^"^^^^-2^ Protection IN CANADA& Australasia CH.dHOMI.t N I76S C6^ BOUGHT WITH THE INCOME FROM THE SAGE ENDOWMENT FUND THE GIFT OF 1891 lla cffj^fi XS./.jl.i.cf.f.'j.. 5901 -isi-iV rt' RRF£626'83 The date shows w and fineness. Tobaccos Advalotemio^et Specific, ad. per Ad valorem mixed to- , cent. baccos 30 per cent.. cigars 40 per cent. Agricultural Ad valorem meat Free. Free. Products. and poultry 10 percent., other products free. Iron and Us Ad valorem 5 per Advaloremiifei Advaloremiopeioent. Manufactures. cent. cent. The Canadian Colonies resembled the Colonies of Australia in that the desire to abolish border tariffs was one of the great causes leading to federation ; but their abolition in Canada was expected to c 2 20 PROTECTION IN CANADA. develop an inter-colonial trade, which was small and unimportant, whereas in Australia it freed a large existent trade from hampering restrictions. In 1853 the total value of the trade between Canada and the maritime provinces was only $1,627,000; in 1866 it was $2,400,000, and in 1896, after thirty years of commercial union and railway and canal making, it had increased to $116,000,000. The following table, giving the tariff rates of Canada on some important articles for 1855, 1856, 1857, and 1859, shows to what a height incidental Protection had attained in the last named year : — 1855- 1856. 1857. 1859. Per cent. Per cent. Per cent. Per cent. Molasses 16 II - II 30 Sugar (refined) . . . 32 28 25 40 Sugar (other) 27* 20 194 30 Boots and shoes . . . I2i Hi 20 25 Harness ^ I2i 17 20 25 Cotton goods I2i 134 15 20 Iron goods I2i i8i 15 20 Silk goods I2J I3i 15 20 Wool goods 12^ H 15 20 As far back as 1855 a Parliamentary Committee had urged the encouragement of manufactures through the tariff, and a policy of retaliation against the United States, by levying duties on its manu- factured goods as high as the United States levied upon those from Canada. Their report stated that they " concurred in the opinion of the Secretary of THE PROVINCIAL TARIFFS. 21 the Treasury of the United States that it is no departure from the general principle of Free Trade to counteract the legislation of other countries," and recommended that " the principle of reciprocity in our commercial legislation be extended" in the manner mentioned above. It is interesting to find a Canadian Committee fifty years ago making recommendations of reciprocity indistinguishable from retaliation, and advocating Protec^on in the name of Free Trade in much the same fashion as Mr. Balfour does to-day. The Committee's advice, however, was not followed, and the Elgin Reciprocity Treaty came into effect in 1855. Its advantages to Canada were very much enhanced by the Civil War which broke out in 1861, disorganising American industry and causing a large demand for Canadian products ; but the Civil War was also the indirect but most important cause of the United States denouncing the treaty in 1866. The American people were sore and angry with Great Britain on account of the sympathy shown there for the seceding States, and were willing to strike a blow at Great Britain through Canada. The Canadians, they knew, placed a great value on the treaty, and in rescinding it there seemed a chance of eventually forcing Canada into the Union, in order to secure its markets. The ostensible reason given for putting an end to reciprocity was that Canada, by the tariff of 1859, had increased her duties on some American goods, but these were outside the scope of the treaty, and it seems the universal opinion of Canadians 22 PROTECTION IN CANADA. that they really lost its advantages through the action of the Mother Country during the war. Deprived once again of specially preserved markets, Canada was thrown upon her own resources, and sought by breaking down inter-colonial barriers, and by the construction of railways, to open new channels east and west for the trade which for some years had been flowing north and south on the tide" of reciprocity. TARIFFS IN THE DOMINION. 23 CHAPTER III. TARIFFS IN THE DOMINION. The first effect of federation upon the tariff of Canada was to bring it down below the level of 1859, since the maritime provinces would not consent to raise their duties to that height. The heaviest duties, except those on spirits and tobacco, were 25 per cent., the rate levied upon luxuries. From duties of 1 5 per cent, on most articles in com- mon use the bulk of the revenue was derived ; other articles less numerous were made dutiable at 10 per cent., and the principle of Protection was preserved in the framing of the free list. Duties on many manufactured articles were reduced, but numerous raw materials, such as iron in partial manufacture, colours when imported for the use of wall-paper manufacturers, &c., were admitted free. The duty on the total imports in 1868 averaged 12 per cent, on dutiable goods alone 20'22 per cent., this high rate being accounted for by the tariff on intoxicants and narcotics. Though it was some years before it had sub- stantial results in the Legislature, the protective spirit was steadily growing stronger in Canada, but it was protection for manufactured goods that was desired, and in 1871 the Government was obliged 24 PROTECTION IN CANADA. by popular demand to remove the duties upon grain and flour, and a petition from the Montreal Corn Exchange urged " the propriety of throw- ing off the duties on the necessaries of Hfe in order to render this country a cheaper one to live in." It might seem that farmers never fare well under Protection in new countries. When the supply of grain is less than the demand the rest of the people naturally demand cheap food ; when there is a surplus for export, and the foreign market fixes prices, the town population is always ready to generously afford any measure of Protection, since it is harmless to them and useless to the farmer, because it fails to raise prices. In 1872 another important tariff change was the removal of revenue duties upon tea and coffee, dictated as much by the policy of the United States as by a desire to lighten the burdens of taxation. These things were free in the United States, and to prevent smuggling over such an extensive border line would have been most costly and difficult. In other directions also the United States policy had great effect upon fiscal opinion in Canada. " Dumping " had already begun. Salt and numerous manufactured articles were sold by Americans at what were called " slaughter" prices in Canada, thereby occasioning great bitterness of feeling and many petitions to the Canadian Legis- lature ; but before the advent of the " National Policy" there came from 1874 to 1878 a tariff-for- TARIFFS IN THE DOMINION. 25 revenue regime. The new duties were introduced by a so-called Liberal Administration, in accord- ance with what is sometimes called a policy of Free Trade. Times were bad, and the need for revenue was urgent. The Liberal party in Canada has always shrunk from direct taxation and looked to the customs for supplies, with the result in this instance that the general rate of duty was fixed at 17J per cent, or 2 per cent, more than under the old tariff. In spite of the smuggling difficulty, and in the face of strenuous opposition, duties on tea and coffee were reimposed ; and partially manu- factured iron, free under the former tariff in order to help Canadian industry, was made dutiable at 5 per cent. Throughout the world there was at this time great commercial depression, of which Canada had its share. The bad times which the tariff was designed to meet from the revenue point of view were laid to its charge by the protectionists, who insisted that it discouraged industry. If ever, in fact, there were circumstances and a tariff well designed to popularise Protection, they were the circumstances and the tariff of Canada from 1 874 to 1 878. Free Trade with a light tariff and direct taxation upon wealth is intelligible to the masses as a liberal policy, and was adopted in later years with enthusiasm by the people of New South Wales. So-called Free Trade, with heavy and comprehensive revenue duties, which fall with peculiar weight on the poorer classes, and with the abolition of a free 26 PROTECTION IN CANADA. list designed to help local manufacturers, rouses the hostility of the latter, and fortifies them with the sympathy and help of the great bulk of the population, who dislike taxation, and resent revenue duties even more than those that are protective. When a tax falls upon tea they are aware that they pay it ; when a tax falls upon boots or clothes manufactured in the country, it is much harder to make them understand that they pay the tax in increased prices to the manufacturer. Frequently, indeed, they absolutely refuse to believe anything of the kind. The price of manufactured goods tends generally to fall throughout the world, and when the average man buys an article as cheaply after the imposition of a 25 per cent, duty as he did before it, he can with difficulty be made to see that he has paid that 25 per cent., though but for the duty he would now buy the article 25 per cent, cheaper than he did before. The policy of the Liberals in these years made real Free Trade in Canada impossible, and rendered the introduction of the " National Policy " almost inevitable. Everywhere there was dissatisfaction with the tariff and clamour for duties which would prevent the United States making a "slaughter market" of Canada. Debates on the relative merits of Free Trade and Protection became frequent in the Legislature from 1876, and in that year a Commission was appointed to inquire into the subject. It reported adversely to Protection. The following is a significant extract from the report TARIFFS IN THE DOMINION. 27 which it submitted to Parliament, and is a powerful argument against high duties : — " The evidence taken before the Committee shows that the average yearly produce of each workman engaged in manufacturing is about $1,000 worth of manufactured goods. It is said that if these goods, now paying 17J per cent., were increased to 25 per cent., the greater portion of them might be produced in this country. If this statement be taken as true, looking to the age and sex of our manufacturing population, it would give employment to 50,000, who would include 100,000 more dependent upon them. The customs revenue would be diminished by $9,000,000. The new population would pay upon the articles still taxable on the list $225,000; the remaining $8,775,000 would be required to be made up in some other way, and this tax of 25 per cent., added to the price of the goods produced at home, would impose a burden of $12,500,000 upon the consumers, as the condition of securing 150,000 additional inhabitants, who, during a period of commercial depression, might be left without employment, and might become a further charge upon the rest of the community. The Committee's findings are thus summed up in the " Encyclopaedia of Canada" : — 1. A protective system would diminish the consumption of foreign goods. 2. It would diminish the revenue by $9,000,000. 3. Its effect would be to increase the price of home manufactured goods. 4. The consumer would have to pay a heavy tax. 5. It is a proposition to relieve general distress by a redistribution of property. The opinions of the Committee, however, failed to silence the cry for Protection, which grew 28 PROTECTION IN CANADA. more insistent, and in March, 1878, Sir John Macdonald moved in the Assembly the following characteristic protectionist resolution : — " That the Speaker do not now leave the chair, but that this House is of the opinion that the welfare of Canada requires the adoption of a National Policy, which, by a judicious readjustment of the tariff, will benefit and foster the agricultural, the mining, the manufacturing, and other interests of the Dominion ; that. such a policy will retain in Canada thousands of our fellow-countrymen now obliged to expatriate themselves in search of the employment denied them at home; will restore prosperity to our struggling industries, now so sadly depressed ; will prevent Canada from being made a sacrifice market; will encourage and develop an active inter-provincial trade ; and moving (as it ought to do) in the direction of a reciprocity of tariffs with our neighbours, so far as the varied interests of Canada may demand, will greatly tend to procure for this country eventually a reciprocity of trade," The motion was not then carried, but after the general election Sir John Macdonald returned with a majority and brought into being an avowedly protective tariff in accordance with what has ever since been known as the " National Policy." This policy was stated by the Finance Minister, Sir Leonard Tilley, to be : " To select for a higher rate of duty those articles which are manufactured or can be manufactured in the country, and to have those that are neither made nor are likely to be made in the country at a lower late." In spite of this declaration and the imposition of stiff protective duties in accordance with it, TARIFFS IN THE DOMINION. 29 there seemed still to be confusion of thought and a strong hankering after reciprocity with the United States, which, if attained, would have exposed Canadians to the unfettered competition of the rivals whom they most feared, and against whose dumping operations they were so much incensed. The Tariff Act of 1879 provided that, with reference to the natural products of both countries, if the United States repealed its duties in whole or in part, the Canadian Government would meet them with equal concessions, and the Finance Minister said that "the Government intended to impose duties on a great many articles imported from there which had been left on the free list since 1875, in the vain hope of inducing our neighbours to renew the Reciprocity Treaty." In accordance with this intention the average duty on American goods under this tariff was made 25 per cent. Had reciprocity been granted by the United States on natural products, Canadian farmers would have again suffered, as the imports from the Republic to the Dominion greatly exceeded the exports to it. There was no proposal for reciprocity in manufactured goods. As it was the farmers obtained specific duties amounting on wheat, at the prices then ruling, to an equivalent of about 15 per cent, ad valorem. Up to the year 1883 there were various tariff changes, almost all tending to increase Protection, but more revenue had been raised than was required, and in that 30 PROTECTION IN CANADA. year taxation to the amount of $1,125,000 was remitted, though with the sacrifice of revenue there were various additions to the protective duties, that on agricultural implements, for instance, being raised from 25 to 35 per cent. In 1882 the Govern- ment had strengthened itself by the abolition of the unpopular duties on tea and coffee, retaining, however, a retaliatory duty of 15 per cent, on tea imported from the United States. From that date until 1896, avowedly protectionist Govern- ments remained in power, and though numerous alterations were made in the tariff, almost all of them tended to give increased protection. EFFECTS OF THE NATIONAL POLICY. 31 CHAPTER IV. EFFECTS OF THE NATIONAL POLICY. It is claimed by protectionist writers and politicians that the adoption of the "National Policy " was immediately followed by an increase of trade and prosperity. Had this been the case there would still be too many factors entering into the matter to render possible an estimate of the effect due to each, but on looking at the statistics of such important items as trade and population, one fails to find an increase in either, which justifies, on those heads at least, any enthusiasm for the " National Policy." First, as to trade, the figures are given by a protectionist authority in the " Canadian Encyclo- paedia" down to 1897, and are here supplemented by figures for later years from the "Canadian Statistical Year Book " : — Policy. Total Trade. Incidental Protection, 1868 — 73 ... 1992,443,289 Revenue Tariff, 1874 — 79 ... 1,093,764,044 Protective Tariff, 1880—85 ... 1,235,902,783 „ 1886—91 ... 1,234,587,974 ,, 1892—97 - 1,438,948,553 Reduced Tariff, 1898— 1902 ... 1,818,467,786 The population in 1871 was 3,635,024; in 1881 it was 4,324,810. On dividing the figures, giving 32 PROTECTION IN CANADA. the trade for six years under incidental Protection by the first number, and those giving the figures for the first six years under the "National Policy" by the second number, we find that the trade per head in the former period was greater than the latter. For the period under the revenue tariff, 1874 — 1879, we have no divisor, since a census was not taken in those years ; but coming to the period of the reduced tariff, 1898 — 1902, and dividing its trade figures by the population figures at the 1901 census, we find the trade much greater per head than at any period under the " National Policy." For the five years 1898 — 1902 it is 1338-6 ; for 1886 to 1891 — on the 1891 census — only $255-4 for the longer period of six years. The figures in the next table show that while imports fell away considerably in the first years of the " National Policy " there was not the increase in exports upon which protectionists place such an immense value. Free traders will not attach great importance to these figures either way ; in the first place, because in a new country imports very often result not from exchange, but from borrowing, the money borrowed reaching the importing country in the form of goods, and, in the second place, because large exports are not necessarily a sign of prosperity, since when the home demand is brisk, goods which might be exported at other times find a home market. Nevertheless, protectionists look to their policy to increase exports, and should find these figures disappointing. EFFECTS OF THE NATIONAL POLICY. 33 Imports and Exports per Head of Population and Duties Collected per Head of Population FOR THE Years 1869 to 1883. Total Imports. Imports Free of Duty. Exports. Duties Collected. « 1 1 1 1869 ... 20—63 7—71 17—72 2—43 1870 ... 21 — 66 7—57 21 — 19 2—74 I87I ... 27—31 7—33 21. — 08 3—37 1872 ... 30—86 10—88 22—88 3-61 1873 - 34-87 14 — 66 24 — 48 3—55 1874 - 33—52 13—37 23—36 3—77 1875 - 31 — 66 10 — 69 20 — 04 3—95 1876 ... 23 — 60 8-71 20 — 50 3—25 1877 ... 24—75 8—80 18—90 3 — 12 1878 ... 22 — 82 7—69 19—44 3—13 1879 ... 19—77 6 — 01 17—24 3—12 1880 ... 20 — 52 4—18 20—85 3—35 I88I ... 24—29 4—57 22 — 67 4-26 1882 ... 27—24 5—95 23—30 4—95 1883 ... 29 — 84 7—10 22 — 13 5—23 With regard to the increase in population, we find a similar failure of the "National Policy" to accomplish great things. The population of the provinces constituting the Union was at the different census periods as follows : — I84I 1,152,772 I85I ... 2,312,919 I86I ... 3,174,638 I87I 3,635,024 i88i ... - 4,324,810 1891 4,833,239 igoi 5.369,666 P.C. 34 PROTECTION IN CANADA. In the period 1842 — 1851, there were no protective duties, though for some of its years the preference was in force, and the population increased by 1,160,147, or over 100 per cent. During the next ten years, 1852 — 1 861, Free Trade prevailed until the incidental Protection of 1859, and the increase in population was 861,719, or 37*3 per cent. Then came ten years, 1862 — 1871, without any tariff change, and the increase of population was 460,386, or I4"5 per cent. In the following ten years incidental Protection gave place in 1874 to the revenue tariff, and in 1879 this was replaced by high Protection, which, however, was not opera- tive for more than two years of the decade ; and the increase in population was 689,786, or 19 per cent. The next decade, 1882 — 1891, saw a further development of the "National Policy," and the increase of population was 508,429, or 117 per cent. Between 1892 and igoi there were in 1897 general reductions in the tariff and special reduc- tions occasioned by the preference to Great Britain, accompanied by an increase in popula- tion of 536,427, or 1 1' I per cent. The figures throughout relate to the provinces now consti- tuting the Dominion of Canada, although Prince Edward's Isle and British Columbia did not join it until after 1867, while at that date some of the other provinces had practically no white population. The percentage increase of population in all countries tends to grow less with a birth-rate EFFECTS OF THE NATIONAL POLICY. 35 falling throughout the world, and in a country which depends largely on immigration for addi- tions to its people, this tendency is especially marked. Nevertheless, the percentage increase for the last decade, which includes several years of reduced duties, is almost as high as that for the previous ten years under the " National Policy." With regard to the absolute increase of population also, the two decades, 1862 to 1871 and 1882 to 1 89 1, in which Protection prevailed, show worse results than those which included the revenue tariff" period of the seventies, and the years of the lower duties and British preference introduced by Sir Wilfrid Laurier. The absolute increase in the twenty years from 1 842, including only two years of Protection, was far greater than it has been for twenty years at any subsequent period. Before the introduction of the " National Policy " there was a large exodus of Canadians to the United States, which protectionists claimed was the result of a low tariff" policy in Canada ; but after the introduction of Sir John Macdonald's high tariff", the numbers who left Canada grew larger, and it was not until the phenomenal increase of wheat-growing in Western Canada during the last three or four years, that the stream set in the opposite direction, and large numbers of Americans began to emigrate to the Dominion. This was contemporaneous with the reduced Canadian tariff" brought in by Sir Wilfrid Laurier in 1897, but no doubt it was more the opening up of rich new D 2 36 PROTECTION IN CANADA. territory than the change in fiscal policy which brought this new population, just as in former years the virgin West of the Republic drew hundreds of thousands of Americans from the Eastern States. In 1876 the Canadian Commission pointed out that 568(608 natives of highly protected New England had gone West where tariffs could not help them, while only 493,000 Canadians had gone from less highly protected Canada, although New Jersey had a population of only 3 J millions to draw upon, and Canada a population of 4,000,000. Free Trade with the highly developed Eastern States has not prevented the establishment and growth of manufacturing in the Western States of America, though the competition they have to suffer is more keen than they would be exposed to by Free Trade with any foreign country ; and in the Western States of the Dominion are the keenest free traders of Canada, since they see that Protec- tion, which raises the prices of the articles they buy from home manufacturers, is powerless to raise the price of their grain, so much of which they sell abroad. The measure of Free Trade which obtains in Western America does not check manufactur- ing; the measure of protection suffered in Western Canada is felt to be a weight on agricultural industry. Whether manufacturing has or has not been encouraged by Protection in Canada it is impossible to say, though protectionists, who begin with a priori convictions that it must be so, have no doubts EFFECTS OF THE NATIONAL POLICY. 37 at all on the question. Protection has certainly enriched some manufacturers, and has given great power to trusts and monopolies, as we shall see in a later chapter, but if, as appears to be the case, it has penalised agriculture and retarded the growth of population, upon which manufacturing industry- depends for a market, it would seem that Protec- tion has only deflected the channels of manufac- turing enterprise without swelling its total volume. Canada has always been more or less a manu- facturing country. In the days of French rule there were iron works in existence, and most of the clothing of the people was woven in the colony. From the beginning of last century and earlier, Quebec and Nova Scotia had a considerable shipbuilding industry. In 1850 nine shipyards in Quebec employed 1,338 men, and there were a number of smaller establishments. In 1842 Canada had 14 paper mills, 96 breweries, 897 saw mills, 261 tanneries and 147 distilleries. In 1856 there were 692 flour and oatmeal mills, 74 woollen mills, 232 tanneries, 50 breweries, 102 distilleries, 97 foundries, 8 shipyards and 388 other industrial establishments. It is needless to multiply figures, but those given above are sufficient to show that long before the introduction of the " National Policy" the Canadian people had well established industries, besides those concerned with primary production. They have lately increased much in number and productive capacity ; they have levied heavy toll on the pioneer 38 PROTECTION IN CANADA. and the wheat grower, and some of them have begun to " dump " their goods in foreign markets at lower prices than those offered to Canadians. This last development may safely be credited — or debited — to Protection, but nothing more can be confidently asserted of the share which Protection has had in fostering the growth of Canadian manufacturing as shown by the following table : — Workers Employed, Wages Pajd, and Value of Goods Produced in Canadian Manufactories for the Years 1871, 1881, and 1891. {The figures for 1901 are not yet available). i8iri. 1881. 1891. Workers Wages Product 188,000 83.869,000 $221,618,000 244,000 $56,897,000 $299,740,000 ^ 345,000 $93,144,000 $448,021,000 More important than the mere increase in pro- duction is the increase of wages which took place between 1871 and 1897, an increase of 84 per cent, on the number of workers being accompanied, according to the " Canadian Encyclopaedia," by an increase of 129 per cent, in the wages paid, and of 102 per cent, in the value of goods produced. These figures indicate growing prosperity in Canada, but to conclude that Protection has been the cause of it would be quite unjustified without elaborate analysis showing what wages were paid in the unprotected industries and what in the protected, without taking into account the different general conditions affecting industry in the two years, and without comparing the prices current. Such an examination is beyond the scope of this EFFECTS OF THE NATIONAL POLICY. 