canadian imports. It is possible, also, that a feeling of bitter hostility, growing out of the attitude of Great Britain and certain factions in Can- ada during our great civil conflict, had its influence upon Congress; but more than all this, it is probable that the great pressing problems with which the statesmen of that day RECIPROCITY 175 had to deal were so all-absorbing that the possible growth and development of our commerce did not receive due con- sideration. Its Practical Effects Figures which state the imports and exports do not al- ways tell the full story of the value of a commerce. In any reciprocity arrangement that may be effected with Canada both nations would be benefitted, not only by their increased sales, but by their increased purchases from the other. But, viewed entirely from the standpoint of the figures which state the exports and imports, an examination of these fig- ures for the years preceding, during, and succeeding the period of the treaty will disclose the fact that both coun- tries were benefitted by its operation. Prior to 1854 there was comparatively little trade between Canada and the United States, and prior to 1846 scarcely any; but during this time, while the trade was insignificantly small, our ex- ports always exceeded our imports. With the ratification of the treaty, in 1854, the trade between the countries in- creased at a bound. Our exports grew from $12,432,597 in !8S3, the year preceding the ratification of the treaty, to $34,362,188 in 1855, the first year in which the treaty was in force, and our imports during the same period from $6,527,559 to $15,118,289. This rapid increase continued, preserving almost the same ratio, during the first few years the treaty was in- operation. During our Civil war the ex- ports and imports grew nearer together, owing to the cur- tailing of our production and the increase of our consump- tion, until, in 1864, the imports exceeded the exports, and so again in 1865 and in 1866. The treaty terminated in 1866, and the excess of imports over exports, which began in 1864, continued until 1874, or for a period of seven years after the termination of the treaty. The Present Volume of Commerce The years when this treaty was in force were far more prosperous for the commerce between Canada and the United States than had hitherto been enjoyed. In fact, it 1 76 SELECTED ARTICLES was the very beginning of what has since developed into an enormous commerce between these two neighboring peo- ples. During the period of a little less than twelve years that the treaty was in force the balance of trade in our favor was $37,479,531, being more than double the entire trade between the countries during any year prior to the ratification of the treaty, and the total commerce grew during that period from $18,000,000 per annum to $76,000,000. As these countries have prospered and increased in impor- tance the commerce between them has continued to grow until, in the fiscal year just ended, the total commerce reached almost to $180,000,000, the balance of trade being greatly in our favor. The present condition cannot, how- ever, long continue. Our average tariff on dutiable goods coming from Canada to the United States is 49.83 per cent., and the Canadian average tariff on dutiable goods going from the United States into Canada is 24.83 per" cent. Un- less commercial reciprocity is soon attained, Canadian tariffs will undoubtedly be raised to approximately the level of our own, which will practically destroy commerce be- tween the countries. The Proposed "Brown Draft" Treaty In 1874, a treaty was negotiated between the United States and the Dominion government which is known in Canada as the Brown Draft Treat}-. This treaty contained three schedules, and by its terms it was agreed that the duty on articles named in these schedules, being the growth, products, and manufacture of the Dominion of Canada and of the L T nited States, on their importation from one coun- try to the other, should, from the first day of Jul}-, 1875, to the thirtieth day of June, 1876, inclusive, be two-thirds of the rate paid at the date of the treat}', and, from the first day of July, 1876, to the thirtieth day of June, 1877, inclu- sive, be one-third of such rate, and on and after the first day of July, T877, for a period of twenty-one years, all such articles should be admitted free of duty into each country respectively. Schedule "A" of this treaty contained a long RECIPROCITY 17/ list of natural products, embracing almost every article produced in either country that could be so classed. Sched- ule "B" was of farm machinery, and centained forty sepa- rate articles, while Schedule "C" contained a long list of other manufactured articles embracing most of the com- modities consumed by people of this latitude. This treaty failed of ratification in the United States Senate, and hence was never passed upon by the Canadian Parliament. Recent Negotiations The Joint High Commission, of which Sir Wilfrid Laur- ier is the Canadian chairman, and Senator Fairbanks, of In- diana, the American chairman, and which is still in exist- ence, was created in 1898. It met first at Quebec in the summer of 1899, and again at Washington in November of the same year, where it was in session until the following February, and while much progress was made in consider- ing a commercial treaty, no definite result was attained. The commission being unable to agree upon the Alaskan boundary dispute, which was also before it, the commis- sioners from both sides were unwilling to proceed with the consideration of a commercial treaty. This troublesome question being now removed by the creation of a special tribunal, to which it has been referred; negotiations for the reconvening of the Joint High Commission have been for some time in progress. Any reciprocity arrangement between these countries must be negotiated and put into effect by the Republican party in the United States and the Liberal party in Canada, — at least such must be the case unless the opposing parties reverse their more recent policy; and while these parties are so thoroughly intrenched in power in their respective countries would seem a desirable time to renew negotia- tions. In any reciprocity agreement that could be made some small interests on both sides of the line would have to suffer. But such interests are prospering to-day at enor- mous cost to far greater interests and to the masses of the people of both countries, and the time must surely come i?8 SELECTED ARTICLES when unnatural barriers will not be maintained at such a tremendous sacrifice of the well-being of the people for the trifling advantage a very few may receive. NEGATIVE DISCUSSION American Economist. 44: go. August 20, 1909. Silly Season At Washington. It is surprising that any person of prominence in gov- ernment employ at Washington should prepare, and still more surprising that the Associated Press should carry, a thousand words or more of such ignorant and absurd twaddle as that attributed to "a well known official" in a Washington dispatch of August 15, on the subject of the "distinct advantage that has been gained by the United States under the reciprocity agreements with European countries under the Dingley Tariff law." This well-known official not only betrays a discreditable lack of knowledge of the wide difference between trade agreements and reci- procity agreements, but also contradicts himself most stupid- ly in first praising the workings of these agreements as im- mensely beneficial to our foreign trade, and then commend- ing the new maximum tariff provision which cancels all of the "beneficial" agreements! The finst part of the article implies a criticism and condemnation of the action of Con- gress which that body should take cognizance of by ascer- taining the identity and demanding the removal of that "well known official"; while the second and concluding part is a clumsy and contradictory attempt to smooth things over. All but three of the New York papers put the article in the waste basket. The "Tribune", "Press", and "Journal of Commerce" gave it space which had been better filled with "bird stories". According to this "well-known official": Generally speaking, these agreements have inured to our bene- fit and have been very helpful in the extension of our foreign commerce. They primarily have secured the United States pro- 180 SELECTED ARTICLES teetion against adverse tariff changes by guaranteeing us a con- tinuation of the favored nation treatment. A little later, speaking of the legislature which abro- gates these "helpful" agreements, he stumbles over himself by saying: The application of the maximum and minimum schedules provided for in the Payne- Aldrich bill is going to work out satis- factorily, according to the governmental tariff experts, who see no reason to anticipate any break in commercial relations with for- eign countries as a result of their operation. The double schedule, in their opinion, will go far to sweep away all discriminations, and it will be suicidal, they say, for any country to stay outside the pale, endeavor to work independently and attempt a tariff war. That this feeling is apparent in France, whose manufac- turers strongly opposed some of the new schedules, is already evident from the discussions in the newspapers. The agreements prevented tariff discriminations, and ' their abrogation makes discrimination "suicidal". Now as to the "benefits" of the undervaluation privileges granted in the agreements: Then, too, there has been a gradual growth of our exports. Lower duties on imported articles covered by the agreements have resulted in increased importations, and the ships bringing them have returned with cargoes from this country, made up of shipments' given special rates. Yes, there were lower duties and increased importations under the pernicious agreements. Was that beneficial to American labor and industry? Compared with 1908, the im- ports for 1909 show an increase of nearly $120,000,000. Of these nearly $44,000,000 were dutiable and displaced fully double the quantity of articles of domestic production. Then, too, our exports decreased nearly $200,000,000 under these "helpful" agreements, and our favorable trade balance fell off more than $315,000,000. The "helpfulness" of this enor- mous loss in a period of depression must appeal strongly to the "well known official." There is, however, one spasm of sense in this statement: As to Cuba, to which a concession was granted on sugar im- ports (and all other Cuban products) the United States has been a distinct loser, our revenue falling off $10,000,000 during the last year. We were morally bound to assist Cuba, however, the officials say, because of the activity displayed in her behalf, so that this deficit is counted up to the profit and loss account. But even here only a part of the truth is told. No men- tion is made of the $50,000,000 which we are sending to Cuba every year over and above our sales to Cuba, and RECIPROCITY 181 which is spent by the Cuban people in the purchase of goods from European countries. Nor does it appear that the "well known official" is aware of the fact that the more than $10,000,000 a year of revenue lost to the United States Treasury by reason of the concessions on imports from Cuba finds its way almost entirely to the coffers of the Sugar Trust and the Cigar and Tobacco Trusts. It would seem that in Washington the vacation season is the silly season. American Economist. 