39 small volume, but it must not be forgotten that there has been a very great increase of wages in Free Trade England during the last thirty years, unaccompanied by such an increase of prices as has accompanied it in Canada, while other facts quoted by protectionist writers on Canadian manu- facturing would seem to show that it has not been fostered by a high tariff. We learn, for instance, from the " Canadian Encyclopaedia " : — " From 1857 to 1864 were the ' halcyon days of the Canadian woollen industry.' The consumer was content to pay more for the home-made product which he knew was good and contained no shoddy ; he was content with less variety, since he had quality and there were long runs on one pattern. ' The manufacturer had not only these things in his favour, but had that precious advantage, which his successor of this genera- tion can but envy, of dealing with wholesale firms who espoused the cause of the home manufacturer, who rejoiced in his prosperity and helped him to uphold prices to the point of good living profit. By this confraternity of interest the manufacturer throve well under a nominal protection of 17 per cent., and many new mills sprang up throughout the country, agree- ably diversifying the products while ' custom ' mills and carding mills still made a good profit." It is a remarkable fact that the woollen industry in British Colonies has always enjoyed its " halcyon days " under a moderate tariff. It was so in Victoria and New Zealand as well as in Canada, and another conclusion, strengthened by the passage above, but drawn from many instances, is that under Free Trade or low duties the consumer has a quasi-patriotic 40 PROTECTION IN CANADA. inclination to support local industry ; he will pay a good price for its products, and a "con- fraternity of interest" between the dealer and manufacturer ensures that they shall be well recom- mended to him. Against heavily protected articles there is a very strong prejudice, caused partly by annoyance at their high price and the pressure put upon the consumer to purchase them, through the tariff making the imported article still dearer, and partly by the feeling that if goods need this high protection to gain a sale they cannot but be inferior. The effect of this prejudice, though difficult to gauge, is undoubtedly great, and often does much to take away from the manufacturer the advantages of an almost prohibitive tariff. Figures concerning the manufacture and export of Canadian agricultural implements are further quoted by protectionists to evidence the benign effect of a high tariff. In the years 1894, 1895 and 1896, Canada exported agricultural implements to the value of $1,727,421, while American exports of the same kind were valued at $15,617,765 for the same years. Canada, it is pointed out, exported 55 per cent, more than the United States in pro- portion to population, even without allowance for the fact that a considerable amount of the goods credited to the United States were really Canadian goods shipped through American ports. Granting that these figures are correct, what do they prove, if they prove anything, but that this particular industry has thriven far better under the comparatively EFFECTS OF THE NATIONAL POLICY. 41 low duties of Canada than under the almost pro- hibitive duties of the United States ? The inference is that with lower duties the Canadian industry might thrive still more, and sell to the Canadian farmer as cheaply as it does to the foreigner. The great Massey Harris Company, the largest manu- facturer of agricultural implements in the world, began operations away back in 1847, ^^^ put many ingenious implements on the market before 1863. Under the " National Policy" it has certainly absorbed many companies " affiliated " to it, it is largely concerned in the operations of others, it employs 2,500 hands, exports largely, and practic- ally charges to the home buyer what it pleases. Its operations began and developed under Free Trade, its monopoly is a triumph of Canadian Protection, and an object-lesson to Canadian free traders. Having quoted protectionist authorities on the help given to manufacturing by Canadian Pro- tection, let us look at the opinions held by a Free Trade authority upon its general effects. In the North American Review of May, 1890, Sir Richard Cartwright, Minister of Trade and Commerce in Sir Wilfrid Laurier's Cabinet of 1897, contended that the result of the " National policy " had been : — I. To remove all check on the expenditure of the Government and to encourage a reckless extrava- gance on their part, which has resulted in an annual expenditure for Federal purposes of nearly 50 per cent, more (after making all deductions) for a 42 PROTECTION IN CANADA. population of less than five millions, than the sum required by the United States for the like objects when their population was over twenty millions. 2. To systematise and intensify the tendency (always so perilous to the welfare of representative governments) to use corrupt means for the purpose of influencing the Press and the electors, and to make it the direct pecuniary interest of a very active and influential class to provide a regular and large fund for such purposes. 3. To aggravate and accelerate the tendency to accumulate large fortunes in few hands, and at the same time to increase the indebtedness and depreciate the value of the property owned by the mass of the community, more especially in the case of the agricultural class. 4. To favour the growth of a few large towns at the expense of the smaller ones, and of the rural population, which latter has been reduced to an absolutely stationary condition over very large portions of the Dominion, in spite of a large (alleged) immigration, and of the fact that much new territory has been thrown open. " These," he proceeded, " so far have been the results in Canada in the period from 1879 to 1890; and if they have been more marked than in other cases, the explanation is to be found in the fact already alluded to, that for a variety of reasons Canada is singularly ill-adapted for carrying out a scheme of Protection, and was singularly unwise in allowing herself to bfe induced to copy the United States." EFFECTS OF THE NATIONAL POLICY. 43 On this question Professor Short, who admires the spirit which animated the Americans when they first set to work to become a great manufacturing community is in partial agreement with Sir Richard Cartwright. " In Canada," he writes, " the same degree of home- centred, self-reliant enterprise did not precede the specific adoption of a protectionist system. As a result, the industries which the "National Policy" brought into existence were simply foreign importa- tions mechanically reproduced. In the majority of cases the motive power, the machinery and the raw materials were all alike imported. Such industries diligently exploited the tariff, but left the natural resources of the country pretty much where they were. Naturally the whole movement was very disappoint- ing, and, instead of diminishing, rather increased the tendency to look abroad for assistance." But however ill-advised Canada may have been in imitating the United States — and that she was ill-advised, no free trader can doubt — it is impos- sible not to see that her proximity to the United States and her peculiar relations with them made it more difficult for Canada than for any other British Colony to adopt a Free Trade policy. For over thirty years there has been constant complaint from Canadians entering on industrial enterprise of "dumping" by Americans, and in 1872, after over- production in America and consequent depression, the complaint was particularly loud and bitter. Even in England, populous, industrially powerful, and separated by thousands of miles of ocean from 44 PROTECTION IN CANADA. the United States, the sale of American goods at cut rates has caused annoyance and threats of hostile action. InXanada there was real reason to fear deliberate attempts on the part of American manufacturers to ruin certain manufacturing enter- prises in the Dominion. It lay close at their hand, and business considerations were interlinked with those of politics. American statesmen always hoped to coax or to coerce Canada into joining the Union ; their reciprocity treaties and some of their duties were dictated by those hopes, and a keen eye to business on the part of the American manufacturer was quite consistent with " dumping " on a scale which he would attempt in no other country in the world. Even if he sold his goods at a heavy loss he had before him the possibility of an alternative reward. He might break down Canadian manufactures in spite of their tariff shelter and thus enlarge a market in which he could compete on advantageous terms with any foreigner, or he might assist in the political end of bringing Canada into the United States, in which case there would be an increased business for him in a market walled in by the almost prohibitory duties of the American tariff. It was thought that Canadians might despair of finding remunerative outlets for their labour and capital in the face of such competition, and despairingly ask for admis- sion to the markets of the Republic through the door of annexation. These tactics might have been successful had EFFECTS OF THE NATIONAL POLICY. 45 the national sentiment of Canada been less strong. As it was, they irritated her into fighting them, perhaps mistakenly, by a protective tariff, and were largely responsible for the ultimate granting of preferential treatment to the United Kingdom. 46 PROTECTION IN CANADA. CHAPTER V. THE TARIFF REDUCTIONS OF 1897. Up to the year 1896 Canada pursued the " National Policy " with considerable vigour, and although there were mutterings of discontent in many parts of the Dominion, especially in the agricultural West, increase rather than remission of protective duties was the rule. Motions to put coal, coke, breadstuffs, and numerous other articles on the free list were moved in 1882, but were all lost, and in 1893, at a convention of the Liberal party, with the Premier of Ontario in the chair. Sir Wilfrid Laurier moved a resolution, which was unanimously adopted, to the effect that the " National Policy " had decreased the value of farms and landed property, oppressed the masses to the enrichment of the few, checked immigration, caused great loss of population, impeded commerce, and discriminated against Great Britain. Previous to this, in 1892, there had been another effort to obtain reciprocity with the United States, but Mr. Blaine, who represented the United States at the confer- ence, would not hear of any treaty which did not include manufactured goods, while the Canadian delegates were sufiSciently under the influence of Canadian manufacturing interests to refuse THE TARIFF REDUCTIONS OF 1897 47 reciprocity on these lines. They wished to confine it to natural products, and were blamed by a large section of the Canadian Press and people for their half-hearted efforts in the matter. The Dingley Tariff Bill in the United States caused great injury to the Canadian export trade, and while it created deep resentment, and its ultimate effect was to create a strong feeling in favour of cultivating trade relations with Great Britain, in the first instance it brought about renewed attempts to escape its effects by means of reciprocity with America. Canadian agriculture had been the chief sufferer from the American high duties, the value of agricultural exports to the United States falling from $9,572,000 for the year ending June 30th, 1890, to $1,911,000 for the year ending June 30th, 1895. Hence the failure of the negotiations caused great disappointment, and in 1896 a proposal for unrestricted reciprocity was made by the Liberal party, under the leadership of Sir Wilfrid Laurier and Sir Richard Cartwright ; but Sir John Macdonald denounced it as " veiled treason," since he considered it would result in an- nexation to the United States, injure England, and involve $14,000,000 of direct taxation in Canada through loss of customs revenue. There were further increases of the tariff in 1894, but neverthe- less this new hankering after reciprocity seemed to show that the purely protectionist spirit in Canada was growing weaker, and in 1 897 Sir Wilfrid Laurier came into power with a strong Free Trade following. 48 PROTECTION IN CANADA. It was generally expected that he would make sweeping changes in the fiscal policy, and the mea- sure of reform which he did effect was disappoint- ing to many of the keen free-traders who supported him. The specific duties were to a great extent dispensed with and replaced by ad valorem rates. The duty on Indian corn was abolished ; fencing wire, reaper and binder twine, mining machinery, surgical and dental instruments, and some other articles were either immediately or a little later placed upon the free list ; the duty on sugar was reduced from $i'i4 to f i per loo lb. ; there were reductions in the duties on rr^aize meal, wheat, flour and iron, and increases on spirits, cigars, and tobacco. This was a poor result for a successful Free Trade campaign, but the pressure of the tariff was somewhat further reduced by the intro- duction of preferential treatment to certain goods of British origin, which was later described by Sir Richard Cartwright as a "flank movement" against Protection "successfully undertaken after many frontal attacks had failed." Leaving the consideration of the preferential tariff for a moment, it may be of interest here to note the treatment of the Canadian iron industry by Sir Wilfrid Laurier's administration. The duties on iron and steel were reduced in 1897 in some instances to one-half and in others to three-quarters of the rate they had reached in 1894, and in 1899, by way of compen- sation for this reduction, bounties were provided for on the following plan (p. 49) : — THE TARIFF REDUCTIONS OF 1897. 49 Canadian Iron Bounties. To April 2ist, igo2 From April 21st, 1902, to July ist, 1903 ,, July 1st, 1903, to July ist, 1904... 1904. .. igos— „ „ 1905, „ 1906... ,, „ 1906, ,, 1907... On Pig Iron. From Native Ore. $ 3 — 00 2 — 70 2—25 1—65 1—05 o — 60 From Foreign Ore. 2 — 00 1—80 1—50 I — 10 o — 70 o — 40 On Steel. 3 — 00 2 70 2—25 1-65 1—05 O — 60 The protectionists insisted that the bounties did not compensate for the reduced duties and that the iron industry had been ruined. Yet $ 1,800,000 were paid in bounties between 1899 and 1902, and though Mr. Borden, the leader of the Opposition, speaking on June 9th, 1903, complained that the imports of iron and steel had increased between 1896 and 1902 from $10,203,052 worth in the former year to $53,601,625 in the latter, the Canadian production had also largely increased. In 1902, $791,000 were paid by the Government in iron bounties. About 800,000 tons of iron and its products were con- sumed in Canada, of which one-third was locally produced. The production of pig-iron was 244,000 tons for 1 90 1, and on November 20th of that year Mr. Clergin, chairman of a company controlling assets alleged to be worth almost a hundred million dollars, told the Toronto Globe that the output of his iron mines at the Sault was now 1,000 tons a day, and all that he needed was more Protection. It was not denied that in the days of high Protection P.O. E 50 PROTECTION IN CANADA. the Nova Scotia Steel Company was paying only from 80 cents to a dollar a day in wages, which was much lower than the rate in 1903, and when it was urged by protectionists that Canada should raise her duties to the level of those in United States.where the ruinous state of the trade threatened Canada with wholesale "dumping," Mr. Bourassa, M.P., very pertinently asked how came this ruin to the iron trade under the American high tariff, which was to improve matters in Canada. The bounties and such Protection as Canadian iron retained were sufficient to raise Canadian prices to the injury of the Canadian manufacturer, and to bring about a considerable export trade. In 1898 pig-iron was exported to the value of $75,000. In 1899 the value rose to $90,000, and in 1902, to $1,262,000. In 1898 the exports of steel and manufactures of steel amounted to only $43,000, and in 1902 to $601,000. THE PREFERENTIAL TARIFF. 51 CHAPTER VI. THE PREFERENTIAL TARIFF. The Canadian Reciprocal Tariff introduced by Sir Wilfrid Laurier was intended primarily to benefit British trade, though other countries shared its benefits owing to commercial treaties between the United Kingdom and Belgium, France, Germany, and Spain, which were denounced in order to permit of Canada giving special favours to the Mother Country. The Reciprocal Tariff which lasted from April 23rd, 1897, to June 30th, 1898, provided for a reduction of one-eighth in the duties on British goods, and on the goods of other countries which gave Canada tariff treatment as good as she gave to them, such reduction to be increased to one-fourth from July ist, 1898. On the denunciation of the hampering treaties by the United Kingdom, and their expiration in July, 1898, Canada from the ist of August of that year increased the preference and confined it entirely to goods from the United Kingdom and those British Colonies which gave Canada as favourable terms as they received from her. It did not apply to tobacco or spirits, and was confined to the bond, fide products of the United Kingdom or the Colonies. On July ist, 1900, the preference was increased from one-fourth to one-third. E 2 52 PROTECTION IN CANADA. Themotivesleading to the granting and extension of the preference were various. From one point of view it was, as Sir Richard Cartwright said, a flank attack upon Protection. From another it was a free gift of trade advantages to Great Britain, inspired by Imperial sentiment and a desire to render some return for the military and naval protection which Canada derived from the United Kingdom. This aspect of the preference was per- haps specially marked on its extension in 1900, which would have met with more opposition than it did from the protectionists, but that British sentiment was particularly strong owing to the war in South Africa, while there was further a belief that the United Kingdom might later show its appreciation by imposing duties upon foreign corn and exempting that from the Colonies. All along there had been a hope that England might recipro- cate. Sir Wilfrid Laurier showed that this was desired when he said in 1902 : — " As we could not obtain an Imperial preference, we thought we would give a preference ourselves. Why did we do that? Because it was our best measure of tariff reform. And it has served its purpose well. It may not have accomplished all that we hoped ; nevertheless, the results are there and show for them- selves — one of them being that our trade with Great Britain has almost doubled within five years." In 1902 the imposition of the British corn duties considerably raised Canadian hopes, and in June of that year, long before Mr. Chamberlain had spoken, the Toronto Globe published an article from THE PREFERENTIAL TARIFF. 53 which the following is portion of a digest, given in the Canadian Annual Review : — " Canada would rejoice in a British tariff preference given freely and without Colonial coercion. " Canada is too rich in natural wealth and possible industrial greatness to clamour for fiscal doles from even the Motherland. "There should be no Canadian alliance with any British political party in order to help to obtain such a preference. "The only safe line to approach the question on either side is by the preferential remission of taxation. " Canadian revenue requirements and the safety of its industries prevent the adoption of Mr. Chamberlain's policy of Free Trade within the Empire. "The natural desire of Great Britain is to manu- facture for the Colonies, and the natural desire of the latter is to manufacture for themselves. " A tax on foreign grain and food products in favour of the Colonies is desired by the latter, while the Liberal party at home is absolutely opposed to it. " Many Canadians seek to re-establish Protection in Great Britain ; many in England want to inaugurate Free Trade in the Colonies. "The present Canadian preference is a fair basis on which to ask a British preference in the new corn duties." The hope that the British corn duties would be made preferential was not realised. A report of the Board of Trade upon the effects of the Canadian preference caused Mr. Chamberlain to say, at the Conference of Colonial Premiers held in 1902, that they were very disappointing, to which there came a Canadian reply urging that British trade had benefited to a most substantial extent. It was pointed out that between 1897 and 190 1 British 54 PROTECTION IN CANADA, dutiable imports into Canada had increased by 56 per cent., while those from other countries, excluding the United States, had increased by only 33 per cent. In the four years before the preference, between 1893 and 1897, while British dutiable imports had decreased by 36 per cent, those from the United States had increased by 7 per cent., and those from all other countries by 64 per cent. Between 1897 and 1 90 1 the percentage increase in the dutiable goods from all countries had been prac- tically equal to the percentage increase in dutiable goods from the United Kingdom. It was true that the British proportion of the Canadian import trade was growing smaller even under the pre- ference, but this was chiefly owing to the enormous importation from the United States of free-list goods — chiefly raw material — which Great Britain could not supply, and, while between 1893 and 1897 the British proportion of dutiable imports into Canada had fallen from 45'6i per cent, to 30*53 per cent., in the succeeding years up to 1901 it had only fallen to 29"92 per cent. In the year 1902 imports dutiable and undutiable from all countries into Canada increased by 12 per cent., those from Great Britain increased by 14 per cent. The substantial nature of the advantage enjoyed by England was exemplified by the case of cottons and woollens, of which the former paid duties of 29 per cent, ad valorem before the preference, and 20 per cent, in 1901, while the duties on British woollens had been decreased from 32 per cent, to 23 per THE PREFERENTIAL TARIFF. 55 cent. It may here be remarked that this reduction on British woollens has caused great heart-burning among Canadian protected manufacturers, who declare that their trade is being ruined, and in April, 1904, the closing of a woollen factory employing 700 workers was reported. If it be true that Canadian manufacturers cannot compete against British goods with a protective duty of 23 per cent., whereas, according to protectionist authorities, they flourished thirty years ago and enjoyed their halcyon days with duties of only 17 per cent., it would seem that the industry has become enfeebled by long dependence upon high Protection. It is still protected by a high tariff against " dumping " from the United States, and if English manufacturers can pay carriage from England as well as a 23 per cent, duty, and never- theless undersell Canadian manufacturers with profit to themselves, in that fact lies a strong indictment of Canadian Protection. The probability is, however, that the closing of mills is merely bluff designed to frighten the Government into increasing duties, or reducing the preference so as to permit of profits on the lordly scale which protected manufacturers consider themselves privileged to maintain. The Canadian statement concerning the pre- ference to Great Britain disclaims the existence of Protection as other than an incident in the Dominion tariff : — " The Canadian tariff was framed specially for revenue purposes with Protection as an incident ; 56 PROTECTION IN CANADA. it admits of reasonable British and foreign com- petition with the domestic manufacturer and producer : it is not in any sense prohibitory." A so-called revenue tariff with incidental Protection to the extent prevailing in Canada is perhaps the most difficult of all for free traders to successfully attack. The protective principle being once admitted there is constant clamour from protected interests to raise the duties and make Protection effective, while the partiality of the Canadian Liberal party for customs taxation, which falls chiefly on the masses, and its declared hostility to direct taxation which would fall more heavily on the rich, deprives it of help from the classes who would support a truly Liberal administration in fighting the power of protected manufacturers. To return to the question of preference, it is finally declared by the Canadian memorandum that :— " If any doubt exists in Great Britain as to the substantial nature of the preference granted by Canada in favour of British goods, certainly none exists in the United States. The manufacturers there have found it necessary to reduce their price to Canada to off-set the preference." The United States may fight the preference in this manner. Germany has taken other measures upon which Mr. Fielding, Minister of Finance, reported to the Canadian House of Commons on April i6th, 1903. Prior to July ist, 1898, as part of the British Empire, Canada received "most favoured nation" treatment from Germany. On THE PREFERENTIAL TARIFF. 57 July 31st, 1898, the treaty was denounced, but before its expiration a provisional arrangement was entered into between Great Britain and Germany, from the benefits of which Canada was excluded. There was correspondence between the High Commissioner, Lord Strathcona, and the Canadian Government, and on July nth Lord Strathcona wrote to the Under-Secretary of State for the Colonies protesting against Germany's attitude, and claiming that the preference was a purely domestic arrangement. It was proposed to treat Germany like other foreign countries, and Germany had not exacted any penalties in her tariff on the colonies of France, Spain and Portu- gal, which gave the Mother Country preferential treatment. Representations were made to Germany through British diplomatic channels without any effect, and in the autumn of 1901 the Canadian Government entered into negotiations with Herr Bopp, the Imperial German Consul in Montreal. After a conference with him in November, 1901, Mr. Fielding wrote a memorandum to Herr Bopp setting out the facts. It suggested that there was a misunderstanding of the position on the part of Germany, and showed that Canada was a far better customer for German goods than Germany was for Canadian goods. Between 1896 and 1901, goods from Germany for home consumption in Canada totalled $10,823,169, and from Canada for home consumption in Germany only $1,298,656. 