44: 92. October 15, 1909. "Reciprocity" with Cuba. Our Consul-General at Havana reports progress in the development of Cuban industries by American capital at the expense of competing American industries. During the last fiscal year there have been imported into this country from Cuba something over 250,000 packages of vegetables and fruit, including 24,348 packages of oranges and grapefruit. As our own area for producing these commodities — except a few strictly tropical fruits — is ample, and as experience has shown the regular Dingley tariff to be no higher than necessary to conserve the American market for American farmers, the 20 per cent, reduction under which these farm products enter this country is -an actual bounty to that amount in aid of foreigners, in their competition with our own people. We should not have said "foreigners" The Consul-General reports that these imports "represent ten years of American endeavor" in the exploitation of Cuba — ■ that is to say, the endeavor of expatriated American capi- tal. The United States government, in effect, proposes to any American who will invest money in Cuba a bounty of 20 per cent, of the regular duty to make it more profitable for him to invest his money in Cuba than to invest it in this country. There could hardly be worse statesmanship. Happily we are not likely to get any more such treaties, but that with 182 SELECTED ARTICLES Cuba still persists and is likely to persist until the people of that part of the United States which lies a little back from the Atlantic coast fully understands what is done to them in the interest of American speculators. Then it will be ended. At one time the sentiment suggested by the en- gaging term "reciprocity" had a strong hold on the Ameri- can people and was worked for all it was worth in the in- terest of shrewd American capitalists. In the case of Hawaii it built up some great American sugar fortunes and annexation followed. And expatriated capital expects to ac- complish the same result in the case of Cuba. — San Fran- cisco "Chronicle'' American Economist. 45: 206. May 6, 1910. Experiences in "Reciprocity". (Correspondence American Economist) Washington, D. C, April 28, 1910. — Early negotiations for reciprocity treaties is one of the things contemplated by President Taft. He agreed with the Canadian authorities to take up that question, and already some work has been done on the subject. The President believes that a reci- procity treaty can be negotiated with great advantage to both this country and to Canada, and takes a similar view with regard to such treaties with Germany, France, and other countries. President Roosevelt, when he first occu- pied the White House held similar views, and probably does yet. But there has never been substantial backing in Congress in favor of this sort of tariff dickering. The lead- ers in both houses look with suspicion upon them, and for that reason it has been difficult to get agreements of that kind ratified. President McKinley appointed Mr. Kasson of Iowa to negotiate such treaties and he spent a good deal of time and money in getting up a bad set of dickers with France and other nations. They were considered by a Senate com- mittee and discussed to some extent in executive session, RECIPROCITY 183 but there was very emphatic opposition to them, and so, with the consent of President McKinley they were never pressed. Mr. Aldrich and other Republican senators regard- ed -those Kasson treaties as preposterous. They could hardly believe that President McKinley really favored them, or that he was even familiar with what Mr. Kasson had done in that direction; and there was never any evidence that President McKinley took any particular interest in them. He made no recommendations to the Senate on the subject, but simply sent the treaties for consideration. The public has been led to believe that great results in the way of increased trade were accomplished fjy the reci- procity treaties formerly in force, and probably a large pro- portion of the people now believe that this country lost when it abrogated the treaty with Canada and would profit if another o.ne were negotiated and carried into effect. A treaty confined to natural products would not be favorable now, and there is hardly a remote possibility, if the Repub- lican leaders in the Senate are authority on the subject, of the ratification of such a treaty. It would also have 'to meet the approval of the House because of its charge of the tariff law. The One-Sided Canadian Treaty As an illustration of the effect of the reciprocity treaty with Canada, which existed from 1855 to 1866, the exports and imports during that time may be quoted. That treaty provided for the free admission into either country from the other of breadstuffs, provisions, live animals, fruits, fish, poultry, hides and skins, furs, stone, ores and metals, timber and lumber, unmanufactured cotton, flax and hemp, and unmanufactured tobacco — the list of articles being identical for each country. The treaty went into effect on March 16, 1855, and ended on March 17, 1866. For the fiscal year ending June 30, 185s, the United States exported to Canada $27,741,808 in value of goods and imported from that coun- try $15,118,289. The next year the exports increased to the extent of $1,283,541 and the imports from Canada increased 184 SELECTED ARTICLES $822,302. The imports and exports fluctuated during the war period, the imports being larger in i860 than the ex- ports, and both being about the same in 1861, while in 1862 and 1863 the exports were the largest, but in 1864 the -im- ports from Canada were over $3,000,000 greater than the ex- ports to that country, and in 1865 the imports were about $5,000,000 greater than the exports. In 1866 they were $24,000,000 greater, which was the year the treaty was abro- gated. But the Canadians had got their trade so well es- tablished on this side that their exports to this country largely exceeded our exports to Canada for the next seven years. Reciprocity Results with Other Nations The reciprocity situation with other nations does not differ materially with that of Canada. Before the Hawaiian Islands were annexed to the United States we had a reci- procity treaty with that country, lasting from 1876 until the time the country became a part of the United States. During all that time the imports from those islands were two and three times as great as the exports to those islands. In 1880 the imports were more than double the exports from the United States, and in 1890 the imports were three times as much as the exports, and they were the same in 1898. So that as far as trade purposes were concerned it was a very one-sided arrangement, to the disadvantage of this country. Central American Treaties There was a reciprocity agreement with Guatemala last- ing from May 30, 1892, to August 27, 1894, when the Demo- crats annulled it. The exports from the United States in 1891, the year before the treaty took effect, were larger than at any time while it was in effect, but the exports were always less than the imports. The agreement with Honduras, which went into effect in 1892, was similar in its results. The imports the last year of the treaty were in value $765,138, while the exports to Honduras were $558,511. RECIPROCITY 185 With Nicaragua there was a somewhat similar experi- ence. The year before the agreement took effect the im- ports from Nicaragua and the exports to that country were larger than they were any year the treaty was in existence. The exports were $1,692,942 in 1891, but in 1893, the year after the arrangement took effect, they were only $937,859, and they were still less the next year, though the imports from Nicaragua were $1,400,236 in 1893 and $1,564,472 in 1894, the last year of the treaty. The exports to Salvador ' declined every year ' the ar- rangement was in effect, but the imports were the largest the last year, being $1,391,611 greater in that year than they were in 1891, the year before the treaty took effect. The exports from the United States were $88,765 less the last year of the arrangement than the year before it took effect. Under the treaty with the British West Indies the ex- ports from the United States to those countries the year before the arrangement took effect were in value $9,709,138, and they had declined in 1893 under the treaty to $8,044,846, and were the last year of the treaty $8,512,016, but the im- ports, which were $12,440,132 the first year of the arrange- ment exceeded $16,000,000 the second year and were $13,- 017,178 the last year. The arrangement with Santo Domingo showed up to a little better extent, the exports amounting to $1,143,479 the first full year of the treaty and to $1,768,602 the last year, but the imports, which were $2,293,748 the first year, in- creased to $3,200,852 the last year. In all those cases the countries with which the arrange- ments were made derived the most advantage from them. So far as trade is concerned the United States obtained no apparent advantage whatever, when the exports from this country were taken into consideration. Big Stuns Paid to Cuba for "Reciprocity" Cuba has been pointed to as one country from which valuable results were obtained under a reciprocity treaty. But the figures do not bear out that statement. The first 186 SELECTED ARTICLES reciprocity agreement with Cuba was negotiated with Spain, and went into effect September, 1891. For the fiscal year 1892 the imports from Cuba increased $6,000,000 over the previous year, and the exports to Cuba increased something over $5,000,000. The next year the imports increased less than $1,000,000, while the exports increased a little over $6,000,000. The last year of the treaty the imports declined $3,000,000 and the exports $4,000,000, the total imports from Cuba reaching $75,678,261 and the exports to Cuba §20,125,- 321. There was certainly nothing in those figures to make out anything like real reciprocity with Cuba. The second treaty with Cuba was negotiated when it became an independent nation and took effect December 27, 1903. Under that agreement Cuba received a 20 per cent, reduction from the Dingley rates of duty. The chief imports from Cuba are sugar and tobacco. The imports from Cuba in 1902 aggregated $34,694,684, and had exceeded that fig- ure only once (in 1901) in six years. The imports in the fiscal year 1903 were $52,942,790. The treaty took effect in December of that year, and the im- ports from Cuba for each fiscal year since, with the exports to Cuba, and the amount of duty which the United States has lost owing to the treaty, are as follows: Reduction of duty Imports Exports in favor of Year from Cuba to Cuba Cuba 1904 $76,983,418 $25,810,812 $8,000,000 1905 86.304,259 36,407,932 8.954,696 1906 84.979,821 46,377,277 10,982.170 1907 97,441,690 48,330,913 13,161,898 190S 85,284,692 46.500,800 10,537,921 1909 96,722,193 42,629.871 13,000,000 1910 -..•99,000,000 •50,215,769 •Partly determined Xot yet determined Under the treaty exports have nearly doubled while im- ports from Cuba have practically trebled, as the effect of the treaty, as they were running previous to 1903 at about $34,000,000, whereas they have now reached nearly $100,000,- 000. At the same time the consumer in this country has got sugar no cheaper and has paid enormous sums annually, RECIPROCITY 187 probably reaching $14,000,000 for the present fiscal year, as a present to Cuba. The United Kingdom and several other countries have increased their exports of manufactures to Cuba relatively greater than the United States, while this treaty has been in effect. Other Unprofitable Treaties Under the treaty with Porto Rico imports increased and exports decreased. With Brazil there was a similar result. The first year of the arrangement imports from that country increased $35,000,000, reaching $118,633,604, while the exports to Brazil increased to the extent of $71,627 only, the total reaching $14,291,873. In the next year the exports to Bra- zil were $825,000 less than they were the first year. The ex- ports to Brazil were greater trje two years following the annulment of the agreement than while it was in effect. The first year of the agreement with Austria-Hungary imports increased $2,300,000, while exports to that country declined $1,000,000, the total of the exports being $571,037, and the total of the imports being $10,054,501. The first year of the treaty with Germany showed an increase in imports from that country of $14,000,000 and a decrease in exports to that country of $22,000,000. No Benefit in the Figures It is not necessary to give any more statistics to show that the falsity of the statements that this country was greatly benefited, in a trade sense, by reciprocity treaties. The very opposite is the fact, as shown by the statistics of our government. That is why Mr. Aldrich and the other Republican leaders in the Senate as, well as in the House were not in favor of extending trade in that way. Canada has been the most obstinate of any nation we have had negotiations with on this subject. She is aided to a large extent in the United States by the ignorance of newspaper writers on this topic. But Congressmen when they under- take to ratify treaties study the question and investigate the facts, and that is the reason the Kasson treaties were 1 88 SELECTED ARTICLES pigeon-holed, as will be similar treaties in the future, pro- viding any such are sent to Congress. The surprise of some members of Congress over Senator Root's declaration in favor of a treaty with Canada confined to natural prod- ucts seems to be fully justified by the circumstances. American Economist. 47: 20. January 13, 1911. Chasing the Reciprocity Rainbow. The attitude of the farmers of the Canadian Xorthwest regarding protection and free-trade is not altogether un- like the attitude of certain people in X'ew England. The Canadian farmers are fierce for free-trade in farm products. They have a big surplus to dispose of, and if they are al- lowed to put their stuff over the border without paying any tariff they are perfectly willing that the industries of Eastern Canada should be sacrificed on the altar of free- trade. Also the reciprocity shouters of Xew England want free-trade in Canada's farm products, so that they may get their food-stuffs cheaper, and if they can have this privilege the}' are perfectly willing to sacrifice the American farm- ers of the food producing sections of the Middle West on the altar of free-trade. But there is a difference. The Ca- nadian farmers are free-traders and don't hesitate to say so; while the Xew England reciprocity shouters claim to be protectionists. The Canadian farmers are honest and con- sistent; the Xew Englanders are not. But neither the Canadian farmers nor the Xew Eng- land near-free-traders are likely to get what they want. American farmers are so big an element in American poli- tics that no political party can afford to trade off their rights and interests in a reciprocity dicker which would let in Canada's competing farm products free of duty. Xeither the Republican nor the Democratic party would dare to do such a thing. On the other hand, the industrialists of Eastern Canada are so strong in the large centers of popu- lation that no Canadian government will take the risk of RECIPROCITY i8g trading off their rights and interests in a reciprocity dicker which would let in American manufactures at low duties or no duties. This situation is so perfectly obvious that Presi- dent Taft ought to see it clearly. Yet the dream of reci- procity with Canada continues to be dreamed at Washing- ton. In a dispatch to the New York Tribune from Wash- ington, December 22, we read: In preparation for negotiations on Canadian reciprocity Presi- dent Taft held an extended conference with Secretary Knox and Chandler Anderson, counselor of the State Department, who was recently appointed to the place made vacant by the death of Henry M. Hoyt. The prospects for a successful issue of the negotiations are brighter at present than they have been at any other time since the subject was brought up in connection with the tariff agree- ment by which Canada obtained the minimum rates under the Payne-Aldrich law. So far no serious obstacles have arisen. President Taft's efforts to pave the way for the negotiations have been unusually successful and there has been much evidence of a responsive feeling in Canada. The negotiations will be taken up directly with the Cana- dian representatives early in January in AVashington. Mr. An- derson has been giving most of his time to the question and carrying on the investigations interrupted by the death of Mr. Hoyt. The conference to-day was for the ' purpose of gathering up the loose ends and mapping out the field to be covered by the agreement. Reciprocity has been well defined as "a sharp bargain between sharp bargainers, one or the other of whom is cer- tain to get the best of the bargain." Another good defini- tion would be: "Reciprocity is a dishonest scheme con- trived by selfish men whereby one producing interest is sacrificed for the benefit of some other producing interest." In practical operation as between the United States and Canada, reciprocity fits both of these definitions. Both parties are trying to drive a sharp bargain. Canada is fig- uring how she can help her farmers at the expense of Amer- ican farmers and without paralyzing Canadian industries, and the United States is figuring how to help American manufacturers without hurting American farmers. The sharp bargainers on both sides are going to fall down. The things they are trying to do can not be done without in- volving unpleasant political consequences to both bargain- ers. President Taft is chasing a reciprocity rainbow. 190 SELECTED ARTICLES American Economist. 47: 62-6. February 3, ign. Canadian Agreement. Following is the official draft of President Taft's mes- sage of January 26, 191 1, to the Congress of the United States, announcing the terms of the proposed "reciprocity" agreement with Canada, together with tabulated statements showing the new rates of duty: Special Message To the Senate and House of Representatives: In my annual message of December 6, 1910, I stated that the policy of broader and closer trade relations with the Dominion of Canada, which was initiated in the adjustment of the maximum and minimum provisions of the Tariff act of August S, 1909, had proved mutually beneficial and that it justified further efforts for the readjustment of the commer- cial relations of the two countries. I also informed you that, by my direction, the Secretary of State had dispatched two representatives of the Department of State as .special commissioners to Ottawa to confer with representatives of the Dominion government, that the}- were authorized to take steps to formulate a reciprocal trade agreement, and that the Ottawa conferences thus begun, had been ad- journed to be resumed in Washington. On the 7th of the present month two cabinet ministers came to Washington as representatives of the Dominion government, and the conferences were continued between them and the Secretary of State. The result of the nego- tiations was that on the 21st instant a reciprocal trade agree- ment was reached, the text of which is herewith transmitted with accompanying correspondence and other data. Controversies That Have Been Eliminated One by one the controversies resulting from the uncer- tainties which attended the partition of British territory on the American continent at the close of the Revolution, and RECIPROCITY 191 which were inevitable under the then conditions, have been eliminated — some by arbitration and some by direct nego- tiation. The merits of these disputes, many of them ex- tending through a century, need not now be reviewed. They related to the settlement of boundaries, the definition of rights of navigation, the interpretation of treaties, and many other subjects. Through the friendly sentiments, the energetic efforts, and the broadly patriotic views of successive administrations, and especially of that of my immediate predecessor, all these questions have been settled. The most acute related to the Atlantic fisheries, and this long-standing controversy, after amicable negotiation, was referred to The Hague Tri- bunal. The judgment of that august international court has been accepted by the people of both countries and a satis- factory agreement in pursuance of the judgment has ended completely the controversy. An equitable arrangement has recently been reached between our Interstate Commerce Commission and the similar body in Canada in regard to through rates on the transportation lines between the two countries. Identity of Interest of Two Peoples The path having been thus opened for the improvement of commercial relations, a reciprocal trade agreement is the logical sequence of all that has been accomplished in disposing of matters of a diplomatic and controversial char- acter. The identity of interest of two peoples linked to- gether by race, language, political institutions, and geogra- phical proximity offers the foundation across the boundary of the thrifty and invancement of our own country by the migration across the boundary of the thrifty and industrious Canadians of English, Scotch, and French origin is now re- paid' by the movement of large numbers of our own sturdy farmers to the northwest of Canada, thus giving their labor, their means, and their experience to the development of that section, with its agricultural possibilities. The guiding motive in seeking adjustment of trade rela- 192 SELEC'I'ED ARTICLES tions between two countries so situated geographically should be to give play to productive forces as far as prac- ticable, regardless of political boundaries. While equivalen- cy should be sought in an arrangement of this character, an exact balance of financial gain is neither imperative nor at- tainable. Xo yardstick can measure the benefits to the two peoples of this freer commercial intercourse and no trade agreement should be judged wholly by custom house statis- tics. The Need of the Hour is a Broad axd Statesmanlike View We have reached a stage in our own development that calls for a statesmanlike and broad view of our future eco- nomic status and its requirements. We have drawn upon our natural resources in such a way as to invite attention to their necessary limit. This has properly aroused effort to conserve them to avoid their waste, and to restrict their use to our necessities. We have so increased in population and in our consumption of food products and the other necessities of life, hitherto supplied largely from our own country, that unless we materially increase our production we can see before us a change in our economic position, from that of a country selling to the world food and natural products of the farm and forest, to one consuming and im- porting them. Excluding cotton, which is exceptional, a radical change is already shown in our exports in the falling off in the amount of our agricultural products sold abroad and a corresponding marked increase in our manufactures exported. A far-sighted policy requires that if we can en- large our supply of natural resources, and especially of food products and the necessities of life, without substantial in- jury to any of our producing and manufacturing classes, we should take steps to do so now. We have on the north of us a country contiguous to ours for three thousand miles, with natural resources of the same character as ours which have not been drawn upon as ours have been, and in the de- velopment of which the conditions as to wages and charac- ter of the wage earner and transportation to market differ RECIPROCITY 193 but little from those prevailing with us. The difference is not greater than it is between different states of our own country or between different Provinces of the Dominion of Canada. We Should Get Rid of an Obstructive or Prohibitory Tariff Ought we not, then, to arrange a commercial agreement with Canada, if we can, by which we shall have direct ac- cess to her great supply of natural products witliout an ob- structing or prohibitory tariff? This is not a violation of the protective principle, as that has been authoritatively an- nounced by those who uphold it, because that principle does not call for a tariff between this country and one whose con- ditions as to