58 PROTECTION IN CANADA. The Canadian Government had been pressed to retaliate. It, however, hoped for an amicable settlement, and though English intervention would be necessary for framing a formal treaty, this confidential memorandum was designed to bring about a better understanding. " If Herr Bopp should be able to intimate at an early date that the suggestions herein made are received with favour, steps could then be taken to have the matter dealt with more formally through the proper treaty-making channels.'' Nothing, said Mr. Fielding, had been done. They had waited patiently for five years, and would now take steps to assert their right to give England a preference. They would take a leaf out of Germany's own book. In the German tariff recently passed but not yet in operation there was provision for a sur- tax of loo per cent, additional duty on dutiable goods, and of a tax of 50 per cent, ad valorem on free goods of any nation discriminating against Germany. The Government did not mean to go quite so far, but from the next morning a surtax of 30 per cent, would be levied on all German dutiable goods, those which were not dutiable remaining free. This surtax would be under a general clause of the tariff applying the same treatment to the goods of any other nation which might discriminate against Canada, but as to Germany it would be operative immediately. He supposed one result of it would be to further trade between Canada and the British West Indies. THE PREFERENTIAL TARIFF. 59 The surtax upon German goods was thereupon imposed, and later in the year the Bill providing for it was passed. Dutiable imports from Germany into Canada amounted in value to $9,175,000 for the year ending June 30th, 1902, and to $10,288,000 for the year ending June 30th, 1903. No figures are available of sufficiently late date to show what effect, if any, the surtax has had on trade between the two countries. There is no doubt that Canada was entirely within her rights in imposing the surtax, but it is not so certain that there was justification for the complaints made by Canada, and recently renewed by the Imperial Government, against the action of Germany, since in tariff matters the self-governing Colonies have complete independence of the United Kingdom, and " domestic arrangements " giving a preference to British goods are scarcely analogous to preferences given by the Colonies of other countries whose tariff policy is controlled by the home Government. What the future of the preference will be it is difficult to say. The Canadian Government is being hard pressed by many Canadian manu- facturers to reduce or abolish it, and those who urge this would be very little placated by a preference to Canadian wheat, even if England should accord it. They would in no way be relieved from the competition of the British manufacturer by duties which raised the price of wheat or other agricultural products in the 6o PROTECTION IN CANADA. British market. At present, however, the Canadian Government stands firm for the preference, which apart from Imperial sentiment is approved by free traders because it lessens the tariff burdens of Canada. Its abolition would certainly be a considerable loss to England, from which Canada imported $42,439,000 worth of dutiable goods in 1903, against $35,330,000 worth in 1902, but its retention would be dearly bought by a duty on British food imports, if that were the price fixed by Canada as necessary and adequate to retain it. PROTECTIONIST FEELING. 6i CHAPTER VII. THE STRENGTH OF PROTECTIONIST FEELING. In the course of last year there were many discussions upon tariff questions in the Canadian Parliament, and though there is a strong feeling among the Western wheat-growing population for a reduction in the tariff, there is practically no party fighting for real Free Trade, and large interests are fighting desperately hard for more Protection. For a time the Laurier Government was gibed at for having preached Free Trade and for practising Protection, but lately the cry has been that the lower tariff is ruining Canadian industry, and while the Liberals maintain that the reductions made by them have on the con- trary immensely increased prosperity all round, they show no desire at present to go any further with this beneficent policy. There is some reason, indeed, for believing that they will not stand by their reforms, such as they are, but will give way to pressure for an all-round increase of duties. This belief is much strengthened by the recently announced retirement from the Government of Sir Richard Cartwright, who was perhaps the staunchest free trader it contained. Another 62 PROTECTION IN CANADA. Minister who retired in April, 1904, is Mr. Sifton. No grounds for the resignation of either of these gentlemen are so far announced, but it is practically- certain that the effect will be to weaken opposition to higher duties in the Cabinet. Mr. Sifton, while he claimed that the present tariff was a compromise, well and carefully worked out, and disclaimed any intention on the part of the Government to reduce it, nevertheless told an Ottawa journal in 1901 that he would like to see it lower, and that any attempt to increase its protective features would meet with the strenuous opposition of every Liberal elected west of Lake Superior. At that time Sir Wilfrid Laurier was also more inclined to stand by Free Trade 'principles than he is at present, for on his return from England he insisted in very strong terms upon the resignation of Mr. Tarte, a member of his Ministry who had seized upon the occasion of the Premier's absence to engage in an energetic protectionist campaign. In 1903, when Sir Wilfrid Laurier was questioned in the House as to the Government's tariff policy, he still declared that he was a " free trader by conviction," but showed very clearly that his convictions would have little effect upon his policy, by admitting that he " had favoured a tariff for revenue purposes carrying with it a good deal of incidental Protection." He refused to declare that he would not increase the protective incidence of the tariff, since the conditions of the country changed and varied, and what suited its conditions in 1897 might not suit its conditions in 1904. The PROTECTIONIST FEELING. 63 Government, he said, was not a Government of doctrinaires, and was always ready to listen to complaints when they were made to it, and would give a sympathetic ear to the grievances of any industry. The grievances referred to were those arising out of too small a measure of Protection, and one of the complaints to which Sir Wilfrid Laurier gave a sympathetic ear came from the manufacturers of reaper and binder twine, who were granted a bounty of f cent per lb. in order to counteract an export duty of that amount levied by the United States on all the raw material, Manilla hemp, exported from the Philippines, with the allowance of a draw- back on hemp manufactured in America. The duty on binder twine was abolished by Sir Wilfrid Laurier in 1897, since which time its manufacture in Canada has considerably increased. Another declaration of policy made by Mr. Mulock, the Postmaster-General, expressly dis- claimed Free Trade as the policy of his party. Speaking at the Canadian Club on December 26th, ig02, he protested against the Government's opponents seeking to make a political football of Canadian trade by representing the Liberal party as a Free Trade party, hoping thereby to create alarm in business and financial circles. There was no issue, he declared, of Free Trade against Protection in Canada. The only question was between a high prohibitory tariff and a moderate just tariff. 64 PROTECTION IN CANADA. In the face of this apologetic attitude on the part of Liberal Ministers and the vehemence shown by the protectionists in the discussions of the general tariff principle, into which members plunged on the smallest pretext last year, it would be rash to prophesy that the Canadian tariff will not be raised much higher in the near future. The Western people, it is true, are for the most part opposed to high duties — though in British Columbia protection for lead is demanded — and the Trades and Labour Congress of 1902, which was the largest on record, and numbered 1 50 delegates representing 102 labour organisations, passed a resolution "condemning any proposal to increase the tariff as being in the interests of the holders of lands and forests and mines, from whose extortion labour was now suffering, and asking instead for the transfer of taxes to those values which now allow non-produc- tion to impoverish industry." On such lines as these enthusiasm might be evoked for a Free Trade movement, but the Liberal party has no desire to abandon customs duties for direct taxation. It would involve an attack upon the privilege now enjoyed by the few of thrusting a disproportionate part of the burden of providing revenue upon the shoulders of the many, and this could scarcely be expected of a Government which admits the vicious principle that special privileges should be given to industries with a grievance, when the grievance complained of is inability to obtain such high prices as are desired for its product. PROTECTIONIST FEELING. 65 Sir Wilfrid Laurier appears to have entirely surrendered all pretence of Free Trade principle when on pressure from the iron industry last year he promised to impose a duty of $7 per ton on steel rails as soon as they should be made of sufficient quality and in sufficient quantity to justify it. The well organised manufacturers have far more weight with the Government than working men or agriculturists, and the Canadian Manufacturers' Association is vigorously demanding more Protec- tion. In August, 1902, it unanimously passed a resolution declaring that the changed conditions then prevailing in Canada demanded the immediate and thorough revision of the tariff upon lines which would more effectually transfer to the workshops of the Dominion the manufacture of many goods which it then imported from other countries. No objection was offered to a substantial preference to the Mother Country on condition that the tariff was primarily framed in Canadian interests, pro- vided always " that under any conditions the minimum tariff must afford adequate protection to all Canadian producers." It is quite certain that Canadian manufacturers will tolerate no preference which gives to England any trade which they hold themselves, and it is safe to say that they would not long tolerate a preference which gave any substantial portion of trade now enjoyed by American or other foreign manufac- turers to those of the United Kingdom. If the tariff can be so manipulated, they would say, as to p.c. F 66 PROTECTION IN CANADA. take business from the American and give it to the Englishman, it can be further manipulated in order to take it from the Englishman and give it to us. The slight increase of British competition with Canadian inanufacturers which the preference has accomplished is already making it unpopular, and the writer of a recent book, " Sixty Years in Canada," gives frank expression to a wide-spread opinion when he says that the British Preferential Tariff of 1897 is the most serious blow that has fallen upon Canadian industries since 1868, and that " the only hope is that the Canadian Parlia- ment will, without delay, eliminate this clause from the Canadian tariff, now that it has accomplished its purpose of causing the Imperial Government to show its hand." And yet it is hard to believe in the ruin of Canadian manufacturers in the face of figures showing that the exports of Canadian manufactured goods for 1902 were worth nearly $18,500,000 as against $16,000,000 for 1901. Among other items in the later year were cottons to the value of $904,000, showing that the cotton industry at any rate was not ruined by the preference. Of iron and steel the exports were worth $2,461,000, of agricultural implements $1,815,000, of leather $2,302,000, of musical instruments $466,000, of wood pulp $2,046,000, of other wood $1,133,000, of drugs and chemicals $621,000. The exports were greatest of those manufactures which depend upon the natural resources of the country and stand in PROTECTIONIST FEELING. 67 need of no Protection. The manufacturers of Canada are not satisfied with this advance, with an increasing trade in their own markets and the markets of the world. They demand " control " of the former, and the power and profit resulting from monopoly. How near they have come in some instances to attaining it was well shown by Mr. Wade, M.P., in the debate on the binder-twine duties on July 24th, 1903. The facts he mentioned were not contradicted, and they point so clearly to the development of industrial tyranny behind the shelter of the tariff, on lines already made familiar to us by the trusts of the United States, that unless his exact words were quoted here, it might be thought that undue colour was given to his accusa- tions in paraphrasing them. Mr. Wade said : — " He [the last speaker] made also another startling suggestion in the interests of the farmers, and that was that the Canadian manufacturer should be given control of the Canadian market. Let me illustrate what that means. I will take one class of manufac- turers and I will show how they deal with the country. I have under my hand some papers. I will take hardware, for instance ; cut nails, wire nails, tarred paper, pressed spikes, tacks, lanterns, rope, lead pipe, shot, bolts and nuts, tire bolts, screens, carriage bolts, bolt ends, varnishes, shovels, coach screws, wire of all sorts, nuts, axes, wooden ware, wire doors, wire screens, coal hods, stove pipes, elbows, locks and knobs, scales, papers, white lead, and putty. There is an association of these gentlemen, and I mean to say to this House that no wholesale dealer in Canada can buy a dollar's worth of any of these articles from any one of the members of this association until he F 2 68 PROTECTION IN CANADA. enters into a binding agreement that he will not purchase from any other parties outside the associa- tion, that he will not sell for a less price than that dictated, and then they will not really sell him the goods, but they will allow him a return commission for selling them. They dictate the price at which he shall sell them, and compel him to buy from them, and after that they require him at stated periods, each year, or each six months, or each month, to make a statutory declaration that he has performed all these conditions. Let me read to the House an extract I have, an extract from a contract that they require the dealer to enter into. This is the statement of the shot men, and I will refer hon. gentlemen to the well- known firm in Toronto of Jenkins and Hardy, who afe the agents for a number of these concerns : — " ' Shot. " 'January 8th, 1903. " ' Dear Sirs, — We beg to advise you that subject to the following conditions, you may be entitled to a premium of 2^ per cent, upon the net amount of your purchases of shot (commencing to-day) in each six months ending June 30th and December 31st, same to be payable within thirty days after the expiration of each six months upon which premium applies.' " Mr. Thomson (Grey) : I am in the hardware business. " Mr. Wade : What manufactory are you connected with? " Mr. Thomson (Grey) : I am a dealer in hardware, and in that statement you have read they stipulated nothing about the price the shot should be sold for. " Mr. Wade : I have yet that to read, and if my hon. friend is a retailer I may say that this does not apply to him at all. It refers to the wholesale man who stands between him and the manufacturer, and the wholesale man has to run the risk of his insol- vency. That is what I am getting at. Here are PROTECTIONIST FEELING. 6g the conditions : — ' Conditions : That we receive from you, after the end of each six months' period ending June 30th or December 31st, declaration which satis- fies us that in the six months upon which you are applying for premium, you have not imported or purchased shot from any manufacturer other than those whose names appear below, and that you have not directly or indirectly offered or sold shot at less than the established prices of the Shot Association of Canada to the retail trade, or upon more favourable terms to your customer than the established terms of the said Association to the retail trade. We reserve the right to revoke and cancel all or any part of this proposition at any time on notice to you by registered letter of our desire and intention to do so, but not thereby to relieve ourselves of any obligations which may have accrued on your above-described purchases of shot up to date of said revocation.' " These are the conditions which are imposed, and if the hon. gentleman doubts my word he can go to the well-known firm of Jenkins and Hardy, and he will find that such is the case. I have the form of declaration which is required from these wholesale firms every six months, or year as the case may be, and if they do not make it they cannot purchase that class of goods from the parties who are in the association, and as far as I know, and as far as I am informed and believe, it is the case with every one of these manufacturers forming part of the Canadian Manufacturers' Association. I will state further that I have been informed and believe that the prices which are fixed by the Canadian manufacturers to-day throughout Canada for all hard- ware are prices which are agreed upon by them in conjunction with the American Manufacturers' Asso- ciation. Not very long ago I chanced to hear a conversation which was taking place between a strong supporter of the Conservative party, a wholesale merchant, and another gentleman, and he made this statement : — ' It is no use for us to talk about it ; we in 70 PROTECTION IN CANADA. the wholesale trade are absolutely at the mercy of the manufacturers of Canada, and they are in affiliation with the manufacturers of the United States.' " Mr. Sproule, another member, declared that business in the leather trade was conducted on exactly the same lines. It may well be believed that manufacturers with so much power and so ready to do business on lines like these will exer- cise very great influence on the future of the tariff, without that belief involving the accordance of any credit to the tales of ruin by which they support their ad misericordiani appeals. IMPERIAL PREFERENTIAL TRADE, yi CHAPTER VIII. IMPERIAL PREFERENTIAL TRADE, When Mr. Chamberlain first propounded his scheme of tariff preferences within the Empire it was received in Canada with acclamation, and those who had supported the preference given to British goods believed that at last they were to receive the reward in a return of those advantages in the British market after which Canadians have hankered ever since the repeal of the Corn Laws. But as the protectionist feeling grows stronger in Canada, enthusiasm for Imperial preferences must decrease, for Imperial preference involves a further blow to Canadian Protection, unless, indeed, Great Britain should consent to levy duties on foreign goods as a reward for the reduced tariff Canada already extends to goods from the United King- dom. Mr. Chamberlain, at the Conference of Colonial Premiers, declared that the United Kingdom would want more as an equivalent for such a sacrifice ; and since that time there has been a growing inclination in Canada to give less. The great objection to reciprocal preferences from the Colonial protectionist point of view is that there is no true reciprocity. The manufacturing interests 72 PROTECTION IN CANADA. make the sacrifice in permitting increased competition from British goods ; the landed interests reap the benefit in increased prices for agricultural produce, and of those increased prices the Colonial consumer, who has lost something of his Protection, will be forced to pay a part. In Australia the manufacturing interest is so strong that reciprocal preferences, even if offered by England, would have little chance of accept- ance. In Canada the wheat growers, and the national pride in wheat growing, have a pre- ponderating influence ; and in Canada, accordingly, there is enthusiasm for Mr. Chamberlain's idea. The Canadian feeling on the matter is well described, and some dangers of preferential treat- ment to Canadian prosperity are forcibly outlined, in an article by Professor Davidson, entitled "Canada's Second Thought on a Preference," which appeared in the Fortnightly Review of September, 1903. After pointing out that the first effect of the preference would be a vast boom in wheat growing, Professor Davidson proceeds to describe former booms which have burst with disastrous effect, and claims that there is nothing to diffe- rentiate that which is coming from all others. Wheat growing has already been undertaken too close for safety to the Northern limit, and, in addition to the dangers arising from climatic con- ditions, there is another involved in such a fatuous proceeding as resting national prosperity on the enactments and decisions of a distant Parliament IMPERIAL PREFERENTIAL TRADE. 73 over which Canada has no control. There can be no stability in a preferential policy which, even if carried, would encounter the keen hostility of nearly half the English people, and there would naturally be great resentment in England if any Colony attempted to dictate British policy and to prevent its change with a change of Government. Canada, says Professor Davidson, unfortunately seems at present prepared to take this risk with her eyes open. The risk, indeed, is even greater than Professor Davidson points out. He alludes only to the obvious danger of a reversal of the preferential policy, but there is the further danger of its success, or at least of the success of the retaliatory proposals with which it is allied. Their avowed aim is to extort concessions from other countries, and if by any chance the effect of a Colonial preference penalising American wheat were the offer of reduc- tions in the American tariff in return for the removal of the penalty, would there be the slightest chance of England refusing the offer .■• It is hardly think- able, and if the American wheat were again admitted on equal terms with wheat from the Colonies, the result of the preference would be that the Colonies would find themselves tricked into growing wheat under promise of a higher price, and under condi- tions which necessitated that higher price, only to find themselves disappointed of it. The wheat boom, according to Professor David- son, would do serious harm to Canada in another 74 PROTECTION IN CANADA. way by preventing the differentiation of agricul- tural industry which is necessary to a country's welfare, for even if the preference were extended to other products there is such a tremendous prejudice in favour of wheat growing that it would be fever- ishly pursued if the price of wheat were temporarily raised. When the price falls the boom will burst, leaving Canada semi-bankrupt, and " Then will come Canada's second thought about the preference. The first thought is joyous accept- ance ; the second will be accompanied by gritting of the teeth. Then will revive some ideals of the past. ' Hewers of wood and drawers of water ' was once a familiar phrase in Canada's politics. The voice of the oppressed manufacturer will be heard in the land, and the convinced Protectionist will begin to renew his partial studies of the trade question. Two things should never be forgotten — (i) That Canada is a great believer in Canada first, and (2) that Canada is protectionist in sentiment." Professor Short, in his book upon " Imperial Preferential Trade," further emphasises the great weight which Canadian national and protectionist sentiment must exercise against any reciprocity which could possibly satisfy Great Britain by checking manufacturing development in Canada for the benefit of British manufacturers. " The trouble with both the American and the Imperialist view of the Canadian future " he writes : " is that it is to be of the saw-log, pulp- wood and wheat growing type, with a great market for manu- factured goods ; and the only question is, who is to capture that market ? That a manufacturing future IMPERIAL PREFERENTIAL TRADE. 75 is plainly not suited to our condition is what Mr. Chamberlain insinuates in the most flattering terms. On grounds of sentiment of Imperial unity and finally of self-interest, we should be willing to leave the manufacturing to the Mother Country. But, in the first place, sentiment or loyalty affords a very pre- carious basis on which to do business, or, as in this case, to refrain from doing business. In fact, no more effective method of corrupting, and ultimately dis- crediting, all Imperial sentiment could be devised than to begin trafficking on it. What the Imperial pre- ferential advocates on the two sides of the Atlantic are trying to do is to divide an expected mutual benefit in such a fashion that each party shall receive about three-fourths of it, on the ground that the other must concede something extra on the ground of sentiment." After this ironical statement of the position Professor Short goes on to show that if the price of wheat will not be raised in England, as preferen- tialists assert, then the Canadian farmer will reap no benefit, and that those people are talking wildly who assure the British workman that Canadian gratitude and Imperial enthusiasm will cause him to open his markets to British goods and devote himself chiefly to the growing of wheat at prices no higher than those at present obtained. The British workman is assured that the foreigner will pay the wheat duties and that the enlarged Canadian market will provide higher wages for himself and higher profits for his master — an attractive if fanciful picture to the British workman ; but with nothing in it particularly alluring to his Canadian fellow subject. To the contention that Canada need not sacrifice her home market to Great Britain in return 76 PROTECTION IN CANADA. for a preference on her wheat, but need only transfer the business now done by the Americans to British manufacturers, Professor Sliort rejoins that the millions now paid by Canada to America are almost entirely for raw products and special manufactured goods which Great Britain could never supply. From the British point of view he touches a serious objection to any preferential trade which might bring about British dependence upon Canada for food supplies, since in time of war a hostile United States could cut the trade routes and make ship- ments from Canada almost impossible. Various other difficulties, he says, stand in the way of Canada becoming the granary of the Empire, " but the supreme objection must ever be that Canada cannot accept for herself any such blighted destiny." Such is the Canadian view of Mr. Chamberlain's proposals as expressed by economists of standing in the Dominion, and endorsed by manufacturers who resent any proposal to increase facilities for competition from British goods. Canada will emphatically reject the slightest attempt to " found an Empire on forbidden industries." An American article on the situation, written by Mr. Robert Ellis Thompson in the Fortnightly Review for September, 1903, puts the interesting view that what Canada has done, or may do, in the matter of tariff preference to England, is dictated neither by a desire to foster trade with the United Kingdom nor by the strength of Imperial senti- ment, but is in fact an endeavour to force America IMPERIAL PREFERENTIAL TRADE. 