production, population, and wages are so like ours, and when our common boundary line of three thou- sand miles in itself must make a radical distinction between our commercial treatment of Canada and any other country. The Dominion has greatly prospered. It has an active, aggressive, and intelligent people. They are coming to the parting of the ways. They must soon decide whether they are to regard themselves as isolated permanently from our markets by a perpetual wall or whether we are to be com- mercial friends. If we give them reason to take the former view, can we complain if they adopt methods denying ac- cess to certain of their natural resources except upon con- ditions quite unfavorable to us? A notable instance of such a possibility may be seen in the conditions surrounding the supply of pulp wood and the manufacture of print paper, for which we have made a conditional provision in the agreement, believed to be equit- able. Should we not now, therefore, before their policy has become too crystallized and fixed for change, meet them in . a spirit of real concession, facilitate commerce between the two countries, and thus greatly increase the natural resourc- es available to our people? I do not wish to hold out the prospect that the unre- stricted interchange of food products will greatly and at once reduce their cost to the people of this country. More- 194 SELECTED ARTICLES over, the present small amount of Canadian surplus for ex- port as compared with that of our own production and con- sumption would make the reduction gradual. Excluding the element of transportation, the price of staple food products, especially of cereals, is much the same the world over, and the recent increase in price has been the result of a world- wide cause. But a source of supply as near as Canada would certainly help to prevent speculative fluctuations, would steady local price movements, and would postpone the effect of a further world increase in the price of leading commodities entering into the cost of living, if that be inevitable. In the reciprocal trade agreement numerous additions are made to the free list. These include not only food com- modities, such as cattle, fish, wheat, and other grains, fresh vegetables, fruits, and dairy products, but also rough lumber and raw materials useful to our own industries. Free lum- ber we ought to have. By giving our people access to Ca- nadian forests we shall reduce the consumption of our own, which, in the hands of comparatively few owners, now have a value that requires the enlargement of our available tim- ber resources. "In Accord With the Exemption of Raw Material from Duty" Natural, and especially food, products being placed on the free list, the logical development of a policy of reciproc- ity in rates on secondary food products, or foodstuffs partly manufactured, is, where they cannot also be entirely exempted from duty, to lower the duties in accord with the exemption of the raw material from duty. This has been followed in the trade agreement which has been negotiated. As an example, wheat is made free and the rate on flour is equalized on a lower basis. In the same way, live animals being made free, the duties on fresh meats are substantially lowered. Fresh fruits and vegetables being placed on the free list, the duties on canned goods of these classes are re- duced. Both countries in their industrial development have to RECIPROCITY 195 meet the competition of lower-priced labor in other parts of the world. Both follow the policy of encouraging the de- velopment of home industries by protective duties within reasonable limits. This has made it difficult to extend the principle of reciprocal rates to many manufactured com-' modities, but after much negotiation and effort we have suc- ceeded in doing so in various and important instances. Benefits to Agricultural Implement Makers The benefit to our widespread agricultural implement in- dustry from the reduction of Canadian duties in the agree- ment is clear. Similarly, the new, widely distributed and expanding motor vehicle industry of the United States is given access to the Dominion market on advantageous terms. My purpose in making a reciprocal trade agreement with Canada has been not only to obtain one which would be mutually advantageous to both countries, but one which also would be truly national in its scope as applied to our own country and would be of benefit to all sections. The cur- rents of business and the transportation facilities that will be established forward and back across the border cannot but inure to the benefit of the boundary states. Some read- justments may be needed, but in a very short period the advantage of the free commercial exchange between com- munities separated only by short distances will strikingly manifest itself. That the broadening of the sources of food supplies, that the opening of the timber resources of the Dominion to our needs, that the addition to the supply of raw materials, will be limited to no particular section does not require demonstration. The same observation applies to the markets which the Dominion offers us in exchange. As an illustration, it has been found possible to obtain free entry into Canada for fresh fruits and vegetables — a matter of special value to the South and to the Pacific coast in dis- posing of their products in their season. It also has been practicable to obtain free entry for the cottonseed oil in the South — a most important product with a rapidly expanding consumption in the Dominion. 196 SELECTED ARTICLES The entire foreign trade of Canada in the last fiscal year, 1910, was $665,000,000. The imports were $376,000,000, and of this amount the L T nited States contributed more than ^223,000,000. The reduction in the duties imposed by Canada will largely increase this amount and give us even a larger share of her market than we now enjoy, great as that is. Chiefly Affects Cost of Living The data accompanying the text of the trade agreement exhibit in detail the facts which are here set forth briefly and in outline only. They furnish full information on which the legislation recommended may be based. Action on the agreement submitted will not interfere with such revision of our own tariff on imports from all countries as Congress may decide to adopt. Reciprocity with Canada must necessarily be chiefly con- fined fn its effect on the cost of living to food and forest products. The question of the cost of clothing as affect- ed by duty on textiles and their raw materials, so much mooted, is not within the scope of an agreement with Canada, because she raises comparatively few wool sheep, and her textile manufactures are unimportant. Will Cemext Friendly Relations This trade agreement, if entered into, will cement the friendly relations with the Dominion which have resulted from the satisfactory settlement of the controversies that have lasted for a century, and further promote good feeling between kindred peoples. It will extend the market for numerous products of the United States among the inhabi- tants of a prosperous neighboring country with an increas- ing population and an increasing purchasing power. It will deepen and widen the sources of food supply in contiguous territory, and will facilitate the movement and distribution of these foodstuffs. The geographical proximity, the closer relation of blood, common sympathies, and identical moral and social ideas fur- RECIPROCITY IP; nish very real and striking reasons why this agreement ought to be viewed from a high plane. Feels That He Has Correctly Interpreted the Wish of the American People Since becoming a nation, Canada has been our good neighbor, immediately contiguous across a wide continent without artificial or natural barrier except navigable waters used in common. She has cost us nothing in the way of preparations for defense against her possible assault, and she never will. She has sought to agree with us quickly when differences have disturbed our relations. She shares with us common traditions and aspirations. I feel I have correctly inter- preted the wish of the American people by expressing in the arrangement now submitted to Congress for its ap- proval, their desire for a more intimate and cordial relation- ship with Canada. I therefore earnestly hope that the meas- ure will be promptly enacted into law. Win. H. Taft. The White House, January 26, 191 1. J'iezv of Canadian Negotiators How the Agreement Is to Affect Wood Pulp and Paper Washington, January 21, 191 1. Dear Mr. Secretary: — 1. The negotiations initiated by the President several months ago, through your communication to His Excellency the British Ambassador, respecting a reciprocal tariff arrangement between the United States and Canada, and since carried on directly between represen- tatives of the governments of the two countries, have now, we are happy to say, reached a stage which gives reasonable assurance of a conclusion satisfactory to both countries. 2. We desire to set forth what we understand to be the contemplated arrangement and to ask you to confirm it. 3. It is agreed that the desired tariff changes shall not iq8 : SELECTED ARTICLES take the formal shape of a treaty, but that the governments of the two countries will use their utmost efforts to bring about such changes by concurrent legislation at Washing- ton and Ottawa. 4. The governments of the two countries having made this agreement from the conviction that, if confirmed by the necessary legislative authorities, it will benefit the people on both sides of the border line, we may reasonably hope and expect that the arrangement, if so confirmed, will remain in operation for a considerable period. Only this expecta- tion on the part of both governments would justify the time and labor that have been employed in the maturing of the proposed measures. Both Governments Free to Make Changes in the Tariff Nevertheless, it is distinctly understood that we do not attempt to bind for the future the action of the United States Congress or the Parliament of Canada, but that each of these authorities shall be absolutely free to make any change of tariff policy or of any other matter covered by the pres- ent arrangement that may be deemed expedient. We look for the continuance of the arrangement, not because either party is bound to it, but because of our conviction that the more liberal trade policy thus to be established will be viewed by the people of the United States and Canada as one which will strengthen the friendly relations now hap- pily prevailing and promote the commercial interests of both countries. 5. As respects a considerable list of articles produced in both countries, we have been able to agree that they shall be reciprocally free. A list of the articles to be admitted free of duty into the United States when imported from Canada, and into Canada when imported from the United States, is set forth in Schedule A. 6. As respects another group of articles, we have been able to agree upon common rates of duty to be applied to such articles when imported into the United States from Canada or into Canada from the United States. A list of RECIPROCITY 199 these articles, with the rates of duty, is set forth in Schedule B. 7. In a few instances it has been found that the adoption of a common rate will be inconvenient and therefore excep- tions have to be made. 8. Schedule C specifies articles upon which the United States will levy the rates therein set forth when such ar- ticles are imported from Canada. 9. Schedule D specifies articles upon which Canada will levy the rates therein set forth when such articles are im- ported from the United States. Can Do Nothing in the Exportation of Pulp Wood 10. With respects to the discussions that have taken place concerning the duties upon the several grades of pulp, printing paper, etc. — mechanically ground wood pulp, chemi- cal wood pulp, bleached and unbleached, news printing pa- per and other printing paper and board made from wood pulp, of the value not exceeding four cents per pound at the place of shipment — we note that you desire to provide that such articles from Canada shall be made free of duty in the United States only upon certain conditions respecting the shipment of pulp wood from Canada. It is necessary that we should point out that this is a matter in which we are not in a position to make any agreement. The restrictions at present existing in Canada are of a Provincial character. They have been adopted by several of the Provinces with regard to what are believed to be Provincial interests. We have neither the right nor the desire to interfere with the Provincial authorities in the free exercise of their constitu- tional powers in the administration of their public lands. Must Be, For the Present, Inoperative The provisions you are proposing to make respecting the conditions upon which these classes of pulp and paper may be imported into the United States free of duty must neces- sarily be for the present inoperative. Whether the Provin- 200 SELECTED ARTICLES cial governments will desire to in any way modify their regulations with a view to securing the free admission of pulp and paper from their Provinces into the market of the United States, must be a question for the Provincial authori- ties to decide. In the meantime, the present duties on pulp and paper imported from the United States into Canada will remain. Whenever pulp and paper of the classes already mentioned are admitted into the United States free of duty from all parts of Canada, then similar articles, when im- ported from the United States, shall be admitted into Canada free of duty. Customs Regulations Necessary ii. The tariff changes proposed might not alone be suf- ficient to fully bring about the more favorable conditions which both parties desire. It is conceivable that customs regulations which are deemed essential in some cases might operate unfavorably upon the trade between the United States and Canada and that such regulations, if made with- out due regard to the special conditions of the two countries, might to some extent defeat the good purpose of the present arrangement. It is agreed that the utmost care shall be taken by both governments to see that only such customs regulations are adopted as are reasonably necessary for the protection of the treasury against fraud; that no regulation shall be made or maintained which unreasonably hampers the more liberal exchange of commodities now proposed; that representa- tions on either side as to the unfavorable operation of any regulation will receive from the other all due consideration, with the earnest purpose of removing any just cause of com- plaint; and that, if any further legislation is found necessary to enable either government to carry out the purpose of this provision such legislation will be sought from Congress or Parliament as the case may be. As to Fishinc Privileges 12. The government of Canada agree that, until other- wise determined by them, the licenses hitherto issued to RECIPROCITY 201 United States fishing vessels under the provisions of Section 3 of Chapter 47 of the Revised Statutes of Canada, granting to such vessels certain privileges on the Atlantic coast of Canada shall continue to be issued and that the fee to be paid to the government of Canada for such license by the owner or commander of any such United States vessel shall hereafter be one dollar per annum. 13. It is understood that upon a day and hour to be agreed upon between the two governments the President of the United States will communicate to Congress the con- clusions now reached and recommend the adoption of such legislation as may be necessary on the part of the United States to give effect to the proposed arrangement. 14. It is understood that simultaneously with the send- ing of such communication to the United States Congress by the President, the Canadian government will communi- cate to the Parliament of Canada the conclusions now reached and will thereupon take the necessary steps to pro- cure such legislation as is required to give effect to the proposed arrangement. 15. Such legislation on the part of the United States may contain a provision that it shall not come into operation until the United States government are assured that cor- responding legislation has been or will be passed by the Parliament of Canada; and in like manner the legislation on the part of Canada may contain a provision that it shall not come into operation until the government of Canada are assured that corresponding legislation has been passed or will be passed by the Congress of the United States. Yours faithfully, W. S. Fielding, Wm. Patterson. The Honorable P. C. Knox, Secretary of State, Washington, D. C. Special Stipulations as to Pulp Wood, Pulp and Paper That portion of the letter of the Canadian ministers which relates to pulp wood, pulp, and paper is as follows: 202 SELECTED ARTICLES Pulp of wood mechanically ground; pulp of wood, chemi- cal bleached or unbleached; news print paper, and other paper and paper board, manufactured from mechanical wood pulp or of which such pulp is the component material of chief value, colored in the pulp, or not colored, and valued at not more than four cents per pound, not including printed or decorated wall paper. Provided, That such paper and board, valued at four cents per pound or less, and wood pulp, being the products of Canada, when imported therefrom directly into the United States, shall be admitted free of duty, on the condi- tion precedent that no export duty, export license fee, or other export charge of any kind whatsoever (whether in the form of additional charge or license fee or otherwise) or any prohibition or restriction in any way of the exportation (whether by law, order, regulation, contractual relation, or otherwise, directly or indirectly) shall have been imposed upon such paper, board, or wood pulp, or the wood used in the manufacture of such paper, board or wood pulp, or the wood pulp used in the manufacture of such paper or board. Provided also, That such wood pulp, paper or board, be- ing the products of the United States shall only be admitted free of duty into Canada from the United States when such wood pulp, paper or board, being the products of Canada are admitted from all parts of Canada free of duty into the Unit- ed States. Note — It is understood that fresh fruits to be admitted free of duty into the United States from Canada do not in- clude lemons, oranges, limes, grapefruit, shaddocks, pome- los, or pineapples. It is also understood that fish oil, whale oil, seal oil and fish of all kinds, being the product of fisheries carried on by the fishermen of the United States, shall be admitted into Canada as the product of the United States, and similar- ly that fish oil, whale oil, seal oil and fish of all kinds, being the product of fisheries carried on by the fishermen of Can- ada, shall be admitted into the United States as the product of Canada. RECIPROCITY 203 American Economist. 47: 102. February 24, 191 1. Plain Truth About the Proposed Reciprocity Agreement. In its issue of February, 1911, the Canadian Textile Jour- nal presents an article entitled "Some Aspects of the Reci- procity Deal." It is an expression from the Canadian side which might well claim attention on the American side of the border. At the very outset of his treatment of the pro- posed bargain between the United States and Canada the Canadian editor draws attention to one peculiar fact which has escaped attention hitherto. Referring to the reciprocity treaty of 1854, he remarks: Although the Canadian commerce affected by the old treaty- was practically confined to lumber, fish and farm products, and presented a comparatively simple proposition, it took eight years of discussion and negotiations before that treaty was con- cluded. Now it is proposed to deal with a vastly more complex range of industry and trade, and an agreement, framed by two gentlemen on each side, after six months of intermittent study, ' revolutionizing the economics of a hemisphere, is presented to both countries in the form of an ultimatum, and must be ac- cepted or rejected in its entirety. Certainly the draft of the proposed agreement of to-day bears on its face evidence of a most deplorable lack of study, investigation, and collection of facts relating to eco- nomic conditions on both sides of the border which is highly discreditable to the negotiators on both sides. It is indeed remarkable that a document so fraught with vital conse- quences to 92,000,000 people on one side and 8,000,000 on the other side should have been rushed to a conclusion in so short a space as six months of superficial figuring and dickering. The result is what might have been -expected, an agreement full of faults, defects, and blunders. The Ca- nadian journal wisely observes: So long as each country maintains its own tariff it will be found, as before, that there is no half-way house between com- plete commercial union and independent fiscal systems. Unham- pered and independent action by both countries is better than the tying of knots which would only have to be undone later on, with more trouble and vexation than if each went its own way as a friendly neighbor. There is a significance in this remark that ought not to be overlooked in view of the excitement and alarm caused by annexation talk. Such talk was inevitable as a conse- 204 SELECTED ARTICLES quence of the so-called "reciprocity" negotiations and their outcome. President Taft set the pace when in his message to Congress and in his subsequent speeches in advocacy of the confirmation of the agreement, he has continually laid much stress upon the "cementing of friendly relations" with our Northern neighbors. We already had the most amic- able relations. No two countries lying side by side in the history of the world ever had more complete friendly rela- tions than Canada and the United States. Then why talk of more friendly relations? Xo wonder the Canadian loyalists and the British loyalists took alarm at a trade agreement whose present scope and ultimate objects were so openly declared to be the cultivation of "more friendly relations." This was diplomatic language, and diplomatic language, ac- cording to Talleyrand's definition, is the "art of concealing meaning with words." Champ Clark in his hope that the time might come when the American flag would float over all of Great Britain's dominions on the American continent, was only a little plainer and a little less diplomatic, for he meant very much the same thing that President Taft has been construed as meaning. Representative Bennett, of New York, only went a little farther than the Democratic leader of the House when he introduced a bill providing for the creation of a commission to bring about the annexation of Canada to the United States. Both Clark and Bennett were following the path blazed by the Presidential ax, only they were clearing the path instead of merely blazing it. What else besides ultimately closer political ties could President Taft have meant when he said: The geographical proximity, the close relationship of blood, common sympathy and identical moral and social ideas furnish very real and substantial reasons why this agreement ought to be viewed from a high plane. This is diplomatic phraseology, but it is none the less significant on that account. Its real drift and tendency have not been misunderstood either in Great Britain or by the loyalists of Canada. The Canadian Textile Journal sees some significance in RECIPROCITY 20s the fact that in the proposed new arrangement the article of wool does not appear at all. This would seem to be an in- advertence. There is no more reason why Canadian wool should be refused free entrance to our market than why free-trade should be established in a large and much more important collection of articles of farm products. If wheat, barley, live cattle and' live sheep, why not wool? It is true, as President Taft remarks in his message to Congress, that Canada "raises comparatively few wool sheep, and her tex- tile manufactures are unimportant as compared with the equivalent industries in the United States. But there is an explanation of this fact which probably did not occur to President Taft. Canada has not" protected her wool or her woolens as effectively as the United States has done. Un- der proper protection for wool and with no preferential tar- iff which permits British textile producers to undersell the woollen manufacturers of Canada, the conditions named by President Taft would not now exist. On the contrary, Can- ada would by this time have increased her flocks by many millions, and her textile weavers would be furnishing wool- len cloths that now come from England under preferential tariff reductions in favor of English weavers. From a reading of the article in the Canadian Textile Journal, which we reprint in this issue, much may be gath- ered that has a bearing on the question of the wisdom, the judgment, and economic and political consequences of the proposed tariff agreement with Canada. The conclusion is necessary and obvious that the agreement was much too hastily and imperfectly considered, and that it is so full of faults and flaws and mistakes that it ought to be rejected both by Canada and the United States. So far as the United States is concerned no such bargain should ever be permit- ted along the lines followed in the negotiations with Can- ada. If we are to alter our tariff system at all, it should be after full and careful consideration by the proper commit- tees of the American Congress and by the final judgment and approval of the American Congress itself. 