77 into reciprocity. Canada looks longingly at the populous Eastern States on her borders as a market for her foodstuffs — they cannot feed them- selves and would willingly buy of Canada. Trade between the United States and the Dominion must always be greater than the Dominion's trade with any other country, and Mr. Thompson thinks Canada may raise duties against the States to almost prohibitive heights in the hope of gaining free entrance to American markets by their re- moval. He believes that Western grain interests will be strong enough in the United States to prevent the granting of reciprocity, but however this be there is ground for thinking that if it were granted the Imperial preference would be imme- diately abandoned. Trade advantages are more potent in tariff making than sentiments of Empire, and it must not be forgotten that before Sir Wilfrid Laurier and Sir Richard Cartwright gave preferen- tial treatment to British goods they had been ardent advocates of unrestricted reciprocity with the United States. Sir John Macdonald denounced the proposal as "veiled treason," and predicted that if carried out it would result in annexation, but the Liberal leaders protested against Sir John Macdonald's epithets and vigorously dissented from his view of the consequences of reciprocity. From the various opinions here quoted and from others for which space is not available ; from the tone of recent Parliamentary debates ; from the attitude of the Ministry ; from the organised 78 PROTECTION IN CANADA. strength of the manufacturing interests ; and from the recent great influx of Americans into Western Canada, it seems reasonable to conclude that the present preference to British goods will not be maintained on Imperial or sentimental grounds. Its interested opponents are too many and too insistent. It might be retained, though it is not likely that it would be extended, as part of a trade bargain with the United Kingdom. It may be held as the citadel of retreating free traders against the growing forces of Protection, whereas when the Free Trade reaction came in 1897 Sir Wilfrid Laurier designed it as outworks, whence further advances should be made against the protectionist enemy. Little advantage, per- haps, was taken of the Free Trade reaction in 1 897, which has now more than spent its force, and if ever there comes another strong enough to shake monopoly interests and lighten the tariff burdens of Canada, it will be democratic and social, not merely economic and financial in its nature. In any country where dependence on foreign food does not put a powerful weapon into the hands of the free traders, it seems that the working classes will never remain uncaptivated by the specious premises of Protection, speaking to them in the guise of democracy, unless the essential democracy of Free Trade is made clear to them by its alliance with true Liberalism of other kinds. Working men are becoming the predominant political force in all the Colonies, and the resolution IMPERIAL PREFERENTIAL TRADE. 79 at a Canadian working-men's conference in favour of lower duties and of direct taxation shows in what direction lies the only hope of a return to Free Trade. A heavy revenue tariff always tends to more and more protective incidence, and it is quite unlikely that the present duties of Canada will be reduced, or even kept at their present level, unless and until the Free Trade party fights a campaign to replace the revenue lost at the Customs by a direct tax upon income and the unimproved value of land. PROTECTION IN AUSTRALASIA. CHAPTER I. THE ORIGIN OF VICTORIAN PROTECTION. Protection in Australia owes its origin in a large measure to two Englishmen who were at the time quite unconscious of the work they were doing, and while one of them probably never knew the part he played in shaping Australian fiscal history, the other expressly repudiated the work upon which some of his Colonial admirers warmly congratulated him. This was John Stuart Mill, who, in 1864, wrote the following letter to a Victorian student of his works : — " It is a great compliment to me that my supposed opinions should have had the influence you ascribe to them in Australia. But there seems to have been a considerable degree of misunderstanding as to what they are. The fault probably lies with myself in not having explained them sufficiently. I have entered rather more fully into the subject in the new editions published this spring. But, not to give you the trouble of referring to them, I can have no difficulty in saying that I never for a moment thought of p.c. G 82 PROTECTION IN AUSTRALASIA. recommending or countenancing in a new Colony, more than elsewhere, a general protective policy, or a system of duties on imported commodities, such as that which has recently passed the representative assembly of your Colony. What I had in view was this : If there is some particular branch of industry, not hitherto carried on in the country, but which individuals or associations possessed of the necessary capital are ready and desirous to naturalise, and if these persons can satisfy the Legislature that, after their workpeople are fully trained, and the difficulties of the first introduction surmounted, they shall prob- ably be able to produce the article as cheap, or cheaper, than the price at which it can be imported, but that they cannot do so without the temporary aid, either of a subsidy from the Government, or of a protective duty, then it may sometimes be a good calculation, for the future interests of the country, to make a temporary sacrifice, by granting a moderate protecting duty for a certain limited number of years, say ten, or at the very most twenty, during the latter part of which the duty should be on a gradually diminishing scale, and at the end of which it should expire. You see how far this doctrine is from support- ing the fabric of protectionist doctrine in behalf of which its aid has been invoked." It was in 1864 that the first Australian protec- tive duties were introduced into the Legislative Assembly of Victoria, and the share which Lord Grey had in bringing about their introduction was much more remote than that assignable to Mill. Some people might indeed urge that it is merely fanciful, but a glance at the previous history of Victoria and a comparison of its subsequent tariff development with that of New South Wales justify the belief that Earl Grey, as the administrator of a ORIGIN OF VICTORIAN PROTECTION. 83 system, if not as an individual, is one of the authors of Australian Protection. In 1851 gold was discovered in Victoria. Within the next few years all the Colonies of Australia with the exception of Western Australia, were given responsible government in exchange for more or less direct government by the British Crown. To Victoria, which had never been a convict settlement, population was flocking from all parts of the world, and between the years 1852 and 1856 340,000 people arrived in the Colony. Most of them were from the old world, but there were thousands of escaped convicts and ticket-of- leave men from New South Wales and Tasmania, whose presence occasioned an insecurity and an outbreak of crime, which roused law-abiding citizens to a state of dangerous exasperation. Regard for England decreased almost to vanish- ing point, as the British Government persisted in sending convicts to Australia, and raised objections to the steps taken by Victoria to prevent the immi- gration of criminals from other countries. There was much angry talk of separation, and Earl Grey, the Colonial Minister, who had broken pledges given to the colonists with regard to the cessa- tion of transportation, was an object of universal execration. At a meeting of the Anti-Transpor- tation League in Melbourne, held on the day following an audacious gold robbery from the ship Nelson, there was much fierce speaking by prominent public men. Alderman Johnston, a G 2 84 PROTECTION IN AUSTRALASIA. member of the Legislative Council, moved a resolution to the effect that Earl Grey's conduct was rapidly wearing out the affections of the colonists for the Mother Country, and " must inevitably drive them to seek refuge from such heartless tyranny and oppression in national independence." He went on to say that a popular celebration of Her Majesty's birthday would be to burn Lord Grey in effigy in every city, town and village of Australia. They " could not go abroad without pistols, could not safely open their doors at night, or venture into the streets after dark, because they were ruled by a regardless, thoughtless, cruel tyranny 16,000 miles away, and represented by wavering imbecility here." Mr. Fawkner, also a member of the Legislative Council, urged resistance by force to the landing of convicts anywhere in Australia ; and another alderman, Mr. Nicholson, saying it was not an uncommon thing to find men dead in the streets, attributed nearly all the crime and evil in the Colony to Earl Grey. " The foul crime just perpetrated was the work of Earl Grey." Mr. Dight, another member of the Legislative Council, bitterly attacked the administration of a man " whose undisguised object is to coerce the Colonies into receiving the sweepings of British gaols." Yet another coun- cillor, Mr. Miller, said he did not want to take up arms, but if this state of things continued Austra- lians would leave to their children a legacy of hate for the Mother Country. This would appear fairly ORIGIN OF VICTORIAN PROTECTION. 85 strong language, but the gentleman who used it was reproved for his moderation by a subsequent speaker, who asserted Australia's right to indepen- dence, and was loudly cheered when he said they had the diggers ready with their weapons to fight against England, and that they could raise some five regiments on the goldfields. "With Earl Grey moral force was of no effect ; they needed to let him see there was physical force in the back- ground." All this is now ancient history ; the hateful trans- portation system was soon abandoned, and as a matter of fact at the time when the colonists were so warmly denouncing Earl Grey he had already retired from office. Nevertheless, when it is remembered that Victoria was the first of the Colonies to adopt a protective system, and the only Colony which carried it to extravagant lengths, and that, further, this system was avowedly adopted as a " National Policy," being introduced by politicians who had declared themselves economically free traders, and that the ablest and most popular of them was entirely hostile to British interference in Victorian affairs — he habitually spoke of the Colonial Secretary as "a foreign nobleman" — there is some reason for attributing to Earl Grey a con- siderable share in the birth of Protection as an Australian " National Policy." There were, doubtless, other important factors contributing to the same result. Among the hundreds of thousands who came to Victoria 86 PROTECTION IN AUSTRALASIA. from Europe and America in the early fifties was a considerable proportion of foreigners, many of them protectionists, and most of them more or less hostile to British policy, while, in common with the miners of British extraction, they were in continual conflict with the Government — in which none of the miners had any share — over the tyranny and high-handedness displayed in the matter of mining licences. The bitter feeling culminated in 1854 in the Eureka riots at Ballarat, when, for a few hours, the rebel flag of a Victorian Republic floated over the miners' stockade. It was carried by assault by a British regiment. Dozens of the miners were killed, and many prisoners were tried for high treason and, though the orderly population did not countenance their violence, there was universal sympathy with their grievances, which showed itself in general satis- faction when the prisoners were acquitted. The rebel leader, Peter Lalor, who lost an arm in the fight and was for some time a fugitive from justice with a price on his head, afterwards became Speaker of the Victorian Legislative Assembly. With a population so constituted, and so lately on the verge of revolt against Great Britain, there were elements far more favourable than those in any other Colony for the adoption of a protective system designed to foster the national spirit and make Victoria industrially independent of Great Britain, when in 1 864 the question came before a Legislative Assembly elected on a wide franchise. ORIGIN OF VICTORIAN PROTECTION. 87 The duties proposed were only of 10 per cent. ad valorem on the articles whose manufacture it was desired to encourage, and one of the reasons for proposing them was that the shallow alluvial mines, open to the labour of any man with a shovel or a pick, were beginning to give out, and the hope existed of providing work in factories for the dis- placed miners and their children. As already stated, several members of the Ministry which introduced Protection were convinced free traders, among them the Attorney-General, Mr. Higin- botham, who was then a fiercely democratic politician, though he afterwards became Chief Justice, in which capacity he refused to recede from his early contention that the Colonial Secre- tary was a foreigner, without the right in any circumstances to over-ride the advice given to a Colonial Governor by his Ministers. For these views he sacrificed the position of Acting Governor, which would otherwise have been his in the inter- vals between the different Governorships, and up to the time of his death, together with the respect of everybody, he retained the positive devotion of the most democratic portion of the community. Thus was Protection made acceptable in its infancy by the circumstances of the time, the politics of the men who presented it, and the dis- position of the electorate to which it was presented, while the politics of the men who opposed it only helped to make its adoption more certain. Those were stormy times in Victorian politics. The 88 PROTECTION IN AUSTRALASIA. popular Lower House was for years in constant conflict with the deeply unpopular Upper House, elected from a very small class with a high pro- perty qualification, by a small electorate in which property qualified for the franchise. The Upper House stoodalmost solidly for Free Trade, and most of the few opponents of the new duties in the Assembly belonged to the propertied class, and were, together with the Council, against payment of members and, above all, doggedly against the breaking up of large estates held by the " squat- ters," which was eagerly demanded by the great majority of the electors in order to settle farmers upon the land. Protection and more liberal land laws were carried at much the same time by much the same politicians, and incidentally the miserable failure of the former, and the success of the latter policy, may be exemplified here by the fact that between 1866 and 1873, 50,000 homes were created on the land, giving direct employment to at least 100,000 people, while the number of men and women employed in factories increased for the same period by only about 11,000. These naturally found a great part of their work in supplying the needs of the new agriculturists — many of them in unprotected industries — and therefore nothing in the figures shows the employment of a single extra man or woman through the medium of the tariff. The circumstances under which Protection first gained a footing in Australia are of much greater importance than at first sight they might appear, ORIGIN OF VICTORIAN PROTECTION. 89 for the events of the time have coloured all Victoria's subsequent tariff history. Liberalism became indissolubly associated with Protection, and Conservatism with Free Trade, since the party which increased the duties in 1873 and again in 1877 was still struggling with the Upper House for complete control of finance, for free education, for manhood suffrage, and other democratic measures, thereby gaining the attachment of working men, not only to itself, but to the protective policy which it had championed. The Democratic and Protectionist hero of the 'seventies was Mr. (afterwards Sir Graham) Berry, who showed uncompromising hostility to the Legislative Council and a blind devotion to Protection. After a period of non- political life in England as the Colony's Agent- General he returned to Australia, and as Treasurer in a Ministry of 1892 carried the last and most disastrous increase of the Victorian tariff. In 1895 there came a reaction ; duties were somewhat reduced — with excellent effect on all industries — and with the federation of the Colonies in 1901 came inter-colonial Free Trade and an Australian tariff with duties against the outside world much lower than those previously levied by Victoria. go PROTECTION IN AUSTRALASIA. CHAPTER II. THE TARIFFS OF NEW SOUTH WALES. It is in Victoria and New South Wales that the tariff battles of Australia have really been fought, with the result that while the former remained steadily protectionist, the latter maintained, up to the date of federation, almost unfaltering allegiance to Free Trade. Later willbe discussed some of the most striking results of the rival policies in the rival Colonies, and in New South Wales they were certainly such as to encourage no alteration of the fiscal policy. But, apart from the prosperity which free traders claimed to the credit of Free Trade, there was an almost entire absence in New South Wales of the political and social circumstances leading to the imposition of Protection in Victoria. Like the younger State, it had its quarrels with the Colonial Office, and joined, in the 'fifties, in the outcry against transportation, but there were interests eager to obtain a supply of cheap labour for working the land, and only a few years earlier petitions had gone from New South Wales to England against the discontinuance of transporta- tion. Though in 1850 the alluvial mines of New South Wales caused a temporary rush to that Colony, the immensely superior richness of the Victorian fields almost immediately afterwards TARIFFS OF NEW SOUTH WALES. 91 drew away far more people than New South Wales had gained. They were for the most part the eager, restless spirits who desired change, and joined the Democratic party in Victorian politics, while in the older Colony remained the more staid and settled elements, many of them attached to England by the traditions of civil or military office which they had held, and with families whom they brought up in the same spirit. Separation from the Old Country never became a familiar idea as it did in Victoria, and Wentworth, the greatest states- man of New South Wales, and practically the founder of its constitution, was so eager for the adoption of British precedent in all things, that he urged the creation of a Colonial peerage or baronetage, from which the New South Wales Upper House should be elected by members of their order, in the same manner as representatives are sent to the House of Lords by the Scotch and Irish peers. In this proposal he was defeated, but the Legislative Council, which in Victoria was made elective, was nominated by the Governor in New South Wales, and in the early history of the Colony the views and spirit of Wentworth were as power- ful as those of Higinbotham and Berry in Victoria. Sir Henry Parkes also — in many things opposed to Wentworth, but nevertheless a fighting free trader was one of the most powerful men in New South Wales, and his personal weight told against any change of tariff policy. Jealousy of Victoria, which began a struggle for 92 PROTECTION IN AUSTRALASIA. separation from New South Wales in 1840 and attained success ten years later, was also operative in creating unwillingness on the part of the mother Colony to imitate its young and ambitious rival. In matters other than political this spirit showed itself — even in the realm of sport. Victorian football, differing considerably from the game as played in England, has never been adopted in New South Wales. In South Australia no other game is known, and South Australia followed the footsteps of Victoria more closely than any other Colony in the development of its tariff. Again, Victoria and New South Wales refused to adopt the same railway gauge. South Australia, for its main line, has chosen that of Victoria, which is somewhat wider than the standard gauge of England and most European countries. These things, small as they are, help to show that the varying fiscal complexions of the different Australian Colonies have been accom- panied by differences of many kinds, and that the tariffs are the result of other causes than a reasoned judgment as to their effect on the production and distribution of wealth. In the year 1864 a slight tincture of protectionism was given to the New South Wales tariff, but it was soon removed, and up to 1892 customs duties were levied for revenue purposes only. Then Sir George Dibbs, defeating Sir Henry Parkes, intro- duced a mild protective tariff, containing a number of ten per cent, duties, and carried it through both Houses. Australia was suffering from reaction TARIFFS OF NEW SOUTH WALES. 93 after the " land boom." Wages were low, employ- ment was scarce, business was depressed, and the people were in the mood for experiment of any kind which might put an end to the existing state of affairs. As far as can be gathered from statistics the Dibbs duties had no effect whatever in improv- ing matters, and did some little harm, but they lasted too short a time for powerful vested interests to grow up under them and clamour for more Pro- tection, as had been the case in Victoria where the first spoon-feeding of local factories was on a similarly modest scale. In 1894 Mr. Reid, now leader of the Federal Opposition, came into power and swept away the Dibbs protective duties. Not only did he sweep them away, but the tariff which he introduced was the simplest and least extensive ever known in New South Wales or any other country. The revenue duties of the former Free Trade period were almost all abolished, and under the new tariff scarcely more than a dozen articles of any kind were taxable. Immediately there was an improvement in the condition of New South Wales — an improvement continued in spite of years of disastrous drought right up to the time when New South Wales surrendered her Free Trade posi- tion to help constitute the Australian Common- wealth, wherein all that her free traders could do was to effect great modifications in the tariff proposed by the Government. As the introduction of Protection in Victoria had been a triumph of the Democratic party in 94 PROTECTION IN AUSTRALASIA. that Colony, so was the re-introduction and the extension of Free Trade a democratic triumph in New South Wales. With the abolition of duties, Mr. Reid allied the introduction of direct taxation of land values and of incomes, thereby securing enthusiastic support for his whole policy from the working men and advanced Liberals of every class, and incurring the bitter hostility of those who stood for Conservatism and special privileges for land and wealth. Thus all those protectionists who may have supported Protection from a sincere belief that it would benefit their country were flung into the arms of reactionaries and Conserva- tives, with the result that any chance they might have had of persuading the people to retain Pro- tection on its merits was absolutely destroyed. All the Australian Colonies are in essence demo- cratic, and the alliance forced upon the protec- tionists of New South Wales damned their cause just as effectually as a similar alliance had been fatal to the hopes of Victorian free traders. The tremendous strength of these associations in mould- ing fiscal opinion is shown in the composition of the Labour party, which entered the recently elected Parliament with a larger following than either Government or Opposition in the Federal Senate, and had 24 members in the House of Representatives, against 25 claimed by the Government, and 26 by the Opposition. The Labour men of New South Wales are free traders, because, in their own State, Free Trade has been TARIFFS OF NEW SOUTH WALES. 