206 SELECTED ARTICLES American Economist. 47: 316. May 26, 1911. Reciprocity Not Favored by the Country Generally. It is surprising to find the following in the. Camden Post- Telegram, which is, generally speaking, a good protectionist paper: Senator Briggs and Martine will vote for Canadian reciprocity when the bill comes up in the upper house of Congress. If Jer- sey interests were, likely to be harmed by this measure it would hardly get the support of these representatives of opposing po- litical parties. The prospects are that New Jersey will be bene- fited by the opening of the Canadian market to its garden prod- uce and some of its manufactures, and by the free entrance from Canada of raw materials for our factories and of lumber and other Canadian products in general use. Senator Briggs has a clearer view of the situation than the two New Jersey repre- sentatives in the lower house who voted against the administra- tion measure. We say this is surprising, not alone because the Post- Telegram, prior to the development of President Taft's as- tonishing free-trade project, had been a consistent and an intelligent advocate of protection, but because of its present short-sighted view that New Jersey is going to be benefited. Suppose that New Jersey will sell some "garden sass" to Canada, will sell some manufactures to Canada, and will get some raw materials from Canada cheaper than it has heretofore gotten them from Americn producers. Will all that, assuming it to be true, benefit Xew Jersey in the long run? No, it will not. First of all, Xew Jersey's best mar- ket both for her garden stuff and her manufactures is the market made by American consumers. Xo small part of her market for manufactures is made by Western farmers. Now, if New Jersey buys her agricultural raw materials from Canada will she sell as much as heretofore to Ameri- can farmers? Most certainly not. She will lose a market at home far more valuable than the Canadian market could possibly be. But there is something else to be considered. If the American farmers lose any portion of the American market, or if they are obliged to accept lower prices for their prod- ucts, because of free-trade, will they continue to vote pro- tection for New Jersey's manufacturers? They will not. It RECIPROCITY 207 is contrary to human nature that they should. They will smash protection when they discover that protection is not for them. Will that benefit New Jersey? Now it is possible that all this may not come to pass as a result of free-trade in farm products. We think it will, inevitably. Moreover, we think it ought to come to pass; that if protection is not for all it should be for none. But, in any event, the scheme is fraught with danger. It is a hazardous experiment with pqssible consequences of incalcul- able disaster. Then why try such an experiment? Why take such a risk? Why not stand by protection in the fu- ture as in the past? There is in that no experiment, no risk, but there is sure and certain prosperity for all. Best let well enough alone. American Economist. 47: 323. June 2, 191 1. "Reciprocity" Is Losing Ground. Arthur J. Dodge. (Correspondence American Economist) Washington, June I. — There have been indications during the past few days that President Taft is becoming seriously concerned about the prospects of the passage through the Senate of the Canadian agreement bill. Doubts regarding the safety of that measure in the Senate have been growing during the past two weeks, and it has come to be plain that the longer the measure is kept in suspense the weaker it be- comes, and the opposition grows confident that the defeat of the measure can be brought about. What appears especially to trouble President Taft is the suggestion of possible amendments to the trade agreement measure, the most important of which is said to be an amendment proposed by Senator Root, of New York, aimed to bring about what is declared is not now the case under the terms of the bill, namely, actually reciprocal exchange of wood pulp and paper, as it was claimed the negotiators of the trade agreement measure really sought to accomplish. There are two remarkable things about the present situa- 208 SELECTED ARTICLES tion as to the trade agreement bill in addition to the dimin- ishing interest in the measure and the indications of its pos- sible failure. One of these is the insistent demands by the supporters of the measure that it shall be brought to a speedy vote, and the other is the opposition to even such a salutary amendment as that proposed by Senator Root. If the Canadian agreement is all that has been claimed for it by President Taft, surely the bill should gain in strength rather than lose, the longer the matter is discussed in and out of Congress. Inevitably the opinion must be among the people of the country that a measure of this character that will not stand the closest scrutiny and the fullest pos- sible discussion and consideration must be far less worthy than President Taft and other supporters of the bill have sought to make the country believe it is.. Reason for Getting Facts In view of the fact that no industries in the country were taken into the confidence of President Taft and his Admin- istration when the Canadian trade agreement was enacted, and the further fact that no hearings of consequence were held upon it during the consideration and passage of the bill by the House of Representatives, it is not surprising that there has been an urgent demand by representatives of in- dustries that would be in a greater or less 'degree affected by the trade agreement to be heard before the Finance com- mittee of the Senate. It certainly cannot be the wish of President Taft and other supporters of the Canadian agree- ment that snap judgment shall be taken upon the people of the country and the bill rushed through, either here or in Canada, without the people of both countries thoroughly understanding what is intended to be accomplished. It is hardly sufficient for the industries of this country, at least, whose representatives have a genuine fear that serious dis- aster may flow from the operations of the trade agreement if it shall become a law, that everybody is to be satisfied with the complacent suggestion of President Taft, that if the agreement does not work satisfactorily it can be speedi- ly repealed! There ought to be and doubtless is a way for RECIPROCITY 209 ascertaining in advance, material facts with respect to the probable operations of the trade agreement, and that is what the hearings before the Finance Committee have sought to accomplish. It is difficult to explain in view of these facts why there should be such insistent opposition by the supporters of the Canadian agreement to such an amendment as that pro- posed by Senator Root, of New York, relating to the paper and pulp sections of the agreement. It must be that Presi- dent Taft and his friends, in urging the speedy passage of the Canadian agreement bill, are coming to realize the fact that, with a majority of the Republicans in both the Senate and the House opposed to this measure, it becomes rather embarassing to a Republican President and his Administra- tion to urge upon the country a measure that is thus dis- credited by a majority of his party associates. The fact should not be overlooked that not only are a majority of the Republicans in the House and Senate opposed to the meas- ure, but a clear majority of the Committee on Finance, in- cluding Republicans and Democrats, are known to be op- posed to a favorable report upon the bill. Indeed, comment has been made by a disinterested writer, in a communica- tion to a leading paper in New York, which is supporting the Canadian trade agreement, that the number of actually loyal supporters of the Canadian agreement in the United States Senate could ride in a single and not very capacious automobile! The Free-Pulp and Paper Amendment Be that as it may, it is the strangest thing in connection with the consideration of this trade agreement that only denunciation and protest is heard, when so distinguished a statesman and former adviser of Presidents at the Cabinet table, Senator Root, proposes that a change shall be made in the Canadian agreement bill whereby there shall be an actual reciprocal exchange of paper and pulp, rather than what is declared to be a "jug-handle" arrangement which would result only in paper and pulp from Canada being im- ported free of duty into the United States. It is charged 2io SELECTED ARTICLES ' by careful students of the trade agreement that if the meas- ure were passed in its present form by the Congress of the United States and approved by the President, Canada might reject the entire proposition and the result still would be that paper and pulp from Canada would come into the mar- kets of the United States free of duty. Senator Root de- clares that this is unfair. He believes that if there is to be a free admission of paper and pulp into the United States, every consideration of fairness with respect to the proposi- tion dictates that the deal shall not be wholly one-sided, but be precisely what President Taft and his friends in support- ing the trade agreement have declared, namely, an actual reciprocal exchange of all commodities touched by the pro- visions of the trade agreement bill. The opposition to the Canadian agreement has developed very strongly in the Finance committee during the past ten days. Farmers and manufacturers of paper have appeared here from many of the border states, emphatically declaring that injurious results certainly will flow from the passage of the bill in its present form. The fact has been emphasized before the committee by farmers, who are well informed re- garding trade conditions on both sides of the boundary line between this country and Canada, that there would be a serious depression in prices of American farm products without any appreciable reduction in the cost of living of finished commodities made from these raw farm products. The explanation for this is that the actual original cost of these farm products constitutes so small a relative propor- tion of the cost of the finished commodities that even if manufacturers were able to obtain the farm products at reduced prices, as a result of free Canadian competition, no appreciable reduction would thereby be brought about in the cost of the finished product to the ultimate consumer. This is an important . feature of the matter which should challenge the attention of thoughtful people throughout the country, regardless of the merits or demerits of the general so-called "reciprocity" proposition. RECIPROCITY 211 Farmers and Manufacturers Object The paper manufacturers are equally emphatic in declar- ing" that there is no justice in the proposition that their products should be subjected to absolutely free competition from the Canadian side. They base this not only upon their own testimony respecting the cost of producing wood pulp and paper in this country and in Canada, but they find un- doubted support for their contention in the reports made by the special Congressional committee and also by the Tariff board. Standing squarely upon the last Republican platform, which demands a rate of duty on competing prod- ucts at least equivalent to the difference in the cost of pro- duction in this country and in foreign countries, they very properly ask what justification there is in demanding that paper and pulp be denied that measure of protection which the Republican platform guarantees. With the prospect that the Canadian trade agreement bill will be reported out of the Finance committee within a few days, probably with no recommendation as to action by the Senate, the committee will then be called upon to give some attention to the remarkable "Free List" bill which was passed by the House without hearings and without anything that amounted to serious consideration. Intimations are given that the committee will give hearings on this bill. It may easily be predicted that the representatives of the in- dustries in the country that are threatened with disastrous competition, as a result of the free listing of their manufac- tured products, even while retaining duties upon the mate- rials from which the products are fabricated, will be able to demonstrate to the committee, to the Senate and to the country how utterly absurd this experimentation in Demo- cratic "Tariff Reform" really is. Less Than Protection is Free-Trade In the meanwhile, the Democratic majority in the House is moving to attack with the usual Democratic "blunder- 212 SELECTED ARTICLES buss" methods, the wool and woollen goods and cotton goods schedules of the Tariff. Clinging to the idea that some duties must be retained "for revenue only," the Demo- crats give evidence of turning their backs upon the former free wool policy of their party to adopt a proposition which gives neither protection nor adequate revenues. The fact seems to be entirely ignored by these tariff-tinkers that less than a fair protective rate of duty is equivalent to absolute free-trade, so far as the actual results in demoralization to labor and industry in this country are concerned. That fact was demonstrated by the last Democratic tariff law that was enacted, and it will be demonstrated by the present Democratic tariff bills if they shall ever be written into the statute books. American Economist. 47: 325. June 2, 1911. "Reciprocity"' Is More In Doubt. (Correspondence American Economist) Washington, June 1. — The testimony given so far before the Senate Finance committee in regard to the proposed measure of reciprocity with Canada shows the wisdom of the Democrats in control of the House committee having charge of the subject, in refusing to allow any hearing on the question. Despite the efforts of Mr. Xorris of the American Newspapers Publishers' Association, and others directly interested in the success of the measure, in getting men like Prof. Boyle, of Minnesota, Gov. Osborn, of Michigan, and others to come here and testify in behalf of the "reciprocity'' bill, and in working up petitions in its behalf, and asking persons to send telegrams and letters to the same effect to Senators, they have done more harm than good. "Reciprocity" Grozring Weaker The measure is weaker today than at any time since it was first introduced in Congress. The farmers and others RECIPROCITY 213 have given the strongest kind of evidence to show the un- fairness of the measure, and the enormous injury that would result from its passage, while Norris and others have been forced to admit the active part they have taken in trying to force the measure through Congress. Norris, on cross ex- amination by the Senate committee, admitted his consulta- tions with Mr. Pepper, the State Department Tariff "expert", who was sent to Ottawa to begin negotiations, and his (Nor- ris's) work in sending circulars and other documents over the country to help the bill, and of obtaining men to testi- fy, etc. How Some Men Came to Speak for the Bill When Prof. Boyle was giving his testimony he admitted that he was a "Tariff reformer," and declined to say whether or not he had been promised reimbursement for his ex- penses, etc., in coming to Washington to testify in behalf of this legislation to help develop the Canadian Northwest. Gov. Osborn, of Michigan, was almost a laughable witness for "reciprocity.' In the first place he had to admit that he owned a newspaper and would therefore be benefited by getting cheaper paper from Canada. But he declared that "wheat could not be raised in Saskatchewan in competition with our wheat fields," and that "the arable region of Can- ada is very small," and "the great Canadian Northwest can- not compete with Michigan or any other section of the United States where wheat is raised." Foolish Assertions In view of the large and rapid increase in the production of wheat, barley, etc., in the Canadian* Northwest, members of the committee were astonished at Gov. Osborn's asser- tions, and they found him equally lacking in information about the provisions of the "reciprocity" bill. Hence Sena- tor Bailey said: "I see very plainly that you have not troubled yourself with the details of this treaty at all," to which the Governor replied: "No; I believe that Canada cannot compete with us in anything." Despite the record 214 SELECTED ARTICLES of Canada's exports of cereals and other products under the reciprocity treaty that was abrogated in 1866, the Governor stuck to his assertions on this point. Seeking to Develop Plate Glass in Canada Mr. W. J. Strassburger, secretary and treasurer of the Allegheny Plate Glass Company, pointed out to the com- mittee the deceptive feature of the so-called reciprocity on plate glass in the agreement. Canada is to make a reduc- tion in her duty on plate glass of 2. l / 2 per cent., which Mr. Strassburger showed would amount to eight-tenths of 1 cent a square foot on glass from 7 to 25 square feet per plate. The reduction made to Canada by the United States would be 14^ cents, against Canada's eight-tenths of 1 cent. Mr. Strassburger said: We would not have any market for plate glass except for the tariff. We organized under the tariff and cannot exist with- out it. We pay $2.25 a day wages, while Belgium pays 65 cents, and other European countries in proportion. England has a preferential rate into Canada of 7^ P e r cent, ad valorem. France has intermediate rates, but Belgium, paying higher rates, ships four times as much of this glass to Canada as does France. Great Britain supplies 62 per cent, of the glass Canada uses. We could not ship any more there if we had free entry. We could not get men to work in this country for the European rate of wages. Under the tariff we have reduced the prices of glass from $1.75 to 30 odd cents, because of improvements in production. But even then we cannot keep out imports of such glass. The pro- posed arrangement with Canada, which produces no glass now, would simply enable Canada to build factories to supply this country with plate glass, but would not foster American industry one particle. It is deception so far as it pretends to benefit the American manufacturer and his workmen. American Economist. 47: 368. June 23, 1911. Both Sectional and Partisan. Mulhall (Okla.) Enterprise. The understanding we have always had of the word "reci- procity,'' namely, a mutual exchange, it seems to us is not carried out by this treaty. How is it figured that a 90,000,000 is a fair exchange for a 9,000,000 market. On a par with the unfairness of this exchange of goods between the United States and Canada, is the partisan man- RECIPROCITY 2is ner in which the Democrats are proposing to revise the tariffs on farm products. The tariff on food animals between Canada and the United States is taken off. The Canadian sheep owner may drive his flock across the border and shear them and sell the wool in the American market and then drive his flock back to Canada. Why not let Mexican sheep and wool come in the same> way? Because Texas is a Democratic state. For the same reason Mexican cattle cannot be driven into Texas, but Canadian cattle may be driven into Republican states on the border without paying the tariff. The wheat, oats, barley, and rye of the Northern farmer must come into competition with the Canadian farmer, tariff free; but the tobacco, sugar and rice of the southern • states are not to be on the free list. Is the method of making a tariff sectional? Is it parti- san? By such methods the Democratic party again shows its capacity for blundering, and no doubt they are consoled by the fact that they have a good sized bunch of Republican "Progressives'" to keep them company. It will only require a year's trial of such an unfair, un- patriotic partisan measure to arouse the - farmer voters to its unequal application, and then they will snow the party under with their ballots, that is responsible for such legis- lation. Not the least joyful result of the storm of ballots will be to see four or five dozen Progressive Republicans in it, up to their knees, having taken a header for private life. Journal of Political Economy, ig: 567-73. July, ign. Proposed Agreement as Viewed by the Farmer. G. C. White. Few questions of. great importance have been so unfairly presented to the reading public as the one now under dis- cussion. For this reason the efforts of this Economic So- ciety to bring together the representatives of the many classes interested at this forum for full and free discussion 216 SELECTED ARTICLES of this subject must receive the approval and praise of all .who believe that right and justice should prevail. For some reason most of the magazines of our country and the great newspapers of our cities have refrained from publishing articles other than those favorable to this agree- ment. This is partly due to the false idea, which is general, that the farmers are making excessive profits and that they could well afford to sell their products for lower prices than have prevailed during the past five years. The Census of 1900 shows the average income of the Iowa farmer to be $1,600 while his investment is over $10,000. After de- ducting interest on his investment, taxes, hired help, making allowance for depreciation, etc., the farmer has left as wages for himself and family les^ than $600. The wife helps with the work of the farm, often husking a part of the corn; the children help with the farm work from the time they are eight years old, and seldom attend school except in the winter season after they are twelve years old. Xo one will dare say $600 is excessive wages for the farmer and his family for their year's work. The Census also shows that the income and wage of the farmer in Iowa is greater than in any other state. The average gross income of the Illi- nois farmer in 1900 was about $1,400. Some will say that prices were much higher in 1910. The Census reports are not complete for 1910, but taking such reports as are avail- able from the Census and the reports of the secretary of the State Board of Agriculture of Iowa, I find the average income of the Iowa farmer for the year 1900 to be $-MOo. and this includes poultry, eggs, and dairy