95 recognised as the Liberal policy ; the Labour men of Victoria are protectionists, because the Protec- tionist party did more for them than the Free Trade party, when such existed, in advancing the views which they held. The Labour representatives from Western Australia, numbering 10 out of a delega- tion of II, are mostly free traders, for though Western Australia has been largely peopled by Victorian protectionists, in their new country they found the occupation of mining which they followed had everything to gain from Free Trade, while on all other questions they were opposed to a most oppressive and Conservative protectionist Govern- ment. The result of these differences in the Labour party was that its members sank the fiscal question altogether, and were ready to give their votes solidly for the Protectionist Government or the Free Trade Opposition, according as one or the other offered them more in return. The overthrow of the late Government by the Labour party has removed the tariff issue for the time being from Australian politics, and there is little likelihood of a move towards Free Trade or increased Protection while the Labour leader, Mr. Watson, remains in power. Should his Govern- ment be soon defeated, as is very probable, the tariff question must come up again, and it seems that protectionists will bid higher than free traders for the Labour party's support. The late Prime Minister, Mr. Deakin, who is a strong protectionist, has considerable sympathy with Labour views, while 96 PROTECTION IN AUSTRALASIA. Mr. C. C. Kingston, of South Australia, one of the strongest men in Australian politics, though not in Mr. Deakin's Government, was the Minister of Customs who introduced the present protectionist tariff, fighting strenuously against every modifica- tion of it, and Mr. Kingston, more than any other politician, has the confidence and support of the Australian democracy. In the Free Trade ranks are a number of revenue tariff men, frank Conserva- tives, opposed to direct taxation, and hostile on many points to the Labour party, while the Opposi- tion leader, Mr. Reid, though he has carried more Liberal measures than any of the other men who have been at the head of State Governments, made himself unpopular with the working men outside New South Wales by his hesitation to support a federal union under which he saw that his own State must sacrifice its Free Trade policy. Mr. Reid is further weakened by the fact that his following, which is equal to that of the protectionists in the House of Representatives, includes half-a-dozen " fiscal peace " men — ^that is, members who, though free traders, have pledged themselves to vote against any alteration of the existing tariff before the next general election. On proposals for an increase they will vote with their party, but on proposals for reduc- tions will support the Government. In a later chapter the question of the tariff outlook will be further dealt with, but at present it is desirable to say something of Protection in the other Australian States before the institution of the Commonwealth. OTHER AUSTRALIAN TARIFFS. 97 CHAPTER III. OTHER AUSTRALIAN TARIFFS. In 1859, after all the Australian Colonies, with the exception of Western Australia, had been granted responsible government, there were no import duties in South Australia, Queensland, or Tasmania, while Western Australia had duties of about 7 per cent, ad valorem, which were increased to 10 per cent, by 1879, while in the same twenty years the other Colonies had all developed con- siderable tariffs. In Tasmania, where scarcely anything imported was on the free list, there were nevertheless no manufactures worth speaking of, and the duties, though high enough to be protec- tive in a larger community, were in effect merely revenue-producing, and had the support of Free Trade Governments. South Australia deliberately adopted the policy of Protection, being considerably affected by the example of Victoria, and further stung to retaliation by the Victorian border duties, which taxed South Australian products. The Labour party of South Australia was, as in Victoria, generally protectionist. Some protected manufac- tures grew up, and there arose vested interests amongst the manufacturers, who feared the loss of high prices, while the workmen, rightly or wrongly, p.c. H 98 PROTECTION IN AUSTRALASIA. feared the loss of employment, with the result that in 1882 the duties were considerably increased, and as a consequence it is claimed by South Australian protectionists that the manufacturing industries employed more work-people. If this were a fact, there would still remain to be set off against it the injury done to the agricultural and pastoral interests, and to the great body of consumers by increased prices, but there is no evidence to con- nect any extra employment given in factories with higher protective duties. In igoo South Australia employed in manufactures only 17,659 men and women out of a total of 360,000, and of these only 8,454 were engaged in manufacturing products which came into competition with imported goods. On the other hand, 9,164 were employed in domestic industries treating perishable products for domestic use and in industries dependent upon the natural resources of the country. The latter class of industry employed 8,158 male and only 261 female workers, while the manufactures which may have been fostered by Protection employed only 5,887 males and 2,577 females. In South Australia Protection has had a similar effect to that experienced in Victoria, of driving women into factories, because Protection encour- aged industries dependerit on cheap labour, and further because, by making the people generally poorer, it obliged a greater number of women to earn their own living. In New South Wales, under Free Trade, in the year 1900 16 per cent, of all the OTHER AUSTRALIAN TARIFFS. 99 operatives employed in factories were female; in Victoria, under Protection, females constituted 28 per cent, of the total, and in South Australia, also under Protection, 16 per cent. In the industries capable of Protection — that is, those whose pro- ducts competed with imported goods — the per- centage of females was, for New South Wales, nearly 23 per cent. ; for Victoria, nearly 32 per cent. ; and for South Australia, over 30 per cent. From these figures the conclusion is fairly de- ducible that Protection in the Australian Colonies, if it has promoted manufacturing industries at all, has promoted those in which the highest percentage of cheap female labour is employed ; and further, since the percentage of cheap female labour is lower in New South Wales for even this class of industry than in any of the protected Colonies, it appears that here as well as elsewhere Protection encourages the displacement of male workers by female. In South Australia, where between the years 1892 and 1900 there was the increase in the num- ber of factory operatives from 1 1,489 to 17,659, which protectionists claim as the result of their policy, it is worthy of notice that the chief increase has been in the manufactures which are not helped by Protection, but which are more or less ham- pered by it, namely, those dependent lipon the natural products of the country. The manu- facturing industry, which employs most men in South Australia,is not, indeed, dependent upon the H 2 100 PROTECTION IN AUSTRALASIA. natural products of South Australia itself, but on those of New South Wales, about 2,500 men being engaged in smelting the silver-lead ore from the Broken Hill mines, which, though situated in New South Wales, trade with the nearest South Australian ports, and not with those of the State to which they belong. Queensland, before federation came, also ranked among the protectionist Colonies, and had con- siderable duties. The tariff issue, however, was never so acute there as in New South Wales, Victoria, or South Australia, and most of the duties were in effect rather revenue-producing than protective, with the exception of that on sugar. There was little opposition from any class in Queensland to this product being heavily pro- tected to counteract the bounties on beet sugar from Europe. Against it the duties were prac- tically prohibitive, and against cane sugar from other countries Queensland required no protec- tion, being itself a large exporter of sugar to the remainder of Australia. Since the production exceeded the supply, Queenslanders were able to purchase cheap sugar, and even had the price been much higher, all classes would probably have willingly allowed the capitalist plantation-owners full protection against any possible competition in the home market, in order to prevent them from raising a new excuse for the employment of imported " Kanaka " labour from the South Sea Islands. This coloured labour has always been OTHER AUSTRALIAN TARIFFS. loi hateful to the working men of Queensland, and the deportation of all Kanakas within a term of years was insisted upon by the first Common- wealth Parliament, an inducement to the employ- ment of white men in the cane fields being given in the meantime by charging a higher rate of excise duty on the sugar grown by Kanaka labour. There were in igoo about 9,000 Kanaka labourers on Queensland cane fields, and the Act of 1901 provides that while more may be imported in limited numbers up to March 31st, 1904, after that date none may enter Australia, while any South Sea Islander found in the couatry after December 31st, 1906, will be deported. The import duty on imported cane sugar was fixed at £6 per ton, the excise at;^3 per ton on sugar grown by black labour, and £1 on that grown by whites. Another tariff experiment made by Queensland was the granting of liberal export bounties on home-grown cotton, and between 1 867 and 1 874 over ten million pounds weight of raw cotton was exported ; but prices fell heavily as American production increased again after the Civil War, and, the bounties being dis- continued, the growth of cotton in Queensland has practically died out. In Queensland, more than in any other colony of Australia, manufacturing industry depends upon natural resources, and derived more hindrance than help from the protective system in force before federation. In 1901 sugar refining and meat pre- serving accounted for ^^3,400,000 worth, or nearly 102 PROTECTION IN AUSTRALASIA. 40 per cent, of the total manufactured output. Meat preserving was in no way encouraged by Pro- tection ; the price of sugar was little, if at all, affected by the Queensland duties, though now that the whole of Australia is a protected market for growers in the northern State, and one which at present they cannot wholly supply, they will no doubt derive some advantage from the higher prices occasioned by Protection, to the great injury of the fruit pre- serving and jam making industries throughout the Commonwealth. Between 1892, the first year in which statistics were systematically collected, and 1901, the workers employed in Queensland factories have increased from 13,369 to 27,123, an increase of over 100 per cent. The majority of them, however, are employed in industries manufacturing goods for immediate consumption or dependent on the natural resources of the country, these numbering 14,600, as against 12,500 making products with which imported goods compete. Among the latter there are thousands, such as makers of clothing and textile fabrics, boots and shoes, agricultural implements, aerated waters, vehicles, saddlery and harness, and furniture and bedding, who would undoubtedly find work without Protection, and as these number over ten thousand, the remainder, who might conceivably owe their employment to the tariif, is necessarily very small. Owing to the number of men in such industries as the treatment of sugar, which employs over 3,000 ; meat preserving, which employs 1,700 ; the saw OTHER AUSTRALIAN TARIFFS. 103 mills, which employ nearly 3,000 ; and metal and machinery works, which employ 4,700, the propor- tion of female workers in Queensland factories is very low — only a little over 13 per cent. This is a lower percentage than that of even New South Wales, and is beaten only by Western Australia, where females number less than 10 per cent, of the total workers employed in manufacturing. This would seem to tell against the claim that Protection fosters female labour, since both Queensland and Western Australia had protective tariffs, though much lower ones than that of Victoria ; but it must be remembered that these are the two newly- developing States of the Commonwealth, both principally occupied in exploiting their mines, their timber resources, and their lands, and that both consequently have a considerable excess of males in their population. In 1901 Queensland had 276,000 males to 220,000 females, and Western Australia 113,000 males to 7 1,000 females. Under these circumstances, seeing that the principal manu- factures are those dealing with the natural products of the country, they must employ a large proportion of men under any fiscal system. Western Australia, which did not receive a full measure of responsible government until 1 890, had even in its Crown Colony days a number of duties which gave protection to pastoral, agricultural, and mining products, and under the rigiine of Sir John Forrest, who held the Premiership from that time until he became a member of the first Commonwealth I04 PROTECTION IN AUSTRALASIA. Government, these duties were considerably in- creased. In 1890 the population of the colony was only about 50,000 ; by 1901 it had increased to nearly 200,000, the quadrupling of population being due to the discovery of immensely rich mines, which attracted immigrants from every part of the world. Then the heavily- protected graziers, farmers, and fruit growers began to make fortunes at the expense of the mining population, which created most of the wealth of the country, and a very strong Free Trade tendency manifested itself on the gold- fields. This was the more remarkable because a large proportion of the goldfields people had come from Victoria, where most of them had been strong protectionists. In 1901 the census showed 40,000 of the Western Australian population to be of Victorian birth, and it is worth notice that this large number of emigrants had left protected Victoria in search of better conditions, while only 14,000 had come to Western Australia from Free Trade New South Wales. The other highly-protected State, South Australia, from its small population of 362,000 had sent 16,000 to swell that of Western Australia, a number about equal proportionately to population to the Victorian contingent, and more than four times as great as the contingent from New South Wales. In their new home these 54,000 Victorians and South Australians were for the most part converted into enthusiastic free traders by the exactions which a narrow protectionist policy imposed upon them, in the shape of exorbitant OTHER AUSTRALIAN TARIFFS. 105 prices for tools of trade, clothes, food, and all other necessaries of life. The result was seen when Western Australia sent eleven members to the first Commonwealth Parliament, for all of them, with the exception of Sir John Forrest, were free traders. In the case of the West Australian miners — locally known as " t'othersiders," because they came from the other side of the world, or the conti- nent — in addition to high prices, there were political factors similar to those which coloured the fiscal policy of New South Wales and Victoria, in deter- mining their adherence to Free Trade. The Forrest Government was an anti-democratic and despotic Government, treating the " t'othersiders " in much the same fashion as President Kruger dealt with the Uitlanders. The miners complained in vain of various monopolies. As long as it was possible they were denied the franchise ; when given to them, it was rendered to a large extent nugatory by a distribution of seats which gave the same repre- sentation to mere handfuls of people on the coast as to thousands on the gold fields. The Conservative Western Australian Govern- ment took a further amusing step in its desperate endeavours to minimise the influence of the "t'other- siders." This was the bestowal of the franchise upon women — a radical measure which seemed good to Sir John Forrest, because the majority of the miners were bachelors, or men who had left their wives and families at home when they went to seek their fortunes. Finally a determined effort io6 PROTECTION IN AUSTRALASIA. was made by the minority in power to prevent Western Australia joining the Australian Common- wealth, then on the point of coming into existence. Feeling was raised to such a dangerous pitch on the goldfields, and the agitation for the separation of the mining area from the rest of the colony became so threatening, that finally Sir John Forrest gave way, and Western Australia entered the Com- monwealth. One of the conditions upon which it did so was that, for the first five years after the imposition of a uniform tariff on goods entering Australia from abroad. Western Australia should be empowered to impose duties on goods the produce of the other States. These duties were claimed by Western Australia as necessary to her solvency, because such a large part of her revenues was raised from the customs, though, of course, it is obvious that since West Australians paid the duties it would have been possible to raise just the same amount as they provided by some form of direct taxation. In order to gain its adherence to the Common- wealth, the rest of Australia reluctantly consented to allow the Western State to thus tax Australian goods, but only on the condition that the duties in the first year should not exceed those of the West Australian tariff, and that they should be reduced each year by instalments until their abolition at the end of 1906, and ultimately this condition was f'^reed to. Thus the Conservative protectionist party in Western Australia obtained some crumbs OTHER AUSTRALIAN TARIFFS. 107 of comfort in the permission to tax the bulk of the population on the food and goods which they bought from the rest of the Commonwealth for a few years after their State had become a component part of it ; but when the Commonwealth elections came the bulk of them joined with the goldfields population in electing Free Trade representatives. There had never been any national ideal to con- done the mistakes of West Australian Protection. It exemplified as narrow, grasping, and cynically selfish an application of the policy as could be well imagined. A few graziers and farmers who did not produce enough food for the country's consumption, and the manufacturers of some local goods, clung tenaciously to a protective tariff for their own colony because it enabled them to grow rich by charging exorbitant prices to the miners. There was no pretence of the belief, which, extraordinary as it may appear, is honestly held by many protectionists of Victoria and South Australia, that Protection, while encouraging local industry, tends to make goods cheaper. The West Australians frankly demanded a tariff to make them dearer, and suc- ceeded in retaining its advantages in a modified form for some years as regarded food and manu. factured goods coming from the Eastern States. Of these States they were intensely jealous : they had no national ideal of a United Australia ; union had been forced upon them by the recent immi- grants, who greatly out-numbered the native-born population ; and if there was one thing they disliked io8 PROTECTION IN AUSTRALASIA. more than another it was the prospect of inter- State Free Trade. It is true Free Trade between the States was to be accompanied by Protection against the rest of the world, but since Australia raised pastoral and agricultural products far in excess of requirements for home consumption, Protection against the out- side world could not help the West Australian pastoralist or agriculturist to higher prices. In manufacturing, also, the more developed Eastern States were far in advance of West Australia, and the West Australian people saw that, while Protec- tion against the outside world might give monopoly profits to some Australian manufacturers, but a small share of them would be reaped by the manu- facturers of their own State. They feared that within the protected area the competition of Victoria and New South Wales would be too strong for any West Australian industry which depended for its prosperity on Protection. The question, then, which presented itself to the protectionist electors of Western Australia was as follows : Is it better to assist in making a high tariff for Australia which will almost certainly raise prices against us for the benefit of Eastern manu- facturers, or to fight for a low tariff which will enable us to buy all we need at a moderate price ? Since all chance of local producers or manufacturers being able to fleece the people would vanish with the abolition of the special tariff in 1906, West Australians decided that it would be better they OTHER AUSTRALIAN TARIFFS. 109 should not be fleeced at all, and thus it came about that they elected men pledged to support a Free Trade policy for Australia. At the second election in 1903, when the miners and new colonists had obtained greater political power, the West Aus- tralian representatives chosen were, with the ex- ception of Sir John Forrest, all Labour members. Among them are some protectionists, but the Labour party does not rank the fiscal question as of prime importance, and the protectionist members of it support that policy more for national and political than for economic reasons. The protec- tionist Labour men from Western Australia are not influenced by any desire to promote capitalistic interests in that State or elsewhere, but are imbued with a strong Austrahan sentiment, and have persuaded themselves that a protective policy will make for the welfare of Australian labour generally. The facts, as free traders read them, are all against this belief ; but there is nevertheless the greatest possible difference in aim and intention between the old provincial protectionism of Western Aus- tralia aad the new national protectionism of some of its Labour members in the Commonwealth, The recent fiscal history of Western Australia has been discussed at some length because of the interesting light it throws upon the motives which may influence a State in adopting Protection or Free Trade. As to the effect which Protection has had upon industry in the West, there can be not the slightest doubt that it has been absolutely and no PROTECTION IN AUSTRALASIA. entirely bad, though no fiscal policy could prevent the natural growth of some manufactures, nor do more than slightly check the progress of a country which teems with gold. In 1888, before the Cool- gardie discoveries, the yield was worth ;^ 13,273, and in 1901 its value was nearly eight millions. In the meantime the population had increased by about 150,000 ; every industry was stimulated by the increasing gold .output, and some attention was further devoted to the great resources of the forest and the soil in an area of nearly a million square miles. These facts need emphasis in any discussion of the effects of fiscal policy in Australia as showing that, though Western Australia has a better record than even New South Wales in several of the matters by which one may endeavour to gauge the comparative prosperity of different communities, it would be quite absurd to ascribe advantages on one side or the other to the adoption of a particular fiscal policy. Between the older and the newer States there is not sufficient similarity of conditions for useful comparison, though, as will be shown later, great similarity of conditions is accompanied by striking differences in the case of fairly comparable communities such as Victoria and New South Wales. The workers employed in manufacture in Western Australia numbered in 1901 11,300, only 1,062 of them women, these numbers constituting a higher proportion of the total population, and showing a smaller proportion of female to male workers, than in any other OTHER AUSTRALIAN TARIFFS. iii Australian State. The reasons for the high per- centage of men employed have already been dealt with, and examination of the industries in which they are employed shows how little their employ- ment is concerned with Protection. Saw mills, for instance, exploiting the magnificent forests of valuable timber, employ 3,700 men. Workshops belonging to the Government railways, which are being rapidly extended, employ 950 men, chiefly engaged in repairing rolling stock. The making of food and drink — principally aerated waters and beer — gives work to 1,000; printing occupies 878 ; the clothing and dressmaking trades, 1,100 ; in brickmaking, 370 men are engaged ; and in iron- working, 1,100. In all, over 9,000 of the total manufacturing population were employed in the foregoing industries, and though some few of their products may have been affected by the protective tariff, it is clear that most of them would in any case have been manufactured on the spot to suit the local needs of a busy and increasing people. Against anything the manu- facturers may have gained in increased prices must be set off the increased price of machinery, raw material, and the food of the workers em- ployed, as well as the lessened demand resulting from all the tariff burdens heaped upon their customers. That farmers, graziers, dairymen, and orchardists were enriched by the taxation of their fellow-citizens there is no reason to doubt, except in those cases where the profiit went into 112 PROTECTION IN AUSTRALASIA. the hands of the landowner, who sold his property at enhanced prices to agriculturists, anxious to reap a share of the spoil. During the last ten years there has been a very considerable increase in agricultural production, which was valued at ;^38i,ooo in 1891 and ;£'86l,ooo in 1901 ; but in the latter year agricultural produce was worth only 275 per cent, of the total production of the country, and Western Australia raised less than one million bushels of wheat, or not enough for her own needs. The value of ;^86 1,000 given above would have been much less but for the high prices resulting from Protection. Western Australia was forced also to import potatoes, oats, hay, barley, fruit, butter, cheese, ham and bacon, to supply defi- ciencies in home production, and therefore in all these things protective duties, which were inopera- tive in Victoria owing to a supply in excess of local needs, fell with their full weight upon the West Australian miners, who were forced by them to pay tribute to the agriculturists. By the end of 1906, when the special tariff of Western Australia will disappear, the deficiency of local production, if any, will be supplied by the other States free of all duty. PROTECTION IN NEW ZEALAND. 113 CHAPTER IV. PROTECTION IN NEW ZEALAND. New Zealand, which is always looked upon as one of the Australian Colonies, though it has not joined the Commonwealth and is a thousand miles distant from the nearest Australian port, has lately made great progress under a protective policy, but even the most enthusiastic protectionist would be puzzled to connect the prosperity with the Protec- tion. With an area of 104,000 square miles New Zealand has a population of about 800,000, and is, next to New South Wales and Victoria, the most populous Colony of the Australasian group. It is also by far the most fertile, its wheat yield averaging in 1901 24'8 bushels per acre against averages of 6"9 bushels in Victoria, I0'6 bushels in New South Wales and 4'6 bushels in South Australia. Its pastures also are unequalled on the Australian continent ; it has immense resources in gold, coal and timber ; its rainfall is more abundant and its climate is better than that of Australia, and there- fore no elements of prosperity are wanting. The Governments of the last fifteen years have, further, done their best to induce the development of the country by legislation devoted to that special purpose. Large estates have been purchased and p.c. I 114 PROTECTION IN AUSTRALASIA. cut up for sale to small proprietors, while land specula:tion and the holding of unused, or half used, land are strongly discouraged by a tax of one penny in the pound on the capital value of land, exempting all improvements from taxation. The man who has cleared, built upon, cultivated or otherwise improved a piece of land worth ^i,ooo, and thereby raised his property to a value of ^2,000, pays no more than his neighbour who owns land also worth ;^ 1,000 which is unused or not used to the best advantage. In most of the munici- palities local rates are also levied upon land values only, exempting improvements, with the result that no one can afford to keep valuable land unproductive. It is since the introduction of these and other so-called Socialistic measures in 1891 that the primary industries of New Zealand have been enormously developed, and with them the output of the factories has also increased. The total wealth production of New Zealand, which was £33 gs. 8d. per head in 1881, increased to ^34 3^. id. in 1891, and to ^36 10s. 4d. in 1901, though in the mean- time prices had been on the whole steadily falling. Since 1881 there have been additions to the tariff, making it more protective, but it is much less onerous to the natural industries and to the mass of the people, than the former tariff of Victoria, or even the present tariff of the Commonwealth. Here it will be interesting to compare the amounts which certain classes of industry contributed to the PROTECTION IN NEW ZEALAND. 115 total wealth production of New Zealand in 1901. The total is given in Coghlan's " Seven Colonies," the standard statistical work of Australasia, at ^28,452,000, made up as follows : — Produced by £ Agriculture 7,515,000 Pastoral Industries ... ... ... 6,962,000 Dairying, Poultry, and Bee Farming 3,008,000 Mining Industries 2,956,000 Forestry and Fisheries 1,081,000 Manufactories ... ... ... 6,930,000 ;^28,452,ooo The value of the wealth created in the factories is arrived at by subtracting from the value of the total output, ;f 16,340,000, the value of the materials used, which amounted to ;£'g,4io,ooo. In pro- ducing the balance of ;f 6,930,000 there were employed 48,500 workers, 38,000 of them male and 10,500 female, who received in wages ^£■3, 512,000. A large proportion of these people were employed in industries which could not be assisted by protec- tive duties, since they consisted in treating natural products of the Colony, with which foreign goods had no chance in competition and the greater part of which was exported. Saw mills, for instance, em- ployed 6,800 men ; meat preserving and refrigerat- ing, 2,600; tanneries and wool scouring, 2,600; butter and cheesemaking, 1,200; brick making, 500; flour mills, 500 ; and jam and biscuit making, 1,000. The largest protected industries were those producing clothing and textile fabrics, in which over 14,000 workers — 5,600 men and 8,500 women — found I 2 ii6 PROTECTION IN AUSTRALASIA. employment. Millinery and clothing manufacture accounted for 6,800 women and 1,200 men of this total, and though under a Free Trade system some garments made by them might have been imported, whether Protection or Free Trade prevails, other considerations will always cause most of the clothing of a country to be made at home. Ready-made garments in New Zealand are subjected to a duty of 25 per cent, the highest penalty of the New Zealand tariff being levied upon those who are guilty of having apparel made to order by British or foreign tailors or dressmakers. Such apparel imported into the Colony pays a duty of 40 per cent. The making of boots and shoes which are dutiable at 22| per cent, ad valorem employed 2,700 workers in 1901, while in New South Wales, where boots and shoes were admitted free, the same industry employed 4,000 workers — much the same number proportionately to population as in New Zealand. The most flourishing of all the protected manufac- tures of the island colony is undoubtedly that of textiles, the woollen mills of New Zealand turning out goods of high quality which sell largely in Australia and even finding a market in Victoria when locally made goods were protected there by a duty of 45 per cent. The duty in New Zealand is only 20 per cent., and the workers employed numbered 1,700, which is more than the number employed in all the woollen mills of the Common- wealth. Victoria in 1901 had 1,075 workers with duties ranging from 15 to 30 per cent. In 1895, PROTECTION IN NEW ZEALAND. 117 when the duties were 45 per cent., the workers employed were only 690. These figures, together with the fact that New Zealand can compete with home and foreign goods in the protected markets of Australia, seem to show that it is to an abundance of the best raw material and to good business methods, and not to Protec- tion, that New Zealand owes its success in woollen manufacturing. In Victoria the high duty pre- vented the constant endeavour to maintain a high standard of quality, and the constant replacement of obsolete machinery necessary to obtain it most effectively ; with the result, it is said, that Victorian mills have purchased machines from New Zealand factories, which required something better to keep abreast of the times. However this be, there certainly was no comparison between the efficiency and the prosperity of the New Zealand factories, protected by a duty of 20 per cent., and the Victorian factories, protected by a duty of 45 per cent. This being so, it is at least questionable whether the New Zealand woollen manufacturers would not have become more self-reliant, more efficient, and more prosperous still, if they had been forced to compete for the home market without any tariff help at all. Success in doing so would have carried with it success in opening up foreign markets much larger than those in which they now have a footing. Though protectionists will not admit that the industry could have been developed under Free Trade, they should at least see in the ii8 PROTECTION IN AUSTRALASIA. experience of Victoria and New Zealand good reason for doubting the efficiency of high protective duties in fostering a natural industry. In comparing the tariff of New Zealand with that of the Commonwealth it is seen that protectionists in the former country have been far more careful than the Australians to save the primary industries of the country from the burdens upon them which are more or less inevitable incidents of any pro- tective system. Australia, for instance, taxes agri- cultural implements and machinery at 12J per cent, and threatens to put a 10 per cent, duty upon reapers and binders as soon as the Minister of Customs certifies — to the sorrow of the agricultural population — that their manufacture has been " suffi- ciently established in the Commonwealth." In New Zealand these things are free. Free also are portable engines, so necessary in many ways to the development of the land, all kinds of mining machinery, locomotives, rails for railways, grain bags and wool packs, reaper and binder twine, salt, roofing slates, and many kinds of chemicals and tools of different kinds which are dutiable in Australia. In New Zealand a chance is given, wherever possible, to the miner and the man on the land, whereas in Australia they have no con- sideration whatever. In both countries, it is true, there are so-called protective duties on wheat, butter, and other agricultural and pastural pro- ducts, but in normal years the production of these is far in excess of home requirements, and the PROTECTION IN NEW ZEALAND, ug local price is fixed by the price which can be obtained for the exported surplus. The alleged protection to pastoral interests is therefore a mere farce, and, while the Australian miner gets nothing in return for duties upon mining machinery, all the duties upon agricultural produce do not compensate the agriculturist for one such burden as is imposed on him by the necessity of paying $s. per cwt. duty on binder twine, which in New Zealand is admitted free. A good crop of oats requires about 5 lb. of twine to bind the sheaves from every acre ; that is to say, a tax of nearly ^d. per acre is levied on the grower for the benefit of manufacturers who do not employ more than a few score of hands in twine making throughout the Commonwealth. In its incidence upon the poorer classes gene- rally the tariff of New Zealand is also lighter than that of the Commonwealth. The duty of 40 per cent, imposed upon the wealthier classes who order their clothing from abroad is typical of the spirit animating New Zealand protectionists, who are keenly desirous of giving local employment, and willing to make the rich pay heavily for such luxuries as foreign-cut coats or dresses. In New Zealand silks and gloves are taxed higher than in Australia, but, while the former country levies duty on the pioneer's tent, into New Zealand it comes free. Owing to a junction of forces between the Australian Labour party and a section of the Free Traders who opposed a revenue duty in order to force the Government to bring other duties down 120 PROTECTION IN AUSTRALASIA. from a prohibitive to a revenue producing level, tea is untaxed in Australia, whereas in New Zealand it pays 2d. per lb., but in the latter country raw coffee, which is taxed ^d. per lb. in Australia, is admitted free ; sugar pays 4J. %d. per cwt. against 6s. on cane and \os. on beet sugar in Australia ; biscuits 3J. per cwt, as against \d. per lb. ; currants \d. per lb., as against zd. per lb. Altogether, in fact, in New Zealand Protection is made as innocuous as an evil system may be, and what is taken away from the agriculturists with one hand, through raising the price of much that they must buy, is returned with the other by means of such concessions as the free railway carriage of artificial manures and of lime for dress- ing their lands. The result of this policy has been a remarkable development in the export trade of New Zealand and the maintenance of prosperity and wages at a level not approached in any of the protectionist Colonies of the Continent except Western Australia, where the gold discoveries reduced all other factors in hindering or pro- moting prosperity to comparative unimportance. The exports of New Zealand, which were valued at 3^9,600,000 in 1 89 1, and fell in the great year of depression, 1895, to ^f 8,5 50,000, rose to ;^ 1 2,900,000 in 1901, and to £13,644,000 in 1902. Since the producing interests have always had special con- sideration in New Zealand, and these exports consist chiefly of food which would be preferen- tially treated under Mr. Chamberlain's scheme. New PROTECTION IN NEW ZEALAND. 121 Zealand protectionists would not show the same measure of hostility as is felt in Australia to an arrangement intended to increase the price of exported meat and wheat, and to admit British goods to freer competition with local manufactures. Nevertheless, Mr. Seddon has not yet made any proposal to do more than increase duties against the foreigner in return for British duties upon foreign food, and has thus once more emphasised the fact that the protectionist Colonies are no more willing to be beaten in their own markets by the competition of the Mother Country than by that of America or Germany. 122 PROTECTION IN AUSTRALASIA. CHAPTER V. FACTORS IN VICTORIAN PROTECTION. Having spoken generally of the conditions pre- vailing under Protection in the States of Australia and the Colony of New Zealand, it is now desirable to consider more fully the causes that have made the Commonwealth protectionist, and the effects that followed upon Protection in the pre-federation days, by following the history of the Victorian tariff a little further and entering into a more detailed comparison between Victoria and New South Wales. It is in these two States, having between them more than two-thirds of the population of the Common- wealth, and more than two-thirds of the members of the House of Representatives, that the develop- ment of Australian tariff opinion can be really traced, and the effect of tariff policy approximately gauged. In Victoria, as we have seen, the early tariff struggles of the 'sixties and 'seventies saw the Con- servatives arrayed on the side of Free Trade — the Liberals and Radicals on the side of Protection. This division of parties, which arose more from extraneous causes than from anything inherent in rival views on the fiscal question itself, was VICTORIAN PROTECTION. 123 somewhat strange because in those days the now popular idea that Protection means protection for labour was scarcely formulated. The early advocates of duties spoke frankly of Protection for manufac- turers. They were expected to employ labour, of course, but the main idea was to protect them against competition from wealthy manufacturers of the old world, rather than to protect the labourers of Victoria against the pauper labour of other countries. There perhaps seemed to be some political analogy with the state of affairs in England where manufacturers had fought the landowners to establish Free Trade ; and, since English manufacturers then belonged to the Liberal party, Victorian manufacturers were deemed to be necessarily Liberals even when they were advocating Protection for their own pockets. But, however this be, from a variety of causes the protectionists were allowed to appropriate the term Liberalism, and to associate it so intimately with Protectionism that, up to the institution of the Commonwealth, five-sixths of the Victorian popu- lation used Protectionist and Liberal as synonymous terms. For a long time there has been no Austra- lian party willing to ticket itself with the name " Conservative," every candidate for Parliament always claiming to be a Liberal ; and it is thus easy to see what a potent aid to the protectionists was their successful usurpation of the title — a usurpation against which the free traders protested in vain. The result of all this was that no one who sought the suffrages of a popular constituency 124 PROTECTION IN AUSTRALASIA. ever considered the possibility of a return to Free Trade. Academically he might believe in it. There is reason to think that many of the foremost men in Victorian politics were at heart free traders, but they kept their opinions to themselves, and from time to time voted increases in the tariff. Protec- tion was known as " the settled policy of the country," and at no meeting of working men would anyone rash enough to say a word against it even succeed in obtaining a hearing. In Parliament from 1880 to 1900 there was no Free Trade party. A few free traders held seats, but most of them were in the Legislative Council, to which the property qualification demanded from both members and voters made money and not public confidence the passport, and they abundantly justified the popular belief that free traders were the enemies of the working man. In conjunction with the handful of free traders who sat for some exceptional constituencies in the Lower House, they consistently opposed all legislation, good or bad, which was designed to curb the power and privilege of wealth and benefit the masses. Socialism was their bugbear, and under this com- prehensive name they included Factories Acts, land taxation, municipal enterprise, abolition of plural voting. State purchase of land for sub- division, old age pensions. State loans to farmers, and a host of other measures which eventually found their way upon the statute book. This, of course, maintained and intensified the dislike of VICTORIAN PROTECTION. 125 working men for free traders, and their suspicion of anyone even leaning towards Free Trade. It was not until after 1892, when very bad times followed upon the bursting of the land boom and the mad heights to which the tariff had just been raised by Sir Graham Berry, that one or two Liberal free traders found seats in Parliament, and in the country generally there came a reaction which led to considerable reductions in 1895. From that time free traders were at least listened to on the platform ; and the fact that the " Free Trade Democratic Association,'' at the head of which was a powerful writer and speaker, Mr. Max Hirsch, known throughout Australia as a fierce opponent of monopoly in every form, included land value taxation as well as Free Trade in its scheme of reform, did a great deal to dissipate the notion that Conservatism and Free Trade were naturally allied. Before the federal elections, Mr. Reid and other democratic Free Trade politicians from the neigh- bouring States addressed large enthusiastic meet- ings in Victoria, and though the protectionists ob- tained an overwhelming majority when the elections came, the spell of their policy was broken. They were thrown upon the defensive, and it was only by the lavish expenditure of money and desperately hard fighting that they secured their victory. That was in the beginning of 1901, and in 1902 a protectionist tariff was passed, but in the teeth of solid Victorian opposition duty after duty proposed by the Commonwealth Ministry was reduced till 126 PROTECTION IN AUSTRALASIA. the Federal tariff was only a shadow of what the Victorian had been. In 1903 the second Common- wealth election showed that Protection was growing weaker in Victoria itself, its supporters losing some seats to the direct Free Trade Opposition, and some to the Labour party, which, as a party, supports neither Protection nor Free Trade. In future no protectionist will be swept into Parliament with a triumphant majority by calling himself a Liberal, and howling " Tory ! " at his opponent. The old gag has lost its virtue, and the man who seeks the votes of the masses needs something more than his fiscal colour to win them. Perhaps one of the most significant incidents of the last Federal election, in its bearing upon the future of the Australian tariff, was a meeting of the Trades Hall Council in Melbourne to celebrate the success of the Labour party, at which meeting the follow- ing words were used by the chairman, Mr. Findley, a Labour candidate just elected to the Common- wealth Senate : — " The Labour Party," said Mr. Findley, " had the opposition of the Argus and the Age. The latter journal had descended to depths of scurrility of which any other journal in the world would be ashamed. The Argus was fair. It fought fairly for its nominees, and it told the people exactly what the nominees were in search of. The Age, on the other hand, did not know what course to pursue. They knew what Age Liberalism was now." The significance of these remarks, which were VICTORIAN PROTECTION. 127 enthusiastically cheered, lies in the fact that ever since the introduction of Victorian Protection, the Age, the most powerful newspaper in Australia, had supported it strenuously, cleverly, and not too punctiliously, and, as the alleged champion of Liberalism, had had the blind support of the Labour party. Its power in Victoria was so great that, before entering upon any policy, protectionist Premiers were accustomed to consult the proprietor, Mr. David Syme, and seek his approval. If he did not give it the policy was changed. Mr. Syme was familiarly known throughout the Colony as " King David." When ten members were to be elected by Victoria to a Convention charged with framing an Australian Federal constitution, the Age nomi- nated ten delegates. Working men voters in thousands cut the Age list out of the paper, carried it with them to the polling booths, and the Age nominees were elected en masse. Then Mr. Syme reached the summit of his power, and, presuming too much upon its per- manence, he rashly quarrelled with the Labour party, who gave it to him, opposed their candidates at the last Federal elections, and attacked, per- sonally and politically, Mr. Trenwith, a leading Victorian protectionist, formerly leader of the Labour party. Mr. Trenwith was returned for the Senate at the head of the poll, the whole State voting as one electorate. Then followed the remarks of the other Labour senator above quoted. The power of th§ Age, though still great, has received 128 PROTECTION IN AUSTRALASIA a heavy blow, and will not count for a tithe of what it did in Victorian politics, and it was the power of the Age which made Protection invincible. Strong as was Mr. Findley's criticism, it but faintly expressed the feelings of nearly all honest men who formed a deliberate judgment of Age methods, which the Labour party, as long as it was their faithful ally, never troubled to do. Every enemy, political or personal, of David Syme was marked down for constant and acri- monious attack in the paper's columns, and as the Age had a vastly greater circulation than any publication in which it was possible to reply, this persecution was at times successful in hounding David Syme's enemies out of public life. Causes were treated in the same manner as individuals. For many years the statistics of New South Wales under Free Trade, and of Victoria under Protection, showed that the former Colony was much more prosperous than the latter. The Age published ingeniously distorted versions of official statistics. It habitually garbled the speeches of political opponents and wrongly de- scribed the reception which they met with. An amusing and characteristic incident occurred in this connection, when a candidate whom the Age was writing down was innocently reported by a country correspondent to have had a good attend- ance at one of his meetings. By some oversight VICTORIAN PROTECTION. 129 this truthful statement was not sub-edited, and the mistake was only discovered when the paper had gone to press and early copies were printed. Of course it had to be rectified. The machines were stopped and the word " good " was erased from the type, so that in later editions it appeared " Mr. Hamilton had a meeting." Readers could supply the missing word as they chose, and there was little fear that those who followed the Age's general account of Mr. Hamilton's candidature would fail to read some such adjective as "bad" or " poor " into the blank space. On another occasion a farmer wrote a letter to the editor of the Leader, a weekly paper issuing from the office of the Age and under the same proprietorship. It was a letter which the editor would have been justified in refusing, as it used rather violent language towards protectionists, by whom, among other things, the writer said he had been gulled long enough. He was now a free trader. The editor, however, published the letter, after making the correspondent say that he had been gulled long enough by the free traders, and effecting consequential alterations by which the whole of the arraignment of Protection was con- verted into an arraignment of Free Trade. The Age is even daring enough to alter the English cables which it receives in precisely the same words as the other Australian papers whose proprietors share the expense of a common service. On more than one occasion the sense of telegrams P.O. K 130 PROTECTION IN AUSTRALASIA. distasteful to protectionists has been entirely altered in the Age's Melbourne office, not only by omissions, but by long imaginative additions to them. It may appear that undue space has been given to these examples — which could be multiplied to any extent — of a newspaper's tactics, but such was the power of the Age, and so relent- lessly was it employed, that no account of Australian Protection would be complete which did not lay much stress upon the part it played. Unless the Age had for many years deliberately concealed and falsified facts concerning the Colony's position, while enjoying a circulation and influence that made it the only authority among the masses, it is almost inconceivable that Victoria would have burdened herself with such a tariff, and would have striven to impose it upon the rest of Australia, when her prosperity was waning, and her people emigrat- ing, while, across the border, in Free Trade New South Wales, there was steady increase in wealth and population. All through the tariff fight the free traders had had the more or less active support of ^'& Argus, the other Melbourne newspaper, but its circulation for many years did not approach that of the Age. It has not been conducted with anything like the same vigour or ability, and being regarded as the organ of wealth and Conservatism, it was so much suspected and disliked by working men that Argus support of a measure or a cause did more to damn it than to recommend it to the country. In 1855, when VICTORIAN PROTECTION. 131 one of the Eureka Stockade rebels was tried for high treason and acquitted, the Age reported that the crowd outside the court gave " groans for the Argusl' while " a scream of uproarious cheering was raised for the Age'.' The Age had bitterly attacked an unpopular Government hated by the miners, and had clamorously urged an amnesty for the many prisoners captured at Ballarat fighting against the soldiers and police. The Argus, while sym- pathising with the miners' grievances, had supported authority. Mr. Rusden, the Australian historian, says that the Age's attitude was the result of the proprietor's anger at the refusal on the part of the Government to give his paper certain advertise- ments, but the excited crowd could not be expected to know or weigh the sordid reasons that made the Age their friend. It bid for their support and got it. "Groans for the Argus" and "screams ol uproarious cheering for the Age^' exemplified the feeling of the people for many years, and it is only now that the Age is beginning to be found out. Its popularity and its clever and persistent mis- representations and the A rgus' unpopularity and its wavering and ineffective maintenance of truth have been perhaps the greatest of all factors in fastening a high protective tarifif upon Victoria, and creating a majority of protectionists there sufficiently strong to out-vote the Free Trade majority of other States, and frame a modified protectionist tariff for the Commonwealth. K 2 132 PROTECTION IN AUSTRALASIA. CHAPTER VI. COMPARISON BETWEEN VICTORIA AND NEW SOUTH WALES. It is not possible to discuss here in detail the figures showing the developmentof all the Australian Colonies under varying tariff systems, and for reasons already given no necessary connection can be maintained in most of them between their methods of customs taxation and their waxing or waning prosperity. That their tariff laws had effects, and important ones, is certain, but other factors have been so much more powerful that these effects cannot be isolated. Therefore, in the endeavour to show a relation between fiscal policy and prosperity in Australia, special attention will here be given to facts concerning New South Wales and Victoria, which, for a variety of reasons, offer a field for comparison probably unique. In 1871, when such additions were made to the Victorian tariff that protectionists complacently declared their policy became effective, Victoria had the lead of the older Colony in almost everything denoting progress. From 1871, Victoria continu- ously raising the tariff wall, and New South Wales VICTORIA AND NETVV SOUTH WALES. 