products. His investment has nearly doubled; wages are about 40 per cent higher, and after making the necessary deductions his net income, or rather the wage received by himself and family, is less than $800 per year. There are three points in this discussion to which I would call your attention: (1) What is the agreement? (2) Who are asking for it? (3) What are the probable re- sults? From the farmer's viewpoint the word "reciprocity'' as RECIPROCITY 217 here used is a misnomer; there is nothing reciprocal or mutual about it. The chief purpose of this agreement is to reduce the price of farm products. These are the only products admitted duty-free through this agreement except fish and rough lumber. All manufactured products will con- tinue to pay duties ranging from 20 per cent upward. The following articles by the terms of the agreement are duty free when moved from one to the other country: live animals, poultry, eggs, dairy products, fruits, honey, fish, rough lumber, and grain including corn, wheat, oats, barley, etc. So far as I can learn this includes nearly every product of the farm. While wheat is on the free list the duty is still main- tained on flour; while cattle and hogs are admitted free the duty is still maintained on dressed meat. This is done supposedly for the benefit of the miller and packer. If the purpose of this agreement is to reduce the cost of liv- ing, why not admit flour and dressed meat duty free? The consumer buys flour not wheat; meat not live cattle. Mill- ing is largely a monopoly and the large mills fix the margin for milling. The packers are now under indictment for illegal acts in combining to depress the price of live animals and to exact excessive prices for their product. It is hard to understand why the miller and packer need protection more than the farmer. The President in his message of April 5, 191 1, presents the issue squarely in these words: "We have so increased in population and in our consumption of food products and the other necessities of life, hitherto supplied largely from our own country, that unless we materially increase our production we can see before us a change in our economic position, from that of a country selling to the world food and natural products of the farm and forest, to one con- suming and importing them." Mr. James J. Hill, through his public utterances and maga- zine articles, has warned the people of this country that we were about to reach the point where we would not produce enough food to feed our population. The argument is freely 218 SELECTED ARTICLES offered that the farmer has received no direct benefit from the tariff. While this is true he has been promised that eventually he would receive a direct benefit. The lamented William McKinley made a tour of the West in October, 1894, to aid the Republican congressional ticket. His speeches were an appeal to the patriotism of the farmer and urged him to vote for the protective tariff in order that the manufacturer might pay better wages to his men; and that the farmer would be rewarded by a home market for his products at greatly enhanced prices. This has been the argument of all who attempt to justify a protective tariff to the farmers of this country. It is in tl}e nature of a con- tract that has existed for years between the consumers and the farmers. Now that the home market is about to be realized, free food from Canada is demanded and this in spite of the fact that food is shown, by the report of the Lodge Senate committee, to be much cheaper here than in European countries. The principal advocates of this co-called reciprocity are the following: The East and manufacturing districts by this means hope to get cheaper food; the large cities and especially those near the Great Lakes believe it will extend their trade with Canada; the railroads hope to haul the wheat from Canada to the United States and to return more manufactured articles from the states than are now shipped. The speculators who have invested in Canada lands believe it will largely increase the value of their holdings. Many others hope that through this agreement the farmer will be convinced that he shares none of the benfits of the protec- tive tariff, but is required to pay excessive prices for what he buys; and after its passage he will be easily induced to vote for the destruction of the protective principle. The greater part of the advocates of reciprocity in the agricul- tural states belong to this latter class. Some prominent newspapers advocate the adoption of this agreement hoping it will utterly destroy the protective tariff. That there is a general demand for cheaper food on the part of the consumer is not disputed, but the question to be RECIPROCITY 219 met here is: Would it not be far better to reduce from the other end of the line than by depressing the price on the article as it leaves the farmer? Recent investigations of the Secretary of Agriculture show that on an average the farmer gets only 50 per cent of what the consumer pays for the product. If the farmer's price is materially reduced he will curtail production because lower prices will not justify the employment of labor at present high rates, and still larger numbers of farmers' boys will be compelled to engage in commercial and professional occupations and the rural popu- lation will continue to decline. The chief reason for the decline in the rural population during the past ten years is the fact that the wages or prof- its of the farmer are less than those in other lines of busi- ness. Those who read the market pages of our great newspa- pers will not deny that the prospect of reciprocity has re- duced the prices of grain. The following from the Chicago Tribune market notes, May 26, helps to explain the marked decline in prices of farm products in recent months: "Wheat in this country from a, supply and demand standpoint is legitimately worth $1. Canadian reciprocity talk knocked from ten to fifteen cents off the price." Now if talk alone will have this effect what will free interchange amount to ten years hence? It is not what Canada produces today that we need fear but the products of future years when the vast areas are under cultivation. Not many years ago the Dakotas grew no wheat. The possibilities of wheat production in Canada are immense. It is said that less than 10 per cent of any of the Northwest territories is cultivated. These four terri- tories have an area of over 400,000 square miles; they are gently rolling, mostly prairie, with a virgin soil, fully as productive as the Dakotas, and an area eight times as great as the state of Illinois. The argument is advanced that free importation of Ca- nadian wheat will not reduce the price of corn; this is a mistake; nearly all of our wheat-growing land will produce 220 SELECTED ARTICLES corn equally as well; if the price of wheat is materially re- duced the Kansas farmer as well as the Minnesota farmer will grow corn in place of wheat, and the price of corn will decline because of excessive production. It is also claimed that because Canada does not grow corn it will not compete v, ith us in meat-production; but Ireland and Denmark are famous for their pork and send large quantities to England, yet they grow no corn. Canada will produce pork with oats and peas and better than our own. It is true that Canada is taking large numbers of our horses; the demand would not be greatly increased because of this agreement, for every immigrant may take ten head, duty free, into Canada at the present time. The inevitable result that is to follow the settling of Canada with its cheap land, producing an abun- dance of hay and oats, will be to make Canada a large ex- porter of horses within ten years. Some persons urge this agreement because Canada is a near neighbor whose people speak a common language and have common motives and by this means they hope to pro- mote closer relations. If this is the purpose why not have free interchange of all commodities; why limit it to farm products? This same argument will apply with equal force to England; the means of communication are such that Eng- land is closer to a large part of the United States than Canada. There are no advantages offered to the farmers through this agreement, should it be adopted they will be compelled to continue to sell in the lowest market in the world and buy in a market greatly consume about 40 per cent of the manufactures sold. The decline of prices of farm products will compel the farmer to curtail his purchases. These prod- ucts are over 30 per cent lower today than the average price during the three preceding years. The products of the farms of Iowa for these years were worth nearly §500,- 000,000 annually. The farmers of Iowa will have about $rso,ooo,ooo less to spend this year than last. If the mer- chants of Iowa are wise they will not purchase over 60 per cent of the amount they purchased last year; the same is RECIPROCITY 221 true of other agricultural states. Thus the decline in price is sure to react upon the manufacturer and laborer. It will be seen that no class can escape the injury that is bound to follow an attack on the prosperity of another class. In this question there is a direct conflict of interest between the agricultural classes and the manufacturing interests. If the manufacturers have reached such a condition that they must invade the world's markets and must have cheaper food and cheaper labor, as was the case in England sixty years ago, they ought to be fair and say, We are willing to abandon our fictitious basis of values and will surrender our advantages under the protective tariff in order that we may get cheaper food and cheaper labor. If the manufacturer is to receive the benefit of a protec- tive tariff on his product ranging from 50 to 100 per cent it is entirely unjust to say that the tariff shall be removed from the products of the farm, for this is the effect of this agreement, and that the farmer shall be compelled to sell in a free-trade market and buy in a highly protected one, while on the other hand the Canadian may sell in our mar- ket if to his advantage and buy from Europe or Japan as he chooses. So long as we maintain a protective tariff it is manifestly unjust to say that the agricultural classes, over 35 per cent of our population, shall receive no benefits from this policy; that the reward of their labor shall be taken from them through an unjust tariff law and given to the more favored classes who enjoy protection. If the measure of protection is to be the difference be- tween the cost of production at home and abroad with a reasonable profit added, why not apply this principle to food products. This principle applied to Canada, because of cheaper land and a virgin soil, would give us a protective tariff on food products of fully 25 per cent. The farmer in the production of grain or meat combines capital, skill, and labor, just as the man who manufactures steel, rails, cloth, or shoes, and is justly entitled to the same measure of protection. 222 SELECTED ARTICLES We have just reached the point where the tariff will enhance the prices for farm products. The farmer is not getting as good pay for his labor as other classes. He does not create fictitious prices for his products through monopo- lies. It would be far better to produce our food at home and have our own farmers prosperous consumers, than to pay our money to the Canadian farmer for his product with no assurance that he will spend any part of such money tor American goods. Our own farms will easily produce 50 per cent more food products than they are now producing if the consumer is willing to pay a reasonable price for them so that the farm- er may expend a greater amount for labor. The consumers should be patriotic enough to demand food grown by our own farmers; reduce the excessive toil taken by the middlemen and increase the wealth and pros- perity of our own states rather than lending their energies to develop northwest Canada.