133 remaining practically constant to Free Trade, the older Colony began to draw away from the younger one, while the younger lost absolutely as well as comparatively much of the prosperity she had gained. In 1871 the population of Victoria was 752,000; of New South Wales, 519,000. Victoria had exports and imports valued at ;^ 14, 5 58,000 and ;£"! 2,342,000 respectively. The corresponding figures for New South Wales were only ;£^7 ,785,000 and ;^8,98i,ooo. Wages in Victoria exceeded those of New South Wales, and Victorian factories employed 19,500 workers as against 13,500 employed in the older Colony. Earlier still, in 1866, before the effects of the first Victorian tariff were operative for good or evil, official returns gave 10,100 workers employed in Victorian factories, and the statist declared that they were incomplete. No reliable figures in the same year are available for New South Wales, but the fact that Victoria exported ;^ 166,000 worth of manufactured goods, and New South Wales only ;6'85,ooo worth, shows that, when both Colonies pursued a Free Trade policy, Victoria took the lead in manufacturing. It is interesting to note that in 1 87 1 the principal manufacturing concerns of New South Wales were tobacco factories, sugar mills, tanneries, brick works, saw mills, iron foundries, and engineering establishments, clothing factories, flour mills, and coachbuilding establishments. In Victoria breweries and boot factories occupied the important place of sugar mills and tobacco factories 134 PROTECTION IN AUSTRALASIA. in New South Wales. Otherwise there was little difference in the class of employment given by- manufactures in the two Colonies. In 1 87 1 Victoria had the advantage in the particulars noted above and many others. Thirty years later, in 1 901, in every one of these respects New South Wales was ahead of Victoria. Its population was greater, so also was its marriage rate and birth rate. Immigrants to the country exceeded emigrants, while in Victoria emigrants outnumbered immigrants. Factories employed more men in New South Wales, though Victoria had more women workers. The capital invested, the horse power employed, the value of the output, and the wages paid in New South Wales factories all exceeded those of Victoria. While wages were higher in New South Wales, prices were lower; the consumption per head of all staple articles was greater ; the income per head of the people was greater ; the public and municipal debt per head was less ; the exports and imports per head were much greater ; deposits in savings banks per head were greater ; Sydney was more populous than Melbourne, and its shipping trade far outdistanced that of the rival port. In fact, judged by almost every conceivable test of prosperity and progress, public or private, the Free Trade Colony was far ahead of the protectionist Colony when federation gave them a common fiscal policy. It may, perhaps, be too much to claim that the whole of this change in their relative positions was VICTORIA AND NEW SOUTH WALES. 135 due to the strangling of Victorian enterprise by Protection, and yet when one seeks for the causes that brought it about, and considers the proven bad effects of Protection on certain Victorian industries, it is impossible not to assign enormous weight to the tariff policies of the two Colonies. It is true that New South Wales gave State aid to immi- gration after its discontinuance in Victoria, and assisted 58,5CX) people to come to the Colony between the years 1871 and 1890, while Victoria assisted only 5,500, but these few thousands are such an insignificant portion of the Free Trade Colony's gain in population that they are quite inadequate to account for it. Again, it is true that the continuous sale of the public estate, which was much larger in New South Wales than in Victoria, gave the former Colony a special revenue fund not available to nearly the same extent in the latter, but free traders do not claim the larger public revenue of New South Wales as a result of its Free Trade policy, while the proceeds of land sales have been more than absorbed in providing railways and roads for sparsely settled districts. . For the rest, the relative advantages and disad- vantages of Victoria and New South Wales, which so nearly balance each other as to make fiscal comparison between the two countries particularly valuable, are succinctly stated as follows, in a volume entitled " Social Conditions," which was written by Mr. Max Hirsch and published by the 136 PROTECTION IN AUSTRALASIA. Renwick Press, Melbourne, for the information of members of Parliament in 1901 : — " A comparison between Victoria and New South Wales must take into account the start in population, wealth and industrial development which the richness of her alluvial goldfields gave to Victoria in the middle of the last century, and which almost at a bound carried her far ahead of the older and larger State ; the greater extent of her sea-board compared with and largely reducing cost of transportation ; the more uniform fertility of her soil and her more general and copious rainfall, exposing her less frequently and less disastrously to droughts than is the case with New South Wales, and also her more bracing climate, result- ing in the more energetic character of her population. " In addition it must not be forgotten that Victoria enjoys the great advantage, owing to her geographical position, of doing the larger portion of the Riverina trade [Riverina is one of the most fertile districts of New South Wales, situated on the borders of Victoria] and that for many years and until recently the land laws of Victoria were far in advance of those of New South Wales, and enabled her soil to be utilised far more efficiently. " Though the total area of New South Wales is far larger than that of Victoria, her really effective area is not. This consists of the Eastern Division, con- taining 94,000 square miles, as against the total of 87,900 square miles of Victoria. The population of the Eastern Division is 1,148,862 [that of Victoria is 1,201,000], leaving only 213,370 persons for the whole of her remaining territory. This vast territory, sparsely inhabited, must, however, be governed ; roads, bridges, and railways have to be built ; schools and other public buildings have to be erected, and the resulting expenditure must be a considerable drag on the Eastern Division, as well as a considerable addition to the expenditure of the Government. VICTORIA AND NEW SOUTH WALES. 137 " On the other hand, it must be admitted that the mineral wealth of New South Wales is greater than that of Victoria, and that the Central and Western Divisions add considerably to her pastoral production. While these facts weigh in her favour they can scarcely make good the disadvantages previously mentioned. As far as the production and employment of the people are concerned, it must also be remem- bered (1) that men working in mines and on squatting stations cannot at the same time work in factories ; (2) that, other things being equal, men prefer to work in industries which pay the highest wages, and that where natural resources are rich, their utilisers can afford to pay higher wages than is possible in many manufacturing pursuits." To this it may be added that Broken Hill, which has nearly 30,000 inhabitants and is the third city in New South Wales, belongs for business purposes to South Australia, doing its trade through South Australian ports and giving employment to a large number of South Australian factory workers, who smelt the silver lead ores from Broken Hill mines. Entering now upon the question of comparative progress in New South Wales and Victoria, the first matter for consideration is growth of popula- tion. As the Victorian " Protectionists' Handbook" very truly but rather rashly declares, " The factor of first importance to national progress is popula- tion. . . . Foreigners are never attracted to settle where the means of living are few, and where poverty is great. The growth of population in a Colony must, therefore, be held as a very significant 138 PROTECTION IN AUSTRALASIA. gauge of its attractiveness." Again on September loth, 1890, the Age, referring to recent increases in population, wrote : " There is no subject which gives the Protectionists greater cause for pride than this." Protectionist pride should receive a rude shock from the study of the following figures, showing the increase or decrease of population by excess of immigration or emigration in the two Colonies from the inauguration of " effective " Victorian Protection in 1 87 1 to the year 1900. In the former year the total population of Victoria was 732,000, that of New South Wales 553,000. In 1901 Victoria had 1,201,000 people, New South Wales 1,355,000 : — 1871—1880 Victoria. ... 13,000 decrease . New South Wales. .. 109,000 increase 1 88 1— 1890 1891 — 1900 Net ... 112,000 increase ... 109,000 decrease , ... 10,000 ,, .. 164,000 ,, 16,000 ,, .. 289,000 „ In thirty years, while New South Wales attracted 289,000 people from other countries in excess of those who departed, Victoria lost 10,000 more than she gained. In only one of the decennial periods, that of 1881 — 1890, did Victoria gain in population by excess of arrivals over departures, thus causing the protectionists to glow with pride, but in this period the temporary prosperity of the " boom," built up on enormous borrowing, was at its zenith, and imports, which Protection is designed to reduce to a minimum, exceeded exports by nearly £48,000,000. In the same period New South VICTORIA AND NEW SOUTH WALES. 139 Wales added 164,000 to her population and had imports only £24,500,000 in excess of exports. In both cases goods imported in excess of imports represent borrowed money, for New South Wales and Victoria alike are debtor countries, obliged to export considerably more than they import in order to meet interest upon past loans. The returns from South Australia throw addi- tional light on the effects of Protection in attracting population. South Australia had practically no boom to create momentary attractions, and in the two ten-year periods 1881 — 1890 and 1891 — 1900 she lost population by excess of emigration — nearly 44,000. These were South Australia's years of high Protection. In the previous decade, when duties were moderate, she had immigrants in excess of emigrants to the number of nearly 35,000. While New South Wales greatly added to her population in the thirty years under consideration, and Victoria maintained hers only by excess of births over deaths, a comparison of the two peoples from an economic point of view also tells in favour of the Free Trade Colony. A prosperous country retains and attracts men, especially young men and men of middle age, who are the chief wealth producers, and in 190 1, while 61 per cent, of the male population of New South Wales were between the ages of 15 and 65, the men of these ages, neither too young nor too old to work, constituted only 59 per cent, of the male population of Victoria. And yet in 1891 Victorian I40 PROTECTION IN AUSTRALASIA. males between 15 and 65 were nearly 63 per cent, of the total. Women also constitute a larger percentage of the population in Victoria than they do in New South Wales, and in this respect the dispropor- tion is growing, as is shown by the following table : — Census of iSgi Census of 1901 Males Females Total ... Percentage of Females ... Males Females Total ... Percentage of Females ... Victoria. 598,000 542,000 1,140,000 47'6 604,000 597,000 1,201,000 497 New South Wales. 613,000 519,000 . 1,132,000 45-8 710,000 645,000 1,355.000 477 It seems that while brain and muscle are increasing in New South Wales, Victoria is becoming the favoured home of old men, of women, and of children, whose bread winners have gone to seek a living outside its protected borders. If the proportion of men in a country be a test of prosperity, then Victoria stands at the very bottom of the list among Australian States, for while New South Wales, Queensland, and Western Australia all have a very large excess of men, and even little Tasmania has nearly seven thousand more men in a population of 172,000, Victoria has only 7,000 more in a population of 1,201,000. The only other State VICTORIA AND NEW SOUTH WALES. 141 with a record approaching that of Victoria is the one which most closely followed Victorian example in tariff policy. The men of South Australia exceed the women by little over 6,000 in a popula- tion of 363,000. It is further remarkable that between 1891 and 1 90 1, while the population of Sydney increased by 105,000, growing from 383,000 to 488,000, that of Melbourne increased by less than the odd five thousand, its inhabitants numbering 491,000 in the former year and 494,000 in the latter. This fact, taken alone, might be claimed as a healthy sign by protectionists, since the centralisation of population is a bad tendency in young States, and specially noticeable in Australia, where in New South Wales, Victoria, and South Australia the capital cities contained in 1901, 3S'90, 4i'i3, and 4475 per cent, of the total people in the respective States. Here it is noticeable that Protection was accompanied by centralisation of population. In spite of the great growth of Sydney in the last ten years, the country population of New South Wales increased far more than that of Victoria, 126,000 being added to the former and only 58,000 to that of the latter. It is not only through attracting more people from abroad that New South Wales has increased its population faster than Victoria, for the marriage rate and birth rate, which have been very low and falling in both States, showed a greater fall and were actually lower in the protected than in the 142 PROTECTION IN AUSTRALASIA. Free Trade one. This will be seen from the follow- ing tables : — Marriage Rate per Thousand of Population. Victoria. New South Wales. 1861 — 1865 ... 7-81 ... 9-04 i8g6 — 1900 ... 6-62 ... 7*o Birth Rate per Thousand of Population. Victoria. New South Wales. 1861 — 1865 ... 43"30 ... 42'7I i8g6 — 1900 ... 26-92 ... 27-98 Of course there are other causes at work besides decreasing ease in providing for children to reduce the birth rate in Victoria, for it has fallen very much in the prosperous States of Western Australia and Queensland, as well as New South Wales. Nevertheless, it is suggestive to find that in the period 1896 — 1900 Victoria had absolutely the lowest birth rate in Australia, being run close by South Australia, its highly protected neighbour, with births numbering 26'59 per thousand. In New Zealand for the same period, which followed on years of acute depression, the rate was even lower, 25-74 psi" thousand, but it is there effected to some extent by the Maori population, among whom births are annually but little in excess of deaths. Whatever may be the case with regard to births, marriages are always most numerous in times of prosperity — a fact strikingly exemplified in Victoria by a great rise in the rate in the boom years of 1886 — 1890, when the protectionist State was riot- ing on borrowed money. For those five years VICTORIA AND NEW SOUTH WALES. 143 alone, out of all the five-year periods since 1861, did Victoria show a marriage rate higher than that of New South Wales. In the years 1896 — 1900 Victoria and South Australia stand at the bottom of the list, the latter State being absolutely lowest with only 6- 17 marriages per thousand. New Zealand is high up with 7'i8 per thousand, and Western Australia highest of all with I0'i3 per thousand. It only remains to add that in 1902 so low was the birth rate, and so high the rate of emigration, that the Victorian population declined and was actually less in 1903 than in 1902. Such are the results of applying the population test to thirty years of Protection. 144 PROTECTION IN AUSTRALASIA. CHAPTER VII. MANUFACTURES UNDER PROTECTION AND FREE TRADE. By their self-chosen test of increase in immigra- tion Victorian protectionists fail to show a brilliant record for their policy, but the claim which is urged above all others for the adoption of Protection in a young country is that it gives variety of employment by bringing manufacturing industries into vigorous existence, whereas under a policy of Free Trade its people would be condemned to remain for ever mere hewers of wood and drawers of water for more advanced communities. Mr. Chamberlain stated in a speech of last year that no Colony had developed manufacturing under Free Trade. It is a statement which is disproved by the experience not only of New South Wales, but also of Victoria, where there were the small but pros- perous beginnings of several manufactures as far back as 1862, before a single protective duty was imposed. Figures have been already given show- ing that in 1866 and in 1871 Victoria was far ahead of New South Wales in manufacturing, the industries of both countries having grown up under nearly the same fiscal policy. The following table PROTECTION AND FREE TRADE. 145 shows how the rival States stood after New South Wales had pursued Free Trade for some thirty years, while Victoria had paid unfaltering allegiance to Protection : — Victoria. New South Wales. Males employed ... 47,059 ... 54.461 Females employed ... 19,470 ... 11,674 Total employed ... 66,529 ... 66,135 Value of output ... ;^i8,5i3,ooo ... ;^24,394,ooo Horsepower ... 35,000 ... 41,000 Value of plant ... ^■4,847,000 ... ;^5,77o,ooo Value of production per head £€> 5s. 3d. ... £y 8s. iid. These figures are all taken from Coghlan's "Seven Colonies of Australasia" for 1901 — 1902, and the year igoi, to which they relate, is the latest for which all the figures are available. It is also the last for which the comparisons have com- plete value, for in 1902 the Federal tariff came into force, and from that date the manufactures of the two States were pursued under the same tariff conditions. The table shows that in every material particular, manufacturing industry had advanced further in New South Wales than in Victoria. It is true that the latter still maintained a very slight lead in the number of workers employed, but of men there was a very considerable preponderance in New South Wales, Victoria's workers in excess being principally composed of low-waged women and girls employed in the clothing trade — the most p.c. L 146 PROTECTION IN AUSTRALASIA. sweated trade in Australia. The proportion of women in Victorian industries, which was steadily increasing throughout the latter part of the pro- tective period, amounted in 1901 to 29*4 per cent, of the total, and in New South Wales to only 177 per cent. The total wages paid were ^4,943,000 in New South Wales, and in Victoria £4,589,000, giving £81 6s. 6d. and £71 gj. 50?. per head as the average annual wages. This is not surprising when we find that Victoria employed 13,392 workers, chiefly women, in clothing, dress-making, and millinery, against 8,580 women similarly em- ployed in New South Wales, while New South Wales had 8,327 persons, practically all men, in smelting, iron works, and engineering, against 5,191 in the same industries in Victoria. While the large number of women brings down the average wages per head of Victorian factory operatives, higher wages were usually paid to men in New South Wales factories than to those em- ployed in Victoria. Since the introduction of provisions into the Victorian factory laws enforcing — or, at least, purporting to enforce — the payment of a minimum wage in many industries, it has become very difficult to obtain a fair basis of com- parison, for the Victorian Act tended to throw out of work a large number of men who could not earn the minimum wage, and placed others on short time, while the Act itself was frequently evaded. Extracts from such evidence as is avail- able are given in a later chapter. PROTECTION AND FREE TRADE. 147 From the data given in the foregoing table no support whatever can be obtained for the theory that valuable manufacturing industry is promoted by Protection. All that Victoria has to show for its heavy tariff burdens is a few more women factory workers than New South Wales employs. Capital, horse power, wages, men, and product are all far greater in New South Wales, and it must be remembered that the difference in manufactured output is even larger than that shown by the difference in value, for protective duties added a heavy percentage to the price of nearly all manu- factured goods in Victoria. One of the virtues claimed for a protective tariff is that it equalises demand and steadies the market for manufactured goods. When bad seasons and hard times affected the primary industries of the country, it was urged by Victorian protectionists that there would be always the tariff-sheltered factories to provide employment and lead the way again to prosperity. Both New South Wales and Victorian factories have suffered ups and downs in the last few years, but the figures show that these have been more severe in the protected State than in the unprotected. In Victoria, for instance, there was a steady decline from 1889 to 1894 in the number of factory operatives, and, while there was a falling-off in New South Wales also, the figures below show how much better than their Victorian rivals the Free Trade factories stood the strain of bad years ; — L 2 148 PROTECTION IN AUSTRALASIA. Workpeople Employed in Factories. Victoria. New South Wales 1889 . •• 57.432 41,299 1890 . .. 56,369 44,909 I89I . •• 54.413 50,879 1892 . ■• 45.415 47,916 1893 . .. 41,729 42,057 1894 • • 43,319 46,502 1895 . .. 47,646 48,030 1896 . •• 50,397 49,840 It is further remarkable that since January, 1896, when substantial reductions in the Victorian tariff came into force, there has been no set-back to the progress of manufacturing, and that nearly 3,000 operatives were added to the numbers employed in the very year in which the reductions took effect. On the other hand, between the year 1892 (when duties were heavily increased) and 1 893, there was a fall of nearly 4,000 in the number of workers employed. But to follow the course of employment in the woollen industry shows more clearly than anything else can do how Protection failed in Victoria when it might have been expected to succeed. In 1878 the duty on woollens was 11 per cent, and the workers employed were 736. In 1887 the duty was 22 per cent., and the number of workers had fallen to 704. In 1890 — par excellence, tht"hoom year" — the duty had risen to 33 per cent, accom- panied this time by an increase in the number of workers to 810. In 1892, however, when the duties were 44 per cent., only 736 workers were employed, PROTECTION AND FREE TRADE. 149 and with increased duties of 45 per cent, in 1895 the number fell to 690. In 1896 the duties were reduced on some woollen goods to 15, on others to 30 per cent, and in 1896 the number of people employed increased to 772. In 1901, still under the lower scale of duties, the woollen mills gave employment to 1,075 persons. When the reduced tariff was under discussion in 1895, Mr. D. Williams, M.P., chairman of the Castlemaine Woollen Mills, solemnly predicted that any decrease of duty would close the mills or necessitate a heavy reduction of wages. His warnings were unheeded, and in August of 1896, after the lower tariff came into force, he told a meeting of his company that " additional machinery had been erected," and that "higher wages had been paid than in the corresponding half-year of 1895. The wages for the past six months of this year were ;f452 in excess of the amount paid for the same period in 1895." A dividend of y^ per cent, was declared. A second company, the Ballarat Worsted and Woollen Mills, held a meet- ing at about the same time, and its report said : " The company was doing very well. Their sales during the preceding half-year exceeded by £1,000 those of the preceding one, and were the largest on record. A number of new machines had been erected during the half-year, and the directors had written off ;f 1,500 for wear and tear." Here a dividend of 8 per cent, was declared. During the year of reduced duties and predicted ruin, the 150 PROTECTION IN AUSTRALASIA. existing mills enjoyed unexampled prosperity and a new one was built, an event which had not happened for more than ten years. There can scarcely be more conclusive proof of the failure of Protection in Victoria than the facts and figures here given. Raw material of the best was provided by the Colony in abundance, and at the cheapest rates. The product of the industry was in universal demand. Cotton, used by the mill-owners for mixing with the wool — to an extent that created a sensation when the facts were stated in Parliament — was admitted duty free. If there was ever an industry which might claim fostering help from the State on the ground of being a natural industry, and of promising soon to stand alone, it was the manufacture of woollens, and yet the more it was fostered the more it languished. In the tariff debate of 1892, when it was proposed to increase the duties to 44 per cent, on woollens, Mr. Frank Stuart, M.P., a protectionist, made some striking admissions as to the effect of Protection upon the woollen industry. Many companies in Victoria had lamentably failed, he said, " Because their machinery was obsolete, because they had not capital to carry on, because they had not a market, and because they had not brains. ... In 1881 the imports of woollens amounted to ir373>ooo, and the duty paid was ;^52,ooo, while in 1891 the imports amounted to /"44o,ooo, and the amount of duty paid was ;^i3o,ooo. To show how the export trade in Victorian woollens had fallen off, he might mention that, whereas ten years ago we sent away PROTECTION AND FREE TRADE. 151 £j,ooo worth of woollens, last year the export amounted to only ;^4,ooo worth. Honourable members seemed to think that we had lost the inter- colonial trade because the other Colonies had recently started manufactures, but as a matter of fact New South Wales made woollens seventy-five years ago, and had been making them ever since. New South Wales to-day was making excellent woollens at a lower price than they could be made at in Victoria, and she could even export her woollens into this Colony, notwithstanding the heavy duty. How was this ? Simply because, somehow or other, we had failed to take the right initial steps in starting this industry. It almost seemed as if certain industries would find a local habitation in particular countries, while in others they could not be made to thrive, however high the duties imposed in their favour." On the same occasion Mr. Deakin, late Prime Minister of the Commonwealth, and throughout his political career a consistent protectionist, spoke as follows : — " He must confess that the woollen mill industry presented more problems to him as a protectionist than any other in the Colony. This industry which ought to be a success — which was natural, if any industry was natural, and in which the Colony ought to be pre-eminent, in which they ought to find their mills not only readily commanding the local market, but also invading outside markets — was continually before him with the sickly complaint of need of sup- port. The honourable member for Melbourne South said that he was assured by the deputation from the mill-owners that if this increase was granted they would not ask for any more. In his (Mr. Deakin's) short political life he had heard that statement many times (' No '). Every increase was to be the last, and the late head of the Government, when a great 152 PROTECTION IN AUSTRALASIA. struggle took place on the floor of that Chamber in 1889, said that an additional 5 per cent, would be the utmost the mills would think of demanding ; if that were granted, he would never ask for a further increase (' No '). That was the fact, and it was not the only fact. Before the honourable gentleman who inter- jected was a member of this assembly, he heard a similar statement made, equally positive, and he had heard it made twice since the honourable member obtained a seat in the Chamber. The problem was : Why these mills were not the success which, according to this theory, they ought to be, and why they needed this continually increasing measure of Protection ? That was a question he was utterly unable to answer. The wages paid in this industry were not commensu- rate with the intelligence they (the employes) dis- played, or the hours they worked. . . . He would vote for this increase of duty with reluctance in order to give the mills a last chance of establishing themselves on a successful basis." The mills, as we have seen, did not take this chance, and it was not until the duties were re- duced far below the level from which they were raised in 1892 that they began to enjoy something like prosperity. The manufacture of clothing, which largely uses woollens as its raw material, affords another strik- ing instance of Protection running mad, with disastrous results to the protected industry which it is supposed to serve. Iri the year 1881 Victorian made apparel was exported to the value of £226,000. In 1893, the duties in the meantime having been increased to 44 per cent, on woollens and 55 per cent, on clothing, exports had fallen away to £S 5,000. In 1896 there was a reduction on both PROTECTION AND FREE TRADE. 153 woollens and apparel, and in 1897 the exports had risen to ;f 139,000. The export trade suffered prin- cipally from the high duties on raw material, while the correspondingly high duties on the completed article, which were supposed to counteract their effect in the local market, resulted in such a rise of price that the demand fell off, and was only prevented from falling further by merciless sweating of the workers employed. By this means alone could the cost of manufacture be kept down. The close con- nection between sweating and protective duties was admitted in this instance by the protectionists them- selves. On May 28th, 1890, the Melbourne Age found itself constrained to write : " It is abun- dantly certain that sweating — mean, frowsy, depraved, and pitiful — is carried on in Melbourne to a degree hardly less horrible than the incidents of its prevalence in London." Then followed columns of particulars which it would have been difficult to match in the East End, and at a mass meeting in the Melbourne Town Hall held shortly afterwards, Mr. Deakin, then Chief Secretary of Victoria, supported a motion to the effect that "in the opinion of this meeting the sweating system at present existing in our midst is a menace to the public health and morality of the Colony ; the long hours of forced labour at starva- tion wages in unhealthy and unventilated hovels, where men, women, and children are huddled together indiscriminately, being a crying evil pro- ductive of hardship, disease, and vice." To a 154 PROTECTION IN AUSTRALASIA. deputation which waited on him Mr. Dealiin replied that "the facts showed that in this city prices were paid for the manufacture of clothing, and perhaps some other articles, wholly insufficient to support a decent workman working decent hours, and this community protested against human beings being compelled by their necessities to accept remuneration that could not possibly allow them to live." Mr. Deakin's protest had no effect. The duties were increased in 1892, the evil grew greater, and at another public meeting in 1895 Mr. Bishop, President of the Melbourne Trades Hall, which has been one of the strongest upholders of Protection in Victoria, opened his speech by saying : — " Ardent protectionist as he was, he was sorry to admit that in this instance Protection had failed as far as the workers were concerned. Workmen united to support Protectionist candidates for Parliament, and were told when that system was established their wages would be secure, but the result had been that the employer was protected while the workman was starving. There were three trades that suffered more than all others by sweating, the boot trade, the furniture trade, the clothing trade (a voice — 'All heavily protected '). He was bound to admit that Protection had failed in that respect. It was granted on the understanding that employers should maintain the standard rate of wages. Had they done so ? No, they had not done so, and the workmen were ground down. They must insist on Protection to the work- man as well as to the employer, otherwise they must call on the Legislature to withdraw that principle." PROTECTION AND FREE TRADE. 155 The trades mentioned by Mr. Bishop were all protected by duties ranging up to an equivalent of 80 per cent, ad valorem. In boot making and furniture making, which required little capital, and therefore were followed by a number of small employers, among whom combination was diffi- cult, there was cut-throat competition which did in some cases bring prices down below the Free Trade level, but it was at the expense of the employers, who could not earn interest on their money, and the workmen, of whom large numbers were receiving starvation wages, or were vainly seeking employment and in receipt of no wages at all. Two leading protectionists, Mr. H. H. Champion, prominent at one time in England in connection with the great dockers' strike, and Mr. Samuel Mauger, secretary to the Victorian Protectionist Association, and now a member of the Common- wealth Parliament, admitted this effect of Protec- tion in ruining the boot trade. In November, 1894, Mr. Champion wrote as follows : — " An increase in the duty on imported boots also seems to have had the effect of attracting to the trade a number of capitalists insufficiently equipped with money, credit and experience. At any rate the result in August was, that the half-dozen or so employers who were still paying the (reduced) standard rate of wages found it impossible to carry on any longer in the face of the competition of their rivals who were paying 20 and 30, and on some lines as much as 60 per cent, less for the labour employed. It must be remembered that in this trade there is practically 156 PROTECTION IN AUSTRALASIA. no foreign competition. The import duty on boots is so high as to exclude from the Victorian market boots of the kind made in Victoria." So too, in November, 1896, at a public meeting, Mr. Mauger claimed sweating as one of the proofs that Protection had succeeded : — " It was said that bootmakers' wages were only 15s. per week. If that was true it was due to unre- stricted competition in that trade. It was the very success of Protection which produced the reduced wages in the boot trade, because every journeyman operative was able to start for himself, and so increase the cut-throat competition." In the clothing trade, where women, not sheltered by unions, were easy victims of the sweater, the distress was perhaps most pitiful, and in this case the Board appointed by the Government to inquire into the evil, though composed without exception of protectionists, was forced to admit that Protec- tion was a direct cause of sweating. The following is an extract from its report : — " It is alleged that one of the principal causes of depression in the clothing trade is the large increase, imposed about a year ago, in the duties on all classes of woollen goods imported into the Colony. . . . The manager of one of the largest factories in the city, employing over five hundred hands, stated in answer to a question as to what suggestions he could make to improve the conditions of the outside workers, that he would increase the demand for clothing by placing it more within the reach of people of limited means. Too high duties were levied on certain materials, including woollens." PROTECTION AND FREE TRADE. 157 One of the expert witnesses stated : — " I find the greater the amount of duty put on woollens, so the greater the reduction in the price of manufacturing. When there is an excessive duty on the cloth, the Colonial manufacturers raise their price, the retailer does not want to pay more, and therefore the price must come off the manufacturing, and that is why the people are suffering from reduced prices, »'.«., wages." Further evidence was received from the workers' point of view that " the high duties on certain goods were oppressive, and one of the predominant causes of sweating." The following is the Board's recommendation : — " We feel impressed by the weight of the evidence as to the loss that has ensued upon the great shrink- age in the inter-colonial trade. It is manifest that if the low priced cloths under consideration are imported at other Australian ports at lower duties, Victorian competition in inter-colonial markets must be seriously hampered. We submit these considerations in view of the representations made by experts on behalf of em- ployers which are supported and endorsed byemployees generally. The latter contend that a much greater amount of employment than that now offering would result from the removal of restrictions which they allege press heavily on the clothing industry, and that an alteration in the direction indicated would by extending the field of labour prove a powerful and effective antidote to the sweating evil." There could not well be a more damning indictment of Protection than this, wrung from a protectionist Board by the evidence of protected employers and workmen. A single extract from dozens available in the newspapers of the time will give some idea of the 158 PROTECTION IN AUSTRALASIA. conditions which prevailed in the clothing trade, and overcame the Board's natural reluctance to cast doubt upon the blessings of Protection. Thus the Argus wrote in February, 1893 : — " The women concerned have learned the mantle- making trade. For cheap blouses they receive 2ji, apiece, of which the best worker with fastest appli- ances can make seven in a day. The best workers can thus earn is. skd. a day, but the great majority earn less. For dressing gowns they are paid ^d. apiece. An average workwoman can make two of these a day, and thus earns lod. a day or 55. a week, provided she works as long on Saturdays as during the rest of the week. Eton jackets are paid for with 6d. and sac cloaks with iii., both equally ruinous rates. One woman, describing her experience, says : ' The average number of women in our room is thirty- six, but it often increases to over sixty. The rates have been so cut down that few of us make more than 5s. a week. We work from nine to six, with half-an- hour for lunch. A friend of mine began to cry last week when she got only 4s. for her week's work. She asked the head woman how she was to live on that sum. The reply was brutal, but it meant a great deal : "You little fool, why don't you get a man to keep you like other girls ? " Another girl said that a fortnight previous the sixty-three girls employed in the room where she worked compared their week's earnings, and found them to range from 8s., the highest, down to is. id., the lowest. Fortunately this state of affairs lasts only half the year ; during the rest what are called fair wages are earned by the mantle- makers. Two girls, who had recently arrived from Glasgow, stated that wages ranged there from 155. to 30s., and the poorest hands never earned less than 10s. a week, which was worth nearly as much as 20s. here. There, moreover, the busy season lasted nine months, instead of, six months as here. " We made a great PROTECTION AND FREE TRADE. 159 mistake in leaving Scotland," was their concluding remark, " and we are both hoping for the day when we may have a chance to get back again." ' " Stringent factory legislation, accompanied by a reduction in duties, has brought about a marked improvement in the conditions of the trade. i6o PROTECTION IN AUSTRALASIA. CHAPTER VIII. PROTECTION AND INDUSTRIAL WELFARE. If space permitted, it might be shown that numerous Victorian industries have gained little or nothing from the Protection accorded to them, and that on the whole they have been as much the victims as the beneficiaries of the system. Detailed attention has been given to woollen manufacturing and the clothing trade, because in no other instance is the failure of Protection so unreservedly admitted by protectionists themselves. They are also typi- cal industries, since in the one case raw material was untaxed, and in the other the high duties intended to indemnify the makers of the finished product for the loss suffered from duties on their material were useless to them. They certainly limited foreign competition, but they raised prices to a height destructive of demand. The general position is well indicated in the following extract from the report of a Victorian Tariff Commission which sat in 1895, and was composed entirely of protectionists : — " We have had numerous complaints from various manufacturers that the material used by them is taxed, and that they cannot in consequence compete. INDUSTRIAL WELFARE. i6i in some instances even in the home market, with imported goods. The main object of almost every manufacturer who appeared before us was to secure the existing duty on his produce, but almost every- one asked for the remission of duty on some material used in his factory." Several of the protected manufacturers, notably the coach builders, went further than this, and expressed their willingness to face foreign com- petition if only their raw material were made free. Thus Mr. J. E. Bishop, at one time a keen pro- tectionist, wrote in his paper, the Coachbuilder, the organ of the trade, published in New South Wales : — " The Victorian duties again claimed attention. We found that in 1889 Victorian coach makers paid over ;^6,8oo in customs duties on ;^i 5,000 worth of axles imported, and that by a liberal estimate the total number of men and boys employed by axle- makers did not exceed thirty. Here was an anomaly. We ventured to suggest that if coach builders sub- scribed amongst themselves to pension the axle- makers off at ^100 a man — or boy — to keep them from meddling with their business, they would save at least ;£'3,8oo per annum by the transaction. We still believed in Protection, though we could not swallow such an anomaly as the axle tax. We gave attention to other duties. We found other anomalies, and kept on finding them until we reached the inevit- able conclusion — namely, that the system of Protec- tion is an aggregation of anomalies. It is a bundle of sticks — inconsistencies which, taken one by one, can easily be broken, but which, together, are almost a match for a Samson. That is how we became free traders without giving up Protection. It was trust P.O. M i62 PROTECTION IN AUSTRALASIA. in anomalies that we surrendered, unconscious of the fact that with the last of them every vestige of Protection disappears." Mr. Grimley, a large importer and manufacturer of coach builders' materials in New South Wales, wrote a letter to the Coachbuilder on September 1 5th, 1900, giving further proof of the injury done by Pro- tection to the trade. The figures as to cost of materials were furnished by two Melbourne manu- facturers, Mr. R. Wearne and Mr. Percival White, and on these data Mr. Grimley wrote : — " The cost of material for a ' single lorry ' is in Melbourne £1'] 25. iii. ; in Sydney ^12 85. 4^. Fora ' carrier's express waggon ' in Melbourne £->,i i8s. i li. ; in Sydney £ih 105. loi. Beit remembered the duties which cause this increase of price are imposed 'to foster industry.' They foster it by compelling the coach builders to pay from 17 to 20 per cent, more for all the material which enters into his product." Leaving now the subject of manufacturing, upon which Protection thus justifies its claim to exercise a specially beneficent influencej we find from a statistical comparison between Victoria and New South Wales, that in almost every economic par- ticular the Free Trade State in 1901 had the advantage of the protectionist. In all this table (see p. 163) there is only one item, that of banking deposits, in which the advantage lies with Victoria. The difference per head is not great, and while it is true that Victorians in earlier days invested much capital in other States, it is also INDUSTRIAL WELFARE. 163 natural that a country constantly attracting immi- grants who have their way to make, and a country in which capital readily finds investment in busi- ness enterprises, should show less per head deposited in banks than is the case with a country from Victoria. New South Wales. Imports for home con- / A. £ i. sumption 13,222,000 19,493,000 Per head II 5 14 2 6 Domestic exports 13,882,000 19.837,000 Per head II 10 9 14 9 2 Production of wealth per head 24 II 28 7 9 Income per head 42 14 47 6 Savings Banks deposits per head 8 7 II 8 II 2 Deposits in all banks per head 33 19 33 9 7 Post and Telegraph re- ceipts 508,000 870,000 State and local indebted- ness 65.594.°°° 71,393,000 Per head 54 3 7 53 17 a Tonnage of ships entered and cleared, in the external trade Tons 2,651,000 Tons 4,520,000 Melbourne. Sydney, £ i. £ 145. 146. 147. 148, 152, 153, 157, 160, 162, 184 Melbourne, 83, 126, 130, 134, 151. iS3> 154. 162, 163, 167, 168, 169, 170, 173, 174, 175, 176, 177, 183 Mill, J. S., 81, 82 Miners, 86, 87, 104, 105, 107, 109, 112, 118, iig, 179, i8i Mining, 90, 93, 94, 100, 103, 104, 106, 115, 137, 173, 183, 184 "National Policy,'' 14, 24, 26, 28, 32, 33, 34, 35, 37, 41, 43,46 New Brunswick, 19 Newfoundland, vi., 19 New South Wales, x., 25, 83, 90, 91, 92. 93. 98, 100, 103, 104, 105, 108, no, 113, 116, 122, 128, 132, 133, 134, 135, 136, 137. 138, 139, 140-147. 151, 161, 162, 164-170, 173, 174. 175, 176, 178, 183, 185, 186, 188 New Zealand, vi., 39, 113, 114, 116-121, 142, 143 Nova Scotia, 18, 19, 37 Parkes, Sir Henry, 91, 92, 93, 173 Pitt, 2 Population, 31, 32, 33, 34, 35, 36, 37, 42, 83, 86, 103, 104, 133. 136, 138, 139. 140. 141. 142, 143, 164 Preference, 2, 3, 4, 5, 6, 7, 8, 35. 45. 48, SI. 52. 53, 55. 56. 57. 59. 65, 66, 71, 72, 73, 74, 76, 78, 120, 168, 191 Prince Edward Island, vi., 19, 34 Queensland, 97, 100, loi, 102, 103. 139. 142. 167, 186 Railways, 7, 12, 13, 20, 22, 92, III, 118, 120, 136, 182 Reid, Mr. George, 93, 94, 96, 125, 173, 183, 189, 190, 191 Retaliation, 20, 30, 58, 73 Revenue, 11, 15, 30, 32, 34, 35, 36, 47. 53. 55. 56, 62, 64, 79, 93.96,97. 100, 106, 119,135 Seddon, Mr. R., 121 South Australia, 92, 95, 97, 98, 99, 100, 104, 107, 113, 137, 139, 140, 141, 142, 143, 164, 186 Spirits, 19, 23, 51 Stock Tax, 168, 169, 184, 187 Sugar, II, 13, 19, 20, 48, 100, loi, 102, 120, 128, 133, i6o, 166, 170, 182 Sydney, 134, 162, 165, 167, 168, 170. 173. 174. 176, 183 Tasmania, vi., 83, 97, 183 Tea, II, 19, 24, 25, 30, 120, 166, 190 Tobacco, II, 19, 23,48, 51, 133, 167 United States, xii., 12, 21, 24. 29. 35. 41. 42. 43. 44. 46. 47. 50. 54. 56, 63, 67, 73, 74, 77 Victoria, x., 39, 83, 85, 86,87, 89, 90, 91, 92, 93, 94, 95, 98, 99, 103, 104, 105, 107, 108. no, 112, 113, 114, 116, 117, 118, 122, 123, 125, 127, 128, 130-148, ISO, 151, 153-157. 160-169, 174-179, 182, 184- 188 INDEX. 195 Wage Board, 174, 175, 176 Wages, viii., 38, 50, 75, 93, 115, 134. i37i 145. 146. 149. 152- 158, 173-176. i8i, 184, 183 Western Australia, vi„ 83, 95, 97, 103-110, 112, 139, 142, 163, 164, 177 Wheat, 3, 4, 5, 6, ii, 12, 29, 35, 38, 48, 59, 61, 72. 73, 74, 7S, 76, 112, 113, 118, 121, 166, 167, 168, 169, i8i, 183, igo Woollens, 20, 39, 54, 5s, 116, 117, 148, 149, 150, 151, 152, 156. 157. 160 BBADBURV, AGKEW, Si CO, LD., PRINTERS LONDON AND TOHBEIDGE. IN THE SAME SERIES. Edited by WILLIAM HARBUTT DAWSON. 3s. 6d. net. Protection in Germany. By WILLIAM HARBUTT DAWSON. Author of " German Socialism and Ferdinand Lassalle," '* Prince Bismarck and State Socialism," and" Germanv and the Germans," etc. 3s. 6d, net. Protection in tlie United States. By A. MAURICE LOW. Member of the American Social Science Association; Author oj " The Conspiracy and Protection of Property Act," " The British Workman's Compensation Act," etc., etc. 3s. 6d. net. Protection in France and Italy. By H. O. MEREDITH. King's College, Cambridge, P. S. KINQ & SON, Orchard House, Westminster. SECOND EDITION. With an Additional Chapter, dealing among others with the following topics:— SHIPPING, ENGLAND AS ENTRE- POT, FOREIGN INVESTMENTS, THE YEAR 1872, AND EXPORTS AND PRICES. THE TARIFF PROBLEM By W. J. ASHLEY. Professor of Commerce in the University of Birmingham ; late Professor of Economic History in Harvard University, U.S.A.; Sometime Fellow and Lecturer of Lincoln College, Oxford. Cr. 8vo, Cloth, 280 pp., 3s. 6d. net. "AnTONOMOs," in the Fortnightly Review: — "One of the ablest advocates of the Birmingham-Shefi&eld Policy is Professor Ashley, whose book on the Tariff Problem is perhaps the most effective plea for fiscal revolution which has appeared in the course of the present controversy." Manchester Courier: — "Whatever other book the student of economics may leave alone in view of the fiscal con- troversy, he cannot afford to neglect Professor Ashley's splendid vindication of the position taken up by the Prime Minister, and to a large extent by Mr. Chamberlain. It contains no padding, is an unanswerable plea for a drastic remodelling of the Free Import system, and in our opinion is far and away the best of the new books for the non-political investigator." LONDON : P. S. King & Son, Orchard House, Westminster. Demy 8vo. Cloth, 256 pp. and Index. 3s. 6d. net ELEMENTS OF THE FISCAL * PROBLEM * * * BY L. G. CHIOZZA MONEY, Fillow 0/ the Royal Statistical Society ; Author of "British Trade and the ZoUverein Issue," etc.; Statistical -Secretary to the Free Trade Union. Westminster Gazette : — " It is impossible for anyone who reads this book to complain that the Free Trade doctrine is abstract, antiquated, or visionary. Never was a case presented in a more modern, concrete, or practical form." Sheffield Independent : — " Mr. Money's book must be reckoned as one of the very best practical expositions of our Free Trade policy the controversy has given us." Birmingham Express : — " Every student of the fiscal question should obtain a copy of Mr. L. G. Chiozza Money's book. ... It is written in a clear and comprehensive style." Spectator : — " We do not know of any book of the same length which contains such a mass of accurate and relevant information upon the main question at issue, and especially upon the nature of our imports and exports." LONDON : P. S. KING & SON, ORCHARD HOUSE, WESTMINSTER. SECOND EDITION WITH TWO ADDITIONAL SECTIONS. Dewy 8vo. Cloth. 436 pp. tOsm 6dm net. THEORIES OF PRODUCTION AND DISTRIBUTION. A HISTORY OF THE THEORIES OF PRODUCTION AND DISTRI- BUTION IN ENGLISH POLITICAL . . ECONOMY FROM 1776-1848. . . BV EDWIN CANNAN, M.A., LL.D., Appointed Teacher of Economic Theory In the University of London. CHAP. CONTENTS. I. The Wealth of a Nation. II. The Idea of Production. III. The First Requisite of Production— Labour. IV. The Second Requisite of Production — Capital. V. The Third Requisite of Production — Land. VI. The Idea of Distribution. VII. Pseudo-Distribution. VIII. Distribution Proper. IX. General Review: Politics and Economics, Index. WESTMINSTER: P. S. KINO & SON, ORCHARD HOUSE. STATISTICAL STUDIES RELATING TO NATIONAL PROGRESS IN WEALTH AND TRADE Since 1883. A PLEA FOR FURTHER INQUIRY. By A. L. BOWLEY, M.A., Author of "Elements of Statistics," etc. Cr. 8yo, 2s. net. Daily Chronicle: — "This book constitutes far and away the best unofficial analysis of statistics bearing on the fiscal controversy. Mr. Bowley is much the most competent and scientific of our unofficial statisticians, and, unlike the many experts who have been entertaining us in the newspapers, he is not only a trained statistician, but also a well-read econo- mist who knows what is behind the figures he displays. . . . Mr. Bowley holds no brief for either side, and is rightly emphatic on the limits of the data, especially for comparison with foreign countries; but, as he remarks, so far as they go they show a steady increase of prosperity, and the onus of proof to the contrary lies on the challengers. As a corrective to loose and slipshod argument this book is invaluable." LONDON : P. S. KING & SON, Orchard